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Fast Track
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20
4
9
3
Vicky Radd Fast muck Sen 10 evens
AUG-18-1997 23:01
CEA ROOM 317
202 395 6809 P.001/002
EXECUTIVE OFFICE OF THE PRESIDENT
ET
"
TITLE
I
THE OLD EXECUTIVE OFFICE BUILDING
COUNCIL OF ECONOMIC ADVISERS
17TH AND PENNSYLVANIA AVENUE, NW
WASHINGTON, DC 20502
CLINTON LIBRARY PHOTOCOPY
7/11/97
fast mack NEC ir.
PT
condit Mien incised could charged.
all exclusinly piul be cl.m
Labor t env.
2 extremes: Rep. "no L or E" vs Cep "ineed saucriouable agr."
Charlew B right posit. 1) we ewbrect yours of Gphan, values.
But
21 won't use far Mack for ghay,
is "we pursue the in many
Don't need to
valuable Amend us evv. 1 labor lous, so lov't need longr. approval.
ways. Echoosg partney
3) world Se under us exec authority, not Mile Traty
is one of Them.)
4) Pres. mill leaxe how to do it. No cookie rutter
approach. Bycoming + civirm canz M=Rusz.
i) side agreemis? No. L.e. world not require as No.
ii) use trall sauans to entare LYE agrints? ND
can say we'd use judicial
processes in those countries.
Gene: Doesn't IT leove us vulucable to " You mean you'd do a Mole lew
with a factor (china) who has (slove labour )( child lo Lu ) -..) ?!'
LS: There are 180 commes. we will be chassy suiable fartners.
and can explain This.
Leon: Tade It Reps rele ort labornenv., can't address China prison labor.
Islome of Their proposals nab Le in consistent.
Ch.B. Labor what take any ihg. Michile. LTA, anything.
we'll need d sweetener like TAA for The tence-sitters.
Alt.s
(1)
Clean 6.11, will statemy. of MTN. or without (2)
(3) recept Ancher inderelated lang. astatemt add of inTht
(J/
no statems of intent means) (B
will talk Mor. drafter summ -over alled,
There 10:00 my pres. with
USES OF FAST TRACK AUTHORITY
Our broad message regarding the uses of fast track authority should be built around three themes.
First, trade expansion has been a key element of the Clinton economic strategy that has created 12
1/2 million jobs, brought core inflation to a 30-year low and created sustained economic growth
that makes the United States the envy of the world. Second, as we enter the 21st Century, we
need to be in front of world trade opening efforts, not lagging behind and losing market
opportunities. Fast track is the critical tool allowing the President to pursue U.S. interests.
Third, fast track will advance a coherent trade strategy built around four Presidential initiatives:
FTAA/Latin America: As the hemisphere integrates, the U.S. must not be left behind.
Negotiating free trade with Chile is key to exerting American leadership in the FTAA
process.
APEC/Asia: We should build on APEC's success by negotiating sectoral agreements in
key areas that are springboards to global market opening (in the same way that the 1996
APEC Information Technology agreement led to the global agreement).
Africa: We would build on our Africa trade and investment initiative by indicating our
readiness to begin free trade talks with South Africa when it is ready.
Multilateral: We would continue a 50-year record of American leadership in the
GATT/WTO that has substantially lowered global trade barriers and contributed to a 90-
fold increase in world trade. Upcoming WTO talks in key areas like agriculture, services,
intellectual property right and government procurement offer large opportunities to reduce
foreign barriers, creating opportunities for American companies and workers.
The Principals also addressed other issues relating the uses of fast track:
Emphasis on Latin America: Despite NAFTA sensitivities in Congress, the Principals felt we
must forthrightly make the case for the FTAA and continued Latin American trade expansion, as
it is an integral part of our agenda and buttresses our broader themes of global leadership and
market opening. However, they recognized that talk of Latin trade can be used by fast track
opponents, who seek to make this debate a referendum on NAFTA. Our message therefore might
present less controversial negotiations first (e.g., sectoral agreements, which do not raise
labor/environment issues), then emphasize Latin American and other regional initiatives.
Additional Bilateral Free Trade Agreements (FTA's): Beyond Chile, Principals felt we should not
signal intention to conclude other Latin American FTA's during your Administration. This will
alleviate concerns about more controversial FTA's (e.g., Brazil) but, since it risks having our
agenda appear small, underscores the need to present Chile as part of a broader, hemispheric
process. Regarding Asia, the Principals do not favor negotiating free trade agreements,
preferring to focus on sectoral liberalization in APEC. Most countries would be too controversial
and/or are not ready for such talks (China, Japan, Korea). Australia and New Zealand have the
advantage of not presenting labor/environment problems, and Singapore has a relatively high per
2
capita income and is a gateway to ASEAN. However, Australia and New Zealand could draw
opposition from U.S. agriculture interests (e.g., dairy, sugar) and Singapore could draw
human/labor rights opposition. Therefore, we would indicate we have no present intention of
pursuing these talks. Of course, we would leave some flexibility for you to pursue negotiations
not presently envisioned, after Congressional consultation.
TIME OF TRANSMISSION
TIME OF RECEIPT
WHITE HOUSE
SITUATION ROOM
PRECEDENCE: IMMEDIATE
RELEASER: Bhr
PRIORITY
17JUL '97 18:47
ROUTINE
DTG:
MESSAGE NO. 1483 CLASSIFICATION Confidential
PAGES 3
FROM Charlene Barshefsky
56890
209 Winder/USTR
(NAME)
(PHONE NUMBER)
(ROOM NO.)
MESSAGE DESCRIPTION
TO (AGENCY)
DELIVER TO
DEPT/ROOM NO.
