Date: Thu, 23 Jun 1994 14:35:19 -0400 (EDT) From: Competitive Enterprise Institute Subject: CEI LIST - CLINTON TRADE ACCORD MOVES TOWARD WORLD GOVERNMENT To: Recipients of the CEI List Gingrich Warns: CLINTON TRADE ACCORD MOVES TOWARD WORLD GOVERNMENT By James M. Sheehan, CEI research associate appeared in *Human Events*, 5/6/94 Representatives from over 100 nations gathered in Marrakesh, Morocco, April 15 to sign the Uruguay Round accord, the most ambitious and comprehensive trade agreement in history. If ratified by Congress, the agreement will establish the World Trade Organization (WTO), a global super-agency that will replace the General Agreement on Tariffs and Trade (GATT) at the beginning of 1995. Ratification of the agreement, negotiated by U.S. Trade Representative Mickey Kantor, was seen as a virtual lock when completed in Morocco. The entire Republican leadership in the Senate and the House of Representatives had endorsed the accord. Like NAFTA, the WTO enjoys special "fast track" rules that do not require the Senate to ratify by a two-thirds vote, as with any other treaty. A simple majority of both houses of Congress is all that is necessary to ratify the agreement. Congress has a limited time for debate and is not allowed to amend the agreement's terms. For the Clinton Administration, it looked like smooth sailing. That is, until House Minority Whip Newt Gingrich began to have second thoughts on national television. Appearing on NBC's "Meet the Press," Sunday, April 24, Gingrich said he was reconsidering his earlier support for the accord because of a "grave concern" that he could no longer ignore. When studying the Clinton proposal, the Georgia Republican found that "buried in the GATT agreement is a brand new World Trade Organization.... This World Trade Organization will have 117 member nations with one vote each. So, in effect, we could be outvoted by Antigua or by Botswana or by Venezuela." GATT VS. WTO Gingrich went on to say that he was more comfortable with the old GATT, a consensual partnership in voluntary tariff reductions that has been in place since 1948. What terrifies the minority whip is that ratification of the trade pact would transform GATT "into a Third World-dominated, dictatorship- dominated system" that could exert authority over U.S. economic policies and infringe on national sovereignty. Gingrich declared, "I'm for world trade, but I'm against world government." The main change in the new WTO is that it holds binding authority over global trade matters, whereas GATT is merely a contractual arrangement between nations. For example, under GATT, a single nation can veto a finding by a GATT panel that its laws are not GATT-legal. But under the WTO, if a panel finds that a nation's laws are not WTO-legal, that decision is final, unless all nations vote to reject the finding. Also, rules- changes under GATT can be made only by a consensus decision. Under WTO, amendments to the rules can go into effect by a vote of two-thirds or three-fourths of the members, depending on the circumstances. Opposing Gingrich on "Meet the Press" was Labor Secretary Robert Reich, who defended the WTO as representing the same "basic principles" that Gingrich had supported in NAFTA. But Gingrich rejected the comparison of the WTO with an agreement among only three countries, the U.S., Canada, and Mexico. THE U.N. OF WORLD TRADE? Gingrich said the WTO would function more like the United Nations. "Do you really want to create the United Nations of world trade and have the kind of mess you have in UNESCO [the United Nations Educational, Social, and Cultural Organization]...?" he asked. Gingrich then pointed out that U.N. incompetence is responsible for the current fiasco in Bosnia. Gingrich's opposition could kill the agreement, since its ratification depends on support from a majority of Republicans, as was the case with Clinton's NAFTA. Such GOP backing would be nearly impossible without Gingrich, who has now begun to echo the concerns that some conservatives were raising about NAFTA. Republican senators such as Bob Smith (N.H.), Ted Stevens (Alaska) and Larry Craig (Idaho) all cited fears about national sovereignty when casting their votes against NAFTA last November. Sovereignty concerns spanned both sides of the political spectrum as conservative columnist Patrick Buchanan lobbied against NAFTA alongside left-wing consumer activist Ralph Nader. Gingrich's comments may suggest a similar alliance will form against the WTO. Nader's budding campaign against the WTO has focused on many issues dear to conservative hearts. Nader warns that the WTO will "impose an autocracy above our modest democracy." Decisions about trade policies will be made by unaccountable, unelected bureaucrats in Geneva. "Harmonization committees" will be used to alter U.S. trade policies and health, safety and environmental standards. Nader agrees with Gingrich that appointments to the WTO Secretariat would be dominated by corrupt regimes, possibly undermining U.S. interests. The WTO agreement obligates the United States to "harmonize" its food safety and sanitary standards with other WTO members, basing them on international standards set by such United Nations organizations as the Secretariat of the International Plant Protection Convention, the Codex Alimentarius Commission (food safety matters), and the International Office of Epizootics (animal health