A New World Order in Trade? : President gets “fast track”; now, he must deliver

After months of sometimes rancorous debate, Congress voted this week to give President Bush a free hand to proceed with two international trade agreements that could dramatically redraw the world trading map. On Thursday the House of Representatives voted to give Bush the authority to keep trade talks on what diplomats call a “fast track”; Friday the Senate concurred. Bush now has two more years to negotiate free-trade agreements unencumbered by meddling from Capitol Hill. As a result, the prospects for a “new world order” in trade have never been more promising.

But now the real work begins: To actually conclude a free-trade agreement with Mexico and Canada, and to bring a successful end to five years of negotiations in Geneva aimed at reducing world trade barriers by extending the General Agreement on Tariffs and Trade.

The President has scored a big political victory. Despite months of vociferous threats that Congress might pull the plug on the trade talks, both the House and Senate granted the President’s request for an extension on fast-track authority by comfortable margins. The next time Congress has a chance to weigh in on the trade talks will be when the agreements come up for a straight yes or no ratification vote.

DOMESTIC CONCERNS: In effect, Congress gave the President a vote of confidence. Now he must deliver. That means he must not only negotiate the best free-trade agreements for U.S. interests, but he must also attend to any domestic disruptions that might result as U.S. workers and industries readjust to a new trading environment. Reducing tariffs and barriers to trade will open new markets for U.S. goods and services abroad, but it will also subject some American industries to greater competition from imports.

In his horse trading for fast track, the President committed to addressing many legitimate domestic concerns. U.S. labor unions and environmental activists fear a free-trade agreement would make Mexico more attractive to U.S. factories drawn by the cheap labor costs and less stringent environmental regulations.

So while the U.S. trade negotiators are at work, Bush must signal his domestic policy-makers to figure how best to keep U.S. workers and businessmen informed about the proposed new trade rules and their potential impact. The President must keep his promise to Congress that he will provide adequate transition periods for adjustments and for helping retrain U.S. workers, should they lose jobs to Mexican competitors.

DISRUPTIONS: Similar disruptions could result if the ongoing Uruguay round of the GATT talks result in new world trading rules that eliminate barriers and reduce tariffs. The fast-track authority also extends to these trade talks, which were stalled last December because of a dispute between the European Community, United States and others over reducing farm subsidies.

If the President succeeds in putting together the U.S.-Mexico-Canada trading pact, it will create a market of 364 million consumers and a total output of $6 trillion. That’s bigger than the European Community.

Canada and Mexico are already fast-growing markets for U.S. exports, which doubled to $111.4 billion during the 1980s. California, in particular, has benefited enormously from that trade. The trend is likely to continue, but U.S. companies are not expected to stampede south because Mexico still has a long way to go to improve its infrastructure and streamline a bureaucracy notorious for inefficiency and corruption.

The challenge now is in hands of the Administration to make good on the President’s promise to deliver free-trade agreements that will enhance the U.S. boom in exports and take care of the interests of the U.S. worker. Only then will the President have scored a real victory.