July 18, 1994

July 18, 1994 | FYI on

A Free Trade Partnership: Why the Governors Want the Gatt and More

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July 18,1994

A FREE TRADE PARTNERSHIP: WHY THE GOVERNORS WANT THE GATT AND MORE

By Douglas Seay Director and Wesley R. Smith Deputy Director The Govemors' Forum Legislation to implement the Uruguay Round of trade talks of the General Agreement on Tariffs and Trade (GATT) is being developed on Capitol Hill and a bill will soon be presented to Congress for an up-or-down vote. Despite its many trade-liberalizing provisions and strong backing by U.S. businesses, the agreement has encountered heavy resistance on Capitol Hill, with opponents citing arguments ranging from its alleged undermining of U.S. sovereignty to unhappiness over its market- opening effects on heavily protected sectors of the economy such as textiles and agriculture. What was once viewed as a relatively uncontroversial trade agreement now is facing considerable opposi- tion, with many arguing for substantial revisions or outright rejection. As a result, its passage is far from certain. As with last year's debate over the North American Free Trade Agreement (NAFTA), the often bitter divisions in Congress over the GATT agreement stand in sharp contrast to the broad support for it beyond the Washington Beltway. Most prominently, the nation's governors have expressed their strong backing for passage of the agreement. In a recent sur- vey conducted by The Governors' Forum at Ile Heritage Founda- Top Exporters tion, all of the 36 governors who have taken a position on the Support the GAIT GATT agreement favor its passage and none are opposed. The re- 1993 EMMU mainder either are not responding or are taking no position. This (Idulans) support is bipartisan and represents every region of the country, in- califamia 68.1 cluding all of the major exporting states. NewYork 40J T@ 35.6 Governors More Aftentive WEhinstm 27.4 The reasons for the governors' solid support of the GATT agree- NkMpn 2S.3 ment parallel those for their support of the NAFTA: because the 1111nob 20.4 governors interact more broadly with their constituencies and Ohio 173 work far more closely with businesses in their states am do Mem- FlorMa 143 bers of Congress, they are much less influenced by special inter- Newjemy 14.5 ests lobbying for protection and thus are much more supportive Of Some: U.S. Conerce Dqwkwt, ftftmaborW free trade. Further, far more than Members of Congress, their po- Trade Adodwation.

litical fortunes are linked closely to economic con- Governors' Views on GATT ditions in their states especially regarding job suft Gowmor View growth. Thus, the governors have considerable in- All ama Jim Folsom (D) Und. centive to identify and promote policies that pro- Al= Wally Hickel (1) Yes duce results in these key areas. As a result, Arizona Fife Symington (R) Und. Arkmm Jim Guy Tucker (D) Yes virtually all are strong advocates of free trade and Cisuilorm. Pete Wilson (R) Yes Colorado Roy R. Romer (D) Yes the expanded economic opportunities it provides. c. -, - cut Lowell P. Welcker, Jr. (1) NP Delaware Thomas It. Carper (D) Yes Rorida Lawton Chiles (D) Yes Goorgis Zell Miller (D) NP Support Not Unqualified Hmwi John D. Walhee III (D) Yes The governors' support for the GATT agreement Idaho Cecil D. Andrus (D) Yes Ifinals Jim Edgar (R) Yes is not unqualified; several have voiced concerns in :rmom Evan Bayh (D) Yes Iowa Terry E. Branstad (R) Yes a number of areas. Unlike the objections of many Joan Finney (D) Yes Kentucky Brereton C. Jones (D) Und. of the agreement's opponents in Congress, how- Lotd9im Edwin Edwards (D) Yes John R. McKernan. Jr. (R) Und. ever, these reservations generally derive not from N n`and Wi ham Donald Schaehr (D) Yes the agreement's removal of too much protection Musadvasaft Wi@llam Weld (R) Yes San John Engler (R) Yes from favored sectors, but from its leaving too Nruessaft Am Carlson (R) Yes Mississippi Kirk Fordice (R) Yes much in place, especially in foreign markets. For "IUOM Md Carnahan (D) Yes example, Governor Pete Wilson (R-California) has No' Marc Rackot (R) Yes Nebraska Ben Nelson (D) Und. expressed disappointment that there was not Nevada Robert J. Miller (D) Yes ow Harniashire Stephen Merril (R) Und. greater progress in liberalizing trade in the enter- N-Jerany Christine Todd Whitman (R) Yes mmmicalco Bruce King (D) NP tainment and telecommunications industries, we York Mario M. Cuomo (D) Yes :arth Cardirsis James B. Hunt. Jr. (D) Lind. among others. Governor Thomas Carper (D-Dela- N. d Diduats Yes ware) believes that much more headway should Me George Voinavich (R) Yes 011didionisis Dave Walters (D) Und. have been made in opening foreign markets to the orw Barbara Roberts (D) Yes F--OWWE Robert P. Casey (D) NP U.S. banking, insurance, and financial service in- Rhode Idond Bruce Sundkin (D) Yes dustries. And Governor Terry Branstad (R-lowa) South careg- Carroll Campbell. Jr. (R) ye: South Dakota Wakeir D. Miller (R) Ye believes that the European Community was treated T- Ned Ray McWhorter (D) Und. T@ Ann Richards (D) Yes far too leniently in being allowed to continue to Utah Michael 0. Lewitt (R) Yes V Howard Dun (D) NR heavily subsidize its agricultural production and eX- Zwo"nmaa George Allen (R) Yes wumpo_ Mike Lamy (D) Yes ports. WestVirgina W. Gairion Caperton III (D) Yes vviwormm Tommy G. Thompson (R) Yes Several governors also have expressed concern ng Michael J. Sullivan (D) Yes Mew Based on a Heritage Foundation survey taken In July 1994. Approvals that the interests of their states will not be repre- Include girvernors who am in fiervorof GATT with certain additional modifications. sented adequately in the deliberations of the World "NR" Indicates no response to the Incluiry, while "Und." means that the governor has rot yet decided his position. "NP" Indicates that the governor will not have Trade Organization (WTO) that the GATT agree- an olficiall position an the GATT. ment will establish to monitor compliance with the ' agreement and to resolve trade disputes. Their concerns in this area stem less from the operations of the WTO itself than from doubts about the commitment of the U.S. government to representing and protecting state interests in the WTO's deliberations. For example, Governor Cecil Andrus (D- Idaho) fears that the WTO may prove to be a mechanism by which Washington expands its interfer- ence into state matters. Several governors worry that their taxing authority will be constrained further by Washington, ostensibly in compliance with WTO rulings. Governor Mario Cuomo (D- New York) has expressed concern that the states may not be able to protect their higher standards re- garding health, food, and safety. None of the concerns expressed by the governors, however, is sufficient to undermine their sup- port for passage of the overall agreement; many of these issues can be addressed by Congress in its implementing legislation without necessitating modifications in the agreement itself. To this end, several of the governors have provided Congress with a set of clear recommendations to address these concerns.

