When Pat Buchanan launched his third campaign for the presidency of the United States, the protectionist candidate visited the archetypal steel town of Weirton, West Virginia. Buffeted by a surge in imported steel, Weirton offered a natural backdrop for Buchanan’s xenophobic fulminations.
But Pitchfork Pat had a predecessor: Six years earlier, then presidential candidate Bill Clinton had also come to town, promising, in the pursuit of fair trade, to uphold the antidumping laws of the U.S.
That both the hapless Buchanan and the ultimately triumphant Clinton felt compelled to invoke the symbolism of a decaying steel town in articulating their respective trade-policy positions speaks volumes about the lack of clarity in the public discussion of trade in the U.S. today.
The decade-long shift away from import protection and toward export promotion is now in jeopardy. A major source of pressure is the rise of the U.S. trade deficit to historically unprecedented levels, a development driven by relatively robust U.S. growth, especially relative to Asia. Despite predictions of a slowdown, the consensus of professional forecasters is that the U.S. will grow more rapidly than Japan and much of the rest of Asia for at least three consecutive years (1997-1999) — a reversal of a decades-old pattern. This means that despite slowing growth, the U.S. trade deficit is likely to expand. The merchandise trade deficit set a record in 1998 and may hit an annualized rate of $300 billion in 1999.
Growing trade imbalances in the context of slowing growth could affect political responses in the U.S. to Asia’s recovery from crisis, especially if the unprecedented U.S. expansion were to slow and unemployment were to rise. We are already seeing this phenomenon in regard to the steel industry and in the Clinton administration’s growing calls for “burden sharing” on the part of the European Union. As Rep. Sherrod Brown, a Democrat from Ohio, succinctly put it, “the U.S. trade deficit is at an all-time high because of our government’s s irresponsible trade policy.”
The complication is that the international institutional context has changed, and profoundly so. The formation of the World Trade Organization has greatly inhibited Washington’s ability to use Section 301, or the newly revived “Super 301,” to pry open foreign markets. Previously, the U.S. stood as judge, jury and prosecutor, ready to retaliate when target countries did not submit, aware that denial of access to the lucrative U.S. market could not be successfully challenged in the dysfunctional dispute-settlement system of the General Agreements on Tariffs and Trade, the WTO’s predecessor organization. Now, under the WTO’s far stronger dispute-settlement mechanism, the U.S. is profoundly constrained in its ability to impose WTO-consistent unilateral trade retaliation.
Moreover, the upcoming Seattle ministerial meeting will focus political attention here in the U.S. on the WTO. Thus, in the primary field of trade policy, the U.S. government finds itself subjected to growing demands for action without recourse to its traditional remedies.
New wine in new bottles
U.S. trade policymakers have historically had to contend with the demands of specific industries for protection from imports. What is new is that the trade-policy agenda has been greatly broadened and action greatly complicated by three interrelated phenomena: the rise of new issues; the use of trade policy for new purposes; and the mobilization of new participants in policy formation.
With respect to the first, a number of issues stand out: the appropriate role (if any) of preferential trade agreements; the linkage between trade and human or labor rights, sometimes described as the “social-clause” issue; the linkage between trade and the environment; the relationship between trade and competition policy; and the issue of transborder investment. Another set of issues relating to the linkage between trade and technological advance, particularly in the form of electronic commerce, biotechnology and genetically altered organisms, is on the immediate horizon. Linkage between trade and social issues on the one hand and trade and the environment on the other is further complicated by the use of trade restrictions as a mechanism for enforcing compliance with other agreements that are not otherwise trade-related.
Not surprisingly, this broadening of the agenda has been accompanied by an increase in the number of participants in policymaking. In the U.S., this has generally taken two forms. One form is the application of economic sanctions or boycotts against foreign countries by subfederal governments or quasigovernment institutions such as public pension funds. The other is the mobilization of nongovernment organizations, especially environmental NGOs, not traditionally involved in trade policymaking. These groups, together with the more traditional business lobbies and unions, are now known collectively as “civil society.”
