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American Trade Policy - Clinton's Defeat on Fast Track
David Richardson
Economics, Commerce and Industrial Relations Group
1 December 1997
President Clinton has failed to obtain fast track authority from
Congress. This note briefly explains what that means.
President Clinton's fast track authority was presented to Congress as
the Export Expansion and Reciprocal Trade Agreement Act of 1997.
Clinton failed to get agreement and the legislation was withdrawn on 10
November. Clinton and House Republican leaders agreed to postpone a vote,
probably to 1998. Although the House of Representatives is controlled
by the Republican Party, the main opposition came from the President's
own Democratic Party.(1)
Trade discussions and agreements can involve literally thousands of items
with perhaps as many vested interests. Hence any agreement is likely to
be subject to many attempts to modify specific provisions when the agreement
goes before the Congress. This implies it is almost impossible for an
American President to negotiate an agreement. Any concessions made by
the President are liable to be 'un-made' by the Congress.
For this reason the Congress has granted fast track to US Presidents
ever since the Reciprocal Trade Agreements of 1934. Fast track enables
the President to negotiate a trade agreement confident that the agreement
will be voted on as a whole without amendments relating to specific items.
That means:
the other country does not believe it is having to negotiate with
535 people in addition to the person with whom they negotiated.(2)
Since 1974 under the Ford Administration fast track has included non-tariff
barriers in addition to tariffs that had been included from the beginning.
However, President Clinton has now been without fast track since the previous
fast track authority ran out three years ago.
As described by the White House, fast track involves three elements:
- consultation and coordination with Congress during the negotiation
process
- a vote on implementing legislation within a fixed period of time,
and
- a vote on the entire bill with no amendments.(3)
To apply fast track to a specific agreement the President must advise
Congress of an intention to sign an agreement. At the conclusion of negotiations
Congress and the Administration negotiate the drafting of legislation.
Fast track may be revoked if the President does not meet consultation
requirements.
Congress heard arguments to the effect that the US is missing out on
trade opportunities because it has been unable to negotiate specific agreements.
For example, Chile has negotiated trade agreements with all significant
countries in the Americas except the US. As a result specific companies
can be identified which have lost business to Canada because the Canadians
entered a trade agreement with Chile and now face lower barriers.
One of the factors against fast track in the minds of legislators was
the view that Congress would lose control over the links between trade
and other issues, such as labour and environmental standards in the rest
of the world. Press reports suggest House Democrats were the main opposition
and were worried that Clinton would use the fast track authority to expand
trade with countries that have inferior environmental and labour standards.(4)
Accordingly the President's current fast track proposals include mechanisms
to allow the President and Congress to receive reports:
from officially-designated advisory committees covering the full range
of sectors and policy matters, including manufactured goods, agricultural
products, services, intergovernmental matters, investment, intellectual
property, labor, and environmental matters.(5)
The arguments for fast track essentially reflect the argument for liberal
trade in the US. As the director of the influential Washington-based Institute
for International Economics, C Fred Bergsten, put it in testimony to the
Senate Finance Committee, the US faces an asymmetrical international situation.
Most barriers to the US market have been eliminated or substantially reduced.
However, most of Latin America and Asia continue to impose major barriers
to trade. Hence the only way to progress a global liberal agenda is for
the US is to induce its trading partners to lower their trade barriers.
Of course Australia would still claim the US has a way to go, but the
point is that the US is likely to have more to gain through improved access
abroad than it would concede with additional liberalisation of its own
market.
There is a substantial list of potential venues coming up in which fast
track authority would have assisted the President. These trade initiatives
include
- US relations with Chile, including extending the North American Free
Trade Agreement to include Chile
- Commitments to the Asian Pacific Economic Cooperation (APEC) Forum,
- the creation of a Free Trade Area of the Americas by 2005, and
- a new round of World Trade Organisation talks focusing on agriculture.
The APEC leaders' summit is under way as this is being written and
the outcome will be important. However, some earlier commentary in the
Canadian press suggested: Clinton will have little credibility when
he attends the leaders' summit of the Asia Pacific Economic Cooperation
Forum ... and the Summit of the Americas in Chile next year.(6)
Each of the above initiatives is relevant to Australia. Agreements such
as the ASEAN Free Trade Area (AFTA) accelerate ASEAN's own free trade
arrangements at the expense of non-ASEAN economies. Bergsten sees it as
important that the US use fast track to give the President authority to
work on other initiatives so that ASEAN's liberal free trade agenda benefits
the US as well. For example, a more liberal APEC would counter any trade
diverting effects of the lower internal ASEAN barriers under the AFTA.
However, note that the initiatives in the Americas could have the effect
of diverting trade from Australia in favour of the countries in the agreements.
Australian exporters to Chile, for example, would not be happy if the
US efforts had the effect of giving better access to American business
at the expense of Australian business.
Some commentators worry that Clinton's defeat on fast track may be the
beginning of a resurgence of protectionism in the US. Defeat of fast track
is seen as a victory for the labour movement which tends to be strongly
protectionist. The international press has described President Clinton's
failure as a 'troubling', 'ominous' indicator of a 'new wave' of 'hostile
and wild protectionism' sweeping over America.'(7) In addition, Clinton's
defeat on this issue and his failure to get even a quarter of the Democrat
vote is taken as showing he is already a 'lame duck' president.(8)
- Associated Press, 10 November 1997.
- Excerpts from the President's Remarks at AFL-CIO Convention, 'What
is Fast Track?' http://www.whitehouse.gov/Initiatives/FastTrack
- 'What is Fast Track?' http://www.whitehouse.gov/Initiatives/FastTrack
- Business Week Online, 17 November 1997.
- Testimony of US Trade Representative Ambassador Charlene Barshefsky,
Renewal of Fast Track Authority Senate Finance Committee, 17 September,
1997, at http://fasttrack.org/track/congress
- D Crane, 'US circles the wagons,' Toronto Star, 13 November 1997.
- United States Information Agency, Postponement of vote on fast track,
Foreign Media Reaction Report, 14 November 1997.
- Oxford Analytica Daily Brief, United States: Fast-track failure, 11
November 1997.
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