Breaking the Deadlock on Trade

What would be a creative way to resolve the question whether U.S. trade is “free” or “fair?”

May 1, 2002

What would be a creative way to resolve the question whether U.S. trade is "free" or "fair?"

As the world economy hangs in the balance, one key obstacle to advancing global growth is the current deadlock on U.S. international trade policy. Breaking that impasse requires a definitive answer to two divisive questions: First, should labor standards be made a compulsory feature of new international trade accords? And second, should environmental standards be written into those new trade deals?

One key to managing U.S. trade policy is to give “fast track” authority to the president. This allows the executive branch to make trade deals and push them through the U.S. Congress more quickly — and with a minimum of debate.

But leaders of the country’s labor unions and environmental organizations say that they will continue to strongly oppose “fast track” and other trade legislation — unless their concerns are addressed by new trade agreements.

At the same time, most U.S. business executives are equally adamant about excluding those standards. They view both criteria as governmental restrictions on private economic activity. Thus, once again, the two sides of a U.S. political deadlock seem unalterably opposed to each other.

What complicates the matter further is the fact that major developing nations, such as India, view these standards in equally negative terms. They see them as a barely disguised protectionism designed to keep products made by low-cost developing countries out of the markets of the high-cost industrialized nations.

It seems clear that, in order for the United States and politicians on both sides of the political spectrum to make progress on international trade policy, decisionmakers must go beyond a simple saying yes or no to linking labor and evironmental concerns to trade.

As it turns out, however, there fortunately is a compelling case for thinking — and acting — outside the box of conventional approaches.

My suggestion is to develop other, more innovative ways of responding to the widespread concerns about low labor and environmental standards in developing countries.

One obvious place to start is the International Labor Organization (ILO). It is the only international organization in which labor, businesses and government are each equally represented. On the one hand, U.S. businesses are wary of the organization because of its emphasis on labor rights. On the other hand, labor unions now view the ILO as a paper tiger. They claim that the group can’t seriously enforce its rulings — and they are right.

That is why the United States would be well-advised to begin strengthening the ILO — by taking it more seriously. In that spirit, the U.S. Congress should quickly approve all of the ILO’s four ‘core’ labor standards.

These four items are widely supported tenets of workplace relations — recognizing unions and eliminating job discrimination, as well as eliminating both child labor and forced labor.

As an economic conservative, I know about the ideological reservations of the political right on this issue. Still, I have to ask: What are we waiting for? Domestic labor laws and regulations in the United States are much tougher.

It seems self evident to me that it is also high time to substitute the application of modern technology for the unacceptable notion of relying on compulsory sanctions to enforce labor standards overseas. Specifically, the ILO should use the Internet to tell the public which countries are violating which standards.

This web-based and disclosure-based approach, if adopted, has many attractions. It enables consumers to make informed decisions — and individuals to make up their own minds. The basic underlying assumption of my proposal is that voluntary private boycotts are far more desirable than compulsory government sanctions.

In the environmental arena, there also are alternatives to compulsory standards. In their place, proponents should support more environmentally friendly trading rules.

In this regard, to an outsider, the World Trade Organization comes across as having a tin ear. In this physically interconnected world, people do care about environmental conditions abroad — especially as international trade brings the indirect effects closer to home.

One alternative to sanctions is to give high priority to liberalizing trade in goods used in environmental clean-up. A broader response to environmental concerns would be to expand the WTO’s so-called “Article 20” exceptions. Article 20 allows WTO rules to be suspended to protect human, animal or plant life or health. For example, one of the current exceptions allows member nations to keep out goods produced by forced labor.

Another Article 20 exception might cover trade actions that are consistent with multilateral environmental agreements. Using this approach, the WTO would still prohibit a government from keeping out products that just violate its domestic environmental standards.

None of these proposals are panaceas. However, any movement to take such constructive actions would represent genuine progress in developing common ground between the U.S. proponents of open trade and those with other priorities.