214 Massachusetts Avenue N.E. Washington, D.C. 20002-4999 (202) 546-4400

1W P7 cHen-tage GFoundatiaq

Nothing written here is to be construed as necessarily reflecting the views of Tbe Heritage Foundatim or as an attempt to aid or hinder the passage of any bill before Gongmss.

Greater State Involvement Given the increasing importance of international trade to their states, most governors have stated a desire for a greater and more permanent consultative role in both the negotiation and implementa- tion of trade agreements. They believe that only through their own participation can the interests of their states be protected adequately. The National Governors' Association (NGA) has outlined a number of specific additions to the U.S. implementing legislation to protect state interests. As sum- marized by Governor Tommy Thompson (R-Wisconsin) in his June 10 testimony to Congress, The most important of these declares that:

State -participation in the dispute settlement process must be greatly ex- panded. States must be involved and represented at each stage of the de- velopment of U.S. positions in dispute settlement cases involving state measures. States must also participate in any future committees and working groups that are formed within the Uruguay Round to discuss implementation of Uruguay Round principles.

A June 14 declaration by the Western Governors' Association (WGA) supporting the GATT agreement reiterated this call for the states' inclusion and, lest the WTO become a vehicle for fur- ther undermining federalism and the powers of the states, recommended that the U.S. implementing legislation "should not permit preemption of state laws without specific federal statutory authoriza- tion, and it should not permit private rights of action against states in any case." This point is under- scored with the recommendation that the U.S. "should also add a general reservation to GATT that will protect the role of states in our federal system."

A Partnership With Washington Far from reflecting resistance to the GATT agreement, the modest modifications suggested by the governors are aimed at preventing it from being used improperly to further erode their powers. Spe- cifically, they seek to prevent Washington from acting in their name, as their experience in this area has been an unsatisfactory one. What they are seeking is a partnership with the federal government in the negotiation and implementation of trade agreements, one which seeks to advance the goal of free trade.

As with last year's NAFTA, the overwhelming support for the GATT agreement by the nation's governors has demonstrated once again that they remain among the staunchest advocates of free trade in the U.S. Any Administration engaged in future trade negotiations should welcome their ac- tive participation, not only to address more easily their concerns as they arise, but also to bring into play a powerful political community, one certain to remain far more supportive of free trade than is the Congress. For their part, by increasing their role in the decision-making in Washington on trade issues, the governors also can bolster their role as defenders of state prerogatives and thereby strengthen the federalism that underlies the American constitutional system. This combination of free trade and federalism is one that is good not only for the individual states, but for the Republic as a whole.

Chris Adams, Ken Mahieu, and Lori Otto contributed to the research for this study.

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