Just a few thoughts on Jagdish Bhagwati's recent FT column on Obama, the bailout, and the WTO:
- Whatever one thinks of Bhagwati's economics, one can't help but be repulsed by his political philosophy. Tariffs or auto bailouts may or may not be a bad idea, but isn't it the rightful place of democratically elected representatives and administrators to determine their value without undue interference from unelected bodies like the WTO?
- Ditto for his ecology. Bhagwati writes, "Under a 1995 WTO agreement, export subsidies and “local content” requirements are prohibited as directly damaging to trade and all other subsidies that are specific to companies or industries are open to complaint; and this applies even when they are claimed to be environmentally friendly." We've been raising the green jobs vs. WTO issue for some time. It's nice that Bhagwati agrees with the analysis, although disturbing that he doesn't see WTO rules that forbid a pro-local bias (read: green) in policy as desirable.
- Bhagwati also agrees with us on the desirability of NAFTA-style FTAs, saying such a vote "is not a vote for multilateralism but just the opposite." Curiously, he somehow thinks that labor unions are friendlier to FTAs than to the WTO, which has been the opposite of my experience and I'm sure of every trade lobbyist on Capitol Hill. Here's Bhagwati's explanation:
- "To understand this paradox, consider that labour union lobbies and their political friends have decided that the ideal defence against competition from the poor countries is to raise their cost of production by forcing their standards up, claiming that competition with countries with lower standards is “unfair”. “Free but fair trade” becomes an exercise in insidious protectionism that few recognise as such. This cynical tactic can work only when the US is engaged in negotiating FTAs, typically with weak countries. It does not work for the multilateral system where powerful, democratic countries such as India and Brazil reject such trade-unrelated demands. So, the “fair trade” lobbies, which Mr Obama continues to embrace, gravitate towards FTAs rather than the WTO. The Democrats’ opposition to occasional FTAs – including the latest one with Colombia – reflects, then, a recurring attempt at imposing yet more draconian demands on small countries rather than a preference for the multilateral trading system."
Wait, is he talking about Democrats, labor unions, or which political actor? The reason labor is opposed to Colombia FTA is not because Uribe won't submit to their demands, but because Uribe's government has been implicated in assasinations of union members. Additionally, they oppose the NAFTA model, and don't believe that any FTA with Colombia is acceptable.
Bhagwati is right that more and more legislatures and citizens groups around the world are rejecting the insertion of non-trade issues into trade negotiations. But labor rights are not the target of this rejection in 2008: it is rather the WTO prohibitions on anti-recession measures that Bhagwati (perversely) celebrates.