PHONE NUMBER
Treasury 14 Secretary Rubin
622-0073
CEA
Janet Yellen
56958
Labor
R
Secretary Herman
219-7659
State
Secretary Albright/Eizenstat
647-5548
NEC
Gene Sperling
456-5385
CEQ
Katie McGinty
66224
NSC
Sandy Berger
I
66941
Chief of Staff Vicky Radd
67176
OVP
Leon Fuerth
54213
REMARKS: WH distribution:
*
UNCLASSIFIED UPON REMOVAL
OF CLASSIFIED ATTACHMENTS
Jim Steinberg
Initials: PB Date: 3/4/19
2017-0401-F
Bob Kyle
*
CONFIDENTIAL
Withdrawal/Redaction Sheet
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
001. briefing
RE: Policy Decisions RE Fast Track (3 pages)
07/00/1997
P1/b(1)
paper
COLLECTION:
Clinton Presidential Records
Council of Economic Advisers
Jeffrey Frankel
OA/Box Number: 13720
FOLDER TITLE:
Fast Track
2017-0401-F
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an agency l(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
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financial information [(a)(4) of the PRAJ
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PRM. Personal record misfile defined in accordance with 44 U.S.C.
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concerning wells |(b)(9) of the FOIA]
RR. Document will be reviewed upon request.
Withdrawal/Redaction Marker
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
001. briefing
RE: Policy Decisions RE Fast Track (3 pages)
07/00/1997
P1/b(1)
paper
COLLECTION:
Clinton Presidential Records
Council of Economic Advisers
Jeffrey Frankel
OA/Box Number: 13720
FOLDER TITLE:
Fast Track
2017-0401-F
db4713
RESTRICTION CODES
Presidential Records Act - |44 U.S.C. 2204(a)]
Freedom of Information Act - 15 U.S.C. 552(b)|
PI National Security Classified Information [(a)(1) of the PRA|
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office |(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute |(a)(3) of the PRA|
an agency [(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information |(a)(4) of the PRAJ
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advice between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA|
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy |(a)(6) of the PRAJ
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
C. Closed in accordance with restrictions contained in donor's deed
b(8) Release would disclose information concerning the regulation of
of gift.
financial institutions |(b)(8) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(9) Release would disclose geological or geophysical information
2201(3).
concerning wells |(b)(9) of the FOIA]
RR. Document will be reviewed upon request.
John D. Montgomery
07/17/97 02:54:00 PM
Record Type:
Record
To:
Jeffrey A. Frankel
CC:
Caroline Thompson
Subject: Fast track
Message Creation Date was at 17-JUL-1997 14:54:00
Jeff,
There is a principals meeting tomorrow on fast-track. (Are you attending?)
This is a follow-uup to a meeting held yesterday, which Janet and I attended.
In preparation for tomorrow's meeting, she asked me to give some thought to
what CEA's position on various fast-track related issues should be. This
e-mail describes yesterday's meeting and some of the outstanding issues. Could
you please give me your views, or can we talk?
Yesterday's meeting was chaired by Tarullo, and attended by Berger, Rubin,
Summers, Eizenstat, Daley, Herman, Sperling, McClarty, and Barshefsky, among
others. Tarullo said that he wanted to decide on what to present to Congress
by the end of the week, so he could present it to the President over the
weekend.
Given that timetable, I was surprised at the amount of uncertainty and
disagreement in the room. Barshefsky made a pitch for FTAs negotiations with
Chile and with some Pacific countries (Australia, New Zealand, Singapore, and
maybe the Philippines), with the FTAA in the background but not formally part
of the fast-track request. South Africa is a fainter possibility. She also
pitched for a set of sectoral liberalization initiatives (a la ITA), which they
are currently proposing to APEC. (The U.S. proposals in APEC are chemicals,
energy-related equipment and services, oilseeds and oilseed products, and
automotive initiative, and MRAs in telecommunications and information
technology equipment. Other countries may also make proposals.) Finally, she
said the built-in agenda in the WTO would require fast-track. This includes
agriculture and services.
Eizenstat suggested FTAs with Central Europe. Berger questioned the approach
of choosing trade strategies based on political support (which was one reason
Eizenstat suggested Central Europe and Barshefsky suggested Australia/New
Zealand and the Philippines) rather than on economic [and strategic?]
benefits. Summers gently suggested that we ought to have a sense of our longer
term trade negotiation strategy, especially regarding when and whether to have
a new GATT negotiating round. Berger noted that the President wants an FTAA,
so Latin American shouldn't be forgotten, despite the greater (NAFTA-related)
political opposition. Barshefsky noted that the success of sectoral
initiatives depends on Europe's attitude, but Leon Brittan has stated that any
new sectoral initiatives (except an extension of the ITA) must wait until the
initiation of a new round, to which Summers replied that maybe we should focus
on a new round, but Tarullo said that probably was premature. Barshefsky said
that we will want the fast-track bill to have enough flexibility to accomodate
proposals in 1998 or 1999 to start a new round, without the bill being specific
about a new round.
My sense is that these issues are still open, and may be revisited at the
principal's meeting on Friday. (Are you planning to attend this?) It is
unfortunate that we have not been invited to participate in the working group
chaired by Bob Kyle on this issue. We could have improved the clarity of
thinking on fast-track.
The meeting ended with a discussion on labor and environment, which is to be
continued on Friday. The "Gebhardt" approach of making labor standards a trade
practice actionable under Section 301 and WTO dispute settlement is a
non-starter (fortunately) in Congress, because Republicans would not vote for
it. Republicans may agree to an approach of allowing language on labor and
environment if it spefically pertains to trade (e.g., an environmental
regulation used as a discriminatory trade barrier). However, the GOP doesn't
trust the Administration to carry this out in good faith and not bend the
letter of the law or negotiate side-agreements (which don't have to be approved
by Congress).
