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News Release

Labor and Environmental Reforms Needed to Restart US Trade Policy

October 26, 1999

Contact:    I. M. Destler    (202) 328-9000
    Peter J. Balint    (301) 405-6330

Washington, DC—To restore bipartisan consensus on US trade policy, and resume negotiations to reduce trade barriers worldwide, executive branch and congressional leaders must deal constructively with trade's impact on environmental and labor standards. This is necessary for both substantive and political reasons, according to a new Institute study by I. M. Destler and Peter J. Balint. To break the current stalemate in US trade policy, the authors recommend a set of measures that would advance global labor and environmental standards while authorizing the negotiation of new agreements to reduce barriers to trade. These include

  1. a national commitment to enhanced labor and environmental standards at home and abroad, pursued through
  2. steps to reinforce the social compact in the United States, such as:
    1. worker opportunity programs;
    2. health and safety regulation; and
    3. ongoing review of biotechnology products; and
  3. steps to make WTO more friendly toward social and environmental concerns,
    1. such as reinforcing existing trade-labor and trade-environment institutions in NAFTA and WTO;
    2. permitting any new trade-related labor and environmental agreements to be implemented through fast-track legislation;
    3. exploring possible changes or extensions in WTO rules on such matters as product labeling, production processes and methods (PPMs), and labor or environmental impact statements; and, in particular,
    4. negotiating, within WTO, new rules that explicitly allow the use of trade restrictions to enforce multilateral labor and environmental accords.

Within this overall framework, new trade legislation would give renewed authority to
4. negotiate the reduction of tariff and nontariff trade barriers.

Through 1994, US efforts to liberalize trade worldwide were buttressed by a bipartisan consensus, in the Congress as well as through successive administrations. Since the overwhelming ratification of the Uruguay Round agreements that year, however, President Clinton has been denied the "fast-track" authority (granted every president from Gerald Ford onward) to negotiate international trade agreements. The most important reason has been opposition from labor and environmental groups to trade negotiations that do not address their concerns. Aided by business/conservative resistance to compromise, they succeeded in blocking fast track in 1997 and 1998. They have, as Representative Barney Frank (D-MA) put it, taken US trade policy "hostage."

These groups espouse interests that contain "protectionist" elements. But Destler and Balint argue that "to view these social concerns as 'the new protectionism' is to misread the challenge faced by the trade-policy community. Today's danger is not a return to the era of high trade barriers symbolized by the Smoot-Hawley Act of 1930. Rather, the danger is one of stalemate and prolonged trade policy stagnation, of the sort that has afflicted the Clinton administration since its early successes-ratification of the North American Free Trade Agreement (NAFTA) in 1993 and completion of the Uruguay Round of negotiations on the General Agreement on Tariffs and Trade (GATT) in 1994."

Moreover, labor and environmental concerns have substantive merit. "As international trade becomes more important to the US economy-and the US economy becomes more intertwined with other economies-globalization's effects within the United States broaden.… It took the better part of a century for the United States and other advanced industrial nations to enact laws and establish norms to ameliorate the negative effects of unbridled capitalism. And just as, for the United States, the nationalization of the economy that accelerated after the Civil War undercut state efforts at regulation, so globalization today undercuts national efforts to strengthen the social safety net and protect the environment."

Some labor-environmental concerns involve processes by which products are made-how labor is employed, for example, or how the environment is affected. These are processes that nations typically regulate within their borders (though domestic regulations may be subject to international agreements). Now advocates of these regulations see their goals challenged, and sometimes their home laws undermined, by foreign processes and practices reflecting lower standards. They may simply object to importing products made with what they see as abusive labor practices or processes that degrade the environment within the producing country. Or they may also see their own process regulations threatened by less stringent foreign practices that lower production costs.

"Established US (and international) trade policymaking institutions are not well structured to address these new issues," the authors find. "Nor is a Congress increasingly polarized along ideological lines. Nor are business leaders who see the labor-environmental agenda at least as a diversion and at worst as an ominous new regulatory threat. Predictably, culture clashes abound." Because they are contentious and threaten consensus, the US trade policy community has long sought to keep these issues on the periphery of international negotiations.

"Yet now that their inclusion has itself become an issue, the old formula of preserving bipartisanship by keeping them out is no longer effective," conclude Destler and Balint. The labor and environmental issues "are here to stay, and the price of inattention [to them] is likely to be further postponement of trade-authorizing legislation, at further cost to US global economic leadership."

Over the next 5 to 10 years, the authors see three possible futures for US trade policy. The first is continuing stalemate, the most likely prospect in the near term. US trade policy has already absorbed costs from this stalemate. Over time these costs will mount because "the trade regime needs maintenance nationally and globally. At home, we have a new generation of congressional representatives with little experience with either the logic or the rules of trade policy, and hence little personal commitment to the specific policies embedded in domestic legislation and international agreements. This lack of commitment, combined with a taste for partisan maneuvering, explains the two-to-one House vote for steel quotas earlier this year more than does any serious resurgence of protectionism. But the more trade policy becomes a partisan plaything, the more difficult it will be to reset it on a forward course."

"Internationally, the WTO regime needs both expansion to new issues and attention to emerging problems in its generally successful dispute settlement mechanism. Regionally, continued US economic leadership in the Western Hemisphere is linked to the projected Free Trade Area of the Americas (FTAA), and in the Pacific arena to implementing the free trade commitment of the Asia Pacific Economic Cooperation (APEC) forum. The lack of trade-negotiating authority undercuts the United States in all these arenas."

