Rob Portman Goes to Hong Kong: A Fools Journey into Asia?
By Dr. Peter Morici, Professor of International Business

As the WTO meetings in Hong Kong approach, the Bush Administration should find honest work for U.S. Trade Representative Rob Portman.

Don't get me wrong, free trade is great stuff! By reducing tariffs and other trade barriers, increasing global commerce lets workers in each nation to specialize more at what they do best. This can raise wages more than any other government policy.

The Doha Round aims to open U.S., EU and Japanese markets to more developing-country farm commodities and labor-intensive manufacturers, like cotton and textiles, while promoting more developed-country export of high-tech goods and services.

For this to work, all countries must accept more imports, and garner as many new jobs from exports as they lose to imports. This requires that national politicians run their economies competently and reasonably free of cynical politics.

In France, Germany and elsewhere in Europe unemployment is constantly too high, because governments wont implement labor-market policies requiring workers to leave farms and factories, where technology and globalization have made them unneeded, and move to knowledge-driven industries and activities, where they can be more productive. Unable to find new jobs for workers displaced by additional imports, France blocks the EU from tabling a reasonable Doha Round offer on farm tariffs and support programs.

Much the same calculus applies in Japan, where the most advanced automobile industry on the planet is trapped inside an economy with medieval farm and industrial policies. Like a rich sinner trying to buy itself into heaven, Japan offers developing countries a generous cash aid package but inconsequential concessions on farm trade.

For their part, developing countries cant deal on manufactures without a meaningful farm-trade package.

The United States has offered to break this log-jam by cutting agricultural tariffs by as much as 90 percent and slashing subsidies, but its whole approach in recent trade negotiations raises yet new questions about vodka in the White House drinking water.

The Bush Administration, in the Doha Round and regional trade talks with Latin America, China and others, has sought significant gains for U.S. intellectual property and services industries, while leaving the concerns of American manufacturers largely unattended. In particular, it has responded with only tepid verbal protests as tariffs in China and elsewhere have been replaced by foreign exchange market manipulation and undervalued currencies; it acquiesced to leave out of the Doha Round regulations imposed on U.S. businesses building factories in developing countries, many insidious industrial subsidies, market dividing cartels, and other anticompetitive practices; and it happily participates in the hoax that special and differential treatment helps developing countries, when it licenses forms of protection proven poisonous to economic progress in Europe, United States and Japan.

Opening up global farm trade, better protecting patents, and populating the world with the branches of American banks, without addressing issues of central concern to manufacturing, will help U.S. multinationals operating abroad, like Cargill, Merck and General Motors, earn profits. However, it will do little to boost U.S. high-tech exports and create jobs in America lost to increased imports of farms products and simpler manufactures.

Ah, but politics!

Progress on patents and in services will do much to benefit those who have already prospered most from Bush Administration economic policies, highly-educated professionals, while continuing to thin the ranks of blue collar and union workers who are more likely to vote for Democrats.

Sadly for President Bush, the American polity is not as simple-minded as this cynical maneuver requires, especially where it counts.

In the electoral precincts stretching from western Pennsylvania, into Ohio and up through Michigan, where U.S. national elections are determined, the tragedies of General Motors, its suppliers, and other reasonably competitive manufacturers have raised new hostility toward trade, and Mr. Bush's apathy has done much to stoke their discontent.

Don't be surprised that if Mr. Portman brings home a trade deal from Hong Kong that developing countries love but that ultimately must be pushed through a skeptical Democratic Congress.

For Messrs. Bush and Portman, those would be just desserts!