To Spur Human Rights, Spur Trade

President Clinton brought home the bacon with the $6 billion Boeing/McDonnell Douglas airplane purchase by Saudi Arabia. He has chatted up Kazakhstan's President on a big Chevron energy deal, and his Administration is courting Indonesia for a piece of its $40 billion oil and gas program. In China, the Clintonites are simultaneously pushing American exports and investments. Vietnam is next.

What is wrong with that? Nothing, except that all these countries are dictatorships by traditional U.S. standards. Even Mexico is a one-party state. As the Clinton Administration pursues a policy of generating high-quality jobs at home by promoting exports abroad, it finds itself increasingly trading with countries that define human rights in very different terms than Americans.

There was no problem when trade was largely with other industrial countries. But as the fulcrum of global growth shifts to Asia and Latin America, the U.S. now must increasingly deal with societies that provide fewer individual human rights than the West. These countries argue that authoritarian rule is necessary for fast economic growth and that communitarian values, such as higher living standards and better education and health, are more important to their people than individual rights. Rampant individualism, they argue, has given the U.S. crime in the streets, whereas anyone can walk through Singapore safely.

What to do? With the end of the cold war, trade policy has suddenly been recast as part of the human rights debate in Washington. Among the "pragmatists" are corporate exporters and pro-growth Administration members, such as Robert Rubin and Lloyd Bentsen. The "idealists" include all of the President's labor union supporters as well as such political doves as Senator Barbara Boxer (D-Calif.).

This split appeared in the battle over the North American Free Trade Agreement, where the idealists tended to identify human rights with fair wages. Now, they're against renewing China's most-favored-nation status.

There's no doubt that U.S. economic pressure can, at times, improve some individual rights abroad. The U.S. has pressured China to release a handful of political dissidents, and Indonesia and Mexico have promised to improve the rights of workers as well.

But this casting of human rights stones can be costly. With exports accounting for 11% of GDP--twice what it was 20 years ago--and export-related jobs paying 15% to 20% more than the average, America's economic self-interest lies in opening up markets abroad, not in ceding them to rivals who have fewer scruples than does the U.S. The idealists are right to pursue their agenda of supporting individual human rights around the world. But linking that agenda to U.S. trade policy can and has hurt the American economy.

Just as surely, rapid economic growth in the Third World is a solvent of the bonds of oppression. Building a strong middle class overseas through foreign investment and trade has led to greater individual rights in South Korea, Taiwan, and elsewhere, even in the face of authoritarian governments ruling in the name of communitarian values. The truth is that delinking trade from human rights policy is the pragmatic way to promote human rights overseas.

Before it's here, it's on the Bloomberg Terminal.