June/July, 2001

From the Editor

Free Trade Easy To Justify

Fast Track may sound like a new thrill ride at Disneyland, but it is actually the key to expanding trade in the years to come and thus laying the groundwork for more prosperity around the globe. Fast Track is the name given to a kind of authority that President Bush is seeking from Congress. It has been previously granted to other Presidents during trade negotiations.

Under the United States Constitution, when a President negotiates a treaty with a foreign power, that treaty must be submitted for approval to the U.S. Senate. If carefully developed compromises are overturned by amendments made to treaties in the Senate during the ratification process, U.S. negotiating partners might refuse to negotiate.

What Fast Track does is commit the U.S. Senate to consider any trade treaty that the President might submit under an up-or-down vote. In other words, the Senate retains the right to ratify or reject a treaty, but cannot add amendments.

Because trade involves so many tradeoffs — “We’ll accept your textiles duty free if you accept our airplanes duty free; we’ll hold the tariff on bananas to 10% but we want free trade in insurance services” — Fast Track Authority is necessary to conduct trade negotiations. So a vote against Fast Track is a vote against reaching a free trade agreement.

The opposition to Fast Track comes principally from Labor Unions and Environmentalists and both for the same reason. Both groups look to use the power of the law to obtain benefits that they would not be able to sustain without the law’s authority. But U.S. law stops at the U.S. border. So if environmentalists want to convince the U.S. Congress to require expensive equipment on factories to reduce pollution, but free trade allows industry to set up a factory in a country without those rules and still access the U.S. market, Congress will hesitate to pass such a law because of the possible loss of factory jobs. If Congress does pass the law, it may only cause pollution to increase in another country and not reduce pollution at all.

The same dilemma exists on wages and working conditions. Labor unions can fight for higher wages and better working conditions. Perhaps they get Congress to pass a law requiring a higher minimum wage or the Union negotiates for better conditions with U.S. companies. The problem is that if companies can simply go elsewhere and produce without these obligations, then U.S. companies will hesitate to agree to such obligations or industry will leave the U.S. even if such obligations are agreed to.

In an economic sense, free trade is easy to justify. If another country is desperately poor, of course they won’t be as concerned with reduced working hours or pollution. These are luxuries that more affluent countries can choose to purchase. Less-developed countries need trade most of all as the first step to lift their countries from grinding poverty. It is later, with more prosperity, that interest in these other areas develops.

That is why President Bush is right when speaking about the WTO protestors and pointing out that people who oppose trade are no friends of the poor. What poor people, and poor countries, need most is economic development. More than giving out foreign aid, which puts countries on the dole and often leads to enriching the political leadership, poor countries desperately need access to wealthier countries’ markets for products that poorer countries can actually produce — such as food and textiles.

The opposition is very powerful and may well carry the day. Part of it is the normal dilemma of democracies where the laws often are made to benefit small, concentrated minorities as opposed to large, but diffused, majorities. In other words if we have free trade in textiles, every American will benefit by being able to purchase less expensive clothing. But clothing is such a small part of the average American’s budget that some small discount will pass imperceptibly. But those who own and work in textile plants in North Carolina are very aware of agreements that might cost them their businesses and jobs. They will campaign, contribute and vote based on the issue. So, politically what is good for the country is bad for the politician.

This is an old problem, but now there is a new problem — a bubbling of frustration among those who want to control things. The protestors at the WTO are fundamentally totalitarians. They live in democracies, where they are free to try to persuade their fellow citizens of the rightness of their cause, but instead, these protestors attempt to obtain their goals through violence and intimidation. And the goals themselves are attempts to impose their own priorities on distant people with different problems. Like modern day Marie Antoinettes, they cry, “If the people have no jobs, let them go for a hike on the natural beauty of their lands.”

Let us hope that, in the end, the U.S. Congress will neither subscribe to such values nor submit to such intimidation.  EXP