Trading Places.

• Author: BRAINARD, LAEL
• Position: Trade liberalization

There are many opportunities to advance trade liberalization--if the U.S. seeks them.

The jury is still out on whether President Bush will be able to score major trade victories. Many have predicted smooth sailing based on the recent Republican unity on tax cuts in the House of Representatives, the tradition of bipartisan support for trade in the Senate, and the momentum created by President Clinton's victory on the vote to grant China permanent normalized trade relations. In reality, the picture is much more complicated both at home and abroad.

America needs a trade strategy that navigates the rocky shoals between the priorities of key domestic groups and the interests of disparate foreign trade partners. There is a way forward, but it involves substantial risks.

First, progress on trade abroad hinges on building broad political support at home. There is an enticing opportunity for a Republican president to borrow a page from his predecessor's gamebook and pursue a "triangulation" strategy on trade, addressing the concerns of those whose jobs are threatened, and exploring constructive ways to improve labor and environmental protections in developing countries. Short of this, it would be better to postpone the fast track debate indefinitely than pursue a partisan bill that could result in polarization at home and signal paralysis abroad.

Second, any meaningful trade agenda must encompass the World Trade Organization (WTO). The status quo option of remaining on the sidelines, which many have advocated in the wake of Seattle, is not in America's national interest. Related to this, any successful strategy must respond to the legitimate interests of poorer nations.

Finally, America should strategically pursue a limited set of regional and bilateral agreements--rather than opportunistically agreeing to a confused patchwork of initiatives. The Free Trade Area of the Americas (FTAA) meets this bar, by helping to nurture the seeds of democracy and market reform throughout Latin America, but the Pacific 5 (P5) and several bilateral candidates do not.

Increasingly, observers on both sides of the trade debate are asking whether it is necessary or wise for America to take an activist posture on global trade talks. Even free traders wonder whether the incremental economic gains are worth the requisite political compromises.

Having been burned at Seattle, America understandably might view pursuit of a new Round as a big risk. But taking important risks for compelling reasons is what leadership is all about. And leadership on the global trade system is in America's national interest. Geopolitically, as a global power, America has a strong interest in shaping the WTO, the only global trade forum that represents nations from all regions and levels of development. Economically, global always trumps regional and bilateral; producers should be scanning the globe for the best market opportunities, not the best special deals negotiated between governments. Pragmatically, there is particular urgency because of the expiration two years hence of the so-called "peace clause" preventing disputes between the United States and European Union on agriculture.

Market access should be the central thrust of the next Round. This is in America's interest. It is also the strongest point of common interest with developing nations, who share deep misgivings at the prospect of a broad Round mandating major changes in domestic regulation. One could reasonably expect special progress in areas of America's competitive strengths: agriculture and services, since these are the unfinished business of the last Round.

Launching a Round is achievable, if we pursue limited goals informed by political reality rather than a technocrat's wish list. America's offensive agenda includes ambitious goals for agricultural and services liberalization--where we have many allies--and modest goals on social issues--where we have few allies. The key defensive points are on antidumping and protection in a few vulnerable sectors. Getting to yes on a Round requires accommodations on three fronts: with the EU, Japan, and key developing countries.

With Europe, U.S. Trade Representative Robert Zoellick and EU Trade Commissioner Pascal Lamy must leverage their much touted friendship to agree an agenda that is acceptable to key constituencies on both sides of the Atlantic. The EU's greatest sensitivities are on agriculture, the environment, and food safety. Truth be told, the European Commission (EC) has a considerable interest in getting dragged to the table on agriculture, enabling it to lay the blame elsewhere for internal reforms that are anyway essential if big agricultural producers like Poland are to join the EU without wrecking the budget.

In return, the EC must get enough diversionary issues such as investment and competition...