Few issues in recent years have been as contentious--or as
widely misunderstood--as the issue of renewing presidential
fast-track negotiating authority. Before the current session of
Congress ends, Members must vote either to grant or deny President
Bill Clinton the fast-track trade authority he has requested.
President Clinton has sought this authority to negotiate agreements
that would expand the U.S. economy further and maintain U.S.
leadership around the world.
Despite ample evidence that free trade has contributed to the
growth of the U.S. economy, however, as well as to the creation of
millions of new jobs and an increase in the living standards of
American families, protectionists hope to kill fast-track
authority. Many opponents of fast track--including the Democratic
leadership on Capitol Hill, organized labor, and isolationists--are
trying to turn the congressional debate on fast track into a
referendum on the North American Free Trade Agreement (NAFTA). They
have gone so far as to revive previously discredited claims about
trade deficits and job losses while cloaking their objectives in
rhetoric over concern for labor standards and the environment.
Before Congress casts the deciding vote on this issue, it should
examine fast track fairly and objectively. Members should study the
facts to see how free trade has contributed to the U.S. economy and
then debunk the common myths surrounding this important issue for
their constituents. Without fast-track authority to expand free
trade, Americans will suffer while other countries prosper.
Debunking Ten Common Myths About Fast Track
Myth #1: A vote against fast track is a vote against
Opponents of fast track argue that voting against fast track
would show congressional displeasure with NAFTA.
Reality: Not true. A vote against fast track will be a vote
against the millions of American families for whom free trade has
meant more consumer choice, better job opportunities, and higher
standards of living
Moreover, a vote against fast track will be a vote for tax
hikes, higher inflation and interest rates, slower productivity and
wage growth, less investment, and less job creation, as well as for
labor unions that favor more government regulation of the economy
at the expense of private investment. Worse yet, denying the
President renewed fast-track authority will be the greatest
economic and foreign policy setback since enactment of the
Smoot-Hawley Tariff Act of 1930, which triggered the Great
Depression and worldwide economic meltdown that helped lead to the
outbreak of World War II. If Congress renounces the historic U.S.
role as the world's leading advocate and practitioner of free trade
by rejecting the President's request, U.S. economic and political
preeminence will be weakened and the global trading system
The fast-track bills approved on October 1 and 8, 1997,
respectively, by the Senate Finance Committee (S. 1269) and House
Ways and Means Committee (H.R. 2621) are entirely consistent with
conservative (indeed, classically liberal) economic principles
regarding free trade, open markets, and deregulation. By renewing
fast-track trade authority, Congress can give the President the
single most powerful tool he needs to negotiate trade agreements
that will benefit small and medium-size U.S. firms and investors.
Moreover, because 75 percent of all U.S. exporters employ fewer
than 50 workers each, Congress's vote on fast-track authority will
affect the pocketbooks of all Americans. If the United States is
not present during all future international trade negotiations to
shape the rules so that they advance U.S. economic interests and
national values, the ultimate losers will be the American
Myth #2: Fast-track authority reduces the role of Congress in
Critics of fast track claim that Congress will give up too much
Reality: Fast-track authority does not give the President a
blank check to negotiate trade agreements, nor does it deprive
Congress of its constitutional power to regulate commerce with
Fast-track negotiating authority was created under the U.S.
Trade Act of 1974 to speed legislation implementing trade
agreements through Congress by barring amendments and requiring a
prompt up-or-down vote. The three essential features of any
fast-track authority are that (1) there must be extensive
consultation and coordination with Congress throughout the process;
(2) there must be a vote on implementing legislation within a fixed
period of time; and (3) this vote must be up or down, with no
amendments. Congress establishes the objectives and limits of the
President's negotiating authority. Throughout any trade
negotiations, the Administration must consult frequently with the
House Ways and Means Committee, the Senate Finance Committee, and
special advisers designated by Congress.
Fast-track authority has been used for every international trade
negotiation undertaken by the United States since 1974. A
Republican President and Democratic Congress produced the U.S.
