Jewish World Review Oct. 4, 2001 / 17 Tishrei, 5762

Jack Kemp

Jack Kemp
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Trade, terror and truth --
IN addition to America's battle plan for the war on terrorism, we have to develop a battle plan to combat recession. Even before the terrible events of Sept. 11, the economy was stumbling toward a deflationary recession because of deflationary monetary policy. Coupled with unnecessarily high tax rates on the factors of production and unwarranted regulatory encumbrances, the economy didn't have a chance.

We are at war with all the uncertainties and behavior-altering exigencies that war brings, piling even more dead weight on top of this struggling economy. And this time around, Rosie the Riveter won't be rushing out to the production line to make tanks and guns while GI Joe exits the labor force to join up. This time, we won't experience a short-run mobilization stimulus that pulls idle resources into production. This time we are likely to feel only the depressing effects of war unless we take concerted steps to reinvigorate this economy now while combating the terrorists.

An accelerated program of pro-growth tax cuts must play a pivotal role in economic revival, as must a nondeflationary monetary policy keyed to a price rule. America must reassure the world financial community of its commitment to the open flow of goods and services by giving President George W. Bush the "fast track" authority he needs to negotiate free trade agreements.

This grant of presidential negotiating authority has to be as free and open as possible and unencumbered by regulatory restrictions. Already there are indications that protectionist forces on Capitol Hill, allied with proponents of global regulation, are reluctant to grant trade-negotiating authority without significant regulatory strings attached, especially in the fields of labor and the environment. Even the U.S.-Jordan free-trade agreement, a profound gesture of openness aimed at the Arab world, contains the seeds of a trade-based regulatory regime in its stipulations that competition in labor and environmental regulation may, in some circumstances, be deemed an unfair trade practice. Free-traders accepted that risk because, as The Wall Street Journal noted, "The pact has been a priority of (Jordan's) young King Abdullah, who has recently expressed his support for the U.S. anti-terror fight."

How far to go in accommodating pro-regulatory political forces, while moving forward with trade promotion authority, is a judgment call. But while reaffirming our commitment to free trade, I believe the White House must not rush into a deal with Congress that undermines our long-term economic security by loading a ton of regulatory freight onto the global trade regime. That's not the right signal to send to financial markets, and it's not in America's interest.

Trade should be a front-line weapon against terrorism. Open trade not only strengthens us and our allies in the armed struggle against radical Islamic terrorism, it also gives us a field on which to compete against this vestige of pre-modern

fundamentalism with the young people of the world who would become the next generation of terrorists. Although the recently approved U.S.-Jordan free trade agreement is flawed, it nevertheless illustrates how trade can create incentives for other nations, particularly moderate Arab states, to live in peace, harmony and commerce with the rest of the world.

Bush and his trade representative, Bob Zoellick, make an eloquent case that a congressional grant of Trade Promotion Authority (formerly known as "fast-track" authority) would, in Zoellick's words, "send an unmistakable signal to the world that the United States is committed to global leadership of openness and understands that the staying power of our new coalition depends on economic growth and hope."

Our war on the terror network will be long and hard, but as Bush and Secretary of State Colin Powell emphasize, our quarrel is not with Islam nor are we at war with Arab nations. In the long run our best interests and noblest aspirations lie with nurturing an Islamic Renaissance --- a 21st century era of enlightenment that will enable what is now even the most rigidly theocratic Islamic nations to develop a devotion to economic freedom under the rule of the law.

As Martin Wolf observed in the Financial Times, the endemic hostility to personal liberty and economic opportunity in too many of the Islamic countries both impoverishes and radicalizes people who, by rights, should have no quarrel with western civilization. It's a good sign that the Bush administration is also seeking to improve our trade terms with Indonesia, the largest Muslim country in the world.

Jack Kemp is co-director of Empower America and Distinguished Fellow of the Competitive Enterprise Institute. Comment by clicking here.


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