Is this any way to run a government? The short answer is that things are confused-and the confusion is far from accidental. With many key trade-policy positions still unfilled and with deadlines looming on a host of issues, U.S. Trade Representative Mickey Kantor is doing exactly what he learned in 25 years as a lawyer: blowing smoke. While Clinton proclaims his support for open markets, Kantor blusters, threatens and leaves almost everyone off balance. That lets the administration reassure business, labor and environmental interests that it’s hanging tough on their issues-without committing itself to specific actions. “It’s been a good-cop, bad-cop strategy,” says Michael Smith, a former U.S. trade negotiator. “The new wrinkle is that the president and Kantor are taking turns playing each kind of cop.”
The administration claims to be heading in a radically new direction on trade. The intellectual firepower comes from Clinton economic adviser Laura D’Andrea Tyson, who considers greater trade vital to economic growth but says agreements that depart from free trade may be needed to deal with trade barriers. Using Tyson’s ideas, Kantor proclaims that the United States is prepared to restrict imports, if necessary, to obtain “comparably open markets” abroad. The precise meaning of that catch phrase is far from clear; arguably, differences in national laws and practices mean that no two countries’ markets are ever comparable. But the import is evident: countries may lose access to the U.S. market unless they lower subsidies and import barriers. “Kantor is trying to shake up the status quo with tactical rhetoric,” says a USTR official. “We have to change the way the trading world thinks and negotiates if we are to get better results.”
Tactical rhetoric, of course, is hardly a revolutionary idea. Self-righteous anger toward U.S. trading partners runs so high in Congress that President Bush gave Kantor’s predecessor, Carla Hills, a crowbar for use in opening foreign markets. While Kantor sharply criticizes Hills’s “passive” policies, he is learning, as Hills did, that a crowbar is far easier to wave to reporters than to wield in resolving trade problems. In fact, it may cause some. For example:
Clinton’s sharp attack on Europe’s subsidies for Airbus was unexpected but hardly novel; the Reagan and Bush administrations took much the same stance. But while Clinton understood the subsidy issue, he misjudged the politics. U.S. airlines and aircraft-parts manufacturers do business with the French-based company and don’t support a hard line. Even Boeing and McDonnell Douglas, the American manufacturers of commercial jets, have repeatedly avoided filing a formal complaint about the subsidies. Nor is it obvious that U.S. retaliation would force the Europeans to retreat on an issue of such symbolic importance. Once press attention died down, the administration asked the Europeans only for “consultations,” temporarily, at least, reducing the heat.
In February the administration warned Japan to adhere to a 1991 commitment to increase semiconductor imports, with the goal of giving foreign manufacturers at least 20 percent of the Japanese market. Most U.S. chip makers weren’t happy about Clinton’s timing: their business is booming around the globe and their market share is heading higher anyway, while Japanese competitors are struggling. Would Washington have retaliated had Japan failed to meet the 20 percent goal? Last week Kantor dodged that question, announcing unexpectedly that foreign companies took just over 20 percent of Japan’s market in the fourth quarter of 1992. But while the agreement has undoubtedly boosted U.S. companies’ sales in Japan, they hit the target mainly because sales by Japanese companies plummeted.
For two years Washington has protested a European Community rule that would give EC manufacturers a preference in bidding on government telecommunications and utility contracts. On March 12 Kantor abruptly called off negotiations and threatened sanctions. “Canceling these talks and retaliating against us instead is a deliberate tough-guy gambit,” says an EC official. The Europeans made no real concessions-but on Friday Kantor agreed to resume talks next week.
With unions and some environmental groups up in arms over the trade agreement among Mexico, Canada and the United States, Clinton says he can endorse the pact only with additional agreements on environmental and labor standards. Those negotiations started last week-but nobody is sure what the administration wants. “I don’t think they’ve done the work-up on the environmental side agreements,” says an expert close to the issue. “They’re going in there thinking they can wing it.” Clinton has already had to back off on an ill-considered promise to set up a trilateral commission with the power to enforce Mexican environmental regulations, since Mexico would be sure to demand similar rights to judge U.S. rules. The rapid U.S. course changes have left bargaining partners uneasy. Canadian trade chief Michael Wilson, whose Conservative Party has suffered a dramatic fall in popularity due partially to its support of the trade pact, told NEWSWEEK he is “a little apprehensive” about U.S. policy. Mexican officials all but accuse Clinton of going back on his word to support the agreement. Whether Clinton reneged “is an important point, and it will be dealt with in the negotiations,” Commerce Secretary Ron Brown said last week.
The seven-year-old negotiations for a new global agreement to reduce trade and investment barriers have been derailed. While Clinton has endorsed lowering barriers to trade in textiles, services and agricultural products and granting better protection to patents and software, the administration waited until last week to get the talks back on track. Now it appears serious negotiations won’t resume until the fall. The Bush administration’s threats failed to force major EC concessions on the most difficult issue, farm subsidies, and Clinton’s leverage is no better.
Aggressive trade diplomacy isn’t necessarily a bad thing; when it comes to opening individual foreign markets for particular U.S. industries, threats and sanctions-carefully used-may well work better than gentle pleas and free-trade homilies. But tit-for-tat strategies won’t do much to resolve big problems like the Airbus subsidies and the stalled GATT talks. And no amount of bluster will stop the rise in the U.S. trade deficit; only faster economic growth in key markets like Europe and Japan can rev up exports. Activist trade policy surely has its virtues, but it also has its limits. Their scant success to date indicates that Clinton’s trade officials have yet to figure out where those limits are.
Clinton has been flexing his muscles. But the way he handles these issues will reveal his true colors.
The president appeared at Boeing and slammed European aircraft subsidies. So what else is new?
Japan helped U.S. chip makers gain a 20 percent market share. Will that approach sell catalytic converters, too?
Clinton’s a paper tiger on this world-trade pact. He questioned Bush’s last offer, but he’ll tinker and eventually approve it.
Michigan in ‘96? Automakers want Japanese vans reclassified as trucks, which would mean much higher tariffs-and prices.
The free-trade pact will be rejiggered. The real question: how will Clinton placate his labor and environmental group constituents?
