WASHINGTON DC – U.S. trade policy is in the doldrums and that is, at the least, missing an opportunity and, arguably, politically unsettling and dangerous. The Senate Finance Committee has now decided to effectively shelve its plan to debate a new draft fast-track trade bill and it is an open question whether the stalemate of the last couple of years can be broken during the Clinton presidency.
Two years ago President Bill Clinton lost the battle with Congress for fast track authority to expand the North Atlantic Free Trade Area, which would have quickly brought in Chile to join Mexico and Canada along with the U.S. itself. Even when less constrained, Cinton has failed to marshal his forces to reach for new openings. His most recent fumble was the opportunity presented during Chinese premier Zhu Rongji’s recent visit to Washington. Then the Chinese leader made sufficient compromises in his bid for China to enter the World Trade Organization for a deal to be had.
A price is being paid for this lack of momentum. It has undermined Zhu in his effort to keep China’s politics moderate. It has prompted Latin American governments to seek trade expansion agreements with the European Union. But, most important, Clinton’s loss of touch has made it impossible to pursue urgently needed across the board trade liberalization deals with developing countries everywhere.
The political problem that inhibits progress, however, is not just Clinton having been consumed with other matters for too long or, as in China’s case, lack of political courage, it is a fundamental, so far irreconcilable, divide between free traders and those concerned for the poor and the environment. They have check-mated each other. And the president has not had the singlemindedness necessary to bang heads together.
On the left, trade union and environmental activists campaign for labour and environmental standards to be at the heart of new trade agreements. Otherwise, they believe, Third World workers are exploited and the jobs of low-skilled American workers undermined by too-cheap competition.
On the right, free trade advocates who want open doors say that more furious economic competition will work over time to raise labour and environmental standards.
It is stalemate. Both sides in the U.S. Congress are equally balanced. Neither can get their way, but they can make sure that the other side doesn’t get its. The Administration ends up with nothing–neither further liberalization nor a raising of standards.
Until both sides are prepared to do a little more homework and mature their extremists views, progress is simply stymied.
Hard line free traders make the mistake of insisting there is a direct causal link between trade liberalization, growth and improved labour and environmental standards. This is to ignore all the evidence that suggests that these relationships in real life are much more complex. Much recent research, says David Weiner of the Washington-based Overseas Development Council, shows that government intervention is often needed to ensure that growth does not increase inequality. Moreover, if free traders can argue that intellectual property rights–the recognition of copyright–must be part and parcel of trade deals, why shouldn’t there be other standards? What is sauce for the goose must be sauce for the gander.
The labour and environmentalist lobbies make a mistake of different proportions. Theoretically right, they have no sense of dynamic, and their eanestness ends up damning the poor twice over–once for being poor and then a second time by closing the door to better opportunities incrementally gained.
Rightly, many developing countries see this as a form of protectionism, less as a policy to help the poor make progress, more to protect rich country workers from being competitively undermined. Understandably, few developing countries are anxious for a new trade round.
If the stalemate that confronts the Senate Finance Committee is to be broken some new thinking must be called for. U.S. business could usefully take a step to clear the air by being more forthcoming by agreeing to promote higher standards in their overseas bailiwicks. Similarly, free traders could give a little more support to the Clinton Administration’s effort to strengthen International Labour Office (a UN body) monitoring of compliance with core labour standards–many of them on issues like child labour agreed to in principle years ago.
For their part labour and environmental activists should recognize that a rising tide can lift all boats, but if you build a causeway across the bay it will take far longer to happen. It would be more farsighted if these activists diverted their resources to encouraging local groups, including trade unions, inside the developing countries to battle for higher standards, rather than persuading Washington to use the sledgehammer of sanctions from outside. They should realize too that the U.S. doesn’t have such immense leverage. Globalization has reduced the relative importance of the U.S. market for many developing countries.
More free trade, especially if developing countries are creatively active, is beneficial to all. That this bill has an uncertain future does nobody any good. A stronger president would effect a compromise.
