Rich’s trade guy writes in response to today’s column:
Jonah: In today’s NRO piece (which I agree with the main point of), you
write:
Free speech is a lot like free trade. It sounds simple in theory, but in
practice it gets awfully messy. For example, the North American Free
Trade Agreement, which is supposed to establish “free trade” between the
countries of North America, is – with all of its accompanying documents
– about the size of a good encyclopedia. The thing is, if it were a real
free trade treaty, it would take somewhere between a page and a
sentence. It would say “there shall be free trade between the U.S.,
Canada and Mexico.” Instead, it’s a Byzantine series of lawyerly
exceptions, caveats, codicils and loopholes. And yet, we call it a free
trade document.
This is what Ross Perot and populist radio hosts were saying during the
NAFTA debate. May I defend the “good-sized encyclopedia”?
(1) Three of the four volumes of the encyclopedia are the tariff
schedules of Canada, Mexico, and the United States in their original
languages (but because of Harmonized System numbers for products, you
only need to know English). These exist solely because we didn’t have
free trade on all products on the same day (1/1/94), but some were
phased in, and so they contain the staging tables.
(2) Generally, people understand “there shall be free trade between the
U.S., Canada and Mexico” to *not* mean “there shall also be duty-free
treatment for stuff from China, Japan, etc. etc. who aren’t part of this
deal as long as they drag it through a NAFTA member on the way to final
delivery and slap a “Made in Mexico” label on it.” This means you need
“rules of origin” to determine whether something is or isn’t a “NAFTA
product,” and given that stuff is made in little bits all around the
world, this gives lawyers a lot of work. You can conceal protectionism
in the rules of origin, but you can’t just do without them, and they
take up lots of pages.
(3) Generally, the U.S., Canada, and Mexico consider that they don’t
give up their own Constitutions and national sovereignty by signing such
a deal. E.g. they can still regulate for safety, environmental, and
public health reasons. But this leads to endless disputes of the “We’re
not taking this milk because it’s spoiled!” “No, you’re not taking it
because it’s American, and you’re letting it spoil at the border on
purpose!” sort. This means you need not only Dispute Resolution
provisions, but you need provisions on all kinds of arcane things like
Sanitary and Phytosanitary Standards that determine where National
Sovereignty stops and Free Trade starts. (BTW we have the same problem
in the U.S. Constitution, where Free Trade among the states is provided
by the Commerce Clause, States’ Rights under the 10th Amendment, and you
get case law about states inspecting fruit at the border, whether states
can ban imports of garbage into landfills, blah, blah).
(4) Free trade in what? Does it include only Goods? Or also Services?
And Investment? And Intellectual Property? Guess what, they also spin
out a whole bunch of issues just like (2) and (3), which if you were
*silent*, you would end up defining the agreement by a bunch of bad
legal battles ex post, whereas the three parties would rather define
what they were trying to do up front.
Hope this helps. If you use any part of this, I’m still “Rich’s Trade
Guy” or just “Trade Guy.”