For the meeting on Friday, we need to:
1. Formulate our view on labor and environment, so Janet can present them. I
would think our view should be that labor and environment should be in trade
negotiations only where there are specific connections to trade issues.
2. Decide whether we can add anything to the type of negotiations that should
be covered by fast-track authority. I would like to see us throw some cold
water on the politically easy but economically (relatively) unproductive
approach of USTR of focussing on bilateral FTAs and sectoral negotiations.
(Think of the horrendous rules-of-origin problems that an FTA with Singapore
would create.) I think we should push for a clear strategy for moving to a new
round where some progress could be made on: (a) barriers in protected sectors
like foodstuffs and textiles and apparel, (b) anti-proliferation agreement on
AD/CVD, and (c) trade and competition policy.
John
P1'
C. Fred Bergsten, Director
INSTITUTE FOR
BOARD OF DIRECTORS
INTERNATIONAL
*
Peter G. Peterson, Chairman
*
Anthony M. Solomon
ECONOMICS
Chairman, Executive Committee
Leszek Balcerowicz
Raymond Barre
11 Dupont Circle, N.W., Washington, DC 20036-1207
W. Michael Blumenthal
Phone: (202) 328-9000 Fax: (202) 328-5432
Jon S. Corzine
George David
http://www.iie.com
Miguel de la Madrid
Jessica Einhorn
George M.C. Fisher
June 2, 1997
Maurice R. Greenberg
Carla A. Hills
W.M. Keck II
Dr. Jeffrey Frankel
Nigel Lawson
Lee Kuan Yew
Council of Economic Advisers
*
Frank E. Loy
Executive Office of the President
Donald F. McHenry
Ruben F. Mettler
315 EOB
Minoru Murofushi
Kaneo Nakamura
Washington, DC 20502
Suliman S. Olayan
Paul H. O'Neill
I.G. Patel
Dear Jeff:
Karl Otto Pöhl
Edzard Reuter
David Rockefeller
Stephan Schmidheiny
Enclosed is a copy of my testimony on fast track legislation to the Senate
Laura D'Andrea Tyson
Paul A. Volcker
Finance Committee on June 3. It makes a strong case for urgent action in
Dennis Weatherstone
granting such authority and proposes its use to achieve a Free Trade Area of the
Marina v.N. Whitman
Lynn R. Williams
Americas, free trade in the Asia Pacific region through APEC, and a new
Andrew Young
multilateral round in the World Trade Organization.
Ex officio
C. Fred Bergsten
Richard N. Cooper
I hope you will find the statement to be of interest. I would be delighted
Honorary Directors
Alan Greenspan
to talk about it if you would like to do so.
Reginald H. Jones
Akio Morita
George P. Shultz
Sincerely,
Member of the Executive Committee
ADVISORY COMMITTEE
Richard N. Cooper. Chairman
Robert Baldwin
Barry P. Bosworth
Susan M. Collins
&. Fred Bergsten
Rimmer de Vries
Wendy Dobson
Director
Juergen B. Donges
Rudiger Dornbusch
Gerhard Fels
Enclosure
Isaiah Frank
Jacob A. Frenkel
David D. Hale
Mahbub ul Haq
Dale E. Hathaway
Nurul Islam
Peter B. Kenen
Lawrence B. Krause
Anne O. Krueger
Paul R. Krugman
Roger M. Kubarych
Robert Z. Lawrence
Jessica T. Mathews
Rachel McCulloch
Isamu Miyazaki
Michael Mussa
Richard R. Nelson
Sylvia Ostry
Tommaso Padoa-Schioppa
Jacques J. Polak
Dani Rodrik
Jeffrey D. Sachs
Lawrence H. Summers
Alan Wm. Wolff
Robert B. Zoellick
THE NEED FOR NEW
FAST TRACK LEGISLATION
Statement by
C. Fred Bergsten
Director
Institute for International Economics
Before the Committee on Finance
United States Senate
June 3, 1997
The American economy can reap enormous benefits from new international trade
initiatives that reduce foreign barriers to our exports. Implementation of such a strategy requires
Congressional renewal of fast track negotiating authority, which is one of the most beneficial
steps the Congress could take this year to help our economy. Provision of such authority is
extremely urgent because our competitors around the world are taking advantage of the absence
of American activity, because opportunities for pursuing beneficial trade initiatives abound, and
because other countries will not negotiate with us in the absence of fast track. I will briefly
elaborate each of these three statements on the view that they should provide the focus for
American trade policy in 1997 and because they make a powerful case for prompt Administration
initiative and early Congressional action.
.
Also Chairman, Competitiveness Policy Council and Chairman, APEC Eminent Persons Group throughout its
existence 1993-95. The views expressed in this statement are those of the author and do not necessarily reflect the
views of individual members of the Institute's Board of Directors or Advisory Committee.
2
Trade and the American Economy
The main problem facing the American economy is the slow growth of average living
standards over the past generation. Our economy has created 50 million jobs over the past 27
years and we are essentially at "full employment." But the median family income remains
virtually unchanged from the 1970s. The average real wage has been flat for almost twenty
years. Our cardinal economic problem is to create better jobs with higher wages and benefits.
Trade provides an important part of the solution to that problem. Export jobs pay 10-15
percent more than the average wage. Productivity in export firms is 20 percent above the norm.
Exporting firms expand their employment about 20 percent faster than others and are 10 percent
less likely to fail. Small and medium-sized firms account for 70 percent of these results.¹
The rapid export expansion of the past decade has come largely in high-wage
manufacturing industries. Since 1992, a majority of our manufacturing workers have been
employed in plants that export. The export surge has almost stopped the decline of
unemployment in the manufacturing sector (see chart 1). A continuation of recent trade trends
could restore net growth in manufacturing jobs within the next few years. It could even restore
their previous (1979) peak in the first decades of the next century.
