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On the Fast Track to Freer Trade?

With the reissuance of increased presidential trade authority in the balance, two sides face off on the relative merits of keeping jobs and opening ports.

By James T. Berger

PRESIDENT GEORGE W. BUSH'S push for "Fast Track" trade authority bears startling resemblance to the conflict between free-trade advocates and protectionists that raged throughout the twentieth century.

Pitted against each other are those seeking to loosen trade barriers and those purporting to protect American jobs. Allied with the opponents of free trade are environmentalists who maintain that foreign producers don't adhere to the same environmental standards as domestic producers.

The current flap sounds much like the Congressional debate in 1930 that resulted in the enactment of the Smoot-Hawley Tariff, which raised protectionist duties to their highest rates ever. World Trade magazine maintains that these draconian tariffs turned the 1929 "recession" into the worldwide depression of the 1930s, though some economists dispute this point.

Today's issue centers on President Bush's desire to make Fast Track, or trade-promotion authority, a top legislative priority. Such an effort is hardly without precedent. Since Fast Track authority expired in 1994, supporters of trade have put forth enormous efforts to regain this prize, which has become a political symbol of America's commitment to free trade.

Pending before Congress is a bill that would give the President increased power and authority to forge international trade agreements. Just before the end of 2001, the House passed the new trade-promotion authority bill by a slim 215-214 margin. The bill now goes to the Senate.

Fast Track affords the President the authority to negotiate trade agreements and provides special rules for considering those agreements. It limits the time Congress can debate trade pacts and prohibits amendments to these trade bills. Without Fast Track, the President can still negotiate trade agreements, but Congress can then debate such agreements at length and add amendments to modify the agreements.

History of Fast Track

Fast Track's history represents an ongoing attempt to balance the roles of the legislative and executive branches of government with regard to international trade policy. Prior to the twentieth century, such authority resided exclusively within the legislative branch, and tariffs were considered a function of domestic tax policy.

The popular opinion that the Smoot-Hawley Tariff abetted in precipitating the Great Depression led to a new direction in U.S. trade policy. The landmark Trade Agreements Act of 1934 effectively "pre-approved" presidential authority to lower tariffs within certain limits and authorized the President to enter into tariff-reduction agreements. This law was extended 11 times through 1962.

During the Kennedy Administration, Congress expanded presidential authority and approved elimination of certain tariffs through the "Kennedy Round" of negotiations under the General Agreement on Tariffs and Trade (GATT). Such authority was conditioned on Congressional oversight. In 1974, when Congress again lowered tariffs, under the "Tokyo Round" of the GATT, it mandated that nontariff agreements be implemented only through legislation. This was reflected in the 1974 Trade Act which also stipulated that the President consult with Congress prior to entering into such agreements. To reassure trading partners and enhance the credibility of U.S. negotiators, Congress established new procedures to ensure timely, amendment-free votes. This marked the birth of Fast Track.

Until 1994, every President since Ford had enjoyed the right to strike a trade deal subject only to an up-or-down vote by Congress. But when the authority lapsed in 1994, President Clinton was unsuccessful in his attempt to get it back. The December 2001 215-214 vote in the House capped an intense week of lobbying in which Republicans, business groups, and the administration battled organized labor, environmentalists, and the Democratic leadership. Ultimately, 21 Democrats joined the Republican majority in the House vote.

The fight is hardly over. The Senate will most likely make changes in the bill, and the final version, drafted by a conference committee, will probably go before the House in the midst of the midterm Congressional election campaign. This promises to end in yet another close House vote.

Pros of Fast Track

Proponents argue that the measure is essential to successful trade talks and will help revive the nation's shaky economy. Those favoring Fast Track include the Republican leadership in Congress and probusiness organizations such as the National Association of Manufacturers (NAM). The proponents use the classic arguments supporting free trade.

In a letter to the President and Congressional leadership, NAM writes: "The need [for Fast Track] is urgent, for the United States has been falling behind. Of the more than 100 free trade agreements in the world, the United States is included in only two of them. Trade-promotion authority must be extended immediately…Further delay risks a high cost in terms of American trade and high-paying U.S. jobs. "International trade is essential to our economic growth," the NAM letter continues. "Through trade, companies such as ours have contributed to over one fourth of the economic growth in this country over the past decade. Continued international trade expansion will allow the United States to reap even more benefits from the strength of our competitiveness and productive capabilities. "For more than a quarter century," it concludes, "every President has had Fast Track authority. The need for this authority has never been more urgent, and we call on Congress and the Executive Branch to work to extend it now."

In a 1997 briefing paper, Washington, D.C.-based Cato Institute supported President Clinton's desire to obtain Fast Track authority.

"Failure to pass Fast Track authority to reduce trade barriers would be a mistake," writes Daniel T. Griswold, associate director of Cato's Center for Trade Policy Studies. "Congress should approve the authority for the President soon, without the baggage of environmental and labor language." The briefing paper goes on to express the following arguments in favor of Fast Track: Free trade among nations increases global prosperity by allowing people to specialize in what they produce relatively more efficiently.

