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June,
2002: The Yankee Trader
By Greg Rushford
Published in the Rushford Report
On May 23, U.S. Trade Representative Robert Zoellick
issued a statement saying that he was “delighted that the Senate joined
the House of Representatives in passing a Trade Promotion Authority bill
that affirms and advances the President’s initiative to open markets.”
This negotiating authority, Zoellick added, “will provide the
administration with the tools to pry open markets and negotiate the best
deals for our workers, farmers, and consumers.”
But when you get down to it, the World Trade Organization’s Doha
Round isn’t really about the
United States
prying open foreign markets, although that’s part of it. The true
measure of the success or failure of the
Doha
negotiations — which are ambitiously scheduled to conclude by the end of
2004 — will turn on the ability of the rich countries to open their
markets to the WTO’s poor countries.
This means two things:
Europe
and the
United States
will have to summon the political will to open their markets to some of
life’s basic staples: food, clothing, and shoes. As everyone knows, the
EU and US are stuck in awful protectionist political positions on food and
clothing, thanks to the influence of their respective domestic lobbies. On
food, Australian Trade Minister Mark Vaile got it right when he told
reporters late last month that the
Doha
round will fail unless agriculture is dealt with. “We aren’t going to
be dudded on agriculture in this round the way previous governments were
in the Uruguay Round, where it was sidelined and it wasn’t treated in an
acceptable manner,” Vaile declared.
Let’s take a closer look at some of the details that will be at
the heart of the
Doha
negotiations and that suggest what the
United States
will have to do about their trade barriers to shoes and clothing.
Consider the
U.S.
tariff regime, which taxes the poor more heavily than the rich:
•
Last year, the average Cambodian earned .72 cents per day, while
the average Singaporean earned $84.
Singapore
exported $14.8 billion to the
United States
last year, while
Cambodia
exported only $964 million. So guess which country had to pay the most
taxes to the U.S. Treasury?
Cambodia
. The U.S. Treasury raked in
$152 million in tariffs applied to
Cambodia
’s exports — that’s a 15.8 percent tax. But
Singapore
’s exports brought in only $96 million, as they were taxed by the
United States
at only 0.6 percent.
•
The United States Treasury reaped $331 million in tariffs last year
for exports from
Bangladesh
. That is $1 million more than
France
paid for its exports to the
U.S.
How could this be, as
Bangladesh
only sold us $2.3 billion worth of goods, compared to $30 billion from
France
? It’s simple. The
United States
taxes exports from
Bangladesh
at some 14 percent on the average, while
France
’s exports are taxed at an average 1.1 percent rate.
•
Mongolia
(annual per capita GDP, $390) sold the U.S. $143 million worth of products
last year, which were taxed at 16.1 percent and benefited the U.S.
Treasury to the tune of $23 million. At the same time,
Norway
’s $5.1 billion in exports to the
U.S.
were subject to tariffs of 0.5 percent and brought in $24 million in
taxes. The average Norwegian earns $33,470 a year.
•
The
United States
has eliminated all tariffs on computers, semiconductors and related goods
pursuant to the 1996 Information Technology Agreement.
U.S.
effective tariff rates overall are 1.6 percent. But look at how the
United States
taxes poor countries.
Cambodia
,
Bangladesh
and
Mongolia
are not the only poor countries to be hit hard by
U.S.
tariffs. Average U.S. tariffs for Mauritius last year were 12.8 percent;
Nepal paid 12.3 percent; Micronesia, 12.9 percent; Burma, 15.7 percent;
Sri Lanka, 14.1 percent; Cape Verde and also Palau, 16.4 percent; and
Macao was hit with 16.6 percent U.S. tariffs.
I know these things because I have read a brilliant 17-page paper
written for the Progressive Policy Institute by Edward Gresser. PPI is the
think tank of the centrist Democratic Leadership Council, which basically
represents the wing of the party that favors international trade. Yes,
there are such people in
Washington
. “The DLC is in line with the Party’s heritage in favor of open
markets, from FDR to JFK,” Gresser says. “I think there is plenty of
room in the Democratic Party for people in favor of open trade.”