Trade Act of 1974 to negotiate and implement the Tokyo Round of the
General Agreement on Tariffs and Trade (GATT), and the United
States has reviewed and renewed fast-track authority to implement
all other comprehensive trade agreements it has negotiated since
that time, including the U.S.-Israel Free Trade Agreement of 1985,
the U.S.-Canada Free Trade Agreement of 1988, the NAFTA of 1993,
and the Uruguay Round Agreements of 1994 creating the World Trade
Organization (WTO). It is inconceivable that 12 Congresses over the
past two decades would have allowed the executive branch to usurp,
contort, or disregard the input of Congress in the trade
negotiation process even once, let alone several times.
Myth #3: Fast-track authority will replicate failed trade
policies of the past
Opponents of fast track argue that free trade weakens the U.S.
Reality: The U.S. economy is in its sixth consecutive year of
expansion, and both inflation and unemployment have fallen to their
lowest levels in more than two decades. Today, the United
States is the world's largest exporter of goods and services. It
also is the world's largest producer of semiconductors,
automobiles, software, and other sophisticated technologies. The
U.S. economy reports the highest productivity and competitiveness
of any economy in the world, creates more jobs than any other
industrialized economy, and accounts for 25 percent of all global
foreign investment each year. As a result, Americans enjoy the
world's highest standard of living. Moreover, U.S. free-trade
policies since the end of World War II have been responsible for
the spread of capitalism and democracy throughout the world.
Over eight successive rounds of GATT negotiations between 1947
and 1994, U.S. trade negotiators wrote about 85 percent of the
global trading rules to advance U.S. interests and values. The
creation of the WTO was a vitally important achievement of U.S.
foreign policy because it established the foundations of the global
trading system for the 21st century--a system that has been shaped
primarily by the economic achievements of Americans over the past
50 years. Clearly, these international agreements are the fruits of
successful U.S. trade policies.
Myth #4: New trade agreements under fast track will destroy
U.S. jobs, depress U.S. wages, and weaken the U.S. manufacturing
Opponents of fast track argue that trade agreements like NAFTA
and the WTO have destroyed hundreds of thousands of U.S. jobs,
depressed U.S. wages, and weakened the U.S. industrial base by
encouraging American companies to relocate to Mexico, where wages
and labor standards are lower.
Reality: The evidence that free trade creates more job
opportunities and higher living standards for Americans is
irrefutable: U.S. employment, wages, and manufacturing output have
grown significantly since 1992. Moreover, the growth in employment
is accelerating--an average of 356,800 new jobs per month thus far
in 1997, compared with 272,000 per month in 1996 and 45,400 per
month in 1995. 1 Hundreds of thousands of U.S. jobs have
not been destroyed, U.S. living standards have not declined, and
the U.S. industrial base has not been weakened since NAFTA took
effect in 1994.
In fact, the U.S. economy has been creating over 2.5 million new
jobs each year since NAFTA and the Uruguay Round Agreements went
into effect on January 1, 1994, and January 1, 1995, respectively.
Moreover, the U.S. economy has created nearly 13 million new jobs
overall since 1992 and currently is at full employment (meaning
that the unemployment rate has dropped below the 6 percent level,
which economists view as full employment). The unemployment rate
thus far in 1997 is 4.9 percent, the lowest in 24 years. If the
United States is at full employment, it should be clear that
hundreds of thousands of jobs are not being destroyed as a result
of expanding free trade. The U.S. Department of Labor determined
that only 125,000 U.S. jobs actually were lost as a result of NAFTA
during the agreement's first three years, and only 10,000 of those
workers who were displaced actually took advantage of NAFTA's
retraining benefits. To place these numbers in perspective, the
number of U.S. jobs lost to NAFTA during its first 36 months is
roughly equivalent to the total of net new U.S. jobs created in
less than two weeks.
U.S. industrial production increased 18 percent from 1992 to
1996. Moreover, during this same four-year period, U.S.
manufactured exports increased 42 percent, high-technology exports
rose 45 percent, services exports were up 26 percent, and
agricultural exports grew by 40 percent. Similarly, manufacturing
employment grew from 16.9 million jobs in 1992 to 18.3 million in
1996--an increase of 1.4 million net new jobs and the first such
increase in more than 15 years. Currently, over 12 million U.S.
jobs, including one in five manufacturing jobs and one in three
agricultural jobs, depend directly on exports.
