Owen abroad

Delivering the State of the Economy report on Wednesday, George Bush made the most effective case for the global trade talks that I can remember him making:

…  And the question for America is whether we treat the changes in our economy as opportunity to help improve people's lives, or as an excuse to retreat into protectionism.

… we can make our economy more flexible and dynamic by expanding trade. America has about 5 percent of the world's population. That means 95 percent of our potential customers are abroad. Every time we break down barriers to trade and investment, we open up new markets for our businesses and our farmers. As we improve free trade, consumers get lower prices. There are better American jobs. You see increased productivity. Jobs supported by exports of goods pay wages that are 13 to 18 percent higher than the average. So one of our top priorities has been to remove obstacles to trade everywhere we can.

When I took office, America had free trade agreements with three countries. We have free trade agreements in force now with 13 countries — and we have more on the way. These agreements are leading to direct benefits for America's businesses and, equally importantly, America's workers. Yesterday, I went to the Caterpillar plant in Peoria, Illinois — that's where they make big bulldozers. The folks there told me that Caterpillar now exports more than one-half of the products they make. They see immediate results when we have broken down barriers to trade. Within two years of implementing our free trade agreement with Chile, Caterpillar's exports to that country have nearly doubled. The opening of this and other export markets has led Cat to add thousands of new jobs here in America.

Manufacturers, farmers, and service providers all across our country have similar stories. So we need to continue to level the playing field for our goods and services. I strongly believe this: When people around the world have a choice, they choose goods that say "Made in the USA."

…At this moment, the most promising opportunity to expand free and fair trade is by concluding the Doha Round at the World Trade Organization. Global trade talks like Doha have the potential to lower trade barriers all around the world. They come around only once every decade or so. Successful trade talks will have an enormous impact on people around the world. Since World War II, the opening of global trade and investment has resulted in income gains of about $9,000 a year for the average American household.

The Doha Round is a chance to level the playing field for our goods and services — in other words, so we can be treated fairly in foreign markets — but it also is a great opportunity to lift millions of people out of poverty around the world. And so we're going to work hard to complete it. We are dedicated to making sure we have a successful Doha Round.

The only way America can complete Doha and make headway on other trade agreements is to extent Trade Promotion Authority. This authority allows the President to negotiate complicated trade deals for our country, and then send them to Congress for an up or down vote on the whole agreement. Presidents of both parties have considered this authority essential to completing good trade agreements. Our trading partners consider it essential for our success at the negotiating table. The authority is set to expire on July 1st — and I ask Congress to renew it. I know there's going to be a vigorous debate on trade, and bashing trade can make for good sound bites on the evening news. But walling off America from world trade would be a disaster for our economy. Congress needs to reject protectionism, and to keep this economy open to the tremendous opportunities that the world has to offer.

Amen to all that.  Completing the Doha round with a good result for developing countries is absolutely essential to enable the world's poor to benefit from economic growth that will lift them out of poverty.

It seems churlish to quibble with what is essentially a welcome and reasoned defence of trade liberalization and the need for a multilateral trade round.  But I can't help noticing that President Bush seems to believe the right thing for the wrong reasons.  He focuses his argument on the possible benefits for American exporters of lower trade barriers elsewhere, though he does at least mention the bigger benefit for America of cheaper imports.  The only reason that this matters is that if politicians believe that the main benefit of a trade deal is improving the opportunities for their exporters, they will tend to hold out for a trade deal in which other countries agree to make reductions in tariffs and quotas.  When they realize that the main benefit is cheaper imports, they will be more inclined to recommend market opening to other countries, but not make a trade deal conditional on it.