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Economists Weigh Chances for Free Trade


Specialists at Washington's non-government Institute for International Economics reviewed the global outlook for trade Wednesday and predicted that a far-reaching trade liberalization agreement might still be reached this year.

Economist Mac Destler of the University of Maryland believes it is possible to reach a successful outcome to the World Trade Organization's (WTO) Doha round of negotiations. Those talks, launched in Qatar four years ago, are due to conclude in December.

Mr. Destler says the Bush administration has yet to reveal whether it favors a modest or ambitious result from Doha. He says an ambitious result would require the Americans to roll back their generous agricultural subsidies, particularly those for the U.S. sugar industry, which is opposing a free trade deal with Central America (CAFTA), because it modestly opens the protected U.S. sugar market.

"Now an ambitious Doha clearly would have to include something that is much more damaging to [U.S.] sugar people than CAFTA,” he explained. “I'm pleased that the administration hasn't been talking about what I think would be horrible, but would presumably put the sugar people on the sidelines in terms of [getting Congressional approval for] CAFTA, which is to say, that's it, we're not negotiating any more sugar liberalization."

In a new edition of his book, American Trade Politics, the most popular volume in the institute's 24-year history, Mr. Destler argues that the United States is becoming less protectionist and more embracing of the freer trade that is a hallmark of globalization. Institute director Fred Bergsten, while agreeing that protectionism has lost some of its traditional clout, sees troubling signs of its resurgence concerning U.S. trade with China.

"I think if you look back over the past 30 to 35 years of U.S. trade policy, you find that the best predictor of protectionism is not the unemployment rate, or indeed any domestic economic variable. It is the exchange rate of the dollar and with it the deterioration of our international current account position," he said.

Mr. Bergsten says to forestall a U.S. protectionist surge, China should move quickly to revalue its currency and avoid the mistakes that Japan made 20 years ago.

"By which I meant resisting changes in the exchange rate, getting a tremendous amount of trade protection [from the United States], getting huge amounts of foreign policy grief, and having inevitably to change the exchange rate anyway, and ending up with the worst of all worlds. And I think that is exactly where China is headed right now," noted Mr. Bergsten.

The economics institute argues that the United States benefits greatly from globalization. But it believes this country lags behind in providing training for American workers displaced by the forces of globalization.

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