Horse-Trading for Free Trade

Business is warming to labor and environmental concerns

During the 1990s, America's big exporters looked on in dismay as other nations signed nearly 100 free-trade agreements with one another. Mexico alone signed pacts with 28 countries; the European Union, 27. Meanwhile, the U.S. has completed just two deals. The problem: A GOP-controlled Congress refused to renew President Clinton's "fast track" trade-negotiating power after the authority to effectively bypass Capitol Hill expired in 1994. The upshot is that U.S. companies still face an array of tariffs and quotas, while foreign competitors increasingly sell into one another's unrestricted markets. U.S. goods entering Chile, for example, face an 11% tariff, while Canadian ones are duty-free.

U.S. multinationals want the Bush Administration to catch up--which means finding a way to restore fast-track. "The U.S. has got to get back in the game," says Boeing CEO Philip M. Condit, chairman of the Business Roundtable trade committee. But there's a hitch: House Democrats, backed up by environmentalists and unions, are holding out for recognition of environmental protection and worker-rights clauses in any new grant of negotiating authority.

Sound like a deal-breaker? Maybe not. For the first time, many major U.S. corporations and business groups seem willing to accept some of these conditions in trade pacts; in late February, the Roundtable endorsed the idea in principle. Among the controversial ideas under consideration: fines on manufacturers that abuse workers or despoil the environment, and conditioning lower tariffs and export financing on worker protections. There are precedents: U.S. legislation grants lower tariffs to some poor nations that protect workers.

NO CONSENSUS. But there are hurdles, as well. There is no consensus among U.S. business on how tough to make environmental and worker-protection clauses. In part, that's because business is worried about unintended consequences. Would protecting worker rights be interpreted as prohibiting the hiring of replacement workers for strikers or laying off workers? Such questions led the U.S. Chamber of Commerce to oppose inclusion of so-called blue-and-green issues in trade agreements.

Many House Republicans are also against attaching protective conditions to trade pacts. They insist that business groups are surrendering too much, too soon. "The idea of writing unrelated issues into trade agreements is wrong," says Representative David Dreier (R-Calif.), chairman of the House Rules Committee. Also worrying U.S. exporters is the silence from the Bush Administration, which has neither submitted a bill nor revealed its preferences on including environmental and worker-protection issues in trade agreements.

So far, no one is saying there will be a quick or easy resolution, but optimists hope to get a bill through Congress this year. That way they can start cutting deals with trading partners as soon as the ink is dry.

By Paul Magnusson in Washington

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