Critics of fast track are wrong to argue that imports of
manufactured goods from low-wage countries like Mexico depress U.S.
wages by causing the loss of high-paying manufacturing jobs. To
test this myth, the Washington-based Employment Policy Foundation
calculated the effect on U.S. wages if the $6.5 billion 1995
manufacturing trade deficit with Mexico had been eliminated. It
found that average U.S. wages would have risen by only $0.0007 per
The most important source of real wage growth is productivity
growth. Recent research shows that exports spur productivity
growth, and therefore real wage growth. For example, Richard
Nadler, a journalist who has covered NAFTA's progress, compared
pre- and post-NAFTA growth rates in U.S. living standards and found
a "clear...correlation between the increasing prosperity of
American workers and international tax-cut treaties such as NAFTA."
2 His review measured the improvement in three ways:
- Gross domestic product (GDP) per capita, adjusted for
inflation, grew by 1.79 percent annually in 1994 and 1995, compared
with only 0.23 percent a year from 1990 to 1993.
- Disposable personal income growth, adjusted for inflation,
averaged 1.89 percent annually in 1994 and 1995, compared with 0.25
percent annually from 1990 to 1993.
- Personal consumption expenditures, adjusted for inflation, grew
by 1.76 percent annually in 1994 and 1995, compared with 0.56
percent a year from 1990 to 1993.
There is no question that economic and technological
globalization and the rapid advance of free trade and investment
policies around the world are replacing low-skill, low-wage jobs in
the industrialized countries with better-paying, high-skill jobs.
The alternative to this process is to erect trade barriers that
preserve low-skill, low-wage jobs at the expense of higher-skill,
better-paying jobs. Abdicating U.S. global leadership and imposing
tax hikes on American consumers in the form of high protectionist
tariffs on imports from other countries will not stop this
transformation from low-wage jobs based on lower skills and lower
technologies to high-wage jobs requiring advanced skills and
technologies. The solution lies not in barriers to foreign trade,
but in domestic market-driven policies to "trade up" the knowledge
and skills of the U.S. labor force through better education and
Myth #5: Fast-track authority will lead to trade agreements
that expand the U.S. trade deficit. Opponents of fast track
argue that more trade agreements will increase the U.S. trade
deficit and destroy U.S. jobs.
Reality: The weight of historical evidence clearly shows that
unemployment drops as trade deficits rise
For example, while the trade deficit soared in 1983 and 1984
and peaked in 1987, the U.S. unemployment rate fell from 9.6
percent in 1983 to 5.5 percent in 1988; when it started to decline
between 1989 and 1991, unemployment grew from 5.3 percent to 6.7
percent; and when it started to rise again from 1992 to 1994,
unemployment fell from 7.4 percent to 6.1 percent. In 1997, the
U.S. trade deficit (particularly with Asian trading partners) will
grow even more, yet the unemployment rate is at its lowest level in
more than 24 years.
Trade deficits and surpluses say nothing about the strength or
weakness of an economy because exports are driven by foreign
demand, while imports are driven by domestic demand. If anything,
trade deficits historically have been a sign of a strong and
growing economy. The United States has a trade deficit because it
has the world's wealthiest and most dynamic economy, and because
important trading partners like Canada, Mexico, Japan, and China
have smaller or weaker economies. Americans buy more from other
countries than other countries buy from United States because
American consumers have more wealth per capita than consumers in
other countries. The United States also is the world's largest
exporter of goods and services because American-made products are
in great demand overseas. As a way to measure the benefits of
trade, subtracting imports from exports simply makes no sense.
Myth #6: The United States could maintain its position as the
world's leading economy without fast-track authority
Opponents of fast track argue that the U.S. economy would be
stronger if the United States entered into fewer--and
tougher--trade agreements with other countries.
Reality: Without fast-track authority, U.S. exports will lose
competitiveness in global markets and the U.S. economy will
weaken. Exports are one of the main engines of U.S. economic
growth. 3 From 1986 to 1992, according to the Department
of Commerce, exports as a share of GDP grew by 39 percent,
accounting for nearly 50 percent of total U.S. economic growth.
4 Total two-way U.S. trade in 1997 (trade in goods and
services plus earnings on foreign investment) will be equivalent to
30 percent of GDP, or $2.3 trillion, compared with only 13 percent
in 1970. 5 During the past 26 years, the rate of growth
in the volume of U.S. trade has been twice the rate of growth for
the U.S. economy.
