America Abroad

By Strobe Talbott

Free trade is vital to the world order, old and new. It is based on the venerable principle of laissez-faire: when people are buying and selling, governments should stay out of the way. Since the early 17th century, nations have been conducting commerce on the theory that lower tariffs mean lower prices for consumers, higher profits for merchants and greater prosperity for all. Countries that are busily shipping goods across their borders may be less likely to dispatch armies. And opening markets to imports is a way of opening societies to ideas.

Despite lapses into protectionism, the U.S. has generally been both a promoter and a beneficiary of free trade. It grants 159 of the 170 countries on earth most-favored-nation status, or MFN, subjecting their products to roughly the same relatively low import duties.

The problem is with the other 11, relegated to what might be called LFN, or least-favored-nation status. They were all connected with the now defunct Soviet bloc, and they have been discriminated against for reasons that have nothing to do with economics and everything to do with ideology. The U.S. didn't like their political systems, and the denial of MFN was intended to force them to change.

Totalitarian countries, however, are better at withstanding trade sanctions than democracies are at imposing them. Fidel Castro's regime, for one, has easily survived a 29-year ban on selling sugar, cigars or anything else to the U.S.

Whenever American politicians try to use trade as a carrot or a stick abroad, the result is almost always a domestic brawl. "There are simply too many voices and competing interests on our side to deliver a clear, coherent, timely message," says Paula Stern, a former head of the U.S. International $ Trade Commission. A fire-breathing anticommunist on Capitol Hill may want to starve America's enemies into submission, but a farm-state legislator would prefer to sell them his constituents' grain.

Congress and the White House have been bickering all summer over whether to attach human-rights conditions to MFN status for China, and there could be another fight this fall over President Bush's recent promise to grant MFN to the Soviet Union. The very subject of the U.S.S.R. sends the American body politic into spasms of divisive debate. That eternally troubled, troublesome country is the oldest and most vivid example of how unsuccessful the U.S. has been at using tariffs as punitive or coercive instruments of diplomacy. In 1912 the Taft Administration revoked a commercial treaty with czarist Russia to protest the persecution of Jews. A few years later, the pogroms stopped, but not because of U.S. pressure: the Bolsheviks came to power and began repressing the entire population. Washington resumed normal trade when it recognized the U.S.S.R. in 1933, even though Stalin was already cranking up the Great Terror.

In 1974 Congress passed legislation withholding MFN from the Soviet Union in an attempt to induce Leonid Brezhnev to permit more Jews to emigrate. Largely to spite the U.S., Brezhnev cut exit visas for Jews by nearly two-thirds. Then, in 1980, the U.S. granted MFN to China. Beijing's treatment of its citizens was hardly exemplary, but its defiance of Moscow made it a "strategic partner" of the West.

As a result, the butchers of Tiananmen still have MFN today, while the struggling reformers in the Kremlin don't. The solution to this absurdity is simple: the very concept of least-favored nation, which never worked well in practice anyway, is a relic of the cold war and should be junked.