Land of the free?

Is Uncle Same the true champion of free trade, or just another hypocrite? By John Armstrong

It's no accident that Lockwood Smith gets on well with high-ranking American counterparts like Charlene Barshefsky.

Put the dispute over New Zealand lamb exports to one side. Smith and Barshefsky - Bill Clinton's top trade negotiator - talk the same language when it comes to cutting trade barriers, though your average (and very grumpy) Southland sheep farmer probably thinks otherwise.

Wellington and Washington preach endlessly about the need for other countries to open their markets.

In New Zealand's case, trade liberalisation is a necessity because we have cut tariffs to the bone. We rely on exports.

And we trade largely in food - and food faces higher average tariffs than most other products.

According to official Apec measures, New Zealand's tariffs now average just over 4 per cent. In contrast, the tariffs imposed by Thailand average 19 per cent, with China not far behind at 17 per cent.

The United States comes in at under 7 per cent. "The US
(has been) practising what we have preached," boasted David Aaron, a senior American trade official recently.

The preaching of the Clinton administration, however,
is at odds with the new wave of protectionism spreading across middle America and seeping into the Congress on
Capitol Hill.

This is hindering the White House's ability to take a leadership role in pushing for open markets, particularly as Congress will not give Clinton the "fast-track" negotiating authority he needs to make new trade deals stick.

The lamb dispute is the perfect example of the White House juggling short-term domestic political pressures with America's longstanding ethos of free trade and its unwillingness to offend a reliable ally (Australia, not New Zealand).

And security matters. Asian stability is contingent on regional prosperity. Which is why, from Barshefsky down, the Americans incessantly lecture the Japanese, who impose particularly high tariffs on some products, about opening their markets to foreign goods. The US also wants Japan to take a leadership role as Apec emerges gingerly from last year's Asian downturn.

But the Americans are really annoyed with the Japanese for flooding the domestic US market with cheap steel.

They feel Japan and other stagnant Asian economies are taking advantage of America's consumption boom to get out of recession by dumping their goods on someone else, rather than go through the painful business of restructuring their own inefficient industries.

This is drastically widening America's trade deficit with the rest of the world, now running in the hundreds of billions of dollars a year. At the same time, US exporters have seen their markets in Asia dry up.

All this is fuelling the protectionist sentiment across the US, making it that much harder for Clinton to head off complaints from domestic producers, like sheep farmers, who feel they are being clouted with cheap imports.

As Richard Fisher, another senior American trade official, said at the Apec trade ministers' meeting in June, the US could simply erect trade barriers and stop bailing out the world economy. No-one wants that - especially the US. Two-thirds of its trade is now with Apec countries.

Instead, the Americans are demanding some kind of quid pro quo, telling other economies that if they do not cut their own tariffs they will only fuel that protectionist feeling.

At the same time, the Americans are sending a firm message that countries will face safeguard actions and anti-dumping duties if they flood the US market with cheap products.

The scale of this flood can be judged from the workload of the US International Trade Commission, the body that ruled that lamb imports posed a risk of serious injury to the local industry. Paint brushes from Indonesia, non-frozen apple concentrate from China, live cattle from Canada, hot-rolled steel from Brazil - the list of complaints in front of the commission from domestic producers is seemingly endless.

New Zealand may feel holier than thou because its lamb is entering the American market subsidy-free. But the US argues that lamb was being sold in supermarkets at cut-rate prices, designed to destroy American farmers.

So Clinton slapped on tariffs. But those tariffs evaporate over three years - and were accompanied by a warning that American sheepmeat producers will have to get more efficient in the interim.

If one country's competitive export is judged another's unfair import, there is still a degree of hypocrisy in the Americans' self-righteousness.

Protecting the sheep farmers of Texas, Wyoming and Montana is also about protecting Al Gore's presidential bid.

It is not so much his Republican opponents that matter.

Gore needs protection from the protectionists in his own Democrat party. The Democrats are the voice of low-paid workers, many of whom do not feel better off as a result of free trade policies like the North American Free Trade Agreement with Mexico and Canada, and fear losing their jobs to low-wage workers south of the border.

As the Economist magazine noted in January, American trade unions are also among the Democrats' big campaign
donors.

New Zealand's bigger gripe should be that the Americans continue to heavily subsidise their agriculture, a non-tariff barrier which allows unfair competition.

The US also plays hardball in forcing countries to comply with international trade rules - and is not above waving the big stick to force compliance, as it did against New Zealand's new parallel importing laws, or in fighting the labelling of genetically modified food.

Washington argues that free trade must be fair trade. Too often, though, the world's biggest economy stands accused of indulging in the luxury of insisting that other countries "do as I say - not as I do".