Skip to comments.Strategic and Economic Blunders Litter Zoellick's Record
Posted on 02/15/2005 8:42:11 AM PST by Willie Green
For education and discussion only. Not for commercial use.
The Senate Foreign Relations Committee's hearings on U.S. Trade Representative Robert Zoellick's nomination to be Deputy Secretary of State could be a milestone discussion of America's strategy in the war on terrorism. This opportunity will be lost, however, if Committee members don't start thinking seriously about the real relationships between economics and national security supposedly Zoellick's specialty but in fact an emerging American diplomatic fiasco.
Superficially, Zoellick does, as widely observed, boast impressive qualifications to serve as the nation's second-ranking diplomat. Thanks to a series of senior positions he has held since the Reagan years, Zoellick has amassed extensive experience conducting both U.S. foreign policy and foreign economic policy. As a result, his list of high-level international contacts has few peers.
Unfortunately, Zoellick has also had a major hand in two of the biggest strategic mistakes made in recent American foreign relations, and as Deputy Secretary of States, he would be in an ideal position to compound these blunders.
The first mistake Zoellick needs to be grilled about is the way U.S. trade policy has limited America's economic capacity to carry out a global war on terrorism free of undue foreign influences. Other major powers, after all, don't always agree with U.S. objectives. Unquestionably, the United States cannot win this struggle singlehandedly. But just as clearly, the Europeans, Chinese, and Japanese among others have raised major concerns about America's tactics and will surely continue to do so.
Part of the problem stems from longstanding habits of free-riding on America's superpower role that U.S. allies developed and perfected during the Cold War. They know that they can continue to benefit from U.S. actions to safeguard global security while continuing to profit from deal-making with rogue states themselves or with countries that deal recklessly with them.
But part of the problem stems from the differing geopolitical positions of the United States and the other major powers, which naturally lead to differing views on coping with global challenges and opportunities. Since geography is here to stay, American leaders must assume that these differences are, too.
The United States will, of course, be able to cooperate regularly on common goals with various combinations of these other major powers, but America will also need the power to act unilaterally when necessary or advantageous, as well as to shape cooperative policies to its liking. This independence, tragically, is exactly what has been seriously compromised by the Bush economic team, to which Zoellick belongs.
Zoellick cannot be blamed for the soaring budget deficits that have so greatly increased America's foreign debt and therefore foreign influence on American policymaking. But he obviously bears major responsibilities for the U.S. trade deficits that comprise so much of this debt.
America's net debt to the rest of the world today is roughly $3 trillion nearly 30 percent of our $11 trillion economy. Since Zoellick became U.S. Trade Representative in 2001, the nation has wracked up a cumulative trade deficit in goods and services of nearly $1.9 trillion.
Moreover, of this $3 trillion in net debt, the Chinese government held $191 billion as of November, 2004 10 percent of the overall foreign total and more than 16 percent of the foreign government total. And China's holdings of U.S. debt increased by 22 percent since January, 2002 alone. Only Japan's holdings about 3.5 times greater than China's and rising just as fast are larger. Is Zoellick truly comfortable with a still-Communist dictatorship with a very uncertain geopolitical future owning this much of America's future? If not, what does he plan to do about it? The public interest demands that the Senate at least try to find out.
Just as bad, Zoellick has intensified a trade liberalization strategy bound to keep U.S. trade and current account deficits rising. Like his predecessors in the Clinton administration, Zoellick has done the bidding of short-term focused U.S. multinational companies and pursued a series of trade deals that are structurally guaranteed to boost U.S. imports much more than U.S. exports.
The reason: These agreements have been sought with low-income countries way too poor, small, broke, protectionist, or some combination of the above to be major net importers from the United States for decades at best, but amply capable of becoming major suppliers to the U.S. market. In fact, these agreements are best described as outsourcing deals, not trade deals. Their main purpose is helping multinationals supply the U.S. market from low-cost production bases abroad.
Such outsourcing agreements help the multinationals buy their inputs including labor cheap and sell the final products dear, and they can dramatically improve corporate bottom lines. But an outsourcing-centered trade strategy can only make the United States more dependent on foreign financing of its living standards, and thus more vulnerable to the agendas of other major powers.
The second big black mark on Zoellick's USTR record is his conduct of the economic side of the global war on terrorism. Zoellick boldly thrust himself onto the post-9-11 stage with a proposal to fight terrorism's appeal by opening the U.S. market to third world countries and offering their people economic opportunity. But even those who believe that global poverty is at the root of global terrorism and Zoellick himself keeps equivocating on this point must recognize that Zoellick's tactics are at war with each other.