Gresser, 39, is a Democrat from
Massachusetts
who came to
Washington
in 1989. He wrote speeches for Sen. Max Baucus (D-MT) for five years, with
a focus on China‘s accession to the World Trade Organization. From April
1998 to the end of the
Clinton
administration, Gresser was a policy adviser to U.S. Trade Representative
Charlene Barshefsky, writing speeches and drafting congressional
testimony, again with an eye to bringing
China
into the WTO.
These days, Gresser’s eye in on tariffs.
“On average, the world’s least-developed countries pay tariffs
four or five times higher than the richest economies,” Gresser reports
in
America
’s Hidden Tax on the Poor.
Why?
Poor countries tend to made products like clothes and shoes, which
have become “the main sources of
U.S.
tariff revenue,” Gresser notes. Last year, shoes and clothes amounted to
only 6.7 percent of all the merchandise imported into the
United States
. Yet, of the $18.6 billion in tariff revenues collected by Uncle Sam,
shoes and clothes amounted to $8.7 billion — nearly half of all tariffs
collected.
Yet tariffs for clothes and shoes, the taxes average more than 11
percent. In some cases, they rise to 20 percent, 30 percent, “or even
above 40 percent,” Gresser notes. “To look at the problem in a
different way, for all merchandise but clothes and shoes, effective
tariffs are 0.9 percent; at 11.4 percent, effective tariffs on shoes and
clothes are over twelve times higher.”
Gresser asserts that it is wrong that
Cambodia
,
Bangladesh
and such impoverished countries paying tariff rates as much as 30 times
the rates applied to the European Union and wealthy countries like
Japan
. “One need not adopt the theory popular in
India
— of a deliberate conspiracy against the poor — to consider this a
remarkable inequity.”
The inequities also extend to
America
’s poorer families.
Poorer women who buy their undies at WalMart instead of upscale
retail outlets like Nordstrom are taxed dearly. Tariffs on the man-made
fiber panties that WalMart offers lower-income women are 16 percent. But
the wealthier women of
America
who buy silk panties are taxed at only 2.4 percent. Likewise, men’s
shirts “present an even sharper disparity,” notes Gresser, along with
tariffs on babies’ clothes, which along brought nearly $200 million in
tariff revenues to the Treasury last year. Men’s knitted shirts made of
man-made fiber are taxed at 32.5 percent; similar baby trousers are
slapped with a 29 percent tariff.
“Thus, the poor — above all, single mothers who spend more of
their income on clothing than other families — lose far more of their
income to tariffs than wealthy or middle-class consumers,” Gresser
points out.
For the poor, things are only going to get worse. “As the final
American Uruguay tariff commitments come into effect, tariffs on silk
panties will drop to a final level of 1.1 percent, and on panties from
man-made fibers only to 16 percent,” Gresser relates.
The answer that Dresser offers is the same as colonial
America
gave to the hated Stamp Tax: eliminate the tariffs that are cruel taxes on
the poor. This should be a top
U.S.
priority in the WTO’s Doha Round of trade negotiations: tearing down
protectionist barriers that help keep the poor countries poor. (Many
impoverished countries also want to maintain their own domestic
protectionist schemes that have contributed to their poverty in the first
place, but that’s another story.)
No doubt USTR Zoellick would love to do exactly this. He
understands how that
U.S.
textile protectionism hurts, not just people in poor countries, but
U.S.
consumers as well. If it were up to him, Zoellick surely would agree to
dismantle
U.S.
tariffs on clothing and shoes as quickly as possible.
The problem, of course, is that the decision isn’t just up to
Robert Zoellick. The man who calls the shots is George W. Bush. And the
problem with the president is that he seems to have been captured
politically by the
U.S.
textile lobby (and the farm lobby, and the steel lobby, and so on).
Bush hasn’t even been willing to fight to give quota relief on
textiles from
Pakistan
, despite that country’s importance in the war against terrorism.
Because of the president’s lack of political courage, the
prospects for a successful conclusion of the Doha Round by the end of
Bush’s (first, maybe only) term in office now look extremely dubious.
Still, because ideas are so powerful, Ed Gresser’s powerful
analysis is going to resonate as the Doha Round progresses. His case can
not be refuted.
Sooner or later, the
United States
will have to show the world that it is serious about free trade.
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