Press Releases 2001

2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | 1999 | 1998

December 6, 2001

Major victory for trade

Washington--The House today passed legislation granting President Bush trade promotion authority. Daniel Griswold and Aaron Lukas, associate director and trade policy analyst, respectively, at the Cato Institute's Center for Trade Policy Studies had these comments:

Daniel Griswold: "The vote today puts the United States back in the business of promoting a more open and peaceful world trough free trade. Now it's up to the administration to turn TPA into real agreements that lower barriers to trade abroad and here at home. Leaders in both parties in Congress need to work together to restore the post-war consensus on free trade that served our nation so well in our long struggle against global communism. That consensus is needed more than ever today in our fight against global terrorism and the poverty and isolation that breeds it."

Aaron Lukas: "The passage of trade promotion authority is a big victory for the American people. It will eventually mean lower prices, higher-paying jobs, and a more stable global economic environment. Those legislators who bucked special-interest pressure and voted to defend the freedom of Americans to trade should be applauded. Those who toed the protectionist line should be ashamed."

December 4, 2001

Costs of U.S. sugar program outweigh benefits, study says
Small number of growers reap benefits, consumers and economy pay the price

As they enjoy their holiday cakes, cookies, and candies this season, most Americans remain unaware that they are paying too much to satisfy that sweet tooth. As a new Cato Institute Trade Briefing Paper shows, the U.S. government refuses to revoke one of its most egregious trade policies, its sugar program, and American consumers are left to pay the price. In "America's Bittersweet Sugar Policy," Mark Groombridge, former research fellow at the Cato Institute's Center for Trade Policy Studies, exposes the harsh truth of the U.S. sugar policy, explaining that, "A very small number of sugar growers receive enormous benefits, while the costs of providing those benefits are spread across the U.S. economy, specifically to consumers and confectioners."

The sugar program raises prices for consumers through trade quotas that restrict price competition. Only a limited amount of foreign sugar is allowed into the United States, which shields U.S. sugar makers from real competition. The sugar program also imposes costs on taxpayers because the U.S. government must buy and store excess sugar to maintain artificially high domestic prices. To quantify these costs, Groombridge cites numerous governmental and nongovernmental surveys:

• The U.S. General Accounting Office estimated that the sugar program cost domestic sweetener users (sugar cane refiners, food manufacturers, and consumers) $1.9 billion in 1998.
• The U.S. International Trade Commission concluded that abolishing the U.S. program would result in a net annual welfare gain to the U.S. economy of $986 million.
• The U.S. Department of Agriculture estimates the program will cost the government an additional $2 billion over the next 10 years to buy and store excess production.

In addition to the costs borne by consumers, the sugar program is also responsible for destroying jobs in sugar-using industries; impacting the environment by encouraging sugar production in ecologically sensitive places; and threatening trade negotiations, as trading partners point out the inconsistency of these policies with the U.S. demand for lower trade barriers abroad. Groombridge concludes that, "It is time for our rhetoric on free trade to be reflected in all of our policies, even those dominated by powerful lobbies."

Trade Policy Briefing no. 13
(/pubs/pbs/tpb-013es.html)

November 8, 2001

Trade Not to Blame for Job Losses

Three members of Congress are holding a press conference today to release a study that supposedly documents job losses caused by the North American Free Trade Agreement (NAFTA). Daniel Griswold, associate director of the Cato Institute's Center for Trade Policy Studies, had this comment:

"Blaming trade agreements for lost jobs is like blaming computers for the demise of the typewriter industry. Like technology, trade eliminates some jobs while creating new jobs in more competitive industries--leaving us richer in the end.

"The years following NAFTA and the Uruguay Round Agreements were among the most prosperous in U.S. history. Real wages rose strongly for workers up and down the income scale. Manufacturing output reached record highs. Unemployment fell below 4 percent, and inflation remained subdued. In the first four years after NAFTA, U.S. industry added 700,000 manufacturing jobs. All this good news came during a time of rising imports and exports.

"The recent spike in unemployment and loss of manufacturing jobs has nothing to do with imports. Our current downturn was triggered by rising energy prices and interest rates, and slumping demand at home and abroad. In fact, in the last 12 months, the volume of imported goods entering the United States has plunged by 10 percent, and so has the U.S. merchandise trade deficit.

