Opinion pieces and speeches by EPI staff and associates.
[ THIS PIECE FIRST APPEARED IN THE TOMPAINE.COM ON JUNE 25, 2003 ]
By Josh Bivens
There’s an old saying that goes, “To a hammer, every problem looks like a nail.” A perfect example is Robert Zoellick’s June 23 column in The Washington Post. Zoellick is the U.S. Trade Representative and urges, per his title, “a return to the cradle of free trade” for the nations of the Middle East.
Helping build sustainable economies for the residents of the Middle East is a worthy goal. Its connection to international trade agreements, however, is a tenuous one. But these agreements are Zoellick’s hammer, and the economies of the Middle East sure look like a nail to him.
Zoellick assumes that growth in international trade equals rising living standards. This is a common slippage in the arguments made by trade-agreement proponents, and has ascended to the level of cant in many discussions of globalization.
The truth is that growth in international trade bears little or no relation to improvements in standard-of-living. Look no further than the United States to see this. From 1947 to 1973, real (inflation-adjusted) Gross Domestic Product in America grew at 4 percent annually while trade growth averaged 5.6 percent.
Some have interpreted the higher rate of trade growth as trade having caused GDP growth. However, from 1979 to 2000, trade growth accelerated while GDP growth lagged; GDP and trade grew annually at 3 and 7 percent, respectively. So the link between trade and growth is much more complicated than Zoellick and others like to assume.
There’s no magic recipe for sustainable economic development — especially not trade agreements or membership in the World Trade Organization (WTO), which constitute the full range of entrees on Zoellick’s menu. In addition to Iraq, Zoellick mentions eight Middle Eastern nations that he would aid with a flurry of trade initiatives. But membership in the WTO — bullet point number one in the Zoellick prescription — has already been granted to six of these (Bahrain, Egypt, Jordan, Morocco, Oman and Tunisia), while the other two are “observer” nations (Algeria and Lebanon). Moreover, an influential (and generally pro-trade) analysis from the Michigan Model of World Production and Trade has found that the Middle East is a net loser in the recent rounds of WTO negotiations (the so-called Uruguay Round).
Zoellick is right to hold up the U.S.-Jordan Free Trade Agreement as a useful model. This agreement marked an important step forward in crafting sensible trade agreements, especially in its relatively strong provisions on enforcing labor rights. Labor rights are indispensable tools for development efforts, and their adoption and enforcement should be actively promoted.
One wonders, then, why Zoellick has not made the U.S.-Jordan agreement, negotiated during the Clinton administration, the model for other trade negotiations undertaken under his watch? Proposed drafts of the Free Trade Agreement of the Americas (FTAA) contain no mechanism to ensure workers get the protections they need. These draft agreements — along with bilateral agreements signed with Singapore and Chile — represent a step backward from the U.S.-Jordan agreement’s precedent of broad and meaningful labor protections.
Then again, neither the invocation of the U.S.-Jordan agreement nor anything else in Zoellick’s column is meant as a serious effort to aid development in the Middle East. At worst, it is window dressing for an administration that wants to look interested in building functional Middle Eastern economies without putting up the capital — financial or intellectual — to do the real work. At best, it’s just a hammer looking for anything that resembles a nail.
Josh Bivens is an economist with the Economic Policy Institute. His areas of expertise are international trade, labor markets and macroeconomics.
[ POSTED TO VIEWPOINTS ON JUNE 27, 2003 ]