Increased globalization thus provides substantial benefits for American workers and the
American economy. Indeed, the competitive pressures generated by globalization are an
important element in our ability to maintain price stability and thus to push unemployment far
below levels considered "safe" by most economists only a few years ago. Moreover, the increase
in imports that comes with globalization is often extremely helpful to our poorest people; the
¹These and other data are derived in J. David Richardson and Karin Rindal, Why Exports Matter: More!,
Washington: Institute for International Economics and The Manufacturing Institute, 1996.
3
long-standing quotas on apparel, for example, have been robbing the lowest quintile of our
population of fully five percent of their total incomes.²
To be sure, we must undertake a series of domestic steps to empower our people to take
full advantage of the opportunities provided by globalization.³ The most important are better
education for all Americans and continuous training for our work force.⁴ In addition, we must
provide an adequate safety net to cushion the transition for those whose lives are disrupted by
rapid economic and technological change--which is accelerated, though not primarily caused, by
globalization. But these efforts would be needed even if we had no trade, and globalization
enables our society to exploit their benefits to the maximum possible extent. There is no reason
to settle for more modest returns on our investment in education, training and the safety net
when global integration offers such handsome benefits.
The Crucial Importance of Trade Negotiations
Even if we do everything right at home, such benefits are available only if we continue to
succeed in breaking down barriers to our exports abroad. The United States now has an
enormous opportunity to do so because we face a hugely asymmetrical international situation.
On the one hand, we have already eliminated virtually all impediments to foreign access to our
own
market. 5 On the other hand, most other major economies--particularly the large and rapidly
2 William R. Cline, The Future of World Trade in Textiles and Apparel, Washington: Institute for International
Economics, second edition, July 1990.
3 See Dani Rodrik, Has Globalization Gone Too Far?, Washington: Institute for International Economics, March
1997.
4
See the several reports of the Competitiveness Policy Council to the President and Congress, especially Building a
Competitive America (March 1992) and A Competitive Strategy for America (March 1993).
5 American's remaining barriers, after full implementation of the Uruguay Round agreements, carry a net economic
cost of only about $10 billion in an economy of more than $7 trillion. See Gary C. Hufbauer and Kimberly Ann
Elliott, Measuring the Costs of Protection in the United States, Washington: Institute for International Economics,
January 1994.
4
growing markets of Asia and Latin America--continue to impose substantial restrictions on our
(and others') sales to them. "Reciprocal" liberalization in the future thus essentially means that
other countries reduce their barriers to, or at least toward, our low level. The best way for the
United States to achieve truly fair trade is thus to negotiate free trade with our most important
trading partners. 6 The only way we can achieve a level playing field is to induce them to emulate
our past liberalization.
This is the right time to make such an effort. The American economy is strong and
vibrant. (From a domestic political standpoint, now is therefore the ideal time to address and
pass new trade legislation.) Our chief competitors, in both Europe and Japan, are suffering from
prolonged economic sluggishness and loss of self-confidence. It would be tragic if we failed to
seize these opportunities to further improve America's global economic position and thus our
domestic economy.
The Reagan, Bush and Clinton Administrations have pursued American interests
effectively and courageously by negotiating an ascending series of liberalization arrangements.
The initial free trade treaties were with Israel and Canada in the middle 1980s. Mexico was
added via NAFTA in the early 1990s. 7 Global progress was made simultaneously in the Uruguay
Round.
The greatest potential lies ahead, however. Building on President Bush's proposed
Enterprise for the Americas Initiative, President Clinton agreed at Miami in December 1994 to
6 As proposed in my "Globalizing Free Trade," Foreign Affairs, May/June 1996.
7
Some critics have argued that recent American trade liberalization initiatives have been a failure because of the
sharp deterioration of our trade balance with Mexico. That deterioration was caused by the Mexican macroeconomic
and financial crisis, however, which had little to do with NAFTA. In fact, NAFTA shielded the United States from
an even greater impact from the Mexican crisis by deterring Mexico from responding (as in the past) by erecting new
widespread new import controls and by exempting the United States from those new controls which it did impose.
5
create a Free Trade Area of the Americas (FTAA). In Indonesia a month earlier, he agreed at the
second annual APEC summit to achieve "free and open trade and investment in the Asia Pacific
region" by 2010 (for the advanced countries that account for about 90 percent of APEC trade, by
2020 for the rest). Building on another Bush initiative, the Administration agreed at the end of
the Uruguay Round to pursue further global liberalization in agriculture, services and several
other key sectors over the coming years in the World Trade Organization. 8
Other countries are clearly ready to liberalize further and it would be irrational for the
United States to fail to join them. The APEC trade ministers met in Montreal in April and,
building on APEC's crucial role in achieving the Information Technology Agreement (ITA) last
year, agreed to pursue an ITA II, an accord on financial services in the WTO by the end of 1997,
and a series of new sectoral initiatives. New Zealand has accepted the Administration's
invitation to pursue a bilateral free trade agreement with the United States--which could catalyze
similar agreements throughout the region, perhaps starting with Australia and Singapore, and
APEC-wide liberalization as a whole. Chile, the Central Americans and the Caribbean countries
are anxious to engage in trade-liberalizing pacts with the United States.
Most importantly, the members of the World Trade Organization agreed to pursue a
series of major new global negotiations in the concluding act of the Uruguay Round and
reaffirmed that program at their initial Ministerial Conference in Singapore last December. This
"built-in agenda" includes such items of central interest to the United States as agriculture,
services, and investment and competition policy. The European Union's chief trade negotiator
8 Details are in Jeffrey J. Schott, editor, The World Trading System: Challenges Ahead, Washington: Institute for
International Economics, 1996.