Trade with other nations allows American consumers to enjoy a wider range of goods and services at lower cost.

The American economy has become increasingly intertwined with the rest of the world. Exports provide a livelihood for a growing share of American workers.

Benefits of free trade spill over U.S. borders, creating a more peaceful and prosperous world. Protectionism, in contrast, makes people poorer by raising prices and diverting resources away from more efficient industries.

Protection also acts as a kind of tax, robbing from the mass of consumers in order to benefit a narrow slice of producers.

Arguments Against Fast Track

Leading the forces against giving the President Fast Track authority are the Democratic Congressional leadership as well as labor unions and environmental groups. Opponents say this legislation will give foreign countries potentially greater leverage to challenge U.S. environmental and labor protections. Adding weight to the foes of Fast Track is the long-standing public sentiment against free trade. In a New York Times op-ed piece published in January 2002, Robert Lighthizer points out, "Given repeated polls showing that Americans believe, rightly or wrongly, that trade agreements cost jobs, the measure [Fast Track] is likely to be a major election issue in 2002. And with the Republican majority in the House razor-thin, this vote could have a major impact."

The AFL-CIO vociferously opposes Fast Track, saying on its website that the authority "has not required the President to include enforceable protections for the environment and workers' rights." The AFL-CIO also criticizes the basic format of the legislation because it "lacks adequate procedure for consultation with Congress and the public and limits democratic debate about trade policy." Before the House vote, the AFL-CIO sponsored a national call-in day on Dec. 4, 2001, which reportedly generated thousands of toll-free calls to House members. And at the AFL-CIO convention, delegates used specially provided computers, faxes, and cellular phones to contact lawmakers to vote against the trade bill.

The United Auto Workers (UAW) took out full-page ads in several major newspapers claiming that "instead of taking action to help laid-off workers, the White House and Republican congressional leaders are pushing divisive Fast Track trade legislation."

A "Smokescreen" says UAW

On its website, the UAW calls Fast Track a "smokescreen," and "completely unacceptable." The union asserts, "Worker rights and the environment must have the same types of protections in trade agreements as corporate interests. It's the only way to prevent trade from fostering a 'race-to-the-bottom,' as countries compete with each other for investment on the basis of who has the lowest labor and environmental standards."

It continued, "The UAW and a broad coalition of union and civic organizations insist that trade agreements stop this destructive competition by establishing basic labor and environmental standards." Joining forces with organized labor are the environmentalists. The Sierra Club says it has no quarrel with expanded trade that can improve living standards and even provide additional resources to protect the environment. The group's concern "lies with the fact that trade agreements don't merely promote trade; instead, they impose measures on government that weaken their ability to protect the environment and workers' rights when those protections threaten corporate profits." On its website, the Sierra Club says that it supports what it has dubbed a "right track" trade policy "that would insure that trade rules cannot undercut hard-won environmental, health, and safety laws; ensure that basic environmental standards, such as toxic-release-right-to-know provisions, are enforced in the same way as commercial provisions…"

Domestic Economic Development

While the basic issue is traditional free trade versus protectionism - protecting jobs on one side and improving one's standard of living on the other - there are some underlying issues that have major implications to economic development within U.S. borders.

The American steel industry continues its fight to survive. The economy in areas producing American steel continues to require protection from steel imported from Europe and the Far East.

In discussing the steel issue, Standard & Poor's analyst Leo Larkin points out, "It's a complex, global problem. There is more steel produced worldwide than can be consumed. It's in everyone's interest to cut the output, but figuring out who is going to cut is hard. Foreigners don't like having to lay off workers any more than we do," Larkin notes.

Additional tariffs on imported steel would compel steel producers in countries like Japan, Brazil, Russia, and China to ship their products elsewhere. While this could help the U.S. steel industry, it could be a disaster for U.S. ports of entry.

Opportunity to Create Jobs

Those American industries seeking to do more business abroad point to the need for free trade to enable them to expand their businesses - and create more jobs for American workers. Major U.S. ports see free trade as an opportunity to expand and create more jobs. It was not coincidental that President Bush chose the Port of New Orleans as a venue to promote Fast Track. In a January 2002 speech the President pointed out, "This isn't a Republican issue. This isn't a Democrat issue. Trade is a jobs issue. And the United States Senate needs to hear voices of the working people to get me a bill I can sign."

The President's push for Fast Track involves the same route he used to secure passage of his tax-cut measure, which enabled him to obtain considerable support from the Democrats. Countering organized labor, Bush said, "I'm worried about jobs. And I believe if you trade more, there are more jobs available for hard-working Americans. There are some who play politics with the trade issue. They want to shut down trade."

 

Area Development Magazine
March, 2002