By ROBERT M. DUNN JR. | New York Times
WASHINGTON - President Bush has now repackaged "fast track" authority as "trade promotion" authority, hoping that a little marketing might push the legislation through Congress.
By either name, this authority gives the president the right to negotiate trade deals that Congress must accept or reject, but not amend. But even some supporters of free trade wonder whether the battle, already lost under President Clinton, is worth pursuing. After all, we have liberalized trade and we are still phasing in the North American Free Trade Agreement and the 1994 global trade agreement that created the World Trade Organization. Why not just leave things as they are and avoid unnecessary trouble?
That would be a reasonable argument if our major trading partners and competitors had stood still. Unfortunately, in recent years, they have reached many agreements from which we are excluded. The European Union is well on its way to admitting a number of new members, and each new arrival will deprive the United States of export sales. For instance, we now compete against other European countries for sales in Poland without any competitive disadvantage - every country faces tariffs. But in a few years, when Poland is likely to have joined the union, E.U. members will probably no longer face tariffs on sales to Poland, and our exports will be at a distinct disadvantage.
Europe, however, is not our biggest problem. Mexico wins that prize. It has aggressively pursued agreements with three big markets - North America, the European Union and Latin America (through individual agreements with many countries, including Chile, Colombia, Venezuela, Bolivia, Costa Rica, Uruguay and Nicaragua). These agreements have allowed Mexico to construct a unique hub-and-spoke trading bloc, with itself as the hub and its partners as spokes.
No other country has such agreements with so many large, varied markets. Under Mexico's agreement with the European Union, enacted last year, tariffs on all industrial products have already been cut sharply and will be fully eliminated by 2007. Because of the European Union's common agricultural policy, farm products could not be included, but many services like banking and insurance will be liberalized.
Undoubtedly, the United States benefits from a more prosperous and stable Mexico, but the Mexican hub-and-spoke trading bloc creates serious problems for our exports. Mexico is the only developing country that can export a wide range of goods without tariffs to the United States, but our exports will have to compete in the Mexican market, without advantage, against all members of the European Union: neither American nor E.U. exports will be subject to tariffs in Mexico. In addition, American products will continue to face tariffs in Europe, while Mexican products will not. The same circumstance will prevail in the Latin American countries with which Mexico has agreements.
A European company that wants to build a factory that will export goods without tariffs to the United States and to much of Latin America has but one choice for location: Mexico. An American company that wants to build a factory that will export goods without tariffs to Europe and many Latin America countries also has only one option - Mexico.
America's goal should be clear: Start making trade agreements. If the United States could reach a free- trade agreement with the European Union, that would eliminate Mexico's advantage in that huge market. Indeed, if this country could get free- trade deals with all of the countries with which Mexico has pacts, we would no longer be at a disadvantage.
It is time for Congress to approve presidential trade authority. President Bush needs this power to advance American interests. It is time for the United States to get back in the game.
Robert M. Dunn Jr. is an economics professor at George Washington University.
Copyright 2001 The New York Times CompanyBy ROBERT M. DUNN JR.:
