Free trade is a proven winner. More than 12 million Americans have jobs supported by exports – jobs that pay about 14 percent more than jobs in nonexport industries. Exports have more than doubled as a share of the nation's total output in the last 25 years. Since 1993, American trade with other countries has increased by 33 percent – and trade with Canada and Mexico, our partners in the North American Free Trade Agreement (NAFTA), has grown by 44 percent.
None of this seems to have registered with Gephardt and his Democrat-Labor faction of the Democratic party. Even New York Times columnist Anthony Lewis agrees that Gephardt is leading his faction backward.
But what about organized labor's demand that any fast-track bill require other countries to meet certain labor and environmental standards in any trade agreements? As the Cato Institute's Daniel Griswold has pointed out in an excellent analysis of the fast-track fight, "The best way to promote higher standards around the world is to promote free trade and the efficiencies it brings."
The Organization for Economic Cooperation and Development looked at labor standards in more than 70 countries last year and concluded that "there is a positive association over time between successfully sustained trade reforms and the improvement in core [labor] standards."
It's difficult to give a high priority to improving the environment when you're unsure of having food and shelter. But United Nations data have shown that once a poor country reaches a certain per capita income, any further economic growth results in reductions of both air and water pollution.
Under fast-track authority, the president could negotiate trade deals and then present them to Congress, which would have to approve or disapprove the deal without being able to offer any amendments. Without the authority, there's no guarantee Congress won't make changes. Trade negotiators say this inhibits nations from making commitments. When fast-track authority lapsed in 1988 during the Uruguay Round of the General Agreement on Tariffs and Trade, they point out that the talks just stopped for eight months until the authority was renewed.
Angela Ellard, the press secretary of the House Ways and Means Committee, says that is exactly what will happen to all the trade agreements now being negotiated, including expanding NAFTA to Chile. However, Jay Zeglar of the White House Trade Representative's Office says President Clinton will continue to move forward on five major trade agreements. But Zeglar says the president still needs fast-track authority and will continue to push Congress to pass the bill early next year.
A couple of germane historical notes here:
Fast-track authority actually expired in 1994, and President Clinton was warned that the longer he waited to ask for renewal, the more difficult it would be to get it. But he didn't ask for renewal until this year because he didn't want to stir up the Gephardt wing of the party before the 1996 elections.
The Reciprocal Trade Agreements Act of 1934 gave the president advance approval to negotiate tariff reductions of up to 50 percent with other nations that were willing to reduce their own tariff barriers. So, as NCPA Senior Fellow Bruce Bartlett has pointed out, when fast-track authority was first granted in the Trade Act of 1974, it really represented a move by Congress to become more involved in the trade process, not less.
There is no doubt, however, that fast-track authority gives the president – and the United States – a stronger hand in negotiating major trade agreements. There is also no doubt that Richard Gephardt, organized labor and other protectionists cannot build a wall around the United States. We saw an example of what happens when you try it in 1981, when the Reagan administration pressured Japan into restricting Japanese auto exports to the United States. U.S. auto employment went up by 22,000 the next year, but prices of American cars went up, the quality went down, Americans bought a million fewer cars per year than they otherwise would have, and eventually 54,000 layoffs resulted. It took years for American cars to overcome the reputation for inferior quality.
The dipsy-doodle behavior of the U.S. stock market in the last few weeks as a result of economic uncertainty in Asia bears testimony to the fact that we have a worldwide economy. Since it is neither desirable nor possible for us to resign from the rest of the world, it seems reasonable to remove any barriers to freer trade worldwide that we can. Free trade is a winner – and so is fast track.