11/03/1999
The Asian Wall Street Journal

By Greg Rushford

It has been hyped as the most important international trade meeting ever held on American soil. Trade ministers of the World Trade Organization's 135 member countries will convene in Seattle on Nov. 30 to launch a three-year round of negotiations to dismantle global trade barriers. But the confab is in danger of becoming the world's biggest flop, because the members can't even agree on a common agenda.

As usual in these multilateral negotiations, government leaders disguise the true nature of their conflicts with a lot of posturing and insiders' jargon. So here's a guide to the codewords and political taboos that will be on display in Seattle. Master these and you'll be able to cut through the hypocrisy.

America's top priority in a new round of trade talks is persuading Europe to jettison its Common Agriculture Policy. The CAP subsidies drive the prices of food into the stratosphere for Europeans, while costing farmers from Des Moines to Sydney billions of dollars in lost sales every growing season. However, while U.S. officials love to talk about CAP subsidies, they are less enthusiastic talking about the $8.7 billion subsidy package for American farmers in this year's agriculture appropriations measure.

Moreover, U.S. Agriculture Secretary Dan Glickman vows that the Clinton administration "would not sacrifice" the interests of U.S. sugar growers, who are protected by their own trade-distorting quotas and tariffs. The Clintonites also vow to protect the domestic peanut lobby, which has its own quota-tariff scheme. Mr. Glickman wants to talk about getting the Europeans to enforce science-based (as opposed to politically driven) sanitary and phytosanitary standards. This would presumably allow American genetically modified crops like soybeans and corn into Europe. Mr. Glickman rightly suspects that politics is afoot, as the EU has taken more than two years to "study" this, without reaching a conclusion.

While GM foods are a big taboo for Europeans, they might like to ask Mr. Glickman about his department's own record on assessing the safety of imports of flowers. Denmark applied for permission to export potted bellflowers to America back in 1993, but in deference to the domestic floral lobby USDA officials haven't even begun to conduct the necessary scientific tests. How difficult are these tests? Well, Canada does them in three months; even the famously strict Japanese permit the importation of bellflowers from Denmark.

While they may want to talk about flowers, Europeans regard the words "bribery" and "dispute resolution" as big taboos. European trade officials do not want the Seattle Round to pressure them into changing their stance on bribery of Third World officials, which is tax deductible in countries like France. "Dispute resolution" is embarrassing because it reminds the EU that despite repeated determinations by WTO dispute resolution panels that it has violated its signed obligations not to discriminate against foreign bananas and hormone-treated beef, it continues to do so. This issue alone could tear the WTO apart.

Another top American priority is cutting industrial tariffs. But it is unclear exactly what this means. U.S. officials have made it clear that the tariff cutting should not extend to U.S. tariffs on clothing imports, which apparently are intended to remain indefinitely in the Smoot-Hawley range of 18% to more than 30%.

U.S. trade officials also acknowledge that they have not even begun to discuss getting rid of one little tariff that is a perfect illustration of American hypocrisy on free trade. In late 1963, angered that Europeans were not buying enough American chickens, President Lyndon Johnson retaliated by sticking on a 25% tax on foreign trucks, which was intended to hurt sales of Volkswagen vans. The so-called "chicken tax" is still on the books, although these days it hurts the Japanese the most. Nobody ever pretended that this tax has an economic justification, nor that it brings significant revenue. Yet American officials say they won't give it up unless some foreigners give something in return. Nobody in Washington seems to know what that might be.

The biggest American taboo word is "antidumping." U.S. Trade Representative Charlene Barshefsky vehemently insists that reform of her country's draconian antidumping laws should not be on the Seattle Round's negotiating table. This is pure domestic politics, mainly for the U.S. steel lobby that drives the political support for the American antidumping regime. Even the U.S. government's own studies show that antidumping laws protect only the jobs of a few, while inflicting a heavier cost to the overall economy.

Forget the theory and just look at how canny foreign businesses have learned to exploit U.S. antidumping laws. The U.S. aspirin-making subsidiary of France's giant Rhone-Poulenc kept its competition from Turkey out of U.S. markets using antidumping laws, and is now trying to do the same to Chinese firms. Another current case involves efforts by the U.S. subsidiaries of several European steelmakers to keep stainless steel from Japan's Sumitomo out of America. This would leave the U.S. petitioners free to import stainless steel from their European parents, free of Asian competition. Japan rightly objects strenuously to the American antidumping regime.

Of course, Tokyo has its own taboo words: "forestry and fisheries," two important examples of Japanese protectionism. Japan is also taken with a codeword it picked up from the Europeans: "multifunctionality." As applied to agriculture, multifunctionality means that those protected, inefficient rice paddies are there to protect the environment and a cherished way of life, not to advance the interests of Japan's powerful rice lobby.

While many of the world's poorer countries rightly object to all of the above, sometimes their own hypocrisy is just as bad. For example, countries like India and Malaysia have objected to the insistence by the Americans and Europeans that the Seattle Round not tackle the rich nations' high tariffs on clothing. At the same time, India insists that it be permitted to keep its own high tariffs on clothing imports. The codeword for this is "special and differential treatment."India, Malaysia and other poor countries are also seeking special and differential treatment in the antidumping area. This translates into asking the Americans and Europeans to make technical changes to their own antidumping laws that will make it more difficult to keep out Third World products. At the same time, these countries want the WTO to give them permission to expand their own antidumping laws to, you guessed it, make it easier to keep out imports from the richer nations.

There is a lot more. Pascal Lamy, the European Union's new trade commissioner, vows that France will be "inflexible" if anyone dares to try to stop his native country from keeping quotas on movies and audiovisual creations from Hollywood. The only way you can get Mr. Lamy to say the word "cultural" is to tack on the word "exception." And last month, U.S. President Bill Clinton announced he wanted labor issues brought into the Seattle Round on the same day the AFL-CIO endorsed Vice President Al Gore's 2000 presidential bid -- a coincidence, the White House spinmeisters said.

Meanwhile, the U.S. wants to liberalize trade in "services," meaning opening the world's capital markets to finance, insurance and transportation. But at the same time it wants to keep the protectionist Jones Act off the negotiating table. The Jones Act drives up costs of shipping between, say, California and Hawaii by requiring that cargoes bound from one American port to another be carried on a U.S.-flagged vessel.

The danger is that all this selfishness will seal the fate of the Seattle Round. Only the United States could rally other nations to avert that kind of disaster, but there's little sign of initiative from Washington. While the United States is by no means the most hypocritical WTO member, the absence of generous American leadership to forge a consensus for free trade in Seattle by setting an example is remarkable.

Says a concerned Jacqueline Willis, Hong Kong's top diplomat in Washington and one of the few officials who will go to Seattle unashamed to openly advocate free trade: "Absent a readiness to take account of others' interests and to engage in mutually advantageous trade-offs, the Seattle Ministerial could well be headed for failure."

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