Free Trade Falls, Protection Creep Rises

These are worrying times for free trade. Back in the dog-days of the 1990s, Republican commentators would wax alarmist about the danger's of "mission creep" during international peace keeping operations. Get into Somalia, they would say, and you'll suddenly be there for years. The rise of protectionism works in much the same way. Without any grand vision on the future of liberalization since "time out" was called on the Doha round, "protection creep" is going to be all around us in the months up to the election. In the FT this morning, we have the latest development over attempts to politicize the CFIUS process of green-lighting foreign investment. Reform proposals were introduced following the Dhubai Ports debacle earlier in the year. Current congressional overhaul plans are the worst of both worlds. They stand a good chance of lessening foreign investment and doing little to increase American security. Much better, as the National Foundation for American Policy suggested recently, to avoid alarmist legislation in the first place. Elsewhere in the FT the reliably sane Guy De Jonquires details exactly what happens when Protection Creep sets in. The problem? His depressing conclusions about the way forward.

When gardens are neglected, weeds sprout. The withering of the Doha trade round has led, predictably, to a flourishing crop of alternatives. Washington has claimed more recently that its use of muscular bilateral trade diplomacy will re-energise the multilateral system by unleashing a wave of "competitive liberalisation". The Doha debacle has exposed that theory for what it is. In practice, bilateralism has fed off itself, intensifying the rush into preferential deals while draining energy from the Doha talks, polarising the US Congress and further diminishing its appetite for trade initiatives of all descriptions..... In the absence of strong leadership, regional trade talks simply rake over the same problems that have proved insoluble in other forums..... So, has trade liberalisation hit the buffers? Not necessarily. One "plan B" has proved its worth: it is for governments to stop leaning on each other to open markets and do it by themselves.

What a mess. The remaining hope for liberaliztion under President Bush is the pie-in-the-sky wish that countries will decide to open markets uniltaerally. Meanwhile protectionism is everywhere on the rise. Creeping up on us we have CFIUS, the upcoming row over China's currency, further potential WTO rows with China over IP, the review of the GSP, and the likely decision by the President to give up on Doha without asking congress to renew his trade negotiation authority. Add to this to strong likelyhood of electioneering politicians wheeling out open markets as election year cartoon villain. Unless supporters can come back with a grand vision for the future of trade liberalization, battling back Protection Creep one inch at a time seems to be where the battle will lie. NDN will be making our contribution to trying to promote such a vision in the coming weeks.