"The American economy needs more trade, not the failed protectionism of the past."

November 6, 2001

Trade laws jeopardize U.S. relations with the WTO
Cato study highlights incompatibility of trade laws and WTO commitments

The administrative protectionism of the U.S. trade remedy laws has long been defended as a "safety valve" for protectionist pressure that actually serves to strengthen the U.S. commitment to the multilateral trading system. In "Safety Valve or Flash Point? The Worsening Conflict between U.S. Trade Laws and WTO Rules" author Lewis Leibowitz, partner with the law firm of Hogan & Hartson, demonstrates that the "safety valve" defense of trade remedy laws can no longer be sustained. In particular, the increasing number of World Trade Organization rulings against U.S. laws makes clear that those laws are undermining the WTO system.

"It is increasingly obvious," Leibowitz states, "that the U.S. trade laws in their current form and U.S. support for negotiated trade liberalization are not complementary but rather antagonistic and even incompatible." Within the WTO, the United States, more than any other country, is being successfully challenged for failure to abide by the multilateral rules that govern antidumping, countervailing duties, and safeguards. Leibowitz catalogs the increasing tension between the U.S. laws and multilateral rules. Some of the recent cases include:

• Korean Stainless Steel, where the U.S. Commerce Department was found to violate acceptable methods of calculating "net" prices necessary to determine dumping
• Japanese Hot-Rolled Steel, where the WTO Appellate Body ruled against the U.S. International Trade Commission's use of the "captive production" provision
• UK Lead Bar, in which the Appellate Body rejected the Commerce Department's practice of treating subsidies as continuing regardless of intervening privatization
• Lamb and Wheat Gluten, in which the Appellate Body found that the ITC had ignored other possible causes of injury in "safeguard" investigations under section 201

"U.S policymakers now face a choice between defending U.S. trade laws in their current form and defending the U.S. commitment to the WTO," Leibowitz argues. The U.S. cannot maintain its leadership role if it is widely perceived to be flouting WTO rules, and it cannot urge other countries to live up to commitments that it does not honor itself. "It is vitally important that policymakers make the right choice--and make it before the damage done is irreparable," Leibowitz concludes.

Trade Policy Analysis no. 17
(/pubs/pas/tpa-017es.html)

October 30, 2001

Safe Harbor Agreement faces uncertain future
Few participants, limited enforcement, Cato study finds

The EU-U.S. Safe Harbor agreement seeks to bridge differences between the Europe Union's top-down approach to regulating personal data and the more decentralized system that prevails in the United States. Specifically, the agreement is intended to head off a potentially costly ban by the EU on the transfer of personal information--such as people's names, addresses, birthdays, and buying habits--to the United States, which, according to the EU, lacks "adequate" data protection. In a new trade policy analysis, "Safe Harbor or Stormy Waters? Living with the EU Data Protection Directive," Aaron Lukas, an analyst at the Cato Institute's Center for Trade Policy Studies, concludes that, "Although Safe Harbor is still in its infancy, its survival is already in doubt."

Only a handful of U.S. businesses have joined Safe Harbor--a list of companies maintained by the U.S. Department of Commerce that are assumed to provide adequate data protection, as defined by the EU Data Protection Directive. Lukas cites numerous reasons why this is true:

• Many of the businesses are simply unaware of the agreement
• European officials have made only limited efforts to enforce EU privacy law
• The Safe Harbor principles are more restrictive and expensive than accepted U.S. privacy practices
• Some firms believe that it may be easier for them to enter into privacy contracts with their European partners than to join Safe Harbor

Compounding its problems, Safe Harbor faces internal European disputes over the legitimacy of the agreement, as well as concern on the U.S. side that national sovereignty has been compromised by the agreement. In addition, Safe Harbor does not cover U.S. financial institutions.

Given the weakness of Safe Harbor, Lukas recommends that U.S. policymakers consider what they will do if the agreement collapses. While recognizing that Europe has the right to set its own privacy policies, he says, U.S. officials should be vigilant in holding Europe to its existing free trade commitments. Moreover, Congress should not give in to pressure--either international or domestic--to change U.S. privacy laws. "American policymakers should recognize the many advantages that flow from a market-based privacy regime and not be bullied into adopting EU-style privacy regulations, " Lukas concludes. "Safe Harbor should not be abandoned today, but neither should it be counted on as a secure port in future privacy storms."