matters). Gingrich was also dismayed by the attempt by the Clinton Administration, abetted by protectionist France, to enforce global environmental standards and labor rights against poorer countries. Almost singlehandedly, Kantor has succeeded in placing environmental and labor rules on the WTO agenda through its numerous work committees. One such body, the Kantor-inspired Committee on Trade and the Environment, created March 21, will develop new WTO rules promoting environmentally "sustainable development," the policy designed at the United Nations Earth Summit in 1992. Trade negotiators also produced a "side letter" that authorizes the WTO to take up labor-related issues such as the right to form unions, strict health and safety regulations, and possibly even minimum wages. Kantor's proposals parallel those of Jessica Mathews, senior fellow at the Council on Foreign Relations (CFR) and a former high-ranking official of the Clinton State Department. In a recent op-ed article for the Washington Post, she argued that the "greening" of trade should force the world trading system to "drastically change its thinking." Because trade is now conducted "as though air, water, and species stay neatly within the lines on a map," Mathews advocates an international planning bureaucracy in the WTO to "mesh" the rules of trade and the environment, bringing them under firmer control. She is disappointed that Kantor's efforts to "green" the trading system were met with resistance from other nations. Republican leaders have objected that WTO intervention in environmental and labor rights issues will lead to costly trade sanctions and other trade barriers that will punish the U.S. economy. Even worse, WTO interference would stifle economic advancement in the Third World, holding its peoples in poverty in the name of nature. Along with Bill Archer (Tex.), ranking Republican on the House Ways and Means Committee, Gingrich sent a letter to Mickey Kantor condemning the administration's plans to use the WTO "to police environmental and labor standards throughout the world." The Archer/Gingrich letter cautioned the Clinton Administration that "the threat of the use of trade sanctions for reasons unrelated to trade will constantly put the sales and employees of [U.S.] exporters at risk." The use of such trade restrictions could result in reduced competition, they said, leading to the creation of international government-supported cartels. The WTO rules on subsidies further obstruct competition by encouraging government handouts to industry for the purposes of research and development, environmental protection and aid to economically "disadvantaged" regions. The Clinton Administration insisted that the WTO subsidies provisions allow programs similar to the Super Car project, in which the U.S. government funnels tax dollars to General Motors, Ford and Chrysler. Even Ralph Nader opposes empowering the government to select winners and losers in industry by doling out tax dollars, a policy he calls "corporate socialism." Republican Sen. John Danforth (Mo.) has another name for it: "European-style industrial policy." In his view, the WTO would "dramatically alter" the world trading system and "the relationship between government and the private sector." Danforth believes that the WTO will get the United States into a massive subsidies war with the European Community that will bust the federal budget and cripple U.S. competitiveness. WHERE'S FULL DEBATE? Frustrated by Congress' peculiar fast-track rules, Danforth exclaimed: "Most people would expect a full debate to precede a decision that Washington will plan our economic future in world trade, and that the government will decide which U.S. industries get billions of dollars in federal subsidies for research and development." On the day Mickey Kantor signed the WTO in Morocco, a four- page advertising supplement entitled "The New Age of Trade" appeared in the New York Times. Sponsored by a group of companies, including Arthur Andersen & Co., SkyTel and the World Trade Institute, the ad depicted a new insignia with "WTO" prominently featured and "GATT" fading into the background, symbolizing the transformation of GATT into what some have called a "new world trading order." According to that view, the WTO will form the third pillar of that order, along with the International Monetary Fund and the World Bank, and will usher in a new era of global economic policy coordination. An earlier version of the WTO went down in defeat in the late 1940s when conservatives battled to prevent trade from being politicized and the voluntary arrangement of GATT emerged as a free trade alternative. Gingrich's remarks recalled that earlier conservative victory when he told Labor Secretary Reich: "I'm in favor of GATT. I'm not necessarily in favor of a World Trade Organization." What Newt Gingrich does next may well determine the fate of the WTO. _______ __________ ___________ / | / | | | |__________ | | | | \ | | \ _______ |__________ ___________ COMPETITIVE ENTERPRISE INSTITUTE 1001 Connecticut Ave. NW #1250 Washington, DC 20036 202-331-1010, fax 202-331-0640 Permission to copy granted as long as these lines are left intact. To subscribe to the cei list, send a message to cei@digex.com. "The Virtual Hand: CEI's guide to the information superhighway" is available for $5. CEI's monthly newsletter, "CEI UpDate," is free to contributors of $25.