6
and a number of important countries are advocating the early launch of a new "Millennium
Round" in the WTO to address the whole range of outstanding trade policy issues.
The Administration can pursue most of these initiatives only with the provision of fast
track negotiating authority by the Congress. Without fast track, the United States will be unable
to reach agreements with other countries because they would fear that Congress might impose
crippling amendments and thus essentially reopen the negotiations. Even Chile, whose President
Frei recently addressed the Congress eloquently on these issues, will not deal with the United
States in the absence of such authority (but has made agreements with Canada, Mercosur and
others which carry tangible disadvantages for the American economy). APEC's initial effort to
launch its liberalization program got off to a slow start last year in part because the United States
was unable to move and other countries were unwilling to do so in our absence.
The exceptions prove the rule. The United States was able to lead two major successful
trade negotiations over the past year, the Information Technology Agreement and a deal on basic
telecommunications services in the WTO. Each eliminates barriers on over $500 billion of trade
in two of the world's most dynamic sectors. Both are hugely in the interest of the United States
and were strongly promoted by American companies. But they were possible only because the
Administration did not need new negotiating authority for them.
The Urgency of Action
It is extremely urgent for the Congress and the Administration to work out new fast track
authority. World trade and investment patterns are moving and shifting at breakneck speed.
Other countries and groupings are rapidly filling the void left by the American inaction (with the
7
two exceptions cited above) of the past two years. We run a serious risk of being left behind if
we do not quickly re-engage. Examples abound:
Tired of waiting for the United States, Chile has struck bilateral free trade deals with
Mercosur and Canada (including a total phaseout of antidumping rules and
legitimization of continued capital controls). The United States is already losing
sizable sales because Chile's new preferential arrangements discriminate against our
exports.
Mercosur, already the third largest trading bloc in the world, is consolidating virtually
all of its neighbors into a South American Free Trade Agreement and will continue to
do so as long as the absence of negotiating authority blocks us from engaging its
members in serious negotiation to achieve an FTAA. It would be an enormous
historical irony if the US initiative to launch an FTAA had the effect of enabling
Brazil to assemble a South American grouping that was permitted, through our own
failure to follow up, to build such vested interests in Mercosur itself that the South
American countries lost all interest in pursuing the original idea of hemisphere-wide
integration.⁹
The subregional arrangements in Asia, notably the ASEAN Free Trade Area, have
accelerated their own liberalization timetable and will thus increasingly discriminate
against us unless we are able to energize APEC to bring down barriers across the
entire Asia Pacific region.
9 For the history to date see Richard Feinberg, Summitry in the Americas: A Progress Report, Washington: Institute
for International Economics, April 1997.
8
Prolonged American absence from implementation of APEC's liberalization goals
could revive interest in an Asia-only arrangement along the lines of Malaysian Prime
Minister Mahathir's proposed East Asia Economic Caucus (EAEC).
The European Union is doing deals throughout the world, including with Mercosur
and East Asia, which are only consultative at this point but could become much more
substantive if the United States continues to dither.
Hence we delay at our peril. The time has long passed when the world would simply wait
for the United States to act. The Asians, Europeans and Latin Americans have all become major
autonomous players in the world economy. They will move on without us if we are not ready.
At the same time, American leadership is essential to push the global trading system in
the most constructive directions. We simply must get back in the game if we are to protect our
own interests, and to exploit the opportunities to achieve the enormous future benefits described
above.
Some Specific Proposals
I believe that the Congress should in fact authorize permanent fast track negotiating
authority when it considers the issue later this year¹⁰. For the reasons already cited, it is simply
too costly for any President to be without such authority for any prolonged period of time. The
United States is in a state of continual negotiation on trade and related issues, with a wide variety
of countries, and should be fully equipped for the effort at all times.
At the same time, the Congress must of course be in on the takeoff as well as the landing
for all significant trade negotiations. Hence I recommend that the President be given general
10 See I.M. Destler, American Trade Politics, Washington: Institute for International Economics and Twentieth
Century Fund, 1995, p. 263. For more details, see Destler, Fast Track Authority for Trade Negotiations,
Washington: Institute for International Economics, forthcoming September 1997.
9
authority to negotiate but that he be required to seek prior Congressional approval to enter into
any major new initiative.
The previous fast track authority required the President to notify the Congress of his
intention to launch any such effort and empowered this Committee, and the House Ways and
Means Committee, to disapprove any such Presidential proposal. This Committee almost did so
in 1986 in the case of the United States-Canada Free Trade Area. No Congressional action was
taken with respect to the subsequent launch of NAFTA, however, which undoubtedly added to
the difficulty of achieving its approval after the agreement was completed. The Congress as a
whole should vote in advance to approve any major negotiation, within the time periods after
submission of Presidential proposals required in the past, thereby making it a full partner in
initiating the entire process and justifying the grant of permanent authority to follow fast track
procedures in approving agreements after they are negotiated.
The new legislation should provide the President with broad authority to pursue all of the
opportunities cited above: a Free Trade Area of the Americas, "free and open trade and
investment" by 2010/2020 in the Asia Pacific region via APEC, and the built-in agenda (or a new
"Millennium Round" to achieve global free trade) in the WTO. Expiration dates should be set
for each authority to provide effective deadlines for the respective negotiations.
Objections will immediately be raised that it would be premature to envisage such far-
reaching negotiations at this time. Even supporters of the ideas proposed here might argue that
there will not be enough time to do so with the legislation to be submitted only in September and
a goal of completing action on it by the end of the year. The problem of course is that minimal
negotiating authority will lead to minimal negotiations, perhaps limited to Chile and a few other
10
bilateral agreements. This would condemn the United States to continued failure to follow
through on its own initiatives, in Latin American and Asia as well as globally, and thereby to
cede leadership to others to an increasing degree--despite the strength of our economy and
competitive position. Now is the time for the United States to move ahead boldly rather than to
waver and procrastinate.
