Forging ahead with free trade

By Harold McGraw III
September 30, 2013

The recent focus on what divides world leaders, from Syria to the euro zone, has obscured the significant agreements reached at the Group of 20 meeting in St. Petersburg earlier this month. One of the most important was support for free trade and opposition to protectionism.

We can now build on this momentum, as well as other trade liberalization efforts, to achieve meaningful progress at the World Trade Organization ministerial meeting in Bali in December.

Though critics describe the G20 as ineffective, it has been key in fostering economic cooperation among the world’s largest countries and helping to stave off the worst economic catastrophe since the Great Depression. With the economic stresses of the past five years potentially triggering protectionism, it’s noteworthy that G20 members have steadfastly supported free trade.

In St. Petersburg, for example, G20 members agreed to freeze the introduction of trade protectionist measures until 2016. This was a major achievement that lays the groundwork for much-needed progress on the trade agenda.

A top priority of the WTO ministerial, which will bring together ministers from the group’s 159 members, should be moving forward with the WTO’s trade facilitation agreement. This would harmonize hundreds of administrative procedures and standards that dictate how goods cross borders or are handled in customs. It would reduce the red tape that can divert precious resources, slow supply chains and increase the cost of goods by an estimated 5 percent to 15 percent.

There would be substantial benefits from this agreement. It could boost global gross domestic product by $960 billion, according to a recent International Chamber of Commerce study, increasing developing countries’ exports by $570 billion and developed countries’ by $475 billion. The agreement is also projected to help create 18 million jobs in developing countries and 3 million in developed countries.

Though bilateral and regional trade agreements usually include trade facilitation provisions, they do not provide consistency across the globe. Only a multilateral deal could do that. As the G20 pointed out, progress on the trade facilitation agreement would be a stepping stone to further multilateral trade liberalization.

Though the Doha agenda offers the most sweeping liberalization — and the biggest benefits — the failure to reach an agreement since talks began in 2001 has spurred multiple jurisdictions to pursue regional agreements.

The Transatlantic Trade and Investment Partnership, for example, could create the world’s largest free trade zone, and deliver economic gains exceeding $80 billion for both the United States and the European Union. Similarly, the Trans-Pacific Partnership is a comprehensive trade liberalization measure being negotiated by 12 countries, including the United States, Australia, Canada, Chile and Mexico.

There have been other encouraging developments. Recent signs that India and the United States are resolving differences on food security; the election of Brazilian Roberto Azevedo, from a key emerging market, as the new WTO director general, and the advancement of multilateral agreements like a WTO agreement on trade in services are all indications that St. Petersburg was not just rhetoric and could pave the way to a global trade facilitation deal this year.

After years of stalemate on the global trade agenda, the G20 meeting and other developments show that there is now a real opportunity to achieve meaningful liberalization. One important next step would be for all WTO members to support the trade facilitation agreement. Progress here can help pave the way for market openings that unleash more opportunity and higher growth throughout the world.

 

PHOTO: Italy’s Prime Minister Enrico Letta (L), President Barack Obama (2nd L), Australian Foreign Minister Bob Carr and British Prime Minister David Cameron (R) chat at the second working session of the G20 Summit in the Constantine Palace in Strelna near St. Petersburg, September 6, 2013. REUTERS/Sergey Guneev/RIA Novosti/Pool

15 comments

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Economic liberalization should enable balance of trade that was the idea behind the creation of G20 at least that’s what they said at that time. Right now what free trade did was take jobs from one place and put it into another place and with that the very concept of balance of trade went into thin air. Developed countries are running in deficit for years because of the imbalance in trade. So whether it is G20 or G8 it doesn’t matter, we need that balance of trade or face economic catastrophe. Maybe the very idea of free trade can become extremely dangerous without balance of trade. Think about it wise guys.

Posted by Looter | Report as abusive

Free trade does create dislocations to the economy, but I’m of the opinion it works out for the better over time. A former consulting client of mine is a global engineering and construction company. This company employs tons of engineers, draftsmen, project managers, and other highly paid workers to design and build the airports, roads, bridges, dams and other pricey infrastructure projects these emerging economies are now buying. Twenty years ago, this company had very few such projects in these countries and a lot fewer employees.

