The inclusion of clauses dictating labor and environmental policies defeats the purpose of free trade agreements.
Despite the mood of accommodation in Congress and the pressure to support bipartisan compromises, Republicans should stand firm against the demand of Democrats to have labor and environmental rules incorporated into all new trade agreements.
By capitulating on this issue, the Republicans would be betraying principles on which they have built trade liberalization since President Eisenhower--that is, that removing barriers to trade is simply an extension to the international arena of the principles of deregulation, privatization, and downsizing government. Creating new international bureaucratic regimes to force "upward harmonization" of environmental and social systems is anathema to this philosophy.
The issue is likely to come to a head in April when the congressional Republicans are presented with President Clinton's request for the fast track authority to negotiate Chile's accession to the North American Free Trade Agreement (NAFTA). Under fast track authority, Congress delegates to the president the power to negotiate new trade agreements and agrees to give such agreements a simple up or down vote within a specified time period.
The labor and environmental issues were included in side agreements to the NAFTA, rather than the pact itself. Although the side agreements were considered at the time as an empty gesture, labor unions, environmental groups, and many Democrats now contend that they have established a precedent for including these issues in all future U.S. trade agreements.
House Minority Leader Richard Gephardt said so openly in a letter to House Democrats, stating, "I am unwilling to support new trade negotiations that do not address fundamental flaws, by including labor rights and the environment as chapters in the core of the agreement. And such labor and environmental provisions must be fully enforceable with access to trade sanctions where necessary."
He also made it clear that his demands went beyond the mere establishment of procedural safeguards for labor unions and environmental organizations. They extended to substantive changes in national labor and environmental laws to be mandated by any new trade agreement. "Let's recognize that what we're talking about is comprehensive economic integration. We need to recognize that further upward harmonization is necessary in labor and the environment [in order] to further our interests in these important areas," he wrote.
The adoption of this agenda would profoundly alter the direction and goals of U.S. trade policy. It would betray the Republican principle that "free trade is its own reward" and that the establishment of complicated new trade rules--i.e., new regulatory systems--to produce a "level playing field" will make a mockery of "free trade" agreements.
Among the key arguments against the addition of social and environmental charters to trade agreements are the following:
Forced upward harmonization of environmental and labor standards ahead of productivity gains is always self-defeating and would have disastrous consequences for developing countries. Indeed, in a developed country--Germany--the decision to equalize wage levels between East and West Germany when productivity rates in the east were only one-third of those in the west proved foolish. The results were soaring unemployment, bankruptcies, and, despite huge state subsidies, little prospect for solid economic growth.
Beyond economic considerations, there is the issue of sovereignty. Mexico or Brazil quite legitimately may espouse different environmental or social priorities from those of the United States. For instance, Brazil, confronted with the devastation of its rain forests, may well choose to spend more scarce resources on forest preservation programs than on air or chemical pollution. Or Mexican workers may find lower wage rates acceptable in return for more substantial health or unemployment benefits. Complete congruity of social welfare or environmental standards is a matter for a nation's political process to decide on the basis of domestic tradeoffs--and not from international mandates.
The regulatory regime under Rep. Gephardt's social and environmental mandates would create new bureaucracies. Even the relatively tame NAFTA side agreements produced a plethora of investigative and enforcement bodies, including ministerial councils, coordinating secretariats, national administrative offices, joint advisory committees, and dispute settlement panels. As critics of the NAFTA side agreements have pointed out, it is ironic that a free-trade treaty--the aim of which is to reduce government interference with commerce--resulted in the creation of a vast new bureaucracy to "manage" trade.
Before accepting any "compromises" to add labor and the environment to the trade agenda, Republicans should remember the admonition of Margaret Thatcher, who, in a famous speech at Bruges, Belgium, condemned proponents of social and environmental charters for Europe. She had not, she stated, "successfully rolled back the frontiers of the state in Britain, only to see. them reimposed at a European level." There is a message in that for Republicans as well.
Claude E. Barfield is a resident scholar at the American Enterprise Institute.
