No Free Ride For Free TradeRichard S. Dunham and Douglas Harbrecht and Mary Beth Regan
They love tax cuts. They hate regulation. And they never met a government agency they couldn't pare. In many ways, the 73 freshmen House Republicans look like a dream to Corporate America--a dream that quickly fades into a nightmare when the subject turns to trade.
Just ask Federal Reserve Chairman Alan Greenspan and Treasury Secretary Robert E. Rubin, who found out the hard way when they went to Capitol Hill last winter to brief lawmakers on the Clinton Administration's peso rescue plan. The duo expected kudos from probusiness Republicans, thankful that the Administration had taken a bold step to prop up Mexico's economy and stabilize world markets. What they got was a bitter thrashing from the freshmen--despite the plan's strong support from GOP leaders. Ten of the newcomers even signed a blistering letter to House Speaker Newt Gingrich (R-Ga.) denouncing the peso plan as "a handout to the international finance community."
Attacks on the business elite chasing the almighty buck used to be the province of populists on the left. But the surprising stridency of the GOP freshmen has alarmed many executives, who are increasingly dependent on foreign markets for growth. Though the GOP has historically been the party of free trade, the vast majority of first-term Republicans reject that mantra, aligning themselves more closely with America Firsters such as Patrick J. Buchanan and economic nationalist Ross Perot. Explains freshman class vice-president Mark Souder (R-Ind.): "We're hot-wired to the grass roots, so that's why you're seeing a more pro-nationalistic tone."
The frosh class constitutes one-third of a majority vote on any issue in the House--a cohesive swing bloc that has voted together more than 98% of the time on the GOP's Contract With America. Unchecked, such sentiments could leave 40 years of trade liberalization dead in the water and even reverse some gains. "I'm very concerned," confesses Dick DeVos, president of Amway Corp., a $5.3 billion direct marketer that gets 70% of its sales overseas. "Among some of those [newcomers], there is an increasingly persistent tendency to reject free trade."
DeVos has good reason to worry. No longer can business count on a monolith of Republican free-traders to offset the Democrats' traditional resistance to expanded trade. On that one issue, the new Republicans are closer ideologically to the Democrats' labor-liberal wing led by House Minority Leader Richard A. Gephardt (D-Mo.). "We are at a crossroads here," worries Representative Jim Kolbe (R-Ariz.), a veteran free-trader. "My freshman colleagues know what they were elected for, and free trade isn't part of their agenda."
Why this shift? Many of the GOP freshmen ran on anti-Establishment platforms, promising to shake up the status quo. Moreover, says freshman Representative Sam Brownback (R-Kan.), a former U.S. trade negotiator, many of his colleagues' beliefs are based on a distrust of large institutions, whether they be international organizations, government bureaucracies, labor unions, or multinational corporations. "They're fearful of bigness--whether that's one-world government or Big Business," explains Brownback.
The newcomers are aggressive with their new clout, too. Their ultimate objective is to seize the policymaking lead on trade issues from the executive branch. Already, their agitating has prompted congressional efforts aimed at undercutting President Clinton's Mexico policy. And opposition from GOP House freshmen has jeopardized "fast-track" legislation favored by Republican leaders to renew Presidential authority to negotiate trade agreements without congressional amendments.
It doesn't end there. The freshmen talk of stalling legislation extending the North American Free Trade Agreement (NAFTA) to Chile and other Latin American countries. The majority backs a hawkish Gephardt proposal to slap sanctions on Japan, China, and other countries that refuse to increase U.S. imports--a proposal tougher than President Clinton's current stance on auto parts--causing many free-traders to worry that it will spark a global trade war. They want to abolish the Commerce Dept. and its export programs, which many consider corporate welfare. "We're hitting everyone," promises Representative Steve Stockman (R-Tex.), a leading freshman trade hawk. "No one, not even business, is leaving the room without getting hit."
SPILLOVER EFFECT. Most members of the group feel they were elected to pursue the Contract's domestic agenda, particularly budget slashing and tax cuts. And the Contract doesn't contain a word about trade. That explains only part of the picture. In many cases, Republicans--among them Representatives Jon Christensen (R-Neb.), Todd Tiahrt (R-Kan.), and David Funderburk (R-N.C.)--replaced Democrats in districts that long favored protection for homegrown industries like textiles, autos, and agriculture. Other GOP freshmen, including Souder, Stockman, and Helen Chenoweth (R-Idaho), won in 1994 because of strong backing from fiercely nationalistic Perot voters.
The hostility the new group feels toward global trade is spilling over to other international issues as well. These neo-isolationists have gleefully backed drives to slash the foreign aid budget, ban U.S. participation in U.N. peacekeeping operations, and adopt a more hard-line stance toward Russia.
Corporate America is so concerned that it is working overtime to "educate" the firebrands on the merits of free trade. Industry groups such as the Electronic Industries Assn. have sponsored briefings on Capitol Hill, and companies such as General Electric Co. are considering one-on-one meetings with novice lawmakers. Even the conservative Heritage Foundation will begin a trade education program for first-term lawmakers in June.
The business reeducation plans could temporarily blunt some of the freshman class's sharper edges. But unless Corporate America can convince the newcomers that free trade doesn't jeopardize jobs in their districts, trade liberalization could be a tough sell for years to come.
GOP freshmen are flaunting Republican leaders on global commerce
MEXICAN CURRENCY CRISIS Agitation by first-termers, angry over what they call a bailout of big investors, prompted congressional efforts to scuttle the Clinton Administration's peso rescue plan.
FAST-TRACK AUTHORITY Eager to assert congressional power on trade, Republican newcomers could thwart efforts to extend White House power to negotiate trade accords without amendments.
EXPANSION OF NAFTA Freshman opposition is likely to delay Congress' consideration of Clinton Administration plans to expand the North American Free Trade Agreement to Chile and other Latin American nations.
TRADE SUBSIDIES Budget-cutting conservatives would gut Commerce Dept. programs designed to subsidize U.S. trade promotion abroad. Many freshmen want to abolish the Commerce Dept. altogether.
DATA: BUSINESS WEEK
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