Yesterday, the Bush administration acquiesced to CongressionalDemocrats' demands that pending trade accords include provisionsfor environmental and labor standards. The administration'saccession to these demands bodes poorly for potential U.S. tradepartners around the globe.
To the person who feels more than he thinks, yesterday'sagreement between Congressional Democrats and the Bushadministration to require stricter labor and environmentalprovisions in trade agreements must sound like progress. What's notto like about forcing business to be nicer to workers and morerespectful of the environment?
But there's less there than meets the eye. The deal constitutesa political victory for Democrats in Congress, who compelled theadministration to swallow U.S. union demands, but is unlikely tolead to any new trade liberalization (another union wish). Forgingtrade policy is a balancing act: the more an agreement is limitedto reflect domestic political demands, the less likely prospectivetrade partners are to see the benefit of agreeing. With respect tothe three Latin American agreements, those countries will now haveto reopen debate in their legislatures, which might reject theterms.
The elusive Doha Round of multilateral trade negotiations, whichthis new pact is supposed to advance, will be much more difficultthan it already is because most of the countries negotiating havearticulated their opposition to stricter labor standards backed bythe threat of sanctions.
This new agreement is troubling. Not only is it asking FTAcountries, all of whom are poorer than the U.S., to adopt laborstandards that might not be appropriate, but the agreementspecifically says that lack of resources or other priorities arenot a valid excuse for lack of enforcement. Similarly, breaches inlabor or environmental standards are subject to the same penaltiesas other FTA obligations. In other words, the U.S. could raisetariffs on imports if the FTA country does not live up to therequired standards. The section on government procurement allowsU.S. Federal and state governments to condition governmentprocurement contracts on 'acceptable' conditions of work and wages.Depending on how that principle is reflected in the final draftinglanguage, it is a worrying development.
The best way to raise standards in developing countries is toopen our markets to their products and allow them to grow.