On the one hand, Zoellick has championed a series of agreements with countries and regions thought to be especially vulnerable to terrorism's appeal because of their large Moslem populations. Leading examples include Morocco, Bahrain, much of the Middle East, sub-Saharan Africa, and Southeast Asia.
On the other hand, Zoellick has blithely supported a decision that could relegate these countries to economic backwater status and political turmoil forever the January 1, 2005 abolition of the Multi-Fiber Arrangement mandated by the Uruguay Round world trade agreement of 1994 and signed by the President Clinton. The MFA, which governed world trade in textiles and apparel, was long condemned bitterly by globalization cheerleaders and developing countries as a protectionist scheme that enabled industrialized countries to limit their textile and apparel imports and even apportion shares of their markets to individual countries as they saw fit.
As the abolition date approached, however, many developing countries began to realize that the MFA quota system had actually enabled them to gain and hold onto foreign markets in industries critical to their hopes for development. Without the MFA, they would certainly have lost out to larger, even lower-cost producers like China and India. Moreover, the quotas had to keep rising every year.
The MFA gave the United States a major diplomatic advantage, too. It allowed Washington to set strategic priorities with its trade policy. Quota shares could be changed to win or reward friends, or to punish adversaries or otherwise promote U.S. foreign policy goals.
Although Washington can still dole out or withhold trade favors by selectively signing trade agreements and thus lowering tariffs for certain countries, such steps easily can be negated by the use of subsidies at which China is so proficient not to mention the even greater scale economies China and India both are beginning to enjoy in the new post-MFA world.
The implications for Zoellick's economic war on terror are huge and were known to the U.S. Trade Representative for months before the MFA expired. Zoellick's office commissioned a study from the U.S. International Trade Commission on the global impact of the MFA's demise, and the results were perfectly in tune with common sense.
China, and to a lesser extent India, shaped up as the biggest winners in the new world textile and apparel trading system. Among the main projected losers are Bangladesh, Indonesia, the Philippines, Thailand, Malaysia, Turkey, Egypt, and sub-Saharan Africa exactly the types of heavily Moslem countries and regions whose populations or economies any sensible economic anti-terrorism strategy would target.
Also badly damaged will be American diplomatic flexibility, which should always be a top U.S. foreign policy priority regardless of the merits of fighting terror with trade liberalization. Yet Zoellick apparently stopped thinking strategically at this point. Consistent with economic dogma and the interests of Washington's powerful retail and importing lobbies, Zoellick let the MFA expire with nary a peep. To paraphrase President Bush who, of course, bears the ultimate responsibility for this decision talk about a pre-9-11 mind set!
Zoellick is widely reputed to be a master strategist, equally at home in the intertwined worlds of national security and economics. But the real test is not whether he can say these words in the same sentence and wow the Charlie Roses of the world. It's whether policy in these two domains can be integrated in ways that promote the domestic economy's strength and, therefore, the nation's freedom of action. So far, it's a test that Zoellick and the rest of the Bush team have flunked miserably.
The U.S. trade patterns revealed by the final 2004 trade figures are a national disgrace and a global danger. They remind us once more how perilously dependent the world has become on U.S. consumption, and yet how America's ability to finance this consumption responsibly keeps eroding. Maybe the nation's globalization cheer-leading political and economic establishments think that, like disaster movies, this story ultimately has a happy ending. When will they realize this isn't Hollywood?
Zoellick's BEST 'next place' would be retirement.
bump for reference
Blunders Litter Zoellick's Record
Please. The only requirement to hold a job is the ability to say YES. I'm sure Zoellick has a perfect record.
Maybe, but after this, it WILL be secretary of state.
Its just a matter of time before the protege of Baker gets a job as SOS under a GOP Prez.
WG, You know better than that. As "free trade" representative, Zoellick has implemented EXACTLY the trade agreements that the globalists and destroyers of the U.S. of A. wanted. There was NO "mistake". Peace and love, George.
Hear, hear, hear!
Regardless of the outcome, it's always full speed ahead for this victim of obsessive compulsive disorder. He could care less about the wreckage behind him. The fact that the Senate is now about to circumscribe some of the things he pushed means nothing to him. To a guy like Bob Zoellick, the rest of the world is crazy, not him.
Well George, you know that... and I know that...
so thanks for bumping the thread so that others may understand it as well!!!
This disaster was underway during the Clinton years, but was offset by the tech boom. There is just no longer any similar sector working in our economy to gloss over the damage from globalism.
Although we read that the budget proposed by the WH does propose to eliminate some of the costly energy boondoggles for big auto and its lobbying allies which are designed to prevent actual energy solutions by displacement. Is this a start on doing something about the incredible failure to question big oil-big ethanol-big auto, which did so much to allow the Terror and assure it would happen.
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