Multilateral liberalisation would be more effective in reducing trade discrimination than preferential free trade agreements, write Jagdish Bhagwati, professor of economics and law at Columbia University and senior fellow in international economics at the Council on Foreign Relations and Arvind Panagariya, professor of economics and Indian political economy at Columbia University.
The following contribution is authored by Jagdish Bhagwati, professor of economics and law at Columbia University and senior fellow in international economics at the Council on Foreign Relations and Arvind Panagariya, professor of economics and Indian political economy at Columbia University.
"Economists generally agree on the advantages of openness in trade. But the case for non-discrimination in trade is also a compelling one.
So good trade policy should push for multilateral trade liberalisation such as at the Doha Round, rather than preferential trade agreements (PTAs) such as free-trade areas (FTAs), and also ensure that any retreat into protectionism does not degenerate into discriminatory trade practices.
The last G20 meeting in Canada was a disappointment on the first front. At the insistence of the United States, an earlier reference by the G20 to a definite date for completing the Doha Round was dropped. Instead, unwittingly rubbing salt into the wound, [US] President Barack Obama announced his administration's willingness to see the US-South Korea FTA through.
On the second front, there are distressing recent reports that the US Commerce Department is exploring ways to strengthen the bite of anti-dumping actions, which are now generally agreed to be a form of discriminatory protectionism aimed selectively at successful exporting nations and firms.
Equally distressing is Obama's decision on 13 August to sign a bill, approved in a rare special session of the Senate, that raises visa fees on H1(b) and L-1 temporary work visas in order to pay for higher border-enforcement expenditures.
This proposal gained its legs from long-standing worries about the H1(b) and L-1 programs on the part of Republican Senator Chuck Grassley and Democratic Senator Richard Durbin, and had recently attracted the sponsorship of the influential Democratic Senator Charles Schumer of New York. Schumer had long agitated against 'outsourcing' as inimical to American economic interests, even allying himself with the supply-side economist Paul Craig Roberts.
But he gained clout with the onset of the current crisis, and concern over intractable unemployment numbers is enabling politicians to justify all sorts of superficially attractive remedies.
Thus, it was asserted that a tax on foreign workers would reduce the numbers coming in and 'taking jobs away' from American citizens. Many supporters of the proposal claimed, incoherently, that it would simultaneously discourage foreign workers from entering the US and increase revenues.
Obama's surrender exemplified the doctrine that one retreat often leads to another, with new lobbyists following in others' footsteps. Perhaps the chief mistake, as with recent 'Buy American' provisions in US legislation, was to allow the Employ American Workers Act (EAWA) to be folded into the stimulus bill. This makes it harder for companies to get governmental support to hire skilled immigrants with H1(b) visas: they must first show that they have not laid off or plan to lay off American workers in similar occupations."
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(Published in partnership with Project Syndicate.)