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December 22, 2006

How Trade Strengthens U.S. Security
Posted by Jordan Tama

As Congress wrapped up its work this month, it passed important measures to normalize trade ties with Vietnam and renew low tariffs for Andean and African countries. Additional trade pacts with Peru, Colombia, and Panama will be voted on by the Democratic-led Congress next year. These votes are likely to be contentious. Many new members of Congress argue that trade agreements spur the loss of American jobs, and some new members call for renegotiating existing pacts, such as NAFTA.

The public debate on trade usually centers on its economic costs and benefits. I happen to believe the benefits outweigh the costs, but that the costs are real and should be mitigated by expanded assistance programs for Americans who lose their jobs when companies move overseas.

Here I want to focus on a different aspect of trade policy: its impact on other U.S. foreign policy interests. While reasonable people can disagree about the relative weight of the economic gains and losses induced by trade, I think the political and security benefits of reducing trade barriers are undeniable (though often underestimated). If we take them into account, the case for opening markets becomes much stronger. Consider the following:

1) Trade can provide an economic engine for foreign policy leadership. Trade accelerates U.S. economic growth, producing positive foreign policy spillover effects. Growth increases our tax base, making it easier to fund foreign affairs and defense programs. It also helps us maintain our technological edge, which is central to our military strength. A stagnant or shrinking economy would likely lead to a smaller U.S. presence abroad and diminished American influence internationally.

2) Trade can foster political and security cooperation. We need help from other countries in the Iraq war, in the broader struggle against violent jihadism, and on other security priorities. But nations that don't have direct interests at stake in those issues will only help us if we help them on issues they consider important, like greater access to our huge market. If we reduce our import barriers, they'll be more likely to back us on security matters.

Why should we care whether poor countries support our policies on Iraq, Iran, or counterterrorism? Because they have votes in international bodies like the UN and their backing can make our policies more legitimate internationally.

Reductions in trade barriers will also help us compete with China and Europe for political influence abroad. While we've been focused on the Middle East, Europe and China have been strengthening their economic ties with countries across Asia, Africa, and Latin America. We shouldn't try to compete with China for influence in nations with morally reprehensible governments, like Sudan and Burma. But trade benefits should be a powerful lever of U.S. influence elsewhere in the developing world.

3) Trade can make America appear less selfish and unilateralist. At a time when large majorities from Indonesia to Argentina think we're a global bully, we can improve our image by eliminating import barriers. A huge step in this direction would be to slash our massive agricultural subsidies and end other protectionist policies that make it impossible for most foreign farmers to compete in our grocery stores. We should push hard for radical cuts in agriculture tariffs under the WTO. Even if Europe and Japan—which are even more protectionist than us on agriculture—refuse to go along, we'll win many new friends abroad.

4) Trade can promote growth and reduce poverty overseas. There's no question that trade feeds prosperity abroad. From South Korea to Chile, countries that have plugged themselves into the global economy have grown and reduced poverty more rapidly than those that have shut themselves off from it. This growing prosperity is good for us because it tends to foster political stability and peace overseas. It's also positive from a humanitarian standpoint because it improves the lives of millions of workers and their families.

Some critics of trade agreements argue that trade threatens the domestic social contract in other countries by undercutting labor rights. In fact, jobs created by foreign investment and trade in poor countries usually provide better pay and working conditions than alternatives. That's why most people in Colombia, Peru, and other Latin American countries support trade pacts with the U.S. and worry about rising American protectionism, as the Washington Post recently reported.

5) Trade can facilitate political liberalization in authoritarian countries. Trade does not inevitably lead to liberalization. China is the case in point. But once people achieve a decent standard of living, they tend to demand political representation and accountable governance. This has happened in much of Asia and Latin America, and even China's growing middle class is showing signs of political restlessness.

6) Trade can make war less likely. This, I admit, is the most tenuous of my six arguments. As international relations scholars like to point out, European countries traded heavily with each other early in the 20th century, and that didn't stop them from stumbling into World War I. But there's also evidence that protectionism can be a trigger for war. Tensions grew among nations in the 1930s as Europe and the U.S. increased barriers to trade, contributing to the outbreak of World War II. In the decades ahead, it's conceivable that China and America will go to war even if they maintain close economic ties. But my hunch is that those ties will make war between the U.S. and China less likely because under high levels of trade both countries will have more to lose if they fight.

These political and security benefits of trade should be a central part of the American debate on trade policy. If we adopt or maintain trade barriers to protect American jobs and prop up U.S. wages—legitimate policy goals—we should recognize that we're not just imposing economic costs on ourselves, such as slower growth and more expensive consumer goods. We're also making it harder for us to achieve other important foreign policy goals.


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Important points, Jordan, but your argument is always "trade can..." More important, particularly for the new Democratic majority as we head into fast-track renewal, is figuring out under what conditions "trade does" achieve what we want it to...

Trade accelerates U.S. economic growth... It also helps us maintain our technological edge, which is central to our military strength.

Please tell you're joking:

The U.S. Department of Commerce today reported that the merchandise trade deficit reached a record level of $666.2 billion in the 2004, a 21.7% increase since 2003.... Growth in the deficit reflects surging imports and a continued, rapid decline in the competitiveness of U.S. manufacturing industries. The U.S. had a $37 billion trade deficit in advanced technology products (ATPs) in 2004, an increase of 38% since 2003.

BTW, for the past 15 years we've promised developing countries that we'd cut our ag subsidies, and the subsidies have increased. I think it's time we admit that this isn't going to happen, and that as a result, free trade will continue to devastate poor farmers. The farmers will then migrate to the cities where they will depress manufacturing wages.

Judah, Point well taken. I used the word "can" because I didn't want to suggest that trade always or inevitably leads to the six outcomes I highlighted. In particular, I might be stretching my case if I asserted definitively that trade facilitates political liberalization and makes war less likely. But I think my first and second arguments can be stated more strongly: trade does provide an economic engine for foreign policy leadership and foster political and security cooperation.

Cal, You've misrepresented my argument. I didn't claim that trade directly helps us maintain our technological edge. I said that trade accelerates our economic growth, which itself boosts our technological edge. That's undeniably true. The large U.S. trade deficit in no way falsifies the argument. If we traded less, we would fall further behind other advanced economies technologically.

There's a lot of stuff here, but I think one think worth pointing out here is that poorer countries have not seen accelerated per capita economic growth (the most basic measure of economic wellbeing) as they have joined the WTO and similar trade pacts which dangerously insert themself into non-trade domestic policy issues. The 12 years of NAFTA, in particular, has not been associated with strong growth in Mexico.
( Korea and Chile's experience have way more to do with encouraging exports and controlling imports -- all things that the countries did of their own accord, just as any country can do. ( In short, there is no doubt that strong economic growth can help create incentives for peace and international harmony, but there is little evidence that the kind of trade policies that have been promoted under Clinton and Bush were associated with stronger growth in poor countries.

I said that trade accelerates our economic growth, which itself boosts our technological edge. That's undeniably true.

There's very little in economics that's undeniably true. This claim isn't part of that very little.

The results of "free trade":
A. The tariff-free imports of goods formerly manufactured in the US.
B. The export of jobs to accomplish A.

We need a trade policy that lifts all boats, not just all yachts.

Why not use the trend toward global economic integration to improve labor conditions and environmental conditions?

Trade with real protections burnishes our image and brings us good will. Trade that causes sweat shops and environmental degradation strengthens the Hugo Chavez's of the world.

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