Trade: Good Policies and Bad Postures

For months now, the Clinton Administration has sent mixed signals on trade. Playing good cop-bad cop, the President and U.S. Trade Representative Mickey Kantor have been a combative--and also confusing--duo. The Administration avoided an all-out trade war with the European Community, but the extent of its commitment to free trade remains annoyingly fuzzy and thus questionable. The Administration has yet to introduce legislation in Congress to enact the North American Free Trade Agreement, which is supposed to go into effect in January. Clinton must take the initiative.

The Administration has raised the specter of vastly expanded managed trade with Japan, prompting fears among other U.S. trading partners that Clinton will press for product-by-product export levels. The concern is that such bilateral market manipulation would undermine free trade.

THE PEROT OFFENSIVE: Enter Ross Perot once again. He is now aiming his television economic evangelism at killing NAFTA because he claims it would take jobs away from Americans. It’s true that some jobs would be lost to Mexico; it’s also true that new jobs would be created in the United States. Perot’s one-sided explication of the issues is neither admirable nor helpful to public understanding. Too bad the former presidential candidate plans to devote one of his half-hour TV commercials to the trade pact, which would eliminate import tariffs and other trade barriers among the United States, Mexico and Canada. We much prefer his better-informed tutorials on the federal deficit. The Administration must move adroitly and soon to counter Perot’s NAFTA offensive.

THE EUROPE COMPROMISE: Exports have been a bright spot for the United States during the recession. Continued open and free trade will only help the U.S. and world economies. In partly resolving the dispute with the EC, the Administration rightly exhibited a willingness to move on with world trade talks, under the General Agreement on Tariffs and Trade.

The United States and the EC reached an agreement to reduce barriers to government purchases of U.S. turbines, generators and other heavy electric equipment. They failed, however, to settle a disagreement on telecommunications, and Washington is planning to invoke sanctions, though mild ones.

The Clinton approach to the EC dispute was worrisome because of its ride-them-hard negotiating style. Having made the point that he will protect U.S. interests, the President must be careful not to be perceived as protectionist. Completing NAFTA and GATT would best serve U.S. interests by expanding trade and creating new jobs.