House Vote Concludes the NAFTA Squeeze

THE BALTIMORE SUN

Washington. -- Wednesday's vote in the House of Representatives on the North American Free Trade Agreement will shape the Clinton presidency and U.S. policy-making.

Technically it will decide whether the United States should become the cornerstone of the world's largest free trade zone with Mexico and Canada, with tariffs between the countries eliminated over 15 years.

But there is much more more at stake here than regional economic partnership. Whatever the rights and wrongs of the argument over the potential gains and losses under NAFTA, it is beyond dispute that the decision on the agreement will resonate politically at home and diplomatically abroad.

For Bill Clinton, a president with an extraordinarily large agenda and remarkably little to show for it so far, the vote is crucial to his credibility. A major rebuff at this juncture would wound him just as he needs all the political clout he can muster to push his controversial health care reform package through Congress in the coming months.

Mr. Clinton was late in the field on NAFTA, but the commitment he began to display two weeks ago seemed to suggest confidence that he could win. Otherwise, why put his presidency so firmly on the line? So went the reasoning Inside the Beltway.

But this analysis was shaken by the sudden invitation from Vice President Al Gore to maverick Ross Perot for a NAFTA debate. This smacked of desperation in the White House, an effort to personalize the issue, to make Mr. Perot, whose negatives have been mounting in the polls, the embodiment of opposition to the agreement.

If Mr. Clinton's stature at home is at stake, his image abroad is even more hostage to the outcome in the House, which will be decisive, since the Senate is expected to pass NAFTA. The House vote will create its own dynamic abroad, where Mr. Clinton's reputation is already less than Olympian.

From Mexico to Mandalay, Paris to Perth, Tokyo to Timbuktu, it will be seen as an indication of whether the United States will be outward-looking opportunists or inward-looking protectionists, whether relations with its neighbors throughout Latin America will be strengthened or weakened, and whether U.S. leadership of the fast-developing truly global economy is dependable.

One of those alternative judgments will flow almost automatically from the vote, depending which way it goes.

As Mr. Clinton pointed out last week, the NAFTA vote will come in the middle of the Asian Pacific Economic Cooperation Conference in Seattle, where he will meet the leaders of Japan, China and other nations. Victory on NAFTA would give him "terrific leverage" in trade negotiations with them. Conversely, defeat would undermine his global economic leadership.

That said, there are good reasons for wondering whether the United States should sign onto a NAFTA that will almost certainly cost jobs in the short term, that puts regional trade ahead of global trade and that tries to create a partnership between one poor, developing and barely democratic country and two of the world's richest and freest nations.

The arguments of both proponents and opponents have done more to cloud than to clarify the landscape, with hyperbole vying with hypocrisy on both sides.

Mr. Perot's nightmare projection of millions of jobs heading south is simply that -- his nightmare. It has little basis in fact, but it plays effectively on the fears of ordinary workers in an age of endemic employment insecurity.

On the other hand, Mr. Clinton's recent trumpeting that NAFTA will make the United States and its partners more competitive by keeping the Japanese and Europeans out of the area hardly sits easily with his commitment to global tree trade.

If history is any guide, the actual effect is likely to be just the opposite: The Japanese and Europeans will rush in, buying up Mexican and Canadian companies or forming partnerships, to get a toehold inside the free trade zone. At least that is what U.S. companies did in the 1980s as the European Common Market was taking shape.

This prompts another question that economists have been gnawing at: Does creation of these regional trading blocs serve or undermine the wider goal of global free trade? More immediately, how does NAFTA fit in with the Uruguay Round of global free trade negotiations under the General Agreement on Tariffs and Trade, due to be completed next month?

There are now regional groups in the Americas, Europe, Africa and Asia, and the trend seems to be gathering pace, with NAFTA as the latest best example.

They range from mega blocs such as the European Economic Community and the Association of South East Asian Nations, through middle-rank groups such as the Gulf Co-operation Council and the Andean Pact, to small partnerships including the Economic Community of West African States and the Central American Common Market.

On different scales, all are pursuing the same goals -- market strength through numbers and increased trade through lower tariffs. But do regional deals weaken international co-operation?

"The risks of regionalism include the possible diversion of scarce skills from multilateral to regional negotiations, the increased potential for friction among regional groups, and possible adverse effects on countries excluded from such arrangements," said a recent International Monetary Fund report on "Regional Trade Arrangements."

To look at these three dangers in terms of NAFTA is to get the drift:

* The NAFTA negotiations certainly have occupied the top trade negotiators of both the Bush and Clinton administrations, depriving the GATT talks of the priority and urgency they might otherwise have had.

* The increased potential for friction among regional groups can be seen in the frenzied interest among other Latin American countries for hitching their wagons to the U.S. locomotive. Think of the resentment if they are left behind.

* The possible adverse effects on countries excluded from such arrangements finds voice in poor Caribbean islands who suddenly see their limited access to the rich neighbor jeopardized.

The IMF report,however, ends on a sanguine note: "Increasingly . . . the process of globalization calls for multilateral solutions. This fact will likely limit the risk that regional arrangements will turn into closed blocs."

Such broad concerns will hardly be weighing heavily on members of Congress this week, however. As Congressional Quarterly said in a recent issue: "Proponents [of NAFTA] are trying to sell a policy with global economic implications to lawmakers for whom all politics are local."

They will be wondering what their votes will do to their chances of re-election in November 1994. Will plants close in their districts in the next year? Will old jobs be lost or new ones created? Will labor's enduring opposition, the promised result of a "yes" vote, cost them dearly in terms of electoral support next year? Will the administration exact an equal and opposite price for a "no" vote?

This is what is making the vote such a cliff-hanger. Only occasionally does an issue polarize the electorate the way NAFTA has. But it has not split the nation along its natural political fault lines, left and right, rich and poor, north and south. Just the opposite. It has created an incredible array of unlikely liaisons, strange bedfellows indeed.

xTC It is rare that a Democratic president relies on the congressional Republican leadership to save his political skin, but GOP support is Mr. Clinton's best hope. It is striking when the likes of liberal consumer advocate Ralph Nader and ultra-conservative Paul Weyrich find common cause to oppose the treaty. And who ever could have imagined organized labor and billionaire Ross Perot seeking out each other's company to shout in harmony: "No to this NAFTA."

One thing the NAFTA vote this week will certainly do, whichever way it goes, is return domestic politics to a more normal pattern, which itself will be reassuring.

Mr. Lewthwaite is economics correspondent in the Washington Bureau of The Baltimore Sun.

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