From 1993 through 1996, U.S. exports of goods and services
increased by 27 percent, from $602.5 billion in 1993 to $825.9
billion in 1996. NAFTA and the Uruguay Round Agreements were
important factors in this growth. For example, total North American
trade increased from $293 billion in 1993 to $420 billion in 1996,
for a gain of $127 billion or 43 percent. In 1996, U.S. exports to
Canada and Mexico, at $190 billion, surpassed U.S. exports to any
other region, including the entire Pacific Rim or all of
The growing interaction between U.S. cities and the world
economy is underscored by a recent Department of Commerce survey
showing that 90 percent of the 253 metropolitan areas in the United
States reported export sales growth from 1993 to 1996. Clearly,
exports have become increasingly important to the economic
well-being of U.S. cities. Moreover, trade between U.S.
metropolitan areas and the global economy is growing phenomenally.
The data show that merchandise exports from these 253 metropolitan
areas totaled $494.5 billion in 1996, up nearly $27 billion from
1995 and accounting for 79 percent of U.S. merchandise exports in
The GATT Secretariat estimated that the Uruguay Round Agreements
would bring up to $510 billion a year to the world's GDP when
implemented by 2005. 6 The consulting firm of
DRI/McGraw-Hill has estimated that the Uruguay Round Agreements
would increase the real GDP growth rate in the United States by 0.3
percent annually, causing real GDP to rise by 4.5 percent by 2005.
7 DRI/McGraw-Hill also examined the economic impact of
the Uruguay Round Agreements on the U.S. economy and found that, by
2005, the U.S. economy should grow by 4.2 percent and labor
productivity should rise by 2.7 percent annually, pushing up real
hourly wages in the manufacturing sector by 2.6 percent and
creating over 2,043,000 net new American jobs. 8
If the President's fast-track negotiating authority is not
renewed before Congress concludes its 1997 session, the issue is
not likely to reemerge as part of the Administration or
congressional agenda until after the presidential election in 2000.
During this four-year period, however, the rest of the world will
have moved ahead with new trading arrangements. The United States
will be left behind as other countries reduce their tariff and
nontariff barriers to trade. In fact, this has happened already:
Canada and Mexico have signed free-trade agreements with Chile that
will give their exporters an 11 percent tariff advantage over U.S.
firms. Since 1994, U.S. firms have lost potential exports to Chile
of nearly $500 million annually. 9
Since 1992, U.S. competitors in Europe, Asia, and Latin America
have negotiated 20 regional trade pacts in the Western Hemisphere
and Asia without U.S. participation. Of the more than 30 bilateral
and regional trade agreements in effect today throughout Latin
America and the Caribbean, the United States participates in only
one--NAFTA. Mercosur is a regional customs union with ambitions to
expand to all of South America; the European Union (EU) has made it
a priority to negotiate a free-trade agreement with Mercosur by
1999, long before Mercosur negotiates a deal with the United States
to establish a Free Trade Area of the Americas. Although the United
States is still the largest foreign investor in Latin America and
the region's largest trading partner overall, total Mercosur-EU
trade in 1996 was greater than total U.S. trade with Mercosur.
Chile and Bolivia already are associate members of Mercosur, and
Venezuela and Colombia are negotiating their admission. China's
"strategic priorities" include Mexico, Argentina, Brazil, Chile,
Venezuela, Panama, and Central America. Japan and South Korea have
undertaken high-level efforts in Asia and Latin America, and
Australia and New Zealand are forging closer ties with South
America's fast-growing economies as well.
Fast-track authority would give the United States clear
authority to be present at every trade negotiating table and the
President the ability to exert U.S. leadership in a decisive way.
Without fast-track authority, and without a presence at those
negotiating tables, the prospects for continued economic progress
and success are questionable. Ultimately, fast track revolves
around the issue of maintaining U.S. international leadership: Will
the United States take the lead in expanding the world economy by
participating in the series of regional and multilateral trade
negotiations starting in April 1998 at the second Summit of the
Americas in Santiago, Chile? Or will it remain on the sidelines as
other countries write the new rules for the 21st century's global
trading system, to the potential detriment of U.S. economic
interests and American national values? How Congress votes will
determine how those questions are answered.