Trade Policy Analysis no. 16
(/pubs/pas/tpa-016es.html)

October 23, 2001

ITC's Decision will Prove Costly

WASHINGTON--"Earlier today, a significant blow was dealt to consumers and trade liberalization around the world," remarked Dan Ikenson, a trade policy analyst at the Cato Institute. The International Trade Commission issued a mixed ruling in its mammoth Section 201 investigation concerning steel, finding imports to be a substantial cause of serious injury to U.S. producers of 16 of the 33 steel product groups investigated. Despite mixed results, the affirmative findings cover products representing close to 80 percent of domestic steel production. Although remedies are not guaranteed, it is likely that the president will impose some form of quantitative restrictions by no later than February 2002.

"This type of protectionism is not free," commented Ikenson. "It represents a massive cost and burden shift to other sectors of our economy." It is costly to the downstream industries, which employ 60 workers for every one employed in steel. Manufacturers of automobiles, construction equipment, machinery and appliances will find it more difficult to compete here and abroad with foreign producers who are not burdened with artificial impediments to their steel supplies. By the same token, exporters--who account for a substantial portion of GNP growth over the past decade--should expect greater difficulties penetrating foreign markets, as U.S. protectionism encourages copycat protectionism abroad.

More Cato commentary on the Steel issue is available here.

August 2, 2001

Labor and environmental sanctions threaten higher standards
Cato report finds no evidence to support the "race to the bottom" thesis

WASHINGTON--At the heart of congressional debates about future trade agreements, including trade promotion authority, are the issues of labor and environmental standards. Progress on trade liberalization has been stymied by the current controversy over whether such standards should be enforced through trade sanctions. In "Trade, Labor and the Environment: How Blue and Green Sanctions Threaten Higher Standards," Daniel T. Griswold, associate director at the Cato Institute's Center for Trade Policy Studies, argues that, "Attempts to enforce labor and environmental standards through trade sanctions are not only unnecessary but also counterproductive."

The argument for enforcing such standards is based on the myth that nations are engaged in a regulatory "race to the bottom." However, Griswold finds no evidence to support this. On the contrary, he notes that low regulatory standards do not attract foreign direct investment (FDI) or increase export competitiveness; Nations with the highest standards attract the highest amount of FDI per capita. He claims that the outcome is, in fact, a "race toward the top." Rising incomes from trade enable poor countries to lift the "green ceiling" so that they can afford to implement higher environmental standards, says Griswold. Similarly, labor standards are highest in countries open to trade, with wages in poor countries highest in export industries and in foreign-owned firms. Griswold adds that, "Trade expansion is compatible with, and in fact promotes, higher social standards."

In addition to refuting the race to the bottom theory, Griswold finds several other problems with imposing such standards through sanctions:

• There is a lack of clear definition of what those standards should be, how compliance should be measured and who should determine whether they have been violated.
• Trade sanctions often miss their intended targets.
• Widespread opposition to sanctions among our trading partners would foreclose opportunities to lower trade barriers through new trade negotiations.

Sanctions deprive poor countries of the international trade and investment opportunities they need to raise overall living standards, argues Griswold. They also damage America's economic interests by sabotaging regional and multilateral trade negotiations, and they would prove to be an onerous and subjective task. Griswold concludes that, "The demand for trade sanctions as a tool to enforce environmental and labor standards confronts Americans with a false choice. In reality, the best policy for promoting economic growth at home and abroad--an economy open to global trade and investment--is also the best policy for promoting higher labor and environmental standards."

Trade Policy Analysis no. 15
(/pubs/pas/tpa-015es.html)

July 30, 2001

Spread of antidumping regulations threatens U.S. exports
Cato study calls for lawmakers to reassess the wisdom of antidumping protectionism

WASHINGTON--Antidumping laws have long been abused by U.S. industries seeking protection from foreign competition. In recent years, however, many other countries have begun utilizing this protectionist tool. As a result, U.S. exports are increasingly cut up in the antidumping crossfire.

