January, 2001: Players - Who's Up To What

By Greg Rushford\

Published in the Rushford Report

For lame ducks, the outgoing Clintonites sure can quack.

Eight years ago, defeated President George Bush pretty much slunk out of town. After twelve years of Republican control of the White House under Bush and predecessor Ronald Reagan, the Bushies seemed exhausted. But while Bill Clinton’s hair has turned white since 1992, he looks as energized as the day he came storming into town. And outgoing U.S. Trade Representative Charlene Barshefsky is another Energizer Bunny, busy with so many deals it is hard to keep track of them.

Are these lame ducks trying to lock in President-elect George W. Bush to their Democratic agenda? Or is the flurry of activity a commendable exit strategy?

Well, partly yes, and partly no.

Here’s a short list of what’s been going on since the November elections:

The morning of December 14 — only twelve hours after the newly-gracious Al Gore went on television to concede the presidency to George W. Bush — Barshefsky put out a press release announcing a “major negotiating proposal” submitted to the WTO under the General Agreement on Trade in Services, or GATS. The idea is to remove trade barriers that hamstring the access of so-called U.S. “services” exporters to overseas markets. “Services” is a generalized, hence nebulous term. Think of firms like AT&T, Citibank, American Express, and insurance powers like the American International Group.

As Barshefsky rightly noted, services — which account for nearly 80 percent of American jobs and produced $255 billion in exports last year — are a very big deal. While this is a technical area for laymen, the GATS negotiations tackle issues like foreign regulations that put equity caps stipulating that U.S. companies must remain minority ownership in joint ventures. U.S. telecommunications companies are also adversely affected by red tape and foreign licenses necessary to operate in some markets. What makes this dry subject exciting, of course, is the huge amount of money at stake.

While the services negotiations are important, much more has been going on. Last month, Barshefsky was: (1) trying to wrap up a proposed Free-Trade Agreement with Singapore; (2) launching a similar negotiation with Chile; (3) working on multilateral issues associated with China’s WTO accession; (4) releasing, with the Council on Environmental Quality, the final guidelines on how to implement environmental reviews of trade agreements; (5) meeting with Japanese officials on the always sensitive automobile and auto-parts issues; and (6) participating with Clinton in a summit with European Union leaders over such hotly-contested issues as bananas, beef hormones, and steel. Even as the old wounds continue to fester, Clinton and his USTR were complaining that the Europeans were opening a major new one, referring to plans by Germany and France to subsidise Airbus Industrie’s new superjumbo passenger aircraft. What a mouthful.

Barshefsky was also working on something called the Networked World initiative, which is about information technology. Most people were too busy following her around last month to take the time to figure out what that one is about.

But to her credit, Barshefsky showed us all that she is on top of her details. She is still the highly competent trade lawyer that she was when she came into the administration as then-USTR Mickey Kantor’s deputy in 1993.

Barshefsky displayed her technical mastery of a dizzying array of details in a December 18 conference call with reporters after she met with EU Trade Commissioner Pascal Lamy to talk bananas, beef, etc. For example, she touted a pending agreement on how to test products — the idea is to test an American product once in this country and then sell it in Europe without further bureaucratic obstacles. “This is a big deal for U.S. business, which has complained for years about EU testing,” Barshefsky explained. Most people have never even heard of this issue. But to business, testing standards affect some $20 billion of trade annually.

But while some of these deals and details are impressive, the big picture is less so.

As I reported last month, the Singapore “free-trade” negotiations sure look like lame-duck mischief. This isn’t about free trade; it’s about how the Clintonites would love to snooker Singapore into accepting the protectionist “labor” and “environment” agenda of the U.S. steel and textile lobbies. The Chile negotiations could be headed the same way, assuming that the free-market oriented Chileans also can be flipped. (There could be another, happier outcome, assuming that Chile agrees to lower its tariffs, which now average about 11 percent. Backward Brazil, which has tariffs of 17 percent and higher, would then be under pressure to get serious about cleaning up its protectionist rackets. And little has been heard from Singapore officials, who seemed to have figured out that they had jumped into a trap.)

