Why Business Might Torpedo New Free Trade Deals

For years, the U.S. unsuccessfully tried to woo Singapore into a free-trade deal. So President Clinton was pleasantly surprised when Singapore Prime Minister Goh Chok Tong raised the issue during a golfing break at the Asia-Pacific Economic Cooperation summit in Brunei in November. The two leaders startled their governments by announcing that talks on a U.S.-Singapore free-trade agreement would begin immediately--and perhaps conclude before Clinton leaves office on Jan. 20. Days later, Chile decided it, too, wanted to negotiate a free-trade deal, ending years of coy flirtation.

Sounds like a nice coda to the Clinton free-trade legacy and an unexpected New Year's gift to business. Well, maybe not. A coalition of business lobbyists and their GOP allies are gearing up to fight the pacts. The reason: Clinton wants Singapore and Chile to agree not to weaken their labor laws or environmental standards to win new trade contracts. Similar "model" clauses are included in a free-trade deal with Jordan, soon to be sent to Congress.

BRAWL AHEAD. While such provisos only prevent trading partners from backsliding on existing labor and enviro safeguards, business groups argue that they antagonize other countries, slowing talks and hampering commerce once an agreement is finally worked out. Labor and environmentalists counter that these clauses are needed to stop U.S. companies from exploiting cheap labor or pushing to relax pollution controls in other countries. Expect a fierce fight on Capitol Hill that could jeopardize free-trade deals in the pipeline and hamstring President-elect George W. Bush's attempts to secure new trade-negotiating authority from Congress.

Business groups are walking a fine line with their opposition, however. They don't want to torpedo the Singapore, Jordan, and Chile agreements completely, since the pacts could increase sales and pump up profits. Nor does business want to get on the wrong side of the Bush Administration. That might happen if lobbyists oppose a free-trade deal with Chile--and dampen enthusiasm among other Latin American nations for a Free Trade Area of the Americas (FTAA), another of Bush's top trade priorities.

Still, argues U.S. Chamber of Commerce President Thomas Donohue, pacts on the environment and labor should be separate. He calls the model clauses "a sop to the unions." Union and environmental leaders say they don't go far enough, claiming that laws safeguarding worker rights in Singapore are weak, as are Chile's environmental rules. Says Sierra Club trade analyst Daniel Seligman: "Protections in countries like Chile have to be strengthened before we can stand up and cheer."

However, if the three free-trade deals are weakened, they may not attract enough Democratic votes to win congressional approval. Calling business' reaction "unhelpful," Montana Senator Max Baucus, soon to be the ranking Democrat on the Senate Finance trade subcommittee, insists that Republicans "have to find a way to accommodate labor and environmental concerns in trade agreements." Otherwise, he warns, Bush's efforts to secure "fast-track" trade negotiating authority will founder, as did Clinton's.

Even business groups agree that no President will be able to put together multinational trade agreements without some variation of fast track. Most countries are reluctant to do deals that Congress can amend. Consequently, fast-track authority is one of Corporate America's top legislative priorities. And with environmental protections and worker rights an unavoidable part of the debate, President Bush will need to forge a compromise--or find his hands tied on trade.

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