The second possible future is enactment, by a narrow majority, of fast-track trade authority along the lines of the legislation considered in 1997 and 1998. This would keep the new labor and environmental issues at the margin, if not exclude them entirely. This outcome seems unlikely. But assuming it were achieved in, say, 2001, the prospects for trade policy would remain rather bleak, for it would be founded on a narrow, vulnerable, and partisan consensus. Trade policy would begin to resemble arms control policy, subject to wrenching shifts such as the Senate's rejection of the global test ban treaty. And approval of trade agreements negotiated under fast track would be a close-run thing at best.

The third possible future is a compromise that addresses labor and environmental concerns and broadens the support coalition. The authors judge this to be "surely the most promising, substantively and politically," if it can be attained. It would not require resolution of all substantive differences between the two camps, either domestically or internationally. But it would need to contain something real and important for both of them. And "they" does not have to be everyone in both camps: organized labor in particular seems unlikely in the near term to endorse any plausible compromise formula. But if it provided important benefits for workers and avenues for attaining more, it might mute labor opposition and attract some labor friends seeking a balanced basis for backing trade expansion.

A key element in any compromise would be to "make the trade regime labor-and-environment friendly" by modifying current international trade rules that inhibit the development of strong multilateral regimes, and the enforcement of effective multilateral agreements, on labor and environmental issues.

For real and symbolic reasons, say the authors, trade-authorizing legislation should not prohibit agreements on labor and environmental issues. But neither is it likely that pathbreaking agreements in these spheres will be reached through trade channels. Demands for improvement in other nations' labor or environmental practices, whose prime impact is on their own citizens, do not fit well within the established, my-interest-against-your-interest, mode of trade negotiations. They are opposed by many US trading partners, particularly in the developing world. Furthermore, it is most unlikely that, over the long run, advocates of labor rights or environmental amelioration wish their goals to be negotiated through trade institutions.

In principle, therefore, negotiations on international labor and environmental issues should be conducted through non-trade policy channels, overseen by institutions at home and abroad reflecting their specific substance. Over the long term, the goal would be to build multiple parallel tracks in international negotiations, rather than attempt to craft one all-inclusive new fast-track procedure. The problem, of course, is that effective international institutions to deal separately with labor and environmental concerns do not currently exist. The International Labor Organization (ILO) operates by business-labor-government consensus, and its conventions and declarations contain no enforcement mechanisms comparable to the threat of trade sanctions embodied in WTO dispute settlement procedures. And no centralized, multilateral environmental organization exists at all.

The US government should work assiduously to strengthen multilateral institutions and agreements, both global and regional, in these spheres. As part of this effort, it should seek, in WTO negotiations, amendments to GATT rules to allow the use of trade restrictions to enforce multilateral labor and environmental accords, just as they are available (if seldom used) to enforce trade accords. There would need to be procedural requirements: for example, to restrict trade in a product whose production caused environmental harm, a nation might be required to cite violation of an agreement signed by the preponderance of nations producing that product, and perhaps also a multilateral finding (e.g., by a secretariat charged with overseeing that agreement) that the country whose product was to be sanctioned was in significant violation.

Such a measure gives something important to both sides in the debate. Trade skeptics get authorization of effective labor and environmental agreements written into the trade regime; trade advocates get assurances that the (almost certainly infrequent) trade restrictions that result would be seriously grounded in real labor and environmental complaints.

Constructing a compromise is likely to take time. A new political basis for trade-negotiating authority is badly needed, but the parties to the current stalemate are widely separated in principle, lacking in mutual trust, and significantly separated in their current legislative stands. Thus the authors' compromise program would probably need to be implemented in carefully negotiated stages, by executive and congressional leaders who gained the trust of all parties to the compromise.

When achieved, however, the compromise program would advance the cause of global labor and environmental standards while authorizing the negotiation of new agreements to reduce barriers to trade. It would benefit business interests, consumers, workers, and environmentalists alike.

About the Authors

I. M. Destler, Visiting Fellow, is Professor at the School of Public Affairs and Director of the Center for International and Security Studies at the University of Maryland. He was formerly Senior Fellow at the Institute, Senior Associate at the Carnegie Endowment for International Peace (1977-83) and at the Brookings Institution (1972-77), and Visiting Lecturer at Princeton University (1971-72) and the International University of Japan (1986). He is the author or coauthor of 10 books on American foreign policymaking and US-Japan economic relations, including Renewing Fast-Track Legislation (1997), The National Economic Council: A Work in Progress (1996), American Trade Politics (3d ed. 1995), and Dollar Politics: Exchange Rate Policymaking in the United States (1989).

Peter J. Balint is Adjunct Lecturer in Quantitative Methods and a doctoral candidate in Environmental Policy at the School of Public Affairs at the University of Maryland. His current research focuses on efforts to integrate environmental conservation and socioeconomic development in rural areas of poor countries. He has published articles on drinking water and sanitation in the developing world and on the economic and ecological effects of marine biotechnology in Politics and the Life Sciences and Journal of Public and International Affairs.

About the Institute

The Institute for International Economics is a private nonprofit research institution for the study and discussion of international economic policy. The Institute, directed by C. Fred Bergsten, provides fresh analyses of key economic, monetary, trade, and investment issues and recommends practical approaches for strengthening public policy toward these important topics. The Institute receives funding from a large number of private foundations and corporations.