Embrace Free Trade and "Fast Track"

Is free trade still good economic policy for the U.S.? After all, Japan's bureaucrats remain hostile to U.S. imports even as Japan tries to export its way out of a long economic slump. America's trade deficit with China widens yearly. Governments in Europe, along with much of Asia and Latin America, still favor erecting barriers to easy commerce among nations. Polls show that many Americans fear that new free trade deals will cost U.S. workers jobs and wages. President Clinton's request for Congress to allow him "fast track" authority to negotiate new international trade agreements is being vehemently opposed by an unusual coalition, ranging from softcore socialists to labor unionists to conservative isolationists.

Yet the case for open borders for goods and services is more compelling today than at any time since the close of World War ll, when U.S. policymakers used free trade to underwrite prosperity for the non-communist world. With the end of the Cold War and the embrace of market capitalism by the developing world, free trade is vital for sustained economic growth÷especially in the U.S.. True, international competition adds to economic insecurity and chips away at the earnings of less skilled workers. But rather than retreat from the exchange of goods and services among nations, there are other, more direct policies, such as training subsidies, that better meet the needs of the less skilled.

America's growing ties to world trade are a big reason why the economy is so healthy, with inflation tame and unemployment low. For instance, Stephen Roach, chief economist at Morgan Stanley, says 42% of the economy's growth since last fall came from exports, mostly capital equipment such as computers. Global trade is booming in the service industries, such as education, telecommunications, financial services, and entertainment, all areas where the U.S. has a competitive edge. At the same time, the World Bank forecasts growth rates in the developing world should average a heady 5% to 6% over the next quarter century. The world is getting wealthier and markets are getting bigger.

Conventional yardsticks often underestimate the economic impact of freer trade. A world open to foreign trade is one that is open to entrepreneurs and their new ideas, new technologies, and new ways of organizing life. The freer flow of commerce and information is hostile to closed-minded bureaucracies and nurtures democracy. It is barriers to competition that often invite a more intrusive government and economic stagnation.