Posted by jambrytay | Report as abusive

THE BRUTAL STRUGGLE OF LIFE
Any business grouping of humans sitting at a kitchen table, from tribal times to today, whether a mafia group, a small-town real estate investor partnership, or a multinational corporation — naturally tend to say, in their meetings, “It’s us against the world.”

And it is. How could it be otherwise?

After all, biological life itself is a brutal competitive struggle, as Darwin showed us, with winners and losers, predators and prey, on every inch of the Earth. The eaters and the eaten. And business is especially so – a brutal competitive struggle for survival.

A NATION
Some consider a nation to be a geographical area of defined by seacoasts, rivers and mountain ranges. But we all know better. We know that a nation is a group of people that have banded together, and have promised each other, “IT IS US AGAINST THE WORLD”. “Each of us agrees that, although we have our internal quarrels every day, when we are faced against outsiders, WE WILL STICK TOGETHER.”

That is what Israelis say. That is what the Japanese say.

That is the premise of being a nation. When faced against the outside world, we either stick together as one. We do not allow the rest of the world divide us.

FREE TRADE
When the Soviet Union fell, a small subset of Russians gained “legal title” to vast swaths of the Soviet economy, all built by decades of the blood and labors of the Russian middle class over an 80 year period.

Vast factories, oil wells, gold mines, forests, ships, millions of acres of land, you name it. The “Oligarchs” then basically sold what was not theirs to sell, and became immensely rich. It was so profitable, they easily bribed the legislators and news media.

So called FREE TRADE is a mechanism by which a wealthy subset of Americans sell out the American middle class, for large sums of money, and keep the money for themselves. Free trade, i.e. the selling out the American people, is so lucrative that those engaged in it can easily bribe the American legislators, and easily afford to run expensive multimillion dollar public relations campaigns to control public opinion.

And that’s what this article is by Harold McGraw III. Part of a multimillion dollar public relations campaign.

He, like most people that inherited their wealth, is quickly selling out America itself. He is selling the America built by America’s middle class, as if he owned it, like the Russian Oligarchs, and keeping the money for himself.

Until a few years ago, America had the wealthiest middle class on Earth. Other countries like India and China, having low wages and over 1 Billion people, had difficulty selling to America because America had protective tariffs.

But the globalists, like Harold McGraw III, told America that dropping the protective tariffs would actually help Americans. What he didn’t say was that it would HELP wealthy Americans like him, but it DESTROYS the middle class American family.

To globalist like him, America is the land bounded by the Atlantic and Pacific and Gulf of Mexico. To him, it is the bounded region that is competing with the other nations. The people who live there do not matter. To globalists like McGraw, the people who live there had better get out of the way.

McGraw and his globalists want to have not only free trade, but free immigration.

There are 1.1 billion Indians and 1.2 billion Chinese. Their poorest want to move to America. The globalists, like Mr. McGraw, who tell the lies about the benefits of globalization, will tell you how massive immigration from India, China, Indonesia, Brazil and Mexico, is going to help you and your family.

Posted by AdamSmith | Report as abusive

So, the ongoing depression as described by Nobel Laureate Paul Krugman in “End this Depression NOW!” is just a myth? The global economic decline is just another myth? The G20 staved off, what? The only negative economic effects that have been “staved off” are the cash flows of the Plutocracy to their vaults in foreign (tax-free) banks, who are doing quite well for the past six years while the Pee-Ons are screwed.

Posted by ptiffany | Report as abusive

trade today has to deal with a big criminal element,like russian mafia that controls international drug trade.

Posted by michaelwind | Report as abusive

Adam Smith, are your for real?

