Three Cheers for Free Trade

The world is bigger than Wall Street.

HONG KONG

With a bailout plan that will cost taxpayers $700 billion, is there any good news for the U.S. economy? The silver lining in this dark cloud is that free trade is still alive and kicking.

[Susan Schwab]

That’s one big reason — think Smoot-Hawley — that constant invocations of the Great Depression are off the point. Thankfully, some world leaders remember the lessons of the 1930s. Phil Goff, New Zealand’s Minister of Trade, tells us: “At a time when the current financial crisis is producing a crisis of confidence, embarking on free trade projects is a positive sign” to the world.

The U.S. Trade Representative, Susan Schwab, announced this week the beginning of negotiations to join a Trans Pacific Free Trade Agreement that already includes New Zealand, Singapore and Chile. That may not sound like much, but the Pacific nations are also wooing Australia and Vietnam, who have expressed interest, as well as Japan, the world’s second-largest economy. The Trans-Pacific region — countries at either side of the Pacific Ocean — accounts for 60% of global GDP.

And Ms. Schwab could use a win: U.S. free-trade deals with Thailand, Malaysia and South Korea are hung up in Congress. If the new deal goes ahead, it would eliminate all tariffs within 10 years. For the average American consumer that would mean, in particular, access to cheaper dairy products from New Zealand, instead of relying on the heavily subsidized domestic industry.

Removing trade and capital barriers during a financial meltdown is sound policy. Former Treasury official Fred Bergsten recently pointed out that, amid all the gloom on Wall Street, the economy has continued to grow, thanks largely to exports. “This export boom has saved us from recession over the past year and, despite the recent financial turmoil, is likely to continue doing so,” he says.

Let’s hope the presidential candidates take note.

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