On other fronts, there doesn’t seem to be much harm in tossing a few last minute Hail Mary’s. Trying to persuade Japan to deregulate more is good advice, even if the USTR has little political oomph in Tokyo (of course, nobody there does). Trying to resolve the beef- and bananas spats with Europe is also worth a Hail Mary pass. And there is definitely no harm in pressing the Europeans not to provide WTO-illegal government subsidies for the new Airbus superjumbo A3XX jet. The Europeans know that George W. Bush will fight for Boeing, too; any American president would and should.

(When Barshefsky left Steptoe & Johnson in 1993 to join the Clinton administration, Boeing was a client. She recused herself of any involvement in Boeing issues for one year. But now — even though there is no ethical prohibition on her being deeply involved in doing battle against Airbus — Barshefsky’s old colleagues at Steptoe and her former client must be delighted with the farewell gesture).

Barshefsky summed up her view of her last days in office in a December 14 speech before the Democratic Leadership Council. To read the speech is to see where the Clinton administration has gone wrong on trade.

When Clinton was elected in 1992, Barshefsky noted, “the domestic debate on trade policy was growing more intense.” America’s very “economic leadership was in question,” she righteously declared. “It was a moment of risk [Clinton] said, comparable to that after World War I, when weariness with political leadership brought the rejection of the League of Nations treaty and withdrew America from European and Asian politics.” Ultimately, she said, it took Franklin Roosevelt and Harry Truman to come in and save the nation from the protectionist cycle that lead to world depression and war.

Give me a break. This is the opposite of what has happened on the Clinton watch. Clinton is no heroic Roosevelt, and he didn’t face a situation remotely like the one FDR inherited from Herbert Hoover. Rather than make unpopular decisions like Truman, and defend them, Clinton has pandered to every protectionist lobbyist who has wandered into the Oval Office. Under Clinton, the buck didn’t stop in the Oval Office, Monica Lewinsky stopped by.

In the last eight years, the free-trade coalition that FDR and Cordell Hull put together has withered. Clinton’s main concern has been to shore up his support in the Democratic Party and the AFL-CIO.

This is the real Clinton legacy on trade. No amount of lame-duck quackery and last-minute fixes will change that.

Remember the December 1999 WTO ministerial in Seattle? Barshefsky told reporters last month how the Europeans have learned from their own (protectionist) mistakes that helped wreck the launch of a new round of trade negotiations. “It is clear that Europe has come to recognize that its proposed agenda was not a sustainable one,” the USTR said.

She’s right. European diplomats acknowledge that they realize that if a new round of multilateral trade talks is to be launched, the EU must be more flexible in what it offers to the developing countries in the WTO. “The new round should be a ‘development round,’ says one official.

But Barshefsky is silent on the embarrassing United States positions that also helped doom the “Seattle Round” — insisting that antidumping reform cannot be on the table because our steel lobby wouldn’t like that, that textile protectionism cannot be on the table because that would offend our allies in the textile lobby, that sugar and peanuts are taboos (although the EU and Japan would be expected to tackle their own agricultural protectionism). Today, the American position is still as rigid as ever.

That’s the bottom line: The Clintonites are bright and they know the technical stuff. They have been on a constant campaign to ensure the president’s popularity for eight straight years. And now that they are about to give up power, they are actually trying to govern.

In Seattle, the Clintonites traded away the interests of the services sector — remember, 80 percent of all U.S. jobs! — for the interests of a handful of domestic steel, textile, and farm protectionists. They have left a mess.

Oddly, business lobbyists who should be outraged — the haughty Business Roundtable is the most prominent example — still haven’t even figured out what has happened to them.

The question now is: Will the incoming George W. team perceive what has gone wrong, and will the new guys do any better?

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