NO. 40 -- October 24, 1997


Feature Article


For more than six decades Congress has delegated much of the authority to formulate U.S. foreign economic policy to the White House. However, events of the last four years or so have led some observers to question the future of this long-standing arrangement. Reauthorization of the president's fast-track trade negotiating authority could be headed toward defeat on Capitol Hill. Moreover, Congress and even state and local governments persist in passing unilateral economic sanctions laws that conflict with U.S. obligations under the World Trade Organization and the North American Free Trade Agreement.

The U.S. foreign economic policymaking system does seem to be under considerable stress. Are the problems life-threatening or does the system still retain the coherence and the support necessary for survival? Evaluating today's situation against the political, ideological and institutional underpinnings of U.S. foreign economic policy supports the conclusion that the existence of the system is not seriously threatened. The recent problems result from a combination of factors that makes the policymaking process more contentious but is unlikely to force fundamental change.

Divided government, rising partisanship in Washington and the loss of the ideological coherence of Cold War U.S. foreign policy all have led to greater congressional activism on trade and related economic issues. Nonetheless, these developments have failed to alter the underlying incentives for Congress to delegate authority to the president to craft this country's foreign economic policy.

State and local sanctions laws have made news in part because they are a still unusual exercise of subnational power. They also violate U.S. treaty commitments. These policies are likely to become minor problems in the future, however, as states and localities learn the costs of their initiatives. And, finally, while ideological support for free trade has wavered in response to the adjustments required by international market forces, the free trade coalition is likely to be both more coherent and more politically powerful than any protectionist/populist alternative for the foreseeable future.

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Weekly Review

LDP Economic Stimulus Package Gets Cool Response by Douglas Ostrom

The administration of Prime Minister Ryutaro Hashimoto knows that it has a tough job on the economic front. It is struggling to come up with a set of policies to satisfy the growing chorus demanding that Tokyo cook up something -- practically anything -- to reinvigorate an economy that in recent months has shown signs of increasing weakness. The problem for the government continues to be that conventional fiscal policies, such as higher spending, are seen as budget-busting, while little if any room exists to make monetary policy more expansionary.


Okinawan Opposition May Complicate Offshore Heliport Plan by Barbara Wanner

Despite Washington's agreement last December to return approximately 21 percent of all land used by the American military on Okinawa within five to seven years, local opposition to the presence of U.S. armed services personnel in Japan's southernmost prefecture has not abated much. The October 2 decision by the Nago city assembly to hold a referendum on whether to support the construction of an offshore heliport to be used by U.S. Marines, in fact, may complicate implementation of a key element of the base consolidation plan.


Japan Pledges Financial Support For Thailand by Eric Altbach

Thai Prime Minister Chavalit Yongchaiyudh managed to garner pledges of financial support for his country's economic restructuring efforts from government and business leaders during an October 9-10 trip to Tokyo. Since then, however, the news out of Thailand has been troubling. A downward revision of the government's economic forecast, rising popular criticism of the Chavalit administration and backsliding on promised budgetary measures are only some of the developments causing concern in government offices and corporate boardrooms in Japan.


FMC Pushes Port Practices Dispute To The Brink by Jon Choy

Like prisoners forced to walk the plank, the Clinton administration and the government of Prime Minister Ryutaro Hashimoto found themselves October 16 suddenly pushed to the precipice of a trade war by the Federal Maritime Commission. The independent agency, charged with regulating seaborne commerce into and out of the United States, had threatened an unprecedented exercise of its power to block foreign ships from entering U.S. ports and to impound foreign vessels already at anchor in American waters unless long-standing grievances by American shipping companies against Japanese port practices were resolved.

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