This past week, the House of Representatives approved a free trade pact with Peru, a development that might cause for a lot of renewed optimism amongst free traders. We were distressed that earlier this year, the White House was forced to accede to the inclusion of labor and environmental standards in future trade agreements. When the White House made the deal to include labor and environmental standards, many feared that these standards would be used to sink future free trade deals. But the House’s decision to approve of the free trade bill with Peru alleviates those concerns. Right?
Well, perhaps not. Just because the Peru deal was approved does not mean that the inclusion of labor and environmental standards don’t continue to pose a threat to the crafting and enactment of future free trade agreements.
As reported by the Washington Post, House Speaker Nancy Pelosi, who actually supported the Peru free trade deal, said that “when I saw an opportunity for us to have labor and environmental standards as a core part of our trade agreements, it marked a drastic difference from what even a Democratic president was willing to give on that score.”(Emphasis added.) This precedent means that labor and environmental standards will be part and parcel of trade agreements for the foreseeable future thanks to the Bush Administration's acquiescence to including them in the Peru deal. For future trade agreements to pass Congress - at least so long as Congress is controlled by Democrats - labor and environmental standards will have to be accounted for in each of those agreements.
Because the Bush Administration is pro-trade, there will still be significant political pressure for free trade agreements to be passed by Congress. But if a Democratic President is elected, he/she may very well use the presence of labor and environmental standards to stifle the free trade by establishing a moratorium on such agreements. Senator Clinton has promised to do just that if she is elected President, a marked departure from the trade practices of her husband’s Administration.
The passage of the Peru trade deal does not mean that future trade deals will be easily passed through Congress. Quite the contrary. As former U.S. Trade Representative Clayton Yeutter pointed out in a New York Times article, “The Peru vote has to be taken with a grain of salt. Of the four pending agreements, this one was the easiest for the leadership and the membership. It is not that big of an agreement, and they can use it to demonstrate some bona fides in favor of trade agreements.” The requirement that labor and environmental standards be included in trade agreements certainly won’t facilitate their passage by Congress.
“So what?” you might ask. “Don't we want to preserve labor and environmental standards? Aren't they good things to have?” Well, abstractly they might be. But things just are not that simple, as World Bank President and former United States Trade Representative Robert Zoellick pointed out to Forbes Magazine during the Bush Administration's first term. Zoellick rightly called those who demanded the inclusion of labor and environmental standards in trade agreements “economic isolationists,” who used the issues of labor and the environment to obstruct the passage of future trade deals.
Zoellick’s point remains valid. Labor and environmental standards can easily be used by protectionists as poison pills to defeat trade agreements. Not coincidentally, labor and environmental standards don't remain an issue at times when trade deals are not demanding Congressional attention. They only come to the fore when protectionists need some form of distraction that will allow them to defeat a trade agreement while at the same time hiding their protectionist colors from the general public.
And if you think that the developing world appreciates the emphasis placed on labor and environmental standards by protectionists, well, think again. As research fellow Kimberly Ann Elliott wrote, the developing world hates the linkage between trade and labor and environmental standards because it fears that its exports will be discriminated against on labor and environmental grounds. They also fear lawsuits based on those. All of this, of course, will only make it more difficult to craft trade agreements with the developing world and win Congressional approval for those agreements.
Free trade is one of the surest routes to a prosperous world in which the middle class is moves up and others rise to join them. More than 11 million jobs were added in service and other sectors thanks to trade and Americans have benefited from lower interest rates, more investment opportunities and lower prices on goods. The worst thing we can do in a period of economic uncertainty - a period in which we might be entering a significant economic slowdown, if not a recession - is to abandon the cause of free trade and the pursuit of free trade agreements. And yet, with the use of labor and environmental standards as roadblocks to further free trade agreements, protectionists are well-positioned to undermine the cause of free trade. They may win in their effort to curb free trade. If they do, the country - and the world - will lose.