In "Coming Home to Roost: Proliferating Antidumping Laws and the Growing Threat to U.S. Exports," Brink Lindsey and Daniel Ikenson, director and trade policy analyst, respectively, at the Cato Institute's Center for Trade Policy Studies, conclude that, "The rapid spread of antidumping protectionism throughout the world threatens to undo many of the liberalizing gains made through the elimination of quotas and import licenses and the slashing of tariff rates. On the global level, the integrity of the world trading system is being undermined by the increasing frequency and virulence of antidumping activity." Lindsey and Ikenson document the explosion of antidumping measures:

• During the 1990s there were 2,483 antidumping investigations worldwide--over 50 percent more than during the 1980s.
• The number of jurisdictions imposing antidumping measures jumped from 12 to 28 between 1993 and 1999. A total of 62 jurisdictions now have antidumping laws on their books.
• Between 1995 and 2000, the United States was the third most popular target of antidumping measures worldwide--trailing only China and Japan.
• The United States is a net antidumping target--there are more measures against U.S. exports than U.S. measures against imports--with respect to the 34 nations that would comprise a Free Trade Area of the Americas.

"It is past time for U.S. policymakers to widen their view of antidumping's effects," Lindsey and Ikenson argue. Before, downstream import-using industries and American consumers were left to suffer; now, with the worldwide spread of antidumping protectionism, so are U.S exporters. "With that broadened perspective, they should see that international negotiations to address the antidumping problem are emphatically in the U.S. national interest. In the WTO, or the FTAA, or in bilateral initiatives, U.S. trade officials should join together with like-minded governments to stem and then reverse the tide of antidumping proliferation," Lindsey and Ikenson say.

Trade Policy Analysis no. 14
(/pubs/pas/tpa-014es.html)

June 21, 2001

Trade not to blame for manufacturing slump, says Cato scholar
Drop in domestic demand responsible for slowing output

WASHINGTON--While it's tempting to blame foreign competition for the recent decline in U.S. manufacturing output, "the cause of the recent slump in output is not a flood of imports or a 'giant sucking sound' of manufacturing investment moving overseas, but a slowdown in domestic demand," argued Daniel T. Griswold, associate director of Cato's Center for Trade Policy Studies, in testimony before the Senate Commerce, Science and Transportation Committee today.

"U.S. manufacturing has prospered during much of the past decade, a period not only of rising manufacturing output but also of rising imports and growing trade deficits," said Griswold. Despite the recent slump, "total output remains almost 50 percent above what it was in 1992, and remains near its record peak of last year. This is not the profile of a nation that is losing its manufacturing base," he argued.

Imports are not to blame for the recent downturn, Griswold argued. "In fact, the growth of real goods imports and manufacturing output tend to be positively correlated," he said. "An expanding economy raises demand both for imports and domestic production." In addition, "The predicted flight of capital to countries with lower costs and standards never materialized," Griswold said. "If there has been any giant sucking sound since 1993, it has been the rush of global capital to the safe and profitable haven of the United States." Finally, Griswold argued, "Technology, not trade, is the great job displacer in the U.S. economy. If members of Congress are determined to stop any loss of jobs in the manufacturing sector, you would have to legislate not against imports, but against the capital investment and technological advances that are fueling the gains in manufacturing productivity."

"An open and competitive U.S. economy has been a tonic for American industry," Griswold concluded. "International competition has spurred innovation, efficiency and customer satisfaction. The biggest winners have been American families, who benefit from the lower prices, greater variety, and higher quality of products that international competition makes available."

[Full text of Griswold's testimony]

June 5, 2001

Bush goes to bat for steel companies, analyst says

WASHINGTON--The Bush administration has decided to initiate a trade case before the U.S. International Trade Commission on behalf of the U.S. steel industry, claiming that imports are causing harm to the industry and that trade protections are necessary. Cato trade policy analyst Dan Ikenson responds:

"By initiating a Section 201 case on behalf of the steel industry, the Bush administration has sacrificed the national interest to appease a squeaky, rusty wheel. Global quotas against steel imports will sock millions of American families with higher prices for cars, appliances and new homes. Higher domestic prices will make life less secure for millions of workers in the automotive, industrial machinery, fabricated metal, construction industries and others that depend on access to affordable steel. It sends a chilling message to our trading partners in the Americas and the WTO who hear our demands that they open their markets while we are closing ours. There is nothing compassionate or conservative about sticking it to the many to benefit a few politically connected corporations and unions in the steel industry."

More Cato commentary on the Steel issue is available here.

June 5, 2001

Helms-Burton Act legally and practically flawed, study says
Measure fails to achieve goals; actually strengthens Castro regime

WASHINGTON--Next month, President Bush faces an important decision with respect to U.S.-Cuba relations: whether to waive implementation of Title III of the Helms-Burton Act, which punishes foreign-owned companies that engage in supposed "wrongful trafficking in property confiscated by the Castro regime." According to a new Cato Institute study, overwhelming evidence indicates that the provision should be waived, and, more broadly, that the entire Helms-Burton Act should be scuttled.In "Missing the Target: The Failure of the Helms-Burton Act," author Mark A. Groombridge, research fellow at Cato's Center for Trade Policy Studies, finds that "Helms-Burton has antagonized our allies, further isolated ordinary Cubans from the influence of American ideas, and strengthened the hand of the very government the policy was supposed to undermine." According to Groombridge, the act has backfired:

• Because we have no formal diplomatic relations with Cuba, the United States remains the one country with which Cuba has not settled claims.
• European officials routinely point to Helms-Burton as a turning point in U.S.-European trade relations, and U.S. intransigence undermines support for valued international institutions, notably the World Trade Organization.
• Helms-Burton has failed to promote democracy in Cuba and has strengthened the hand of the Castro regime by providing a scapegoat for its own failed economic system.
• The act will actually make it more difficult to settle property claims by dramatically raising the number and value of U.S. property claims against Cuba from their current total of about $6 billion to as much as $100 billion.

"This summer," Groombridge concludes, "President Bush will have the opportunity to remove a painful thorn from the side of U.S.-Canadian and U.S.-European bilateral relations. He can do so by urging Congress to repeal the Helms-Burton Act. At a minimum, Bush should continue to waive implementation and enforcement of the most egregious provisions stipulated in Title III of the act."

Trade Policy Briefing Paper no. 12 (/pubs/briefs/tpb-012es.html)

March 26, 2001

Free trade had few real advocates in 106^th Congress
Cato study finds only 26 members support trade without barriers or subsidies

Only 26 House members fit the category of free traders in the Cato Institute's free trade ratings of the 106^th Congress, released today. Of current House members, Reps. John Linder (R-Ga.), Richard Armey (R-Texas), Steve Chabot (R-Ohio) and Jim DeMint (R-S.C.) gained the highest marks for consistently voting against government intervention in the form of both trade barriers and subsidies. A near majority of House members, 212, voted as internationalists, 24 voted as isolationists, and 43 voted as interventionists. House Republicans were only marginally more inclined to vote against trade barriers than Democrats, but they were three times more likely to vote against trade subsidies.

In the Senate, a majority of 60 voted at least two-thirds of the time against trade barriers. (No votes were recorded on subsidies.) The typical Republican senator voted against barriers 71 percent of the time and the typical Democrat 61 percent. Sens. Richard Lugar (R-Ind.) and George Voinovich (R-Ohio) scored highest, voting against trade barriers in all 15 votes.

In "Free Trade, Free Markets: Rating the 106th Congress," Daniel Griswold, associate director of Cato's Center for Trade Policy Studies, finds that "well-worn labels such as 'internationalist' and 'isolationist' do not fully capture the policy choices lawmakers face when deciding international commercial policy. The choice is not between engagement and isolation but between the free market and all forms of government intervention, including barriers, subsidies, and bailouts. The paper examines 29 key trade votes in the 106^th Congress and finds that on the basis of their voting records, legislators can be classified into four categories: free traders, who oppose both trade barriers and subsidies; internationalists, who oppose barriers and support subsidies; isolationists, who sup-port barriers and oppose subsidies; and interventionists, who support both barriers and subsidies.

"When weighing policy toward the international economy," Griswold concludes, "members of Congress do not need to choose between anti-trade, anti-subsidy isolationism and pro-trade, pro-subsidy internationalism. They can choose to vote for a coherent program to liberalize trade and eliminate subsidies--in sum, to let Americans enjoy the freedom and prosperity of a seamless free market undistorted by government intervention." The complete report contains detailed data on each congressman and senator, their respective votes, and the issues upon which they voted.