Myth #7: The United States does not need fast-track authority
to negotiate free-trade agreements with other countries
Opponents of fast track claim that it is not a necessary tool
for negotiating new trade agreements because other countries are
eager to gain access to the U.S. market and therefore willing to
deal at any cost.
Reality: Although the U.S. market is undeniably attractive to
foreign exporters and investors, no other country will undertake
serious trade negotiations with the United States unless the
President has fast-track authority in hand
Foreign governments will not negotiate substantive trade and
investment agreements with the United States if they have to turn
around and renegotiate implementing legislation with Congress after
the original agreements have been signed. Special interests could
tempt Congress to amend the agreements, accepting concessions that
foreign governments make to the United States while rejecting U.S.
concessions made to conclude successful trade agreements.
Fast-track authority is a necessary pledge of good faith that
assures trading partners that agreements negotiated over many
months or years will not be changed restrictively by Congress.
Myth #8: Fast-track authority is needed only to expand NAFTA
Some opponents of fast track argue that, because only Chile is
in line for a free-trade agreement with the United States,
fast-track authority should be limited exclusively to signing a
trade deal with Chile.
Reality: A free-trade agreement with Chile is only one item
on a very broad and ambitious U.S. global trade agenda covering the
The President needs fast-track authority to complete
negotiations within both the WTO and the Organization for Economic
Cooperation and Development (OECD) to open international markets
for agriculture, financial services, information technology, and
government procurement, as well as to liberalize investment flows.
The "built-in WTO agenda" created by the Uruguay Round Agreements
also includes government procurement rules, technical barriers to
trade, sanitary and phytosanitary measures, customs valuation, and
preshipment inspection and import licensing procedures.
10 Fast track is necessary to complete negotiations
within the OECD to liberalize investment flows and to launch formal
negotiations in April 1998 to create a hemispheric Free Trade Area
of the Americas; after Chile, it also is needed to negotiate trade
agreements with other countries in Latin America and Asia.
Fast-track authority will be essential to the success of all these
Fast-track authority is absolutely essential if the United
States is to lead the renegotiation of the GATT Uruguay Round
Agreement for agriculture, scheduled to begin in 1999. Among the
important issues in future negotiations will be increased market
access, resolution of state trading issues, greater transparency
between trading partners, greater adherence to sound science in
resolving sanitary and phytosanitary measures, rules of origin,
export subsidies, internal support schemes disguised as
environmental payments, clearly defined trade in genetically
modified organisms, and overall trade in products of biotechnology
based on sound science. Negotiations to cut trade barriers in the
$526 billion global agriculture market will define the structure of
agriculture in the United States for the next decade.
The accession of Chile to NAFTA is the first step in fulfilling
present and intended commitments to and from U.S. trading partners
in Latin America and the Caribbean--commitments to open their
markets to goods produced by American workers in American
factories--while improving the prospects for managing such
important non-trade issues as illegal immigration, drug
trafficking, and policy toward Cuba.
No country in the hemisphere is more qualified or deserving of
NAFTA membership than Chile, the standard for market reform in
Latin America. Since 1987, Chile's economy has expanded at an
average rate of 7.2 percent annually. Inflation currently is less
than 8 percent, and unemployment is 5 percent. Chile has a savings
and domestic investment rate equivalent to 27 percent of gross
national product (GNP), a trade surplus of $2 billion on a $47
billion GNP, the highest rating of any Latin American country in
Standard & Poor's risk classification, and an excellent record
on labor and environmental issues. It also depends on the United
States for only 21 percent of its trade (the EU captures a 24
percent share) and is a member of the Asia-Pacific Economic
Cooperation forum. Denying Chile entry into NAFTA could well result
in its developing much closer trade and investment ties with Europe
and Asia at the expense of the United States.
Myth #9: Fast-track authority should include provisions
linking trade agreements with non-trade issues like labor standards
and protection of the environment
Protectionists maintain that fast track must include strong
provisions linking trade agreements to progress on non-trade
issues, such as labor standards and the environment, in order to
safeguard American jobs and industry while helping to raise
standards of living in low-wage countries.
