Reflecting the current obsession with expanding global trade, government officials thrive in the limelight of splashy foreign trade missions. They shouldn't. There is no economic justification for these high-level junkets.
As most economists recognize, the emergence of a globalized financial market in the 1980s eliminated the need for governments to ''pave the way'' for cross-border financial transactions. Decisions made by investors in this global capital market are an unquestionably superior method of identifying and supporting worthy projects. The same goes for trade. The helping hand of politicians or trade bureaucrats is no longer a necessary feature of international transactions, if indeed it ever was.It is surprising to see such an exaggerated value ascribed to government ''fixers'' of deals for private companies. It is as though U.S. exporters could close a deal only when they arrive in government aircraft emblazoned with official insignia and loaded with bureaucrats. Despite all the media hype, these activities seldom generate broad benefits and always involve a variety of mostly hidden costs.
In addition to the high cost of the junkets to taxpayers, the trade missions also include the ''extras'' that government officials offer to sweeten the deals. Many large trade contracts, for example, are arranged with guarantees from the federally funded Export-Import Bank, which provides loans or loan guarantees to buyers of U.S. products. Consequently, American sellers can provide below market interest rates to potential buyers.
As long as government officials take a role in ''fixing deals,'' cozy arrangements will emerge between them and the companies cultivating political connections. Usually, the companies that spend most on lobbying are those that cannot offer a comparative advantage to secure a sale on the merits.
The growing practice of U.S. companies paying political parties to participate in official trade junkets marks a new form of corruption that may undermine the credibility of the American political system. The late Commerce Secretary Ron Brown was not the first to engage in fixing deals for hand-picked American businesses.
Many will remember President Bush's ill-fated trip to Japan, accompanied by the top brass of America's automobile industry. The trip, which turned out to be a resounding failure, conveyed the impression that the U.S. auto industry was incapable of competing with the Japanese without its ''iron axis'' with the government. It also gave the misleading impression that Japan's market had been rigged to exclude American automobiles. This masked the fact that, while 80 percent of Japanese car buyers drive cars with engines 2,000 cubic centimeters or less, no American producer was offering such models in Japan. American companies are doing well in the market for large cars with engine capacity over 3,000 cubic centimeters, but that accounts for only 3 percent of the Japanese automobile market. Deal fixing by trade bureaucrats arises out of political inspiration and has little to do with economic rationality. It erroneously includes trade bureaucrats as a necessary element in the rough and tumble of the new global economy.
The dubious rationale used to defend these arrangements is that trade deficits are a threat to national security. However, with multinational firms moving capital freely across national borders, trade deficits between Asian countries and the United States are no more ominous than a trade deficit between Ohio and Georgia.
Playing the role of ''fixer'' because other countries do it is also a poor justification. It creates a sort of competition among governments to support ''national'' businesses. Moreover, with most multinationals spread across the globe, a deal fixed with China may well result in jobs created in France or Spain, rather than the United States. It would be irrational to use U.S. taxpayers' money to create jobs in Europe.
The Clinton administration's international economic policy clearly favors multinationals over small firms, and provides benefits to investors at the expense of taxpayers. By doing so, it is just as likely to generate job opportunities for foreign workers as for American ones.
A government is at its best when it acts on broad policy or strategic matters, not as a sales representative for private companies. It should, for example, promote institutions, such as the World Trade Organization, or negotiate agreements to remove trade barriers
Beyond that, though, U.S. businesses can and should strike their own deals.