In practice, none of these three major sets of negotiations are likely to proceed very soon.
The internationally agreed dates are all some distance in the future: 2005 to work out the FTAA,
2010 or 2020 to reach APEC's goal, 1999 to start the next set of wide-ranging talks in the WTO.
The United States could expedite them by reaching earlier agreements with Chile (en route to an
FTAA) and with New Zealand (en route to APEC) and should have the authority to push these
processes (and the WTO) as fast as the international traffic will bear but there will be plenty of
time for the Congress to consider each negotiation in detail before approving US participation in
it.
The proposed approach would also help deal with the currently vexatious problem of how
the fast track legislation should address the question of the country's negotiating objectives. I
believe it is a mistake to generalize; different negotiations with different sets of countries at
different times may call for very different US aims. The Clinton Administration, for example,
despite its insistence on including labor standards and environmental concerns in any new trade
legislation, publicly announced in late 1994 that it would not raise those issues in APEC and has
not done so.
11
CFB
The new general negotiating authority should leave such issues open, ruling them neither
in nor out. Specific US objectives could then be devised for each specific negotiation starting
with those proposed here, worked out with the Congress in that context, and pursued accordingly.
If it turns out to be necessary to address the substance of those issues in the upcoming
legislation, a three-part set of objectives could be adopted for both labor and environmental
concerns under which the Administration would be instructed to make every effort to:
achieve multilateral agreements on the basic standards in question, in the ILO for labor
and à la Montreal Protocol (on CFC emissions) for the environment;
improve enforcement of those multilateral standards through their own institutions, as in
the ILO's recent program on child labor in Bangladesh; and
authorize the use of trade remedies to enforce those multilaterally agreed accords, as was
successfully threatened when Korea initially failed to comply with the Montreal Protocol,
) rally
subject to the trade procedures of the WTO itself.
One other key issue is whether "nontrade" elements of the legislation that approves trade
negotiations, under fast track authority, should also be handled under fast track procedures, i.e.,
without amendment and under firm time limits. This issue arose with the Uruguay Round
legislation in 1994 because of its "pay-go" budget provisions and related policy questions.
It would be preferable to waive the "pay-go" provisions for trade legislation. Reductions
of trade barriers clearly add to our economic activity and thus strengthen rather than weaken the
us anys
Federal budget position. 11 If the basic requirement must be retained, it would be desirable to
permit amendments to the specific budgetary provisions of the legislation as long as they yielded
11 See William R. Cline, Impact of the Uruguay Round on US Fiscal Policy, Washington: Institute for International
Economics, March 1994.
12
the same net impact on the federal deficit. However, it would still be essential to retain the
timing deadlines or the whole process would founder.
Conclusion
The fast track process has proved its worth for over twenty years. Under its procedures,
the United States maintained its leadership of the world trading system by negotiating successful
conclusions to the Tokyo Round and the Uruguay Round in the GATT. We achieved free trade
in North America through successive agreements with Canada and Mexico.
The future prospects are even brighter, for the reasons outlined above. Sharp reductions,
and eventual elimination, of barriers to our exports in the world's most dynamic markets in Asia
and Latin America are within our grasp. Enormous gains to the American economy and
American workers would result. Fast track authority is necessary if we are to seize these
opportunities. There are few steps that the Congress could take this year that would be as helpful
to the American economy.
In view of all this, I urge the Administration to effectively carry forward the commitments
made repeatedly by President Clinton to make fast track one of his highest priorities in 1997 and
to recognize that it must compromise on the labor and environmental issues in order to do so. I
urge the Congress to then provide the new negotiating authority as soon as possible. It is
imperative to move forward on the bipartisan basis that has, with so much benefit to the country,
characterized American trade policy for the past 60 years.
Chart 1
Total Jobs and Job Growth for Exporting and Non-Exporting Plants
1987-1992, with 5-Year Projection Through 2017
(in millions of workers)
18
Manufacturing
employment recovers
16
14
because strong
employment growth by
exporters
12
10
Exporting Plants
Non-Experting Plants
All Plants
8
6
eventually swamps the
4
shrinking non-exporting
sector.
2
0
1985
1990
1995
2000
2005
2010
2015
2020
In his speech, Gore said the U.S. needs to do three things to sustain the economic growth. They are elimina-
tion of the federal deficit; investment in education, new technologies and environmental protection; and seizing the
benefits of "reciprocal free and fair trade," Gore said. She said as the summer proceeds there will be "more and
more" efforts by Gore and President Clinton to highlight the importance of trade.
Gore emphasized that the U.S. cannot turn away from the policies of open markets, despite the fight that both
parties have over this policy.
"Let me just say, if protectionism was wrong in the Industrial Age, in the time of Smoot-Hawley, it is just
plain dangerous in the Information Age," he said. At a time when knowledge is the most important component of
national success, America should embrace fair and free trade with open arms, he said. "It is one of the three
essential components that is allowing us to have this prosperity with a closing gap between rich and poor while
inflation declines and encourages more investment so that we can have even higher standards of living in the
future."
Gore said the Administration's policies face opposition from "organized foes" who would push the U.S. back
to outdated economic policies.
At the hearing, several members of the committee warned Barshefsky that obtaining fast track will mean
a tough fight. Ranking member Lee Hamilton (D-IN) said President Clinton will have to weigh in with members of
Congress as he did for NAFTA and the Uruguay Round agreement. Rep. Bob Clement (D-TN) said he did not think
there are sufficient votes to pass fast track, and said the Administration was probably "correct" in delaying the
proposal for the fall.
