Bush vs. Clinton: Defining Free Trade at Home and Abroad : The President’s international approach is most impressive but its force is diminished by weak domestic-policy components

For the last three years, trade has been the engine for what little economic growth the United States has seen. Without a bustling global marketplace, this recession would have been far worse, as difficult as that may be to imagine. Every bushel of American wheat, every Caterpillar tractor or pair of Levi’s jeans shipped abroad helps cushion, at least a little, the crippling effect of the downsizing of the defense, auto, service and retail industries.

But for all the benefits of burgeoning trade--exports and imports together account for 25% of the nation’s gross domestic product, compared to a mere 10% in the late 1970s--the adjustments have not been easy. The blossoming of trade produced some bitter fruit as international competition forced painful changes on the U.S. economy--especially on American workers.

Free Trade: Economic Liberation or Economic Imprisonment?

As the nation debates a new domestic economic agenda this election year, the opportunities and benefits of trade are under close scrutiny. Each of the two major presidential candidates recognizes the importance of trade. Neither President Bush nor his Democratic opponent, Gov. Bill Clinton, are protectionists. Both see the globalization of the world economy as inevitable and irreversible. But there are differences. Bush has been a champion of free trade and has the track record to prove it. Clinton says he supports free trade in principle, but on one specific trade issue, the new North American Free Trade Agreement, he appears to be waffling.

Crucial Importance of the North American Free Trade Agreement

This is the hot topic in the presidential trade dialogue. The trilateral agreement, widely referred to as NAFTA, must still be ratified by Congress, and certainly should be.

Even before the agreement was reached, the prospect of a free trade zone raised economic confidence both inside Mexico and outside. Cross-border transactions have risen dramatically as Mexico has liberalized its economy in anticipation of a successful agreement. U.S. exports to Mexico tripled to $33 billion in 1991 and are expected to rise to $44 billion this year.

The U.S. push toward a regional trading arrangement would offset the European Community’spossible consolidation into the world’s single biggest market; the Maastricht Treaty, if ratified, would provide for economic and monetary union as well as security and foreign policy coordination. Bush, to his considerable credit, has doggedly pursued NAFTA during his presidency. Congress gave the White House the green light last year to negotiate the agreement under “fast track” authority, which provides for a simple yes-or-no vote by Congress but no amendments. The President promised Congress that the treaty negotiations would address their concerns about displaced American workers and environmental issues. The Administration did take up those issues very generally in the agreement, but specific programs to implement worker retraining or raise spending for border cleanup require separate enabling legislation that must be approved by Congress.

Clinton supported putting NAFTA on the diplomatic fast track but now says he is reserving judgment on the actual agreement until he has a chance to review the 2,000-page document, made public only last week, and to see what congressional hearings on the trade pact reveal. That is not unreasonable, and at least it doesn’t step back from Clinton’s previous support for an agreement that offers protection for workers, farmers and the environment on both sides of the U.S.-Mexico border. But there are protectionists in Congress who want NAFTA renegotiated, which could sabotage the pact. Clinton must firmly repudiate them. If there is fine-tuning that needs to be done on NAFTA, it can be done by Congress through the enabling legislation.

Clinton’s vagueness on NAFTA is troubling because it raises questions as to how far the governor would go as President in supporting free trade before giving in to his protectionist supporters. When he accepted the nomination, Clinton said, “American companies must act like American companies again--exporting products, not jobs.” That can be read in different ways, not all of them good.

World Trade Talks: More U.S. Leverage Would Help

For six long years, the United States has been at the negotiating table with 108 nations trying to hammer out a new multilateral trade agreement. The goals of the talks, begun in Uruguay six years ago under the auspices of the General Agreement on Tariffs and Trade, are to lift export subsidies from farm products and to bring services, intellectual properties and investment under international law for the first time ever.

The Bush Administration is holding back on its approval of a new GATT treaty until the European Community dismantles its hefty agriculture subsidies and supports. Unfortunately, Bush himself undercut the sound U.S. stance by recently adding $1 billion in subsidies to U.S. wheat in a blatant political ploy to win farm votes in the Midwest. That was a shortsighted, even cynical, move by a President who knows better.

Clinton supports the world trade talks but maintains that Bush’s lack of leadership on U.S. economic issues has undercut the U.S. bargaining position in these negotiations. He maintains that the United States has less leverage in talks if its economic house is not in order. That is a fair point indeed.

Freer Trade: It Takes at Least Two to Make It Work

Despite continuing efforts to open up world trade, full market access is often a problem for American exporters seeking to crack or expand overseas markets, particularly in Japan and China.

Bush has taken a so-called “managed trade” approach with Japan by negotiating market-opening trade agreements to cover specific product categories, such as semiconductors or auto parts. Much progress has been made, but Japan still has a long way to go to reciprocate for its virtually unlimited access to U.S. markets. Clinton has said that if he were President he would toughen U.S. trade laws so that countries that fail to comply with their promises would face tougher trade sanctions. That sounds good in theory but in practice could invite anti-U.S. trade sanctions in retaliation. Bush could be tougher with the Japanese, but on balance his nuanced, gradualist approach may be the best way to deal with Tokyo on trade.

For the third consecutive year, the Bush Administration faces a contentious Senate in renewing most-favored-nation trading status for China. Since the 1989 massacre of pro-democracy demonstrators in Tian An Men Square, Bush has kept MFN status for China despite Beijing’s checkered human rights record and pressure from Congress--and Clinton--to make MFN status conditional on China improving that record. Bush has been able to secure some concessions from Beijing with his conciliatory approach, such as barring the use of prison labor for manufactured exports. But that hasn’t been enough--one reason the United States recently had to threaten China with billions of dollars in punitive tariffs if Beijing does not agree to lift barriers to U.S. imports by October.

More Training--and Real Jobs--in the Global Age

In a global economy, the United States will best compete in those economic sectors that require high-tech expertise and skill, such as telecommunications, computers and engineering. Both Bush and Clinton have proposed job retraining programs to prepare more U.S. workers for these sectors. That’s fine except for one very necessary element. They have no plan for finding these retrained workers new employment. They have proposed public works programs to provide transitional employment for displaced workers. But in the long run new jobs will be needed in the private sector, particularly in manufacturing, which this year (for the first time and almost incredibly) employs fewer people than the government.

Transition programs to accommodate greater trade are also crucial. Studies now show that in the 1980s, the benefits of increased trade went disproportionately to professionals and the college-educated. Factory workers had to trade down to lower-paying jobs to survive. The result: income stagnation and a widening gap between the haves and have-nots.

Free trade provides a blueprint for American economic growth in the 1990s and beyond, but it will be incomplete for any new Administration without a domestic plan for government-private cooperation in fostering new industries and preparing American workers for the global challenges of the 21st Century. While Bush has been very strong on the internationalist side of the free-trade issue--in both deed and word--Clinton has taken advantage of the Administration’s domestic-policy weaknesses by addressing directly, and sometimes impressively, the need for a new domestic plan.