Source: Carnegie
ISSUE BRIEF
Global Policy Program
August 9, 2002
With close votes and tough compromises, Congress has granted trade promotion authority (TPA, formerly known as fast track) to the Bush administration. This ends a decade-long standoff between the executive and legislative branches on trade, giving the President a powerful tool for increasing global economic integration and writing the rules of globalization. However Congress also included specific instructions on how the administration should address important social issues like labor rights and environmental protections when shaping new trade deals.
We now enter a new phase of modern U.S. trade policymaking. Debate shifts from Capitol Hill to negotiating tables with Chile and Singapore, where negotiations languished while the administration waited for Congress to act. How the administration actually uses its new power in these trade negotiations will determine whether trust can be built between the executive and legislative branches on trade, whether the government can persuade a substantial majority of the public that further economic integration is in its interest, and indeed whether any trade agreements negotiated under TPA can ultimately win congressional approval and take effect.
Among the pivotal issues in the decade-long debate over trade are those concerning labor and the environment. Polls have shown that the American public, by broad margins, fears that increased trade can threaten U.S. jobs, lead to exploitation of workers in developing countries, and increase environmental degradation at home and abroad. Their political representatives on both sides of the aisle recognized that no legislation on trade could pass both houses of Congress unless it dealt with these issues in a serious way.
The resulting compromise was twofold. With respect to domestic job fears, the new bill creates a somewhat improved program of assistance for U.S. workers who lose their jobs because of trade. With respect to the impact on workers and the environment overseas, the bill adopts an approach that was first forged in the free trade agreement between the U.S. and Jordan, negotiated by the Clinton administration in October 2000. In that accord both countries agreed to effectively enforce their own domestic labor and environmental laws. If one country fails to do so, the other can ask a neutral international panel to review the situation, and if such a failure is found, the complaining country can deny certain trade benefits or take other appropriate steps to bring the offending country into compliance with its labor and environmental commitments.
The policy logic behind the Jordan approach is simple. It assumes that good government policies don't exist in isolation but can-indeed should-be mutually reinforcing. Good economic policy, workers' rights, rule of law, effective courts and sustainable environmental stewardship all go hand in hand in successful countries. We can help our trading partners do the right thing on more than one issue at a time. Congress has told the administration to incorporate the Jordan approach into all future trade agreements, as a minimum step to ensure that trade rules reinforce labor and environment laws, rather than undermining them.
The first test of the administration's willingness to follow Congress' instructions will come in the Chile and Singapore negotiations. Both countries have indicated they are willing to include labor and environmental commitments in trade deals with the U.S. When Singapore and the U.S. launched negotiations, Singapore said it was willing to sign on to the Jordan approach. And Chilean President Ricardo Lagos argued to legislators in his own country last year that labor law reform was needed in Chile to advance a free trade deal with the U.S. (He won approval of the reforms.) Moreover, both Chile and Singapore had already agreed to a trade-labor linkage years ago, when they applied for and won tariff preferences under the U.S. Generalized System of Preferences (GSP) for developing countries. To qualify for those benefits, countries must respect fundamental worker rights.
Chile actually lost GSP benefits during the Pinochet years because of its abuse of workers' rights. Its benefits were restored only when the country returned to democracy and its elected leaders started down the path of revising the draconian Pinochet labor code. Singapore eventually "graduated" from eligibility for these developing country trade preferences by virtue of its economic growth-growth that included rising wages for workers, as well as a steady expansion of workers' rights. Both Chile and Singapore are case studies showing that trade-labor linkages work to the advantage of both overall economies and working people.
Chile still enjoys preferential GSP treatment. Paradoxically, if the US were to conclude a free trade agreement with Chile without strong protections for workers' rights, the Bush administration would create the anomaly of granting greater trade benefits to the country while scaling back or eliminating existing requirements for labor law enforcement and protection of worker rights.
Both Chile and Singapore are waiting to see what the Bush administration will actually demand of them on these issues. They may suspect that labor and environmental provisions are not important to this administration, and that they can avoid new commitments in these areas. They may be looking for a wink and a nod, if U.S. trade negotiators propose the Jordan language but quickly back off and agree to hollow commitments with no enforcement teeth.
This is where the administration has a crucial choice to make. It can insist on the Jordan terms, as Congress has directed, and make it clear that this is a sine qua non for an agreement. Based on the strong interest of Chile and Singapore in free trade deals with the U.S., it seems clear they will agree, perhaps with minor modifications that meet their specific concerns. Chilean foreign minister Soledad Alvear said earlier this year that "at the end of the day" the key determinant of the shape of labor and environmental provisions in a U.S.-Chile free trade agreement would be the U.S. position. Singapore's trade minister, George Yeo, also said recently that his country would follow the U.S. lead on these issues.
Alternatively, U.S. negotiators can choose to trade away worker rights and environment protections, pursuing only corporate trade goals. This would be a fateful mistake for three reasons. First, it might well cause enough members of Congress to vote against the resulting agreements to prevent them from being adopted. Second, it would sour relations and fan mistrust between key elements of Congress and the administration on trade policy. Third, and most important in the long term, it would steer U.S. trade policy down a path that seeks benefits in trade agreements only for corporate interests and wastes the opportunity to promote a broader societal sharing of the gains from trade in the countries that we trade with.
We can use the powerful incentive of access to U.S. markets to help steer our trading partners in the right direction on workers' rights and enforcement of labor laws, and thereby contribute to greater equity and poverty alleviation. These things don't happen automatically with trade-it all depends on how the rules are written. In a world where poverty and inequality are growing-and threaten our own prosperity and security-we can't afford to waste this valuable opportunity.
Congress also has a role to play in making a success of the new trade legislation. If a consensus on trade is to emerge, Congress must exercise its right to send informed representatives to the negotiating table and take part in the formulation, negotiation and implementation of U.S. positions on labor and the environment. Until now, congressional attention to trade negotiations has been an eleventh hour phenomenon that comes too late to have meaningful impact. Although real oversight will have costs in terms of staff and members' time, there is no short cut to achieving sound terms on labor and environment in trade agreements. It is simply too expensive not to do this, because of the continuing risk of a policy stalemate and the danger of embarking on a flawed trade policy path. These are issues that constituents back home genuinely care about. Both Congress and the White House should seize the opportunity to get the rules right this time.
Sandra Polaski is a senior associate at the Carnegie Endowment for International Peace. She served from 1999-2002 as the special representative for international labor affairs at the U.S. Department of State, the senior official handling labor matters in U.S. foreign policy.
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