Posted by jambrytay | Report as abusive

Increasing trade (it is actually managed trade, not free trade) is critical to American and global prosperity. As the author notes the gains, in terms of increased efficiency and productivity,and with it higher economic growth, are robust.
There is not a successful economy in the world that is autarkic, while nations that trade extensively (as a % of GDP) are the wealthiest. American workers that work for firms that export have higher salaries and greater job stability than those who do not. And an increasing percentage of American exports rely on intermediate components imported from abroad. Consequently, protectionism isn’t shooting oneself in the foot, it is shooting oneself in the head. Moreover, the fastest economic growth rates recorded have occurred after WW II as markets opened up globally.
Bilateral free trade agreements are critical for U.S. prosperity, unless trade critics are willing to see American jobs appropriated by American competitors. There are about 300 such pacts in existence, with the U.S. participating in only about a dozen.
Unfortunately populists of all stripes seem to think that closing American borders will somehow benefit the American economy and somehow benefit American manufacturing. This is sheer fantasy and would lead to ruination, Russian style. When is the last time you purchased a Russian computer, software,auto?
However, dislocated workers have to be protected as much as is feasible, which is resisted tooth and nail by conservatives. And the benefits of trade have to be distributed more fairly through taxation and labor policies.
We cant save (in the U.S.) every textile job, or consumer electronics job, or rote assembly job as many such jobs are done more efficiently overseas. And these and other low value added jobs are decent jobs for a poorly educated Chinese factory girl but not for an American high school graduate for which we spend about $1000,000 educating.

Posted by Cassiopian | Report as abusive

Hi Harold. I am the Reuters reporter covering the WTO out of Geneva. I would take issue with your assertion that the G20 has supported free trade and opposed protectionism. G20 countries may have tried to abide by the WTO rulebook, but independent studies (notably the Global Trade Alert) show they are very busy with “stealth protectionism” that skirts the WTO rules.

Posted by TomMiles | Report as abusive

This article is outright propaganda to allow the 1% to sleep better, after destroying the economy of middle America. These liars for the rich always use the phrase ‘protectionism,’ as though protecting the middle class worker was akin to communism or socialism. Every trade agreement be it from Dem or Repub has put another nail in the coffin of middle America’s jobs to benefit a handful of already rich international corporate CEOs, who in turn bribe our political class with campaign contributions. The so called saving of our economy by the Fed did nothing for middle America, every bit of financial benefit went to the top, while the rest of us saw our real spending power decrease.

Posted by anotherfakename | Report as abusive

> Bilateral free trade agreements are critical
> for U.S. prosperity
As clearly evidenced by the US’s stellar balance sheet, fantastic employment rate and current account debt of 12 (or is it 100 yet) trillion.
What a bunch of grade A garbage.

Posted by UScitizentoo | Report as abusive

Globalisation and free trade has caused global growth since the 90′s and at the same time, has increased global inequality and unhappiness. It is similar to the slave trade which was good most but unfair to some. We need a new way of working.

Posted by BidnisMan | Report as abusive

Protectionism is what makes nations money. America was built on a 20-30% import tariff. It was like that for 200 years. Now that we have dropped it to around 1%, and other nations have kept their tariffs high…. how has that benefitted America? It hasn’t.

We have one of the strongest, best developed marketplaces in the world. We should be charging for access to it. Return the import tariffs to 20%. Tariffs are direct revenue for treasury. And…. The price of underwear and plastic crap will rise. But so will wages here. Protectionism works.

Posted by AlkalineState | Report as abusive

International “Business Without Borders” Group Seeks to Promote Influx of Foreign Labor into your country, outflux of profits to a bank in the Cayman Islands.

Yay?

Posted by AlkalineState | Report as abusive

The uninformed response to my comment, is simply that – uninformed. As for bilateral trade agreements, eighty percent of the American trade deficit is with countries with which the U.S. does not have a bilateral trade agreement, such as Germany, China, Japan, Ireland, and Italy. Moreover, the export/import ratio of the U.S. with its bilateral treaty trading partners, such as Canada and Mexico (both of which the U.S. imports considerable oil from), is much more balanced (even with all those oil imports!) than it is with the countries listed above, the non treaty countries.
In addition, it is ridiculous to think that somehow the U.S. can stand aside while the Europeans and others are signing bilateral trade agreements with countries like South Korea, which gives them a first mover advantage into these lucrative markets (S. Korea is the 7th largest economy in the world). If Boeing, John Deere, pharmaceutical, and other firms are to compete, and if they are to maintain American jobs, they have to have access to these markets on favorable terms.
In addition, the U.S. is the largest and most successful service exporter in the world – banking, financial, insurance, engineering, advertising – and the Obama administration is trying to further U.S. exports in this growing area, where U.S. firms have a competitive advantage.

Posted by Cassiopian | Report as abusive

Harry, you are out of touch. You need to make the minimum wage and get back in touch. there will never be “free trade” because your people will never allow it.

Posted by rikfre | Report as abusive