Death of a treaty
Perhaps the most striking example of the newly mobilized political forces in trade policymaking was the collapse in 1998 of the Multilateral Investment Initiative. Stymied by the opposition of developing countries in the WTO, the developed countries began in 1995 to negotiate a multilateral investment-liberalization accord in the Organization for Economic Cooperation and Development. The core principles of the initiative — national treatment and most-favored-nation — were borrowed from the international trade regime, but negotiators were far from agreement on a wide range of issues and the draft text was full of bracketed language, footnotes expressing national delegations’ concerns, and national exceptions.
In February 1997, this text was leaked to Public Citizen, a Washington-based NGO that had earlier made its mark with its hysterical opposition to the North American Free Trade Agreement, the Uruguay Round, the fast-track proposal, the African Growth and Opportunity Act and every other recent attempt to liberalize the U.S. trade regime. A kind of intellectual Gresham’s Law took hold on the Internet with a transnational coalition of NGOs making outlandish and apocalyptic claims about what was admittedly a work in progress.
In the U.S., a diverse set of groups, including the AFL-CIO, the Sierra Club, the Western Governors Association and the Women’s Division of the United Methodist Church were among the organizations that came out against the treaty — which was still being negotiated. The U.S. government, along with its OECD counterparts, was clearly caught flat-footed and was slow to respond. In April 1998, the OECD announced that the negotiations would be suspended for six months. For all intents and purposes, the MAI is dead, although one can debate whether it died from self-inflicted wounds or was in fact the first major casualty inflicted by a global coalition of NGOs. Although the mobilization of NGOs in the U.S. has not achieved the bottle-throwing fervor it did in Geneva, it has clearly reached a point where it can have a decisive effect on policy outcomes.
Fast track to nowhere
For 50 years beginning in 1934, the U.S. Congress in effect evaded its constitutional duty by allowing the president to take the lead in formulating trade policy. This system of acquiescence with oversight more or less successfully addressed Congress’ tendency to engage in protectionist log-rolling exercises when setting tariffs, by absolving Congress of the primary responsibility for trade outcomes for particular industries, either by subsuming tariffs into large packages or channeling demands for protection into quasijudicial remedies such as the antidumping procedure.
This system began to fray in the mid-1980s under the strain of record trade deficits and the partisan political rivalries of a divided government. Its demise received a further impetus in the early 1990s, with the fight over NAFTA and the dramatic increase in demands on trade policy both in the form of new issues (preferential trade agreements, the social clause, the environment, competition policy) and new participants, especially antitrade NGOs.
The result has been a trade policy marked by little overall strategic coherence and, as a consequence, little public appeal. The debate over trade policy has been reduced to nearly pure tactics, and the proliberalization forces within Congress and the administration have been badly outplayed.
The most recent contretemps centered on U.S. President Bill Clinton’s rejection — over the advice of the U.S. trade representative, the State Department and the National Security Council — of the WTO accession offer made by China during the Washington visit of Chinese Premier Zhu Rongji. Those opposed to rejection arguing that the deal could be improved in time for the Seattle WTO meeting later this year.
In the first half of this century, the dominant powers were unable to successfully integrate two rising powers, Japan and Germany, into the international order. The result was a world war. Clinton may have just made a mistake of comparable historical importance.
It is possible to envisage coherent U.S. trade policies. One alternative would be a policy that explicitly recognizes the centrality of the new issues to the agenda and responds both substantively and organizationally to the changed reality they represent. Another, equally coherent approach would marginalize the influence of the new players, insulating traditional market-access issues from the new demands. Both responses require a degree of intellectual honesty that the political class appears unable to muster; in the absence of leadership, the U.S. polity is badly split.
It is unlikely that, without a significant shift in public sentiment, either strategy would prove sustainable. This appears to be a recipe for continued drift and continued use of trade policy by narrow special interests for particular ends. In such an environment, international agreements, which could constrain the abuse of domestic-policy formation, could be a useful way to precommit authorities to relatively enlightened policies. Even this may prove unsustainable, however, if supporters of a liberal international system do not demonstrate the courage of their convictions.
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