Clinton's Emerging Trade Policy: Act One, Scene One
Article Summary and Author Biography
President Clinton is getting jostled by the grousing of U.S. trading partners and critics of his economic policy. Yet his trade policy assumes-correctly-that the costs of inaction are too high. A trio of books details the stakes.
By the close of the administration's first 100 days, President Bill Clinton's trade policy had come under heavy fire at home and abroad. Referring to the international shouting matches over computer chips, steel, minivans, aircraft manufacturing and government procurement contracts, The New York Times wrote of "a growing tension in trade relations provoked by President Clinton's new and more confrontational approach to international negotiations." The Wall Street Journal accused the administration of caring "less about principle than about making a political deal." The Economist called Washington's approach "at best incompetent and at worst a step down a slippery path towards protectionism." And The Financial Times urged Europe to side with Japan against America's new trade initiatives.
European Community ministers talked of America's "unilateral bullying" and of "having to grope in the dark" to figure out what the new Clinton team was trying to do. Japan's ambassador to theECwas more polite, saying only that America's top trade negotiator, Mickey Kantor, "is very new to trade matters." Jagdish Bhagwati, economic adviser to the director general of the General Agreement on Tariffs and Trade (GATT), said: "This should be a spring of hope, and instead we get a nuclear winter."
In retrospect, such charges are not surprising. Fundamental policy changes are never easy to accommodate, and big changes should have been expected. Well before he was elected, Clinton was promising to recast the entire intellectual basis of U.S. trade policy. Trade was to be an integral part of creating competitive industries and high-wage jobs. It was to be placed at the center of foreign policy, becoming at least as important as political and security questions. Clinton had promised to remove the ideological blinders that caused government and industry to regard one another as antagonists. He had committed his administration to putting the issues of environmental and labor practices into trade negotiations. And so it has gone.
The fact is that critics of Clinton's trade policy have fired their shots prematurely and at the wrong targets. The administration's accomplishment in changing the national mind-set on trade policy dwarfs in significance the mini-crises, rhetorical jousting and inevitable inconsistencies that have emerged in these early days. The president has focused on the most basic problems affecting America's international position. He has riveted the country's attention on the federal government's fiscal solvency, a cancerous threat to the long-term vitality of the American economy. He has given priority to improving worker productivity. He has proposed a technology policy to bolster university research, upgrade vocational training and improve the way America transforms basic inventions into commercial products. In his speeches, news conferences and meetings with foreign leaders, Clinton has put other nations on notice that America will no longer make trade concessions in deference to the NATO or U.S.-Japanese security relationship. Clinton and his trade policy makers have done all this in an astonishingly short period of time, and they have based it on the assumption that America's economic trajectory has been arching in the wrong direction for well over a decade. The Clinton team has acted as if the United States has no choice but to make bold departures from existing policies, and that the risk of inaction is greater than the dangers inherent in dramatic change. They are dead right.
THE POTENTIAL REWARDS
The gains from a successful policy could be an essential spur to domestic renewal and to the development of the new, post-Cold War foreign policy that the administration seeks. It is not just that exports have been the most important ingredient in the expansion of America's GNP these past few years, but that almost all the growth of high-wage manufacturing jobs has been attributable to sales abroad. It is not just that some 14 million workers now owe their jobs to exports, but that we will have to do much better than that if today's economic stagnation is not to undermine the very fabric of our society. A vigorous trade policy, which gains greater access for American firms to foreign markets and keeps open our markets to others, will help ensure a competitive economy at home-essential for growth with low inflation. A more effective international economic policy, based heavily on increased trade competitiveness, will enhance U.S. influence around the world at a time when our military assets will be deployed with decreasing frequency. It will also give America the resources and the confidence to make its rightful economic contributions to assist Russia and Eastern Europe in their historic transformations, and to lead in efforts to promote development in Latin America and elsewhere. Viewed from another perspective, a trade policy that fails because it does not result in greater U.S. sales abroad, or because it descends into protectionism, would be a disaster for America and the world. Such are the stakes.
THE RISKS
The benefits of a vastly reinvigorated trade policy should not obscure the dilemmas to be confronted or the pitfalls to be avoided. In foreign policy, an aggressive emphasis on commercial diplomacy is essential, but it promises to transform radically the rules, patterns and relationships between America and virtually every major power. Despite the restrained rhetoric of summits and other high-profile gatherings, intense trade competition untempered by the need to band together against a common, Cold War enemy is likely to lead to conflict with all U.S. allies, the implications of which can only be dimly perceived.
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