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Expanding Trade: A Powerful Weapon Against Terrorism

By John O. McGinnis
December 01, 2003
By John O. McGinnis [1]

Summary

Defending the Homeland will involve more than beefing up security for the nation's airlines and other infrastructure, hiring additional law enforcement personnel and developing mechanisms to guard against biomedical threats. To be sure, these steps must be taken immediately.

But defending the Homeland also requires us to focus on broader issues and longer term threats to American security. One such threat is the desperate poverty in many Muslim nations - poverty that deprives hundreds of millions of people of both the physical necessities of life and hope for any improvement in their tomorrows. These environments produce receptive audiences for the radical, hate filled anti-American harangues of Osama Bin Laden.

American generosity must now be extended beyond our traditional humanitarian efforts. We must now reach out to the developing nations of the world in ways that help them develop their economies. Economic development brings jobs, improvements in health and education standards, and overall rising standards of living, bringing a new sense of hope to turn aside the false appeal of Osama Bin Laden and other would -be terrorists.

The link between trade and economic development is well established. Less developed countries must be encouraged and helped to produce goods and services, and those goods and services must be allowed to enter the world's economy through trade with other nations. The United States and other developed countries must be willing to engage developing countries as full economic partners - each country using its comparative advantage to increase its trade and create economic growth for its people.

In addition to economic growth, trade brings two other critically important values to the developing world, values that ultimately benefit the United States as well. Trade brings new products and services to the developing world. It brings new people and new ideas into contact with peoples in the developing world and opens them to ideas of freedom and democracy - powerful weapons against tyrranny and terrorism.

Second, trade is a potent weapon against corruption in government. The transparent regulations that the world trade regime encourages will improve social governance in the developing world. Clean government will facilitate economic development and simultaneously remove a weapon from Bin Laden's armory.

Obviously, trade is no substitute for military and diplomatic actions against current terrorist threats, but in the long run it can transform social conditions in a way that is very unfavorable to terrorism. Trade Promotion Authority is needed now to allow trade negotiations to begin to move us toward a new economic partnership with the developing world - a partnership that may well serve as the best long term Homeland Defense for our children and grandchildren.

Trade Is An Important Weapon Against Poverty.

Ignorance and poverty are the greatest friends of the terrorist, because the ignorant and impoverished are easy prey for the conspiracy theories and millennial religious visions that are staple of the Islamic fanatics. In contrast, as people become better educated and more prosperous, they will tend to oppose the arbitrary and theocratic rule promised by the terrorists as a threat to their prosperity and freedom.
To walk among the people of the developing world is to witness real poverty and inequality-not the relatively small measure of poverty and inequality observed within Western society. In Western society, whatever the formal measures of inequality, there has been a large convergence in ways of life both within developed nations and among them. Even our relatively poor citizens have access to what only the extremely wealthy had a hundred years ago. To travel in the developing world, however, is to see the kind of raw poverty that blights all opportunity, makes the relatively young seemed aged, and the previously healthy prematurely infirm.

Free trade is a way to help the world's poor, including those whose poverty is life threatening. At a theoretical level, trade opens new markets in areas where developing nations produce efficiently and thus allows the poor to raise their income. It also brings them into the web of exchange, encouraging the skills of entrepreneurship and habits of industry that will lift them from poverty. The additional skills and income in turn help give the poor an independence from their governments and thus leverage to push for changes in their own nations that will better their lot.

Empirically, there is ample evidence that trade helps poor countries become more wealthy [2]. One major difference, if the not the major difference between developing countries that have prospered and those that have not, is their participation in world trade [3]. Moreover, empirical evidence also shows that trade helps those lowest in the income scale of developing nations as much as those higher on the income scale. [4]

Trade With Developing Countries Benefits Both Developed And Developing Countries

Free trade also helps make all nations wealthier, even as it provides benefits to the least fortunate. It provides cheaper goods for our consumers and new markets for the goods we produce most efficiently. While evidence is conflicting whether it increases inequality within wealthier countries, we have evolved government mechanisms from progressive taxes to targeted retraining grants to compensate for losses trade imposes on a few of the less well-off. This option is far more efficient than simply blocking trade [5].

Moreover, the benefits of free trade to exporting groups in developed countries are crucial to obtaining open trade for developing countries, because these benefits mobilize exporters to fight for lower tariffs in their own countries. Protectionist interest groups have substantial leverage in developed democracies and use that leverage to block imports of goods from other countries [6]. The World Trade Organization, however, provides a framework for reciprocal tariff reductions and reciprocity gives exporters in developed countries an incentive to lower tariffs in their countries so that they can obtain lower tariffs abroad [7]. This political structure makes rich exporters the guarantors of the interest of the poor in the world in free trade. Because reducing poverty is an important step in fighting terrorism, the world trade regime itself is an important institution for fighting terrorism.

