US GATT Flap Reverberates Around World
Global trade pact faces uncertain future amid new GOP resistance in Washington
IT was supposed to be so easy. Lawmakers, plump from their yams and stuffing, would return to work after Thanksgiving for one final housecleaning chore: to ratify a 124-nation pact to free up world trade. No fuss. No problems.
Instead, in the newly reconstituted world of Washington, the General Agreement on Tariffs and Trade (GATT) has become the first big test of power in the nation's capital - how much President Clinton has left and how much the soon-to-be GOP majority in Congress will hold.
Flush with their vaunted new status, some big-name Republicans are now either balking at the treaty or seeking to wring concessions from a wounded White House. On the outcome rides not only political prestige but millions of jobs and the shape of 21st-century trade practices between the United States and much of the rest of the world.
Mindful of the stakes, international supporters warn that failure to pass the treaty will erode world economic growth and US leadership abroad.
``Everything is riding on the US,'' Peter Sutherland, GATT's director general, told the Monitor.
GATT's scheduled transformation in January into the new World Trade Organization (WTO), the agency set up to oversee the pact, hinges on votes in the House of Representatives Nov. 29, and in the Senate Dec. 1.
Mr. Sutherland calculates that about one fourth of all GATT members have already signed onto the WTO. But rejection or postponement by the US, the world's biggest economy, will derail it.
A small army of environmentalists, workers-rights advocates, and partisan politicians continue to fight hard against GATT. The latest GOP attack has come from Senate majority leader-to-be Robert Dole (R) of Kansas, who threatens to scuttle the trade deal if the White House refuses to resurrect a capital-gains tax. Senator Dole and the White House may agree to a plan that would allow the US to withdraw from WTO if it improperly rules three times against the US.
Mr. Sutherland predicts staggering costs if the pact is not approved: The first 10 years of the WTO's existence are slated to boost world income by $510 billion - with more than $120 billion for the US and $160 billion for the European Union, the US's largest trading partner.
The White House promises big gains, given findings of the US Labor and Commerce Departments that $1 billion in exports generates 20,000 jobs. Both the Bush and Clinton administrations have pointed to exports as the key to the rebound from recession and joblessness.
Free trade has historically transcended party lines in the US. Ironically, this year's showdown includes protectionists from both parties who worry that unregulated, low-cost labor abroad will flood the US with cheap products and rob Americans of jobs.
Hans van den Broek, European commissioner for external political relations, who expects the bipartisan support to prevail, says a speedy adoption of a new trade system ``should put recession behind [Europe] and restore confidence.''
Europe's sound economy and US jobs are inextricably linked. Forty percent of all US investment abroad is in the EU, and half of total EU investment is in the US. ``A stronger European market means more US jobs,'' says Stuart Eizenstat, Washington's ambassador to the EU. Exports are credited with what little job creation Europe has had over the past five years.
Mr. Eizenstat, a Clinton confidant, echoes the concerns of other top US officials who worry that the net effect of a failure to pass the trade accord will be an erosion in Clinton's ability to lead. ``It's very important to recognize our special obligations,'' he says. ``We can't let [protectionist] trends in either party prevail.'' Mr. Van den Broek adds: ``As the world's only remaining superpower, the US cannot afford to turn its back on the world.... Our prosperity depends on stability.''
The developing world is waiting anxiously to see whether Washington will slow the international momentum for freer trade, says Cesar Gaviria, the new secretary-general for the Organization of American States. Should US lawmakers vote against the accord, Washington will have ``less credibility.... The will of the country in trade matters will be in doubt,'' he says. Mr. Gaviria, who represents a region whose trade is expanding fast with the US, says regional trade blocs could become exclusive rather than develop as stepping stones toward broader free trade.
The struggle over GATT coincides with troubling news for US exports. The most recent Commerce Department data, released last week, show the US trade deficit in September reached its second highest level since 1987.
While WTO detractors caution that approval of the new free trade accord will only push the US position into further decline, boosters contend that without an agreement, future trade data could look even worse.
The WTO may have little impact on the practices of Japan and China, which combined make up almost two thirds of America's trade deficit. The US will continue to pursue bilateral talks with Japan, its most recalcitrant partner. And, given Chinese piracy of US production, among other unfair practices, Washington has spurned Beijing's efforts to regain GATT membership.
``We're a million miles from free trade,'' concedes Sutherland. ``But with a rule-based system, we are protecting the weak from the strong.... The law of the jungle would become destructive of the world in which we live.... It would totally marginalize ... portions of the world population.''