Critics Say Deficit Argues For Quitting WTO

Original Publication Date: 
26 March, 2005
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Critics say deficit argues for quitting WTO
Rep. Peter DeFazio and others hope a bill will spur debate on U.S. trade policies, but some say the organization isn't to blame
The Oregonian Sunday, March 27, 2005

WASHINGTON -- The dollar has plunged.

The trade deficit is reaching record highs.

Labor groups complain about losing high-paying jobs to Asia.

The confluence of events has created an opening for those who object to U.S.
membership in the World Trade Organization. That membership is subject to the review of Congress every five years and happens to be up for consideration this year.

WTO opponents acknowledge that Congress will almost certainly vote to stay in the organization, in which administers trade agreements for its 148 member countries. But they hope to use the platform as a broader debate about U.S. trade policies and the efficacy of the WTO.

"I don't believe we can force American withdrawal, but once every five years we get to vote on it," said Rep. Peter DeFazio, D-Ore. "And I think we can have a very vigorous debate."

DeFazio co-sponsored a bill, proposed earlier this month by Rep. Bernie Sanders, that calls for WTO withdrawal. Backers come from across the political spectrum, from Sanders, a liberal Independent from Vermont, to Rep. Ron Paul, a libertarian Texas Republican.

"Nobody, not even Alan Greenspan, the hack economist who runs the Federal Reserve, is saying that $600-plus-billion-a-year trade deficits are sustainable, and exporting all of our industrial intellectual technology and high-technology industries is a sustainable policy for the greatest nation on Earth," DeFazio said. "There is nobody outside of the Bush administration who can point to these trade policies and say, 'Oh, this is fine, let's do more of it.' "

But some critics of the bill say that the WTO is not the cause for trade deficits. They also say that trade deficits have no correlation to economic problems.

"The trade deficit is primarily a political issue," said Dan Griswold, director of the Center for Trade Policy Studies at the libertarian Cato Institute.

"It's not any kind of referendum on the health of the U.S. economy. Our trade deficit was growing very rapidly in the late 1990s when employment was falling to a record low and output and production were reaching record levels."

Charter members

The United States joined the World Trade Organization on Jan. 1, 1995, when the organization was officially formed. The WTO's visibility increased in
2001 when China joined, with the potential of exporting tremendous amounts to other countries. And in recent years there have been increased concerns about the loss of U.S. jobs to countries such as China, where labor is cheaper.

Member countries use the WTO to resolve trade disputes. For example, the WTO favored European nations in a complaint over U.S. tax policies, forcing the United States to make legislative changes last year. But some trade experts say the WTO isn't always fair to the United States.

"The WTO isn't really addressing certain issues having a paramount effect on trade," said Peter Morici, former chief economist at the U.S. International Trade Commission and currently a professor at the University of Maryland.
"In particular, it is woefully inadequate in dealing with exchange rates and basically what we would consider unfair business practices."

WTO opponents complain about its secrecy and say it threatens sovereignty.

"Our trade competitors now have a bureaucratic means to gang up on us," said Jeff Deist, spokesman for Paul, the Texas congressman. "WTO isn't free trade. It's government-managed trade."

Critics of the Sanders bill say that having no dispute resolution process would be a worse scenario.

"The WTO dispute settlement mechanism has been remarkably effective and fair overall," Griswold said. "You can quibble with certain aspects of certain decisions, but overall, the dispute settlement panels have done their best to interpret the rules that we all agreed to follow."

Last year the United States brought a case against China involving a tax refund policy in the semiconductor industry. After discussions, the countries resolved the dispute.

"That was pretty effective for the industry," said Melika Carroll, trade policy director at Intel, Oregon's largest private employer.

Focus on trade deficit

In addition to focusing on the WTO's flaws, the congressional debate will likely focus on the overall U.S. economy and trade patterns. Recent months have seen more attention paid to the trade deficit.

A great deal of attention has recently been paid to the growing current account deficit, which measures the net transactions in goods, services, assets and income between the United States and its trading partners.

"My boss doesn't view the current account deficit and the dollar collapse as necessarily stemming from the WTO, but it's certainly related," said Deist, Paul's spokesman. "Participation in the WTO has not helped our current account deficit imbalance. We're deeper in the hole on a per-year basis than we were before we were ever in the WTO. One of the promised benefits has been entirely repudiated."

Imports, Griswold said, should not be looked upon negatively.

"Imports are just as valuable to our economy as exports," Griswold said.
"They lower prices for consumers. They allow businesses to produce their products more competitively. . . . Germany has a $200 billion trade surplus and 12.6 percent unemployment."

When the House voted on the issue in 2000, 56 members voted to leave the WTO. DeFazio said the vote count may be higher this time, but not high enough for the bill to pass.

"Maybe we'll get up to near 100, who knows?" DeFazio said. "You're going against all of the largest multinational corporations in the world, Wall Street, the administration, all the editorial writers in America at all the major papers. They're all out to lunch on trade."

But the American public, DeFazio said, is seeing problems with current trade policies.

"People are just starting to think, 'We're borrowing $2 billion a day, and we're borrowing half that from the Chinese?' " DeFazio said. " 'How's that going to work for 20 years or 50 years? There aren't any jobs in America. We don't have basic industries.' The American people are so far ahead of the policymakers and the pundits on this."