Trading Places

April 6 1997 3:30 AM

Trading Places

Why is Clinton sabotaging his one unqualified success--the World Trade Organization?

We all know why trade with China is vital: It exposes that country's executives and entrepreneurs to the democratic civilizations of the industrial West. It also instructs them about how things can be different from what they are in today's China--where all power resides in the bloody hands of a narrow oligarchy and a broader party of bootlickers. The best way to change China's abysmal human-rights record is to "engage" China so that its government has a stake in the good opinion of the rest of the world.

And we all know why no trade with Cuba is vital: It would give Fidel Castro and his lieutenants a powerful boost. Prosperity from trade would strengthen the regime and delay democratization. The best way to nurture civil society and dissent in Cuba is by embargo. Only by making the economic failure of the Cuban regime crystal clear can the United States "help" Cuba.

This Washington hypocrisy is bipartisan: Congress is eager to vote for sanctions on Cuba and reluctant to vote for sanctions on China. The president is eager for "engagement" with China and happy to sign the Helms-Burton act punishing Cuba. But today's inconsistency is no worse than the inconsistencies under George Bush, Ronald Reagan, and other prior administrations. The legacy of the Cold War, the hatred of Castro among Cuban emigrants, provocations like the shoot-down of "Brothers to the Rescue" planes over international waters (along with Castro's belief that he is strengthened by confrontation with the United States) have brought us to this point, where American politicians are comfortable with one set of principles for the Caribbean and another for the Pacific. The embargo has been tough luck for 12 million Cubans who cannot buy or sell in the United States, but it has made little difference otherwise.

But the United States' different principles for trade with Cuba are about to cause it trouble, thanks to the World Trade Organization--the newly established referee to police international trade disputes that Clinton was so proud to establish (and Congress to vote for) at the end of 1994. The WTO is supposed to ensure that countries stick to the spirit and letter of the trade-liberalization agreements they have signed, and to authorize sanctions against countries that break the trade rules they had agreed on. It keeps other countries from breaking trade commitments that benefit the United States in exchange for keeping the United States from breaking trade commitments that benefit those countries, and it keeps all of us from indulging in the everyone-loses pattern of trade sanction and retaliation. If we in the United States are the good guys more than half (or even half) the time, a strong WTO is in our interest.


Y et now the White House--noticing the WTO for the very first time since the signing ceremony--is trying to make sure it gets off to a bad start. Last year's Cuba-punishing Helms-Burton act denies U.S. visas to executives of companies that use buildings or equipment seized by Fidel Castro, and threatens the companies themselves with financial judgments by U.S. courts. Because of Helms-Burton, the United States is threatening to fine Wal-Mart if its Canadian subsidiary sells Cuban-made pajamas, and is denying Italian executives visas to the United States.

Europeans and Canadians point out that Helms-Burton infringes upon their nations' sovereignty and violates U.S. commitments under the WTO. They are right. In retaliation, Canada promises to fine the U.S.-based Wal-Mart's Canadian subsidiary if it does not sell Cuban pajamas. The Europeans ask that the WTO hear the case and authorize sanctions against the United States. This is exactly the kind of messy dispute that calls out for a referee--like the WTO.

But the United States counters that 12 million Cubans threaten the "national security" of 260 million Americans, and that the WTO has no jurisdiction over such national-security matters. The Clinton administration declares it will boycott any hearing the WTO schedules.

Now this is a strange position for the president to take. The Helms-Burton clash is shaping up to be the WTO's first big case. A strong WTO will block a lot of measures that hurt the U.S. economy in the long run, if it is allowed to gain strength and authority. If the WTO proves powerless in its first big case, all will observe that its rules are only binding when the strong wish them to be. The point of having the WTO as a referee would be lost. And a chance to remove trade disputes from the cycle of unilateral sanction and subsequent retaliation would be lost as well. If the administration "wins" the dispute over the jurisdiction of the WTO, then in the long run, the U.S. economy loses.

Trade liberalization has been the principal (and by some counts, the only) achievement of the Clinton administration. The creation of the WTO was the capstone of trade liberalization. The WTO had, in fact, been first proposed by Franklin D. Roosevelt and Harry S. Truman. It was one of three sister organizations (the other two being the International Monetary Fund and the World Bank) they had sought to establish. They had wanted to make the post-World War II international economy a free-trade, free-investment economy oriented toward growth--in sharp contrast to the pre-World War II economy riddled with high tariffs and import controls and oriented toward stagnation. But tariff-loving senators killed the WTO in the late 1940s.

Thus, the putting-in-place of the final piece of Roosevelt's and Truman's grand design for a free world--a piece that they had tried and failed to put in place in their day--would be an accomplishment to be proud of.



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