Reality: Grafting such extraneous issues as labor standards
and the environment onto trade agreements liberalizing global
markets for goods and services will prove counterproductive,
particularly when the proponents of such linkages actually are
promoting protectionist policies
As Jagdish Bhagwati, professor of economics at Columbia
University, has stated, "Linking human rights and the environment
to trade is the lazy man's solution to extremely difficult
problems, and a recipe for failure all around." 11 Free
trade is the key to rapid income growth in developing countries,
and high income leads to adoption of tough social and environmental
rules. The historical record--including the history of the United
States--demonstrates conclusively that pollution rises in the early
stages of development and declines when countries become wealthy
enough to afford clean air and water standards.
Trade agreements are not cure-alls for social concerns in U.S.
foreign and international economic policies. The fast-track
negotiating objective on labor and environmental issues should seek
only to prevent a social agenda from providing cover for
protectionist policies, higher taxes, and big government. Free
trade and investment should be promoted as mechanisms for enhancing
and improving environmental protection. Free trade magnifies a
country's environmental responsibilities. The goal of U.S. trade
negotiators should be to promote national treatment, transparency,
and nondiscrimination so that environmental regulations do not
distort trade. Moreover, they should encourage market-oriented
solutions that promote environmental goals. Trade restrictions
should not be imposed to achieve environmental objectives or
government-imposed changes in labor markets. Trade sanctions do not
work against environmental pollution, abuses of labor and human
rights, or health and safety concerns. Any attempt to negotiate
trade agreements that sanction a whole range of non-trade matters
and standards is doomed to failure.
Myth #10: Fast-track authority will lead to additional
international agreements like the WTO and NAFTA that violate U.S.
sovereignty. Protectionists who oppose fast track argue that
global organizations like the WTO and regional trade agreements
like NAFTA undermine U.S. sovereignty and represent a move toward
Reality: Nothing in any trade agreement signed by the United
States, including NAFTA and the Uruguay Round Agreements creating
the WTO, can force the United States to follow any law not passed
by the U.S. Congress and signed by the President
A world government indeed would be grotesque and harmful, but
fast-track trade authority will not lead to any such result. All of
the above agreements contain language stating that nothing
contained in them can supersede U.S. law. Congress created
fast-track authority in 1974 to encourage free trade, which is the
very antithesis of world government. Fast-track authority will
allow the President to negotiate free-trade agreements to
facilitate the free flow of ideas, investments, goods, and
services. This promotion of trade liberalization and economic
freedom worldwide is inconsistent with the centralizing principle
of world government.
For 50 years, the United States has led the world in opening
global markets to free trade and investment. This persistent and
committed leadership to free trade has succeeded in reducing global
tariffs from an average of 40 percent at the end of World War II to
about 5 percent today, fueling a 90-fold increase in world trade.
Along the way, U.S. trade negotiators have been directly
responsible for writing at least 85 percent of the rules that guide
today's global trading system. In 1996, the developing world
imported over $1 trillion in manufactured goods from the
industrialized countries. The U.S. accounts for only 4 percent of
the world's consumers; the remaining 96 percent live elsewhere.
During the next decade, the global economy is expected to grow at
twice the rate of the U.S. economy, while economic growth in Asia
and Latin America is expected to be at least three times as great
as economic growth in the United States.
In light of this global expansion of trade, there is no
substitute for the ability of the United States to negotiate and
implement comprehensive free-trade agreements. The lack of
presidential fast-track negotiating authority is the single most
important factor limiting the capacity of the United States to
access global markets, expand exports and investments overseas, and
sustain the dynamic performance of its economy at home. It also
will undermine U.S. global leadership and influence in the 21st
With fast-track negotiating authority, however, the United
States can set the pace and timing of its most important trade
negotiations, establish negotiating credibility, and ensure its
success in the major multilateral and hemispheric trade
negotiations that are scheduled to begin early in 1998. Promptly
renewing the President's fast-track authority will send other
countries the message that Congress and the Administration stand
united in pursuit of free-trade agreements that advance U.S.
economic interests and values around the world. The economic
security of the United States is at stake in this debate. Neither
ignorance of the facts about free trade nor retreat in the face of
isolationist rhetoric is an option.