Note: (October 14, 1997) Due to an editing error, an opinion article on Oct. 9 on page 8A by Claude E. Barfield, "Standing firm on fast track," included an inaccuracy. The article should have said reasonable consensus has established that changes in technology and international competition are leading many developing countries to race upward for product quality, rather than downward for price. -- Journal of Commerce
As a part of the current drive to renew the president's fast-track authority, labor and environmental leaders, backed strongly by many Democratic House and Senate members, are demanding that upgrading other nation's labor and environmental standards become preconditions to further trade liberalization.
House Minority Leader Richard Gephardt, D-Mo., has stated bluntly: "Labor and environmental provisions must be fully enforceable with access to trade sanctions where necessary. 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."
Despite the mood of accommodation among Republicans, they should stand firm against the demands that labor and environmental regulation become a central focus on the international trading regime.
There are two compelling reasons why: One, capitulation to the Democrats would betray the principles on which Republicans have defended free trade since the 1950s, and two, the overwhelming weight of evidence from both trade theory and empirical studies strongly contradict special interest view of the world.
Since President Eisenhower, the Republicans' case for trade liberalization has been built on the party's domestic principles -- that is, removing barriers to trade is simply an extension to the international arena of the goals of deregulation, privatization and downsizing government.
In the international arena, Republicans should continue to adhere to the idea that "free trade is its own reward," and government regulations and bureaucracies should not be reintroduced in the name of labor or environmental upgrading.
Republicans should also stand firm because they have the preponderance of economic evidence solidly behind them. Economists across the political spectrum steadfastly maintain that the case for rules and sanctions to level the playing field in trade is weak or nonexistent. It is for this reason that on Oct. 1, 50 leading U.S. university-based international trade economists signed a statement strongly backing fast track and condemning attempts to link trade with social and environmental sanctions.
Economic research has produced a reasonable consensus on the conclusion that wages and working conditions in developing countries in general are in line with productivity changes and not artificially depressed, as is often charged.
Moreover, there is scant evidence that low labor standard countries enjoy a better export performance than high-standard countries or that changes in technology and international competition are leading many developing countries to race upward for product quality rather than downward price.
Contrary to popular belief multinational firms are not locating primarily in low-standard countries, and labor standards in general are not large determinants of location decisions.
The case against top-down environmental trade regulations is equally strong. In general, the evidence demonstrates that, as incomes rise through trade and investment, the level and sophistication of environmental regulations also rises. Moreover, there is little evidence that multinationals favor countries with low environmental standards. On the contrary, they usually adopt higher environmental standards than local companies.
Given these facts, leaders from Asian and South American countries have good reason to argue that calls for new labor and environmental standards are stalking horses for protected interests in the developed countries.
Because of the political debts they owe to the labor and environmental movements, neither President Clinton nor his Democrat wannabe successors should be trusted with negotiating rules in these areas. Thus, Republicans should draft legislation that strictly limits the president's freedom of action. They can do this by specifically prohibiting the use of trade sanctions to enforce any language on labor and the environment and instructing the president not to conclude agreements which would force changes in U.S. labor or environmental laws.
Republicans are currently offering to allow labor and environmental negotiations if the issues are "directly related" to trade. This is a mistake because the language in reality leaves it to the executive to decide what is "trade related." If Republicans keep this language, it should at least be accompanied by a strong prohibition regarding the use of sanctions.
Over the past two years, President Clinton has proved uncannily adroit at manipulating Republicans to get his way -- and he may well do so again on fast track. But before they go down this path, Republicans should heed the admonition of Margaret Thatcher, who in a famous speech condemning social and environmental charters for Europe, stated that she had not "successfully rolled back the frontiers of the state in Britain, only to see them reimposed at a European level."
Claude E. Barfield is a resident scholar, director of science and technology policy studies, and coordinator of trade policy studies at AEI.
