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November 13, 1994
"A Bigger Fight Over Free Trade"
San Jose Mercury News
By Timothy Taylor
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NAME THE U.S. president in the following situation.

A treaty for an international trade organization to encourage free trade has been painstakingly negotiated over several years. The president had consistently backed the treaty, calling it "an integral part of the larger program of international economic reconstruction and development" and "an essential forward step."

But political times were tough. The opposition party, the Republicans, had just made substantial gains in the mid-term elections. Foreign policy concerns, especially in Korea and eastern Europe, were diverting attention from trade agreements.

Protectionist sentiment was running strong. Opponents of free trade argued that America would lose its sovereignty under the treaty -- it would be outvoted by smaller nations and forced to acquiesce. Although the most recent recession had ended, fears of economic decline remained, and in particular a fear that imports would steal American jobs.

Moreover, the protracted negotiations had made the treaty very detailed, explaining all the rules and exceptions and opting-out clauses and special situations. This made even many supporters of free trade uneasy. They feared that the treaty would put a tacit stamp of approval on less free trade. Many of them favored bilateral deals with other countries, rather than a global approach.

The president facing this situation was Harry Truman in 1950. That December, Truman decided that the charter for the proposed International Trade Organization would not even be submitted to Congress. (In describing the climate of that time, I have culled extensively from "The End of the I.T.O.," a 1951 essay by economist and diplomat William Diebold.)

The General Agreement on Tariffs and Trade -- the GATT -- had been passed in 1947 as an interim measure, pending expected approval of the ITO. When Truman pulled the plug on the ITO, other countries backed away as well. But the GATT has remained as the world's primary treaty for negotiating trade disputes and reductions in trade barriers.

Now events have turned full circle. The most recent "Uruguay round" of the GATT talks agreed that GATT would replace itself with a more comprehensive World Trade Organization, an updated version of the ITO.

President Bill Clinton must now decide how hard to push the WTO. As the thumbnail sketch above shows, many elements of his decision are the same as Truman's: midterm election losses for his party, other hot priorities, fear of job loss from imports, worries about sovereignty, and so on.

Will Clinton follow Truman's lead, first talking up his support for a global trade organization and then backing away? I hope not.

After all, political lines have shifted since 1950. In Truman's time, organized labor and Democrats supported free trade, while Republicans largely opposed it. Republican gains thus made it harder for Truman to pass the ITO.

Now, unions are the single strongest opponent of NAFTA and the proposed WTO, while Republicans have become the party more supportive of free trade. For Clinton, the WTO offers a chance to work with a Republican Congress.

But passage of the WTO won't be easy. The whole anti-NAFTA brigade, from unions and some environmentalists to Ross Perot, will take up battle. Many Republicans feel that Clinton hogged the credit for NAFTA, even though it passed because of Republican votes. If they decide not to cooperate, a long agreement with lots of fine print offers lots of juicy targets for obstruction.

Would a failure of the WTO actually matter? After all, even after Truman backed off the ITO, bipartisan American leadership through GATT slashed trade barriers and expanded free trade rapidly over the next several decades.

Moreover, world support for free trade has broadened. In Truman's time, most European nations wanted to be bribed with U.S. financial assistance before reducing their trade barriers. Many experts believed that free trade was altogether unrealistic for the poorer nations.

Today, countries across Latin America, western and eastern Europe and sometimes even Asia and Africa are reducing many of their trade barriers on their own. They see the benefits of participating in the world economy, the access to technology, new products and services, and finance.

Regional free trade agreements, modeled after the European Union and the NAFTA, are springing up all over. As new technology shrinks the world, pushing down the price of transportation and communication, new opportunities for trade keep opening up.

Despite these encouraging trends, America's attitude toward the WTO matters a great deal. On trade issues, America sets the tone for the world. When America turned protectionist during the Depression, so did the world. When America supported GATT, it led the world toward freer trade.

But during the 1980s and early 1990s, America has become more ambivalent about free trade. It has pushed other countries to "voluntarily" restrict their exports, and threatened to raise barriers unless trade was "fair," as U.S. politicians defined fairness.

If Clinton and congressional Republicans bang heads, blame each other, and back off the proposed World Trade Organization, it will be taken as a signal that the world's largest national economy no longer truly supports free trade. If that happens, the world will be a poorer place.

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