Rising Standards of Living from Trade Enhances Respect for Civil Rights

Increasing prosperity is not, of course, the only social good that may reduce terrorism. Civil rights are also helpful to waging the war against terrorism, because they create nonviolent outlets for social change in countries whose repressive inward policies turn their citizens to directing their energies in destructive ways against the outside world. But trade agreements can also facilitate the expansion of civil rights in developing countries not through fiat but through encouraging a process which will generate pressure for such rights internally. Civil rights are highly correlated with wealth of society [8]. This correlation accords with historical evidence that because of prosperity a rising middle class demands civil and political rights to help secure its swelling wealth against the dangers of tyrannical government and political instability [9].

The potential of multilateral trading agreements to cascade into civil rights has one important advantage over the direct international pursuit of human rights: it is more likely to be honored by the most despotic countries [10]. Many countries, particularly developing nations that have signed the Universal Declaration on human rights as well as the most important human rights conventions, continue nevertheless systematically to abuse the civil and political rights of their people and resist basic democracy [11].

In contrast, despots are more likely to honor trade multilateralism, because expanding trade will make their nations richer and therefore redound to their short-term personal advantage by permitting them to increase their tax revenues and other exactions. Therefore by offering attractive bait to hook despotic regimes multilateral trade agreements may actually provide a more effective, if circuitous, route to securing civil and political rights than civil and political rights conventions themselves. In this way trade agreements also help in creating social conditions inhospitable to terrorism.

Trade Opens Developing Countries to People, Goods and Ideas From the West

Trade serves as a potent long term weapon against terrorism in two other ways -- by opening developing countries to the rest of the world and by causing reforms that help to eliminate official corruption.

Free trade brings the developing world into more contact with the products, practices and business people of the developed word. These products and entrepreneurs bring with them the ideas of the West both directly and indirectly. For instance, labor saving devices free up time for women from household work and, thus liberated from many tedious daily chores, they will be even less willing to tolerate those terrorists who fight for political ideals that would make them prisoners in their own homes. More generally, more trade means more interchange of people and ideas. Insofar as both ideas and people become vectors of the ideals of freedom and prosperity, they weaken the ideological ground for radical Islamic and other forms of terrorism [12].

Trade Regulations Help Fight Corruption

Second, trade helps to fight corruption. The World Trade Organization has increasingly required regulations affecting trade to be transparent. For instance, nations that accede to the WTO must publish regulations that affect traded goods and services and must provide fair opportunity for notice and comment on these regulations. The reason the world trade regime imposes these requirements is to prevent discrimination against foreign products. But the transparency requirements also have important ancillary advantages to citizens in the developing world. The WTO rules make it harder for their rulers to frame government regulations in secret and steer economic opportunity to their cronies and supporters. Transparency thereby reduces official corruption. Since terrorism appeals to those hurt by official corruption, reducing corruption should diminish Bin Laden's appeal.

Trade and Environment Restrictions Will Hinder Economic Development

Some groups in developed nations are seeking to limit trade unless the WTO moves toward imposing labor and environmental standards on exported products. This stance, taken at the behest of labor unions and other wealthy interest groups in the developed world, represents a dramatic break from the policies pursued by every post-war President from Truman to the elder Bush that favored freer trade without regulatory strings. As leaders of developing nations understand, this new trade regime would retard, perhaps even end, their economic progress. Developing nations cannot afford our labor and environmental standards, just as they cannot afford many other goods and services that the West takes for granted.. (See John O. McGinnis and Mark R. Movsesian, The World Trade Constitution, 114 Harv.L.Rev. 511(2000).) Moreover, industries and workers in the developing world lack the resources or lobbyists to defend their interests in the distant international forums in which regulations would be forged. As a result, international rules would tend to block exports from developing nations, dealing a blow to the prospects of the poor in the developing world. This kind of regime could thus retard the forces that diminish the conditions in which terrorists can thrive.

Thus our objective must be to deepen world trade through new agreements that reciprocally reduce tariffs. International environmental and labor standards not only fail to advance this enterprise, but they are counterproductive, particularly as they made lead to resentment in the developing world about what citizens there will see as attempts to dictate how they choose to govern themselves.

Trade Promotion Authority Is Needed Now to Begin Trade Negotiations

Trade promotion authority would permit the President to submit legislation carrying out a future world trade agreement under streamlined legislative rules that would speed passage without amendment or threat of filibuster. Trade promotion authority mandates that the President pursue certain trade objectives and consult with key congressional committees on trade, such as the Ways and Means Committee and the Senate Finance Committee on the progress of negotiation. In return the President receives assurance of an up-down vote in the House and Senate. Such authority provides an essential impetus to global trade talks because other countries will not begin seriously to negotiate if they lack reasonable assurance of ratification by the leading trading nation in the world.

All Presidents since Nixon have sought such power under the rubric "fast-track authority" and all but President Clinton have received it. But as the administration's decision to abandon this old label in favor of a more opaque, bureaucratic appellation suggests, it is not at all clear that this concept enjoys as wide and open support as it once did. Many in Congress oppose the trade promotion authority that President Bush seeks because it does not require the introduction of international labor and environmental standards into trade pacts. Some labor unions and environmental organizations want to impose higher regulatory standards on foreign industries as the price exacted for selling foreign goods in the United States.

