Prime Minister David Cameron of the United Kingdom
wrote an article under the title: “A British-American Tax and Trade Agenda” and
the subtitle: “The Europe-U.S. trade talks are a precious opportunity, but they
must include fairer taxes and more transparency.” It was published in the Wall
Street Journal on May 13, 2013.
He says at the outset that the challenge today “is to
restore ... sustainable growth to the world economy.” But he hints at possible
difficulties in the upcoming negotiations by observing that: “When times are
tough, some want to put barriers up ... and protect themselves.” So he suggests
that Britain and America work to
have “not less openness and less free trade, but more.”
He justifies that suggestion with the following: “Trade is
not a zero-sum game [it] makes the cake bigger so everyone can benefit.” He
gives the example of the free trade area between Europe and the U.S. that will
be negotiated next month. He says it could add 10 billion Pounds to the British
economy, 97 billion dollars to the U.S. GDP, and 132 billion to the rest of the
world.
He returns to the subject of difficulties in the
negotiations by observing once again that: “Too often the voices defending
special interests shout loudest. But it makes no sense to exclude vital parts
of the economy. Everything must be on the table.”
It all sounds nice and good but what Mr. Cameron did not do
is tell how to handle those loud voices. The fact is that when they begin to
shout, the politicians listen, and then join the chorus that is pleading for
protectionist measures. Being lawmakers, they start to work in the heat of the
moment to make the laws that can be so destructive; they invite retaliation
from the other side. In fact, I am old enough to remember a spectacle in the
1970s when members of the U.S. Congress staged a scene for the world to see, in
which they attacked a Japanese car with baseball bats. It was poignant.
Luckily, the most that came out of that encounter was a
Japanese counter-argument to the effect that they too had an industry that was
dying because of foreign competition. It was rice, a crop so much a part of
their culture; they could not bear the thought of seeing it disappear. Yet,
this is exactly what was happening as the old farmers were dying off but were
not replaced by younger ones who could not see a future in this field.
And this was the time when I began to formulate the idea
that no country should be so badly out-competed in a vital industry as to feel
threatened by its possible demise. When something like this begins to happen,
all the good things that Mr. Cameron says will result from unlimited free trade
between the nations will mean nothing because the pressure will mount, and
people will cheat or ignore the trade agreements or abrogate them entirely.
For this reason I suggested that a backstop be created to
defend the nations from the threat of seeing a vital industry disappear, as
well as protect the agreement itself (it was the WTO) from being ignored or
abrogated. I thought that every country should have the right to protect its
vital industries by any means it sees fit up to perhaps a third of its local
consumption. For example, if America
consumes 15 million cars a year, it will have to the right to subsidize the
industry up to 5 million cars.
If this is agreed to, everybody will feel better, feel less
threatened and will not be inclined to cheat. A provision of this kind in the
agreement will be the best safeguard you can have to maintain the integrity of
the agreement. I hope to see the suggestion adopted.