The New Trade Rep Won't Get Much Sleep

Zoellick will tangle with Congress as well as Europe and Mexico

Speaking last October to a luncheon for lobbyists and policy wonks on Capitol Hill, Robert B. Zoellick didn't hide his disdain for President Clinton's record on international trade. There had been a "pattern of dereliction" by the Clinton team on trade liberalization, he charged. "If the U.S., with all of its advantages, is unwilling to liberalize trade, what can we expect from other nations?"

Now, Zoellick will be in the hot seat as he tests his free-trade theories, assuming he is confirmed as George W. Bush's choice for U.S. Trade Representative. Zoellick won't be able to ease into his new role. Instead, he will confront a hornet's nest of disputes with Europe, Canada, Mexico, and Japan. His first order of business will be defending U.S. practices against foreign charges of protectionism. At stake: billions of dollars in potential retaliatory tariffs against U.S. exports.

When he isn't playing defense (table), the 47-year-old Harvard University-trained lawyer will be waging war on two other fronts. First, he must persuade Congress to hand Bush the fast-track authority that Clinton repeatedly failed to secure. That allows the President to negotiate new trade agreements and submit them to Congress for a vote--with no amendments allowed. Second, Zoellick must scramble to resuscitate stalled talks over establishing a Free Trade Area of the Americas (FTAA). Those negotiations are expected to resume at an April summit in Canada, which is likely to be President Bush's first foreign trip.

Dealing with Congress may prove Zoellick's biggest first-year challenge. "The toughest negotiations are the ones you do here at home," says Carla A. Hills, who was Trade Rep for the elder Bush. Both left and center Democrats insist that trade deals address two issues dear to their core constituencies: labor rights and environmental protection. But GOP lawmakers refused to write these priorities into fast-track legislation. Business generally backed the Republican approach. But the result was gridlock in Congress and stalled talks to establish the FTAA and to strengthen the World Trade Organization and the 21-member Asia-Pacific Economic Cooperation forum.

Zoellick has already demonstrated some flexibility. He helped draft protections in 1993 for Mexican labor unions and for the environment into the NAFTA trade pact. Those protections aren't very different from those in a free-trade deal that the Clintonites reached with Jordan.

Zoellick is also likely to be more influential in White House policy debates than his Democratic predecessors, who lacked the broad foreign experience he got by working on relations with China, Taiwan, and Japan. As a result, trade policy should be better integrated with Bush's diplomatic strategy.

NASTY SURPRISE. But hemispheric free-trade zones may have to wait. As soon as Zoellick takes office, he'll have to immerse himself in WTO disputes. Rather than establishing itself as a forum for trade liberalization, the WTO has become a contentious world court dominated by battles between the U.S. and its trading partners.

Zoellick has at least one nasty surprise in store. The Clinton Administration left him to deal with the thorniest WTO case out there. The European Union has twice won WTO rulings that a $4 billion-a-year tax break for U.S. exporters is a subsidy that violates trading rules. The Foreign Sales Corporation law had allowed U.S. exporters to set up sham trading companies in Caribbean tax havens. Congress amended the law late last year, but lobbyists who largely drafted the bill managed to expand, rather than eliminate, the break. Now, the EU is petitioning the WTO to levy $4 billion in retaliatory tariffs against a wide variety of U.S. exports.

Thanks to Zoellick's experience, he's among the best prepared trade ambassadors to take the job. But none of his predecessors has had to confront the barrage of trade challenges Zoellick will immediately face. If he is to succeed, his first six months will be crucial.