Ron Paul's Texas Straight Talk - A weekly Column

March 20, 2000

The World Trade Organization
Barrier to Free Trade

The economic argument for free trade should be no more complex than the moral argument. Tariffs are taxes that penalize those who buy foreign goods. If taxes are low on imported goods, consumers benefit by being able to buy at the best price, thus saving money to buy additional goods and raise their standard of living. The competition stimulates domestic efforts and hopefully serves as an incentive to get onerous taxes and regulations reduced.
If one truly believes in free trade, one never argues a need for reciprocity or bureaucratic management of trade. If free trade is truly beneficial, as so many claim, unilateral free trade is an end in itself and requires neither treaties nor international management by politicians and bureaucrats. A country should promote free trade in its own self-interest -- never for the benefit of someone else.
Those not completely convinced of the benefits of free trade acknowledge a "cost" of lower tariffs for which they demand compensation and fair management. Thus, we have the creation of the WTO. By endorsing the concept of managed world trade through the World Trade Organization, proponents acknowledge that they actually believe in order for free trade to be an economic positive, it requires compensation or a "deal."
Congressional approval for the WTO came in the lame duck special session in 1994 shortly after Republicans won the House and before the new Members were sworn in. Although it was actually a treaty that brought the WTO into existence it was called an "agreement" thus avoiding the required two-thirds votes in the Senate. A simple majority of both Houses would be enough to put the US in the WTO.
Belonging to the WTO undermines national sovereignty. An encouraging sign is that those on the left, who frequently champion international causes, are becoming more aware of the shortcomings of organizations like the World Trade Organization when it undermines domestic laws, such as those protecting health, workers, environment, and consumers. The argument that membership in the World Trade Organization does not undermine national sovereignty is not supported by the facts. The CRS report on the World Trade Organization (August 25, 1999) is explicit in its explanation: "As a member of the WTO, the United States does commit to act in accordance with the rules of the multi-lateral body. It is legally obligated to insure national laws do not conflict with WTO rules."
The most blatant example of the World Trade Organization undermining US sovereignty was the recent ruling rejecting US tax breaks to US companies doing business overseas. The European Union charged that the Foreign Sales Corporation program established in 1984 is now an "illegal subsidy," and the WTO appellate panel supported this position. Despite the fact that the US unfairly taxes corporations for profits earned overseas, unlike our foreign competitors, this program was meant to compensate to some degree for this unfairness built into our tax code. Nevertheless the WTO, in a ridiculous ruling, claimed that allowing a company to keep more of its own money through lower taxes is a "subsidy" -- something given at the behest of government.
This example clearly demonstrates that membership in the World Trade Organization is in conflict with our Constitution, undermining our legal system and our sovereignty. The message is clear. For us to be a responsible member of the WTO we must follow the rules, and, if we do, Congress must capitulate and raise taxes on our corporations by repealing the Foreign Sales Corporation program. As was explained by the CRS, members are "legally obligated to insure national laws do not conflict with World Trade Organization rules."
I have introduced HJR 90 to protect US Sovereignty, and true free trade, by withdrawing our membership from the World Trade Organization. If you are not a resident of the 14th district of Texas and would like to know where your representative stands on this issue, I encourage you to call his or her office and ask them.