Trade Policy Analysis no. 13
(/pubs/pas/tpa-013es.html)

March 15, 2001

Global capital markets should be left open
Cato study finds IMF should not be expanded, capital flows should not be restricted

Recent financial problems in emerging economies have led to calls for a new international financial architecture. Proposals include restricting short-term capital flows and extending the International Monetary Fund's role to that of an international lender of last resort. According to a new study by the Cato Institute, "both 'reforms' would be mistakes."

In "The Case for Open Global Capital Markets," Robert Krol, professor of economics at California State University, Northridge, finds that "calls for a new international financial architecture that would include controls on international capital flows may be politically expedient, but they will be harmful to the global economy. Allowing international capital markets to determine how funds are used is the best way to raise the living standards of the world's poor." According to Krol, policymakers need to understand four key points if they desire to improve the operation of the international financial system:

• Open capital markets promote investment, efficiency, and economic growth that lead to improved standards of living. Restricting international investment denies a country those benefits.
• Controls on international capital flows harm economic performance and should be avoided. They cause slower growth and reduced standards of living.
• Government and IMF bailouts lead to excessive risk taking by both lenders and borrowers. The result is more frequent and severe financial crises.
• IMF lending and adjustment programs are ineffective and harmful. Instead of helping to create sustainable economic growth, IMF interventions promote a debilitating dependence on further IMF loans. The United States should stop funding the IMF.

These points lead Krol to conclude that "without IMF intervention, global investors will increase their scrutiny of the economic policies of emerging market economies. Countries that want access to world capital will face strong incentives to adopt market reforms. As a result, global capital will be used more prudently and efficiently. There will be fewer and less-severe financial problems. An open global capital market can thus serve as an important engine for worldwide economic growth in the 21st century."

Trade Policy Briefing Paper no. 13 (/pubs/briefs/tbp-011es.html)

February 9, 2001

Record trade deficit is nothing to fear
Anxiety rests on misunderstanding of deficit's causes and consequences, study says

WASHINGTON--Later this month, the Commerce Department will announce that the annual U.S. trade deficit has set another new record, fueling worry that it could seriously injure the domestic economy. But according to a new study by the Cato Institute, trade deficits are a sign of strength, not a cause for worry. The real danger lies in any attempt by the new administration or Congress to "fix" the trade deficit.

In "America's Record Trade Deficit: A Symbol of Economic Strength," Daniel T. Griswold, associate director of the Cato Institute's Center for Trade Policy Studies, finds that "the worries of policymakers, economic commentators, and critics of American trade policy rest on a fundamental misunderstanding of the causes and consequences of the U.S. trade deficit. Deficits are driven primarily by macroeconomic factors, in particular investment flows, and not by allegedly unfair trade barriers or declining industrial competitiveness." The report's detailed economic analysis refutes the most common allegations made about the deficit:

• Trade deficits do not cause poor economic performance; rather, they typically accompany improving economic conditions. A survey of the U.S. economy since 1973 confirms that, by almost any measure--economic growth, employment, industrial production, poverty reduction--the economy has performed better in years in which the trade deficit rose than in years in which it shrank.
• Overall and bilateral trade deficits are not the cause of net job losses in the U.S. economy. During years of rising deficits, the unemployment rate has fallen by 0.4 percent. Claims that agreements such as PNTR with China will cost hundreds of thousands of jobs are based on faulty analysis.
• The trade deficit does not lead to "deindustrialization." In fact, the growth of real goods imports and manufacturing output tend to be positively correlated. That is, as manufacturing output rises in the United States so do imports of goods, adjusted for price changes.
• America's annual trade deficits are sustainable as long as the United States remains a safe and profitable destination for the world's savings. The accumulating net foreign ownership of U.S. assets--America's so-called foreign debt--does not threaten our sovereignty, our ability to finance that investment or our continued economic expansion.

America's current economic slowdown lends credence to this analysis, Griswold asserts. "In the last few months, almost every major economic indicator is down, and the monthly deficit figures have fallen right along with them," he says. "Proponents of smaller deficits should be careful what they wish for; they might just get it."

Trade Policy Analysis no. 12
/pubs/pas/tpa-012es.html

[top]