"Many who voted for NAFTA are not ready yet to vote for fast track," Clement said. Those members first
need answers on how NAFTA is working, he said.
Barshefsky disputed the notion that the Administration would be better off to seek congressional ap-
proval of a trade agreement with Chile than a fast-track bill. "It might be easier to enact a Chile [trade
agreement] bill than a fast track for Chile, but that assumes that fast track is only for Chile, which it is not,"
she said. "But the Chilean government itself has told us they will not negotiate without assurance that
Congress cannot renegotiate [the agreement], in part because of the sensitive agriculture issues that would
arise in the negotiations."
Barshefsky said there are several problems with agricultural market access as well as an issue related to
Chile's investment regime.
The Administration is seeking fast-track authority for multilateral, regional, bilateral and sectoral trade
agreements, she said. Sectorally, the U.S. wants to pursue initiatives on medical equipment and environmental
technology, where the U.S. is the world leader, she said.
Barshefsky said that fast-track negotiating authority gives the U.S. more options in reaching trade
agreements than it would otherwise have. "As a policy, the U.S. must be in a position to look at an economy,
and look at a sector and pry open markets on a much more sustained, consistent basis," she said. This means
"not always using the stick of threatened trade sanctions, but the carrot of a perceived closer relationship
with the U.S."
Failure to obtain fast track would show up immediately in the Administration's inability to strike a trade
agreement with Chile, she said. That, in turn, would send a "signal to our hemisphere that the U.S. will not be
engaged in as forceful a manner as the hemisphere had hoped," Barshefsky said.
UNION PRESIDENTS vow TO FIGHT FAST-TRACK BILL WITHOUT LABOR RULES
The President of the AFL-CIO and-a group of union presidents this week told White House chief of staff
Erskine Bowles and senior Administration economic advisors that they will mount a major campaign against any
fast-track bill that does not provide for labor rights to be included in future trade agreements, according to in-
formed sources. The group emphasized that trade agreements that are acceptable to union members must take into
account the interests of working families, not favor corporations the way the North American Free Trade Agree-
ment does, these sources said.
The union presidents expressed their "deep reservations" about NAFTA, and emphasized that it should not be
used as a model for future trade agreements, one source said.
Bowles did not use the meeting to lay out the kind of fast-track authority the Administration would seek, but
instead insisted that the NAFTA on balance is a successful trade agreement, these sources said. He also pointed out
that the current economic situation, characterized by low unemployment and increased exports, benefits workers,
these sources said.
Bowles also conveyed the message that if the unions do not fight the Administration over fast-track authority
that does not explicitly include labor standards, the White House would take into account union issues, sources
8
INSIDE U.S.TRADE - June 13, 1997
yet, waiting until September could seriously hurt the chances of passing fast track at all.
"I think that by delaying action until the fall, the Administration runs the risk that we will not be able to
complete fast track this year or next," he said. "[I]f there is any hope of getting fast track done before the end of
this year, the President must begin to lay the groundwork now, and not wait until September to start the difficult
work with Congress."
Roth said he is "disappointed" that the Administration has not presented a fast-track proposal, and that
reauthorizing fast track is one of his "top trade priorities."
In response, Barshefsky said the Administration does not believe that the chance of passing fast track
"dwindles" after September, and noted that NAFTA was passed in a short span of time in 1994. In addition, she
said she has already met with over 150 members of Congress to consult with them and explain the need for fast
track. But Barshefsky added after the hearing that she did not use those consultations to win or even count votes.
"We haven't tried to round up votes," she said. "I met with 150 members and have not asked one where they
stand on fast track or any special formulation of a proposal. I've been laying groundwork. This is not a question of
counting votes or counting heads."
In response to a question from Sen. Bob Graham (D-FL), Barshefsky said she did "not want to put a date" on
when the Administration might forward a fast-track proposal to Congress. She also said the Administration would
not "pop in a bill" without first preparing Congress.
Specifically, Barshefsky said in the hearing that the Administration will likely seek broad fast-track
authority that can cover three distinct areas of trade. The Administration wants the ability to cover multilateral
agreements, such as the upcoming agriculture and services talks in the World Trade Organization; sectoral agree-
ments both inside and outside of the WTO, such as the information technology agreement, which need fast track
2
authority for implementation; and free trade areas with other countries.
3
On the ability to negotiate agreements with other countries, Barshefsky said the Administration does not
intend to request authority for a single country. Instead, it will propose a flexible system that will allow the Admin-
istration to pursue talks with any country following "very substantial preconsultations" with Congress.
"Provided there is adequate consultation and provided that senatorial prerogatives are adequately taken care
of, we would like to see authority that is as broad as possible," Barshefsky said.
But she added that the exception to preconsultations would be in the case of Chile, because that negotiation is
already well known to members of Congress. Barshefsky declined to comment after the hearing whether the
Administration is looking to add Chile to the NAFTA, or whether to simply negotiate a bilateral agreement with
that country.
She also added in response to a question from Sen. John Breaux (D-LA) that the Administration is considering
the development of a list of likely countries with which it might seek to conclude trade agreements. But she said
such an effort could be "a bit of a complication" because it could limit the Administration's choices in the future.
In response to a question from Sen. Charles Grassley (R-IA), Barshefsky said that the absence of fast track has
not seriously hurt the U.S. in multilateral forums such as the Free Trade Agreement of the Americas (FTAA) and
the Asia-Pacific Economic Cooperation forum. For example, FTAA negotiators have decided to begin formal talks
in March of next year, which means having fast-track authority will only be crucial at that time, she said. Similarly,
the U.S. is "not prejudiced" by not have fast-track authority in APEC, she said.
However, she said fast track authority is generally needed to allow the U.S. to participate in trade agreements that
could otherwise discriminate against the U.S. She highlighted that many Latin American countries have concluded
agreements with other countries in the hemisphere that have the potential of excluding U.S. goods and services.
