Date: Sun, 17 Jul 1994 17:23:27 -0400 (EDT) From: Competitive Enterprise Institute Subject: CEI LIST - "SOCIAL" TRADE ON FAST TRACK? To: Recipients of the CEI List "SOCIAL" TRADE ON FAST TRACK? by James M. Sheehan, CEI research associate appeared in *The Journal of Commerce*, 7/14/94 The Clinton administration hopes to submit legislation to Congress in the coming weeks to implement the Uruguay Round world trade agreement. But several contentious issues have emerged that could stall Congressional consideration of the accord, including tough budget law requirements and national sovereignty concerns. Recently, a controversy has erupted over the scope of "fast- track" negotiating authority for the president, an equally explosive issue that threatens to dampen enthusiasm for the world trade pact even among its core supporters. Fast-track authority will be voted on by Congress simultaneously with the Uruguay Round. The fast-track legislation the Clinton administration seeks would authorize the president to pursue social objectives in other countries through trade negotiations. However, business groups and Republican lawmakers oppose linking trade to labor standards, environmental protection and "sustainable development" -- the Earth Summit mandate for environmental restrictions. If successful, the administration's version of fast-track authority would give ammunition to special interests and opponents of trade liberalization and could compromise the economic benefits of tariff reductions. It would also restore the linkage between trade and social objectives which was severed when President Clinton renewed trading privileges to China despite human rights concerns. A fast-track provision for "social" trade could have serious ramifications for U.S. trading interests in the near future. Extension of the North American Free Trade Agreement to Chile, Argentina or other countries could be entangled by NAFTA-like environmental and labor side agreements. Efforts to "green" the GATT, already in their early stages, would also gain momentum through the proposed World Trade Organization, the strengthened enforcement arm of the agreement. In pursuing this so-called green and blue agenda, the Clinton team may be alienating the very business constituency that is supposed to benefit from expanded trade. An increasing number of industries are beginning to fear that the administration's commitment to freer trade is faltering. U.S. Trade Representative Mickey Kantor has claimed we must "harness [the multilateral trading] system for the good of the environment." Some wonder whether this administration wants trade to be more green than free. The business groups that have raised these concerns are not opponents of the Uruguay Round. Most, in fact, perceive the accord as a pragmatic step towards trade liberalization. Yet, they cannot condone what they see as a sacrifice of trade to international social restrictions, and a watering down of free trade principles. Combined with efforts to "green" U.S. trade policy through the Generalized System of Preferences, the Marine Mammal Protection Act, and the Pelly Amendment, American imports and exports would be severely jeopardized by such a reinterpretation of free trade under the new WTO. Republican heavyweights Howard Baker and Lawrence Eagleberger have spearheaded an intense lobbying campaign for business groups worried about how the WTO will be enforced. All 44 Republican Senators, led by Jack Danforth of Missouri, have signed a letter protesting inclusion of environment and labor standards in fast-track negotiating authority. As long ago as mid-April, House Republican leaders Newt Gingrich and Bill Archer sent a strongly worded letter to Mickey Kantor, inquiring: "Is the U.S. willing to set aside its sovereignty for the new WTO to define unnamed social objectives?" They argued that policing environmental and labor standards around the world would necessitate the use of trade sanctions, putting the sales and employees of U.S. businesses at constant risk from WTO interference. More to the point, the Clinton administration's inclusion of these issues in the WTO had ignored "the consultation requirements of existing law." Mr. Kantor has ignored these pleas, assuming that the business community and the minority party have no choice but to accept social trade objectives as the price for trade liberalization, as they did under NAFTA. Similarly, Mr. Kantor successfully inserted managed trade concepts in the Uruguay Round accord itself, over the objections of more doctrinaire free traders. The draft implementing legislation's anti-dumping language, for example, could permit greater abuse of U.S. anti- dumping procedures, and could lead copycat measures against U.S. exports abroad. The accord's subsidy provisions may encourage our trading partners to engage in trade-distorting industrial policies, and could promote growth in America's own research and development subsidies. Moreover, the Clinton administration ensured that the new WTO itself could facilitate greater environmental and labor-based trade restrictions. Mr. Kantor has made no secret of the administration's plans in this area; he almost single-handedly persuaded our trading partners to create the WTO Committee on Trade and the Environment. Indeed, WTO voting procedures may allow modifications to multilateral trading rules along these lines without engaging in cumbersome negotiating "rounds." Nonetheless, a clarification of fast-track authority will still be important symbolically as a visible statement of U.S. trade policy. If Congress approves social objectives in the president's fast-track authority, U.S. trade policy could be subject to greater influence by an assortment of environmental activists, labor unions, and other special interests. Enactment of environmental and labor restrictions would erode the economic benefits of tariff reduction and contradict the purpose of trade liberalization. The nascent WTO may either continue the GATT tradition of trade liberalization or develop into an unwieldy and unaccountable global bureaucracy. A clear U.S. commitment to free trade could not come at a better time. _______ __________ ___________ / | / | | | |__________ | | | | \ | | \ _______ |__________ ___________ 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 free-market guide to the information superhighway" is available for $5. CEI's monthly newsletter, "CEI UpDate," is free to contributors of $25.