Economic & Business Focus: Dark Days For Trade

Corporate executives will have to take proactive measures to pull U.S. trade policy back from the abyss.

With media attention squarely focused elsewhere, U.S. trade policy quietly imploded last fall. Within the space of a few months, the tensions that had been brewing throughout the global downturn erupted into an all-out catastrophe.

World Trade Organization talks in Cancún, Mexico, collapsed last October, quickly followed by a breakdown in Free Trade Agreement of the Americas (FTAA) talks in Miami. A series of new U.S. trade disputes emerged with Japan, China and the European Union. The U.S. steel tariff was banned by the WTO in December. And in January, Brazil's international court case against the United States over agricultural subsidies turned serious.

Few trade experts can recall a time when so much has gone wrong so quickly. U.S. trade policy is now in disarray and poses a serious threat to the economic recovery.

Some U.S. companies gain from the protectionism that led to these crises, but most will lose in the end. Crucial issues such as intellectual property rights and patent protection have been buried under conflicts that benefit special interest groups, and the proliferation of trade barriers has begun choking global growth.

"2003 was not a good year for U.S. trade policy," says Jeffrey L. Dunoff, the Charles Klein professor of law and government and director of the Institute for International Law and Public Policy at Temple University's Beasley School of Law in Philadelphia. "The WTO round derailed in Cancún and is not yet back on track. Regional agreements such as the FTAA are stalled. And bilateral free trade agreements, such as the U.S.-Australia and U.S.-Morocco agreements, have hit unexpected bumps in the road."

The collapse of the WTO Cancún talks is emblematic of serious problems in the global trading system, according to Peter L. Scher, a former U.S. special trade negotiator who is now a partner in the Washington, D.C., office of international law firm Mayer, Brown, Rowe & Maw and head of that firm's government and global trade practice. "These problems have important implications for U.S. companies seeking to expand their business activities into foreign markets," Scher contends.