In a related development, Special Representative to the President for the Americas Thomas McLarty said in
June 3 speech in Lima, Peru, that the Administration's goal is to have the fast-track bill passed and have advanced
trade negotiations with Chile by the time the second summit of the Americas convenes in March 1998.
Two senators in particular criticized the Administration for insisting on linking trade with labor and
environmental goals in trade agreements. Roth said he had no objection to the Administration seeking separate
labor and environmental accords, but said he objects "most strongly" to the use of fast track to pursue those goals
as they are "inconsistent" with trade agreements.
Sen. Phil Gramm (R-TX) also guaranteed that no "blanket authority" on labor and environment would be
granted by Congress.
"I want to be a strong leader for fast track, but to do that, we have to be sure it won't be used for labor and
environmental purposes," Gramm said. "We see the possibility of massive environmental agreements [over which]
we would lose the power of unlimited debate in the Senate" if fast track authority covered environmental issues, he
said.
Roth also brought up the point that Sens. Gramm and Richard Lugar (R-IN) have proposed that the fast track
bill include only "necessary" provisions, as opposed to "necessary and appropriate." Barshefsky said she did not
have a position on that issue, and said the Administration will weigh these and other proposals on that subject in
INSIDE U.S.TRADE June 6, 1997
5
and importers of textiles and apparel staunchly oppose this so-called "ratcheting-down" of Single Limit quot
whereas U.S. textile makers and unions strongly support it.
Two other approaches for liberalizing textiles and apparel trade with the CBI a draft bill under negotiatic
between textile, apparel, importer and retailer associations and a bill introduced in the last Congress by Ways &
Means trade subcommittee Chairman Phil Crane (R-IL) -- do not include a "ratchet-down" provision (Inside U.S.
Trade, May 30, p. 1).
U.S., EU FAIL TO SETTLE KEY ISSUE IN TEXTILE RULES OF ORIGIN DISPUTE
The U.S. and the European Union this week failed to resolve the major sticking point in their fight over U.S.
rules of origin, which the EU charges have impaired its exports to the U.S. The U.S. refused to change the rules of
origin to accommodate EU exports of printed and dyed cotton fabric, and as a result the two sides are likely to
begin the formal dispute settlement proceedings under the World Trade Organization next month.
The U.S and EU will hold new talks in the week of July 14, "probably" as formal consultations under WTO
dispute settlement rules, according to a senior Administration official. The EU requested these formal consultations
on May 22 because of the U.S. failure to address the problems the EU charges are facing its cotton fabric exports as
a result of the 1996 rules of origin changes (Inside U.S. Trade, May 30, p. 7).
"We are still talking about it [the problem]," the senior official said. "We are looking into their request."
But the official said the U.S. will not change its new rules of origin, and has made that clear "upfront" to any
country which has complained about them. The U.S. does not feel the EU trade in cotton fabric has been damaged
by the rules, since EU trade with the U.S. in the disputed fabrics is growing, the official said.
Under the 1996 rules, printed and dyed cotton fabrics no longer are considered products of the EU.
Instead, they are the product of the country that produced the raw material, and require an allocation in the quotas
that govern the trade of these countries with the U.S.
The U.S. has refused to deal with the cotton issue by insisting that the EU has not demonstrated any trade
damage. In contrast, the U.S. has offfered to deal with the other problems caused to EU products by the rules of
origin change.
In April, the U.S. has offered the EU to change its marking requirements for silk scarves to ensure they are not
labeled as a product of China. Earlier, the U.S. agreed to address trade problems caused by the rules for three
categories of synthetic fabrics.
EU industry sources have pointed out that the U.S. argument that very little cotton fabric is affected by the
rule change could open the door to an informal gentlemen's agreement that would consider the product in question
to originate in the EU.
BARSHEFSKY CALLS FOR FLEXIBLE LABOR, ENVIRONMENT FAST TRACK TERMS
U.S. Trade Representative Charlene Barshefsky this week said the Clinton Administration places great
importance on enhancing labor and environmental standards, but wants flexibility in handling these issues in
upcoming trade agreements to be authorized by new fast-track trade negotiating authority.
"If you negotiate with some countries, the issues of labor and environment may be very important, with other
countries perhaps less important," Barshefsky said after a June 3 Senate Finance Committee hearing.
"The only question is how do we maximize progress on the full range of issues that the United States has [an
interest in]," Barshefsky said in the hearing. She cited U.S. interests in "economics, interest in the environment,
interest with respect to worker rights and worker welfare [and] other interests institution building, drugs."
Barshefsky added that labor and environmental issues comprise the "single most difficult set of issues" in the
fast track debate because of ideological divides between and within the Republican and Democratic parties.
During the hearing, Barshefsky came under repeated attack by Senate Finance Committee chairman Bill Roth
(R-DE), ranking member Patrick Moynihan (D-NY) and other committee members for the Administration's
decision to delay introducing a fast-track bill until September. But Barshefsky defended that decision by saying the
we
weren't
Administration decided the best chance for passing fast track this year was to wait until the fall.
included
"It was the unanimous view of members of the Cabinet to introduce fast track in September, and this was
communicated to the President and the Vice President,' she told the senators. "The reason is that fast track will
take substantial presidential time, along the lines of the time spent on passing [the North American Free Trade
Agreement]."
Waiting until September would allow Clinton and Gore to spend the necessary time on lobbying fast track,
since efforts on the budget and most-favored nation status for China will have passed by then. She also added that
there is "no question that the White House is committed to fast track."
But Roth contradicted her by saying that while the window of opportunity for passing fast track has not closed
4
INSIDE U.S.TRADE - June 6, 1997