But the justification for providing accelerated legislative procedures for tariff reductions does not extend to legislation imposing environmental and labor standards. Throughout our history we have profited from the cumbersome rules encrusting the legislative process, including amendments and filibusters, because they protect liberty and restrain special interests from getting benefits for themselves at the expense of the public. An arduous legislative process creates a higher hurdle for bills to surmount, screening out special interest legislation and delaying ill-considered and illiberal enthusiasms until passions have cooled.

International trade agreements lowering tariffs, however, do not need these high hurdles because they promote liberty and strike a blow against special interests. Reducing tariffs overseas frees our efficient producers from restrictions that reduce their exports. Reducing tariffs at home permits our consumers to enjoy better goods at lower prices. Far from being special interest legislation, tariff reductions represent the public interest's triumph over powerful interest groups, because domestic producers and unions that enjoy the fruits of tariffs can more effectively lobby the government than can consumers who benefit from international competition.

Environmental and labor standards, in contrast, potentially interfere with liberty by blocking trade. Moreover, organized interest groups like unions and companies who stand to lose from international competition provide ready sources of support for such standards. Thus, any new structure for international and labor and environmental standards should surmount the ordinary legislative obstacles that safeguard the public interest. Indeed, as discussed above, we particularly need an extended national debate about internationalizing environmental and labor standards because, unlike tariff reductions, such standards are unprecedented and deeply controversial in the rest of the world.
The addition of environmental and labor standards to trade agreements would also change the way in which we govern ourselves. Reducing tariffs is a straightforward task, because it involves simply removing barriers to voluntary transactions and then preventing countries from discriminating against foreigners in their internal taxes and regulations. A judicial process run by a small staff of the World Trade Organization can police such obligations. In contrast, formulating appropriate environmental and labor standards for the world to follow would require a much larger bureaucracy charged with generating and carrying out a vast set of regulations. As such it would raise serious questions about whether the United States and other countries were giving up sovereignty to international organizations and reducing the accountability of domestic officials for regulatory decisions. Surely we should have a full scale debate, complete with amendments and extended deliberations, before sliding into a new regime of global governance.

In the interim, expanding free trade can continue to create wealth among nations, increasing the living standards of our citizens at home even as it helps feed and clothe the truly impoverished in the developing world. Because it is such an important weapon against terrorism, we thus cannot afford to await the results of a larger debate about environmental and labor standards before starting the next round of world trade negotiations. The terrorists by their choice of targets show that they know that free trade is one of their deadliest enemies. The question before the West is whether it will summon the will, as it did in the cold war, to rearm this silent but relentless ally of freedom for the long struggle ahead.

1. Professor, Benjamin N. Cardozo Law School
2. L. Alan Winters, Trade and Poverty, Is There a Connection?, in SPECIAL STUDIES 5: TRADE, INCOME DISPARITY AND POVERTY 43 (World Trade Org. ed., 1999), http://www.wto.org/english/news_e/presoo_e/pov3_e.pdf: see also David Dollar & Art Kraay, Growth Is Good for the Poor5 (Mar. 2000) (unpublished manuscript), http://www.worldbank.org/research/growth/pdfiles/growthgoodforpoor.pdf (citing a World Bank study that, using data from 80 countries over four decades, confirms that openness to trade boosts economic growth and that the incomes of the poor rise proportionately with overall growth).
3.Dollar & Kraay, supra note 1.
4.Id.
5.See Winters, supra note 1, at 43 (arguing that nations should seek to alleviate the hardships caused by trade rather than abandon all attempts at reform). See also Jim Chen, Globalization and Its Losers, 9 MINN. J. GLOBAL TRADE 157, 212 (2000).
6.See DENNIS C, MUELLER, PUBLIC CHOICE II 238-42 (1989).
7.See Jeffrey L. Dunnoff, Understanding Asia's Economic and Environmental Crisis, 37 COLUM. J. TRANSNAT'L L. 265, 277 (1998) (reviewing ASIAN DRAGONS & GREEN TRADE: ENVIRONMENTAL ECONOMICS AND LAW (Simon S.C. Tay & Daniel C. Esty eds., 1996)) (discussing the Uruguay Round's "grand bargain," in which developing countries made "concessions in services and intellectual property" in return for "concessions in market access in sectors... of export interest.").
8
.See James D. Gwartney, et al, Economic Freedom of the World, 1975-1995 xxii (Fraser Institute 1995) (showing that citizens in wealthier countries enjoy greater protection for civil rights than those in poorer countries).
9.See John O. McGinnis, A New Agenda for International Human Rights: Economic Freedom, 48 CATH L. REV. 1029, 1032 (1999).
10.See John O. McGinnis, Trends In Global Governance: Do They Threaten American Sovereignty? The Political Economy of Global Multilateralism, 1 CHI. J. INT. L. 381, 392 (2000).
11.Id.
12.Id.