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Clinton White House Is Using Scare Tactics to Pass NAFTA

Creating a bloc that raises trade barriers with the rest of the world would harm US

BEING a free-trader carries with it a moral obligation not to whip up public hysteria against foreign nations. It is all too easy to blame foreigners for problems whose causes and cures are right here at home. The economic consequences of violating this obligation are protectionism, a lower standard of living, and sometimes an open trade war.

It is tragic that President Clinton has suddenly begun to use anti-foreigner rhetoric in his sales pitch for the North American Free Trade Agreement. He argues that NAFTA is needed to protect us against ``threats'' from Japan and Europe. Lee Iacocca is more explicit; he says we should pass NAFTA because Japan and Europe don't like it. Even columnist William Safire has gotten into this xenophobic act.

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Japan and Europe are, after all, our customers and our suppliers. Governments may squabble over the unfortunate quotas, ``dumping'' laws, and tariffs that blight international trade, but we are not in an ``economic war'' with them. In fact, our prosperity is in many ways interdependent with that of Japan and Europe, just as everyone in the domestic market economy is linked through trade.

These attacks on ``the other'' could endanger crucial global trading relationships. No foreign nation wants to be scourged by the leader of the world's only superpower. It creates resentments that can lead to trade wars. Even if NAFTA were free trade - and it isn't - it would be far better for it to go down to defeat than to pass under the rhetoric of protectionism and hatred of foreigners.

As inward-looking as Mr. Clinton's new NAFTA strategy is, it highlights an important truth about this trade agreement. It isn't about creating an open and nondiscriminatory atmosphere for businesses to buy and sell their wares. It is about the creation of a new trade bloc that gives preferential treatment to this region's goods over those of other regions. ``Rules of origin'' are the logic of cold-war alliances applied to the trade policy of peace.

Economists have long known that a trade bloc, or its ``customs union'' cousin, can cause as much trade diversion as it can encourage trade itself. It does no favor to the American consumer to give Mexican cars better treatment than Japanese cars. American businesses, moreover, should be allowed to make their own decisions about whether Europe, Japan, or Mexico should buy their products.

There are other reasons NAFTA does not deserve the free-trade label. United States Trade Representative Mickey Kantor has bragged time and again that the side accords he negotiated put new conditions on regional trade. Under them, ``No nation will lower labor or environmental standards, only raise them.'' The teeth in the commission is the power to impose $20 million fines on taxpayers.

Mr. Kantor's environmental accord, for example, mandates ``on-site inspections'' and ``search, seizure, or detention'' of alleged violators, with punishments of ``fines, imprisonment, injunctions,'' and ``the closure of facilities.'' That's why the World Wildlife Fund and the Natural Resources Defense Council were so pleased.

The Labor Accord is in many ways even more ambitious, guaranteeing the right to collective bargaining, minimum wages, overtime pay, and even ``equal pay for men and women.'' In all, NAFTA creates 49 new bureaucracies with the power to regulate trade among Canada, the US, and Mexico.

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Free-traders can only wince. International trade is supposed to be its own reward. There is nothing wrong with lowering costly regulations to spur foreign (and American) investment in America. Canada and Mexico need to have that freedom as well. But NAFTA prohibits this explicitly in Section 1114. Section 906, moreover, even asks nations to increase regulatory and labor costs so that standards can be ``upwardly harmonized.'' That encourages big government, not economic interdependence.

Free trade is about freedom and enterprise, about getting government out of the way of entrepreneurs. Yet NAFTA mandates that the US spend more on foreign aid to Mexico through guaranteed bond sales and infrastructure projects. The administration even proposes a sort of tariff on people traveling to the US to make up for lost tariff revenue on goods. That's not free trade.

Perhaps Clinton is only being honest when he says NAFTA would be a bullet aimed at the Japanese and the Europeans. He wants to create a ``free-trade unit'' as a step-up in regional competition. NAFTA's benefits - lower tariffs and quotas - will be phased in over 15 years. Its protectionist ``rules of origin'' will come into effect immediately.

Free trade is always, in the long run, beneficial to all countries involved, whether they are in our own region or overseas. Free trade expands opportunity, investment, jobs, and wealth. But by increasing taxes, regulations, and trade barriers with the rest of the world, NAFTA will cause more harm than good.

Free trade ought to be global and indiscriminate. What Messrs. Clinton, Iacocca, and Kantor want is the opposite. The Opinion/Essay Page welcomes manuscripts. Authors of articles we accept will be notified by telephone. Authors of articles not accepted will be notified by postcard. Send manuscripts to Opinions/Essays, One Norway Street, Boston, MA 02115, by fax to 617 -450-2317, or by Internet E-mail to OPED@RACHELCSPS.COM.

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