The Heritage Foundation

Executive Memorandum #788 on Trade, Economic Freedom

November 2, 2001

November 2, 2001 | Executive Memorandum on Trade, Economic Freedom

Time to Give President Bush Trade Promotion Authority

A cornerstone of President Bush's trade agenda is securing Trade Promotion Authority (TPA). Formerly known as fast-track authority, TPA would limit Congress to a straight up-or-down vote on any trade agreements negotiated by the Administration. This would accelerate the implementation of trade agreements and enhance U.S. credibility by assuring foreign countries that there will not be counterproductive amendments to deals they negotiate with the President.

Some Members of Congress are apprehensive about the TPA legislation (H.R. 3005) that is up for consideration in the House of Representatives due to its provisions dealing with labor and environmental standards. Although it is warranted to have reservations over including labor and environmental provisions in trade agreements, these reservations need not be a deterrent to giving President Bush TPA. The key is for Congress to give President Bush a version of TPA that does not mandate that the United States enforce labor and environmental standards through economic sanctions. There are other, less draconian tools available to the Administration. Moreover, the fear that U.S. sovereignty will be eroded by including labor and environmental provisions in trade agreements is misplaced.

Although every President since Gerald Ford has had fast-track authority, the United States has been without it for the past seven years. Without TPA the United States has been forced to sit on the sidelines while other countries have been moving ahead and securing free-trade deals. There are 131 trade and investment agreements in the world, and the U.S. is party to only three of them. U.S. exporters are at a competitive disadvantage every time another country or region negotiates a free-trade deal. For instance, according to the National Association of Manufacturers (NAM), countries that negotiated a free-trade agreement with Chile since 1997 have seen their market share increase by 8 percentage points, while the U.S. market share has declined by 6 percentage points. NAM estimates that the decline of U.S. exports to Chile since 1997 represents a loss of $800 million and 10,000 job opportunities.

Politics of TPA 
The debate over TPA in the United States largely centers on whether or not to include labor and environmental provisions in the trade agreement. Most Republicans favor TPA without labor and environmental standards attached to the legislation. They believe that enforcing labor and environmental standards through trade agreements would harm economic development in developing countries.

On the other hand, most Democrats believe that if labor and environmental standards are not attached to a trade bill, there will be a "race to the bottom" in these standards around the world. They believe that countries will lower their labor and environmental standards to attract more investment.

The solution is for Congress to give the President a version of TPA that elevates labor and environmental issues to a negotiating objective for the President but does not force the United States to use sanctions.

Enforcing Environmental and Labor Standards
 It is critical for Congress to avoid giving President Bush a version of TPA that compels the United States to enforce labor and environmental standards through sanctions. Otherwise, America would continue to be on the sidelines and would lose the opportunity to increase its trade with other countries, since many countries will not sign an agreement that includes sanctions. In the absence of trade, developing countries will not achieve the higher growth rates associated with increased trade, which history has shown to be the most effective method of raising labor and environmental standards.

The Administration has many other tools to enforce labor and environmental standards other than the use of sanctions. For instance, the President could negotiate an agreement that would require countries to offer greater market access if a violation of the labor and environmental standards occurred. This scheme would give countries an incentive to adhere to the standards and would advance free trade.

A second way to enforce labor and environmental standards is through monetary fines. This enforcement mechanism would fine the government for failing to uphold its labor and environmental laws. The North American Free Trade Agreement authorizes fines against a government that fails to uphold its domestic labor laws, and this has proved to be an effective means of enforcement.

Neither of these options would disrupt trade, as sanctions do. Congress still would have the option to vote against a trade agreement when it is submitted for a straight up-or-down vote.

Sovereignty Issues 
Some lawmakers are opposed to including labor and environmental standards in trade agreements because they fear that U.S. sovereignty will erode as other countries have a venue to challenge U.S. domestic law. This fear is misplaced. Other countries cannot force the United States to change domestic law. The only way domestic labor or environmental laws can change is if Congress passes legislation to alter existing law.

Sovereignty means that the United States has the final say over its laws. The United States retains the right to determine what laws are enacted and/or changed. Former appeals court judge Robert Bork noted that "no treaty or international agreement can bind the United States if it does not wish to be bound. Congress may at any time override such an agreement or any provision of it by statute." Including labor and environmental provisions in TPA does not pose a threat to US sovereignty because the only way domestic laws are changed is if Congress passes new legislation.

Conclusion 
President Bush has made TPA the top priority on his trade agenda. It is crucial for Congress to give President Bush TPA so that the United States can take the lead in promoting free trade around the world. Increasing trade with other countries is clearly in the U.S. interest, as it raises incomes and provides better paying jobs while promoting economic development around the world. Congress should avoid the dead-end of mandatory sanctions and give President Bush TPA that addresses labor and environmental provisions sensibly.

Edwin J. Feulner, Ph.D., is President of The Heritage Foundation.

 

About the Author

Edwin J. Feulner, Ph.D. Founder, Chairman of the Asian Studies Center, and Chung Ju-yung Fellow
Founder's Office

Related Issues: Trade, Economic Freedom