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Needed: a Fast Track on Trade

By R. Sean Randolph / April 15, 1997



The time has come to restore momentum to the free trade process. Significant advances have been made in recent months in areas such as information technology and telecommunications, but to fully assert American leadership partisan divisions in Washington must first be overcome.

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For most of the last two years, trade has taken a back seat. Part of the reason was pure exhaustion. Pushing through the North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT) required huge efforts by the Clinton administration and congressional Republicans. Last year, with elections looming, few in either party wanted to take on new issues.

Now, in 1997, trade policy faces fresh challenges - such as how to to restore a bipartisan consensus. This won't be easy. Republicans, with the help of moderate Democrats, carried the day on NAFTA and GATT. Some in both parties fought those agreements and remain deeply opposed to the new global economy. One side stresses sovereignty and the other jobs. Both share a nostalgic desire to erect economic walls around America.

The first question to be resolved in building a new consensus involves the relationship of labor and the environment to trade. Despite the administration's urging to include these issues in all post-NAFTA agreements, most of the world rejects the notion that they are directly linked to trade.

Use other forums

Both issues have a place in the global policy dialogue, but rigidly insisting on a forced marriage to trade will impede the process of global liberalization from which most countries - including the United States - benefit. Labor and the environment should be the subject of serious bilateral and multilateral discussions, in bodies such as the International Labor Organization, but not a litmus test of trade policy.

Resolution of the labor/environment debate is the key, in turn, to a more immediate challenge facing Washington - restoring fast-track negotiating authority for new trade agreements. Unfortunately for the US, the rest of the world isn't waiting. Chile, which was repeatedly promised NAFTA membership by both the Bush and Clinton administrations, has been kept on ice. Meanwhile, it has associated itself with Mercosur - the emerging South American group composed of Brazil, Argentina, Paraguay, and Uruguay - which in turn is positioning itself as the core of a new hemispheric trade bloc. Chile has also concluded a separate free trade agreement with Canada and is expanding its existing free trade agreement with Mexico. Paralyzed by policy drift, US leadership of the Free Trade for the Americas Agreement (FTAA) process has foundered.

To change this dynamic, restoration of fast-track negotiating authority is essential. At the minimum, fast track is a statement that the US intends to negotiate seriously and to play a leadership role in trade. Without fast track the credibility of US negotiators is in doubt, and we will forfeit an opportunity to shape the global trading system of the next century.

A related challenge facing trade policy is more subtle - to build the credibility of the new World Trade Organization. Much political blood and sweat went into the passage of GATT and the establishment of the WTO as the heart of the new global trading system. Now that we have a strong institution, it is incumbent that we use it, including the WTO's newly empowered dispute resolution panels. Some issues will be unpopular domestically, and some decisions will go against us.

Remember, the US brings far more complaints before GATT/WTO panels than any other nation, and has a strong track record of success. When the arrow does move against the US we can't just pick up our chips and leave.

Importance of trade

Why is trade so important? In 1960 international trade accounted for a mere 9 percent of the country's GDP. Today, it accounts for 23 percent, employing over 12 million Americans. As other nations have liberalized trade, lowering barriers to imports and foreign investment, US exports have risen. Despite critics' continued harping, NAFTA is stimulating strong two-way trade, new jobs, and increased consumer choice on both sides of the border.

Globally, the stimulative effects of GATT's Uruguay Round are just starting. New global agreements on trade in telecommunications and information technology promise more benefits for consumers and companies.

California offers a good example. Last year it exported over $100 billion in manufactured goods, plus $40 billion more in services. The state's major markets - including Mexico - all saw double-digit growth. California's $26 billion increase in exports in the last two years alone has created almost 500,000 new jobs - most of them high quality.

Global economy

The global economy is here to stay, and attempts to seal ourselves off are futile. The best strategy is to influence that economy through positive leadership, rather than fight rear-guard actions to protect declining jobs or aspects of sovereignty that long ago diminished in relevance.

Democratic leaders in Congress - who originally opposed both NAFTA and GATT - threaten to block any expansion of NAFTA or any other free trade agreements unless their demands on labor and the environment are met and "congressional authority" to dissect agreements is recognized. A mid-year report to Congress on the effects of NAFTA will spark a major debate on free trade agreements.

Trade proponents should not be deterred. It is critical to US leadership that fast-track negotiating authority be restored, unburdened by rigid labor and environmental restrictions. The US reaps huge benefits from trade. Americans need and deserve a bipartisan trade policy based on aggressive leadership.

* R. Sean Randolph is director of trade for the State of California.