President Clinton had trouble getting Congress to approve the North American Free Trade Agreement back in 1993 because many Americans blamed free trade for the recession they had recently endured. Well, happy days are here again, with low unemployment, a resurgent labor movement, low inflation and seemingly unstoppable growth.
And guess what: Many people are still scared of free trade. Protectionists have the suspect in custody. Now they just need a crime to pin on it.
Leading the anti-trade forces is House Minority Leader Dick Gephardt, who plans to lead the fight against Clinton’s effort to regain the “fast-track” negotiating authority enjoyed by his predecessors. But the real debate is over whether we are better off dismantling walls that prevent buying and selling between nations or hunkering down behind those walls.
Since World War II, the United States has consistently preferred opening up markets, not closing them. Global trade agreements have scrapped import barriers and reduced average worldwide tariff rates from 40 percent to 4 percent in recent decades, stimulating a huge increase in commerce. The U.S. and the world are vastly more prosperous than they were under the protectionist system that prevailed before–and that is no coincidence.
But free trade still evokes widespread suspicion. Many people whose standard of living has risen enormously, thanks in part to international commerce, still regard international commerce as a threat to their standard of living. It’s as if, having relied on science to send a man to the moon, we turned to astrology to bring him home.
Fast-track legislation doesn’t commit Congress to any specific trade proposal. It merely allows the president to haggle with other countries without the fear that Congress will adorn an agreement with amendments that force him to reopen the whole deal. Under this procedure–which had been available since 1974 but expired three years ago–the president hammers out a trade accord, and then Congress approves it or rejects it in its entirety.
Fast-track authority recognizes that we can’t have 535 trade negotiators. As long as the president lacks this power, we can’t expect other countries to bargain seriously with us. They see no point in forging agreement with the administration if every comma is subject to revision on Capitol Hill.
Critics say not allowing amendments is “undemocratic,” which is like saying that presidential elections are undemocratic because voters don’t get to pick the Cabinet. No trade deal means anything unless it’s approved by both houses of Congress.
Clinton would like to have fast-track authority so he can negotiate with Latin American and East Asian governments to open up their markets to American goods–in exchange for easier access to ours. We have lower import barriers than most of these trading partners, which means that moving toward free trade would force them to make much bigger concessions on tariffs and quotas.
That is exactly what happened with NAFTA. When it took effect, the average U.S. duty on Mexican goods was 2 percent, but the average Mexican tariff on U.S. goods was 10 percent. How can the U.S. lose if both sides agree to go to zero?
Opponents of free trade claim that it induces jobs and industry to flee to anyplace wages are low. But NAFTA has hardly produced a rush of American businesses southward–witness our low unemployment rate. Poor countries can offer low wages, but they generally lack assets the U.S. and other wealthy nations enjoy: a skilled work force, ready sources of capital, good transportation, proximity to markets, an established legal order and the like.
Gephardt and his allies say that in any trade deal, we should insist on tough labor and environmental standards. That’s another way of saying we should shun commerce with any country that hasn’t attained our standard of living. Of course the labor unions that Gephardt speaks for also oppose trade with any country that has: The AFL-CIO lobbied against the 1988 free trade agreement with Canada.
The way to improve the lot of workers and reduce pollution in Third World countries is to trade with them, which in due time will push up wages, promote better working conditions and facilitate the luxury of a cleaner environment. (Hong Kong wasn’t always wealthy.) Refusing to trade until they meet our standards merely dooms them to permanent poverty and squalor.
Protectionism is no favor to Americans either, with the exception of those at the lucky corporations and unions it shields from competition. Denying the president the power he needs to work toward a more open world market would be a surrender to economic superstition, and it would put our prosperity on a fast track to nowhere.
