No. 7 — February 23, 1996


Weekly Review

--- by Christopher B. Johnstone

Will trade policy become an election issue during the 1996 presidential campaign? If history is any guide, the answer will be a resounding "no." Even during times of deep concern over America's huge current account and merchandise trade deficits, the issue rarely has energized voters. Richard Gephardt's failed 1988 campaign for the Democratic nomination — in which he attempted to make trade a focal issue — is perhaps the best example. But, while this year's campaign has only just begun, the 1996 elections may be different. One candidate for the presidency — Republican Patrick Buchanan — has made criticism of U.S. trade policy under the current Democratic administration and its two Republican predecessors a central component of his campaign. Mr. Buchanan's success in the early stages of the election season — his victory in New Hampshire, according to some observers, establishes him as the GOP front-runner — clearly owes much to his stance on a number of social issues as well. He advocates tougher restrictions on immigration, for example, and is a staunch opponent of abortion rights, positions that have a broad appeal in some parts of the Republican Party. Nevertheless, both the current Democratic president and rival GOP candidates arguably have moved in recent months to "cover" themselves on trade issues — suggesting that many contenders for the nation's highest office perceive the subject as resonating in the public at large.

Mr. Buchanan's hostility to free trade — despite his affiliation with a party traditionally supportive of open markets — is well-documented. He achieved prominence in the 1992 presidential campaign in part as a result of his — and independent candidate Ross Perot's — scathing attacks on the North American Free Trade Agreement. His current campaign is a magnified echo of the earlier campaign's populist themes, in which he decries current trade policy as contributing to widespread "economic insecurity" and the wage and salary stagnation of America's middle class. For example, in a mid-February debate with other GOP presidential hopefuls in New Hampshire — which was the site of the first presidential primary, February 20 — Mr. Buchanan repeatedly attacked NAFTA and the Uruguay Round of multilateral trade accords. He asserted, "Two years after we signed ... [NAFTA], our trade surplus is gone, we've got a billion [dollar] trade deficit with Mexico, 300,000 jobs are going south." Mr. Buchanan also frequently asserts that such trade agreements undermine the sovereignty of the United States. In a recent New Hampshire speech the GOP candidate criticized the World Trade Organization, noting that the one vote that the new arbiter of international trade disputes accords to the United States "makes the world's greatest superpower the equal of Bangladesh," among other countries with low gross national product.

Mr. Buchanan's proposed solutions to these problems involve measures that are openly protectionist. He has pledged to withdraw the United States from both NAFTA and the WTO. In a January 17 op-ed column in The New York Times, for example, the GOP candidate described himself as an "economic nationalist" and suggested that it is "the duty of the national government to produce policies that [lead] to the economic independence of the United States" — although exactly what he meant by that is unclear. Presumably in support of that goal, Mr. Buchanan called for "consumption taxes" on the products of countries that have "run up ... trade surpluses at our expense." Mr. Buchanan further called for an "equalization tax" on developing countries where wages are so low that "they have become meccas for transnational corporations anxious to off-load their American workers on the junk heap of the 'global economy' and hire Asians at a tenth of the price." As an example of these policies, the GOP candidate frequently has suggested imposing 10 percent tariffs on imports from Japan and 20 percent duties on goods from China.

Many of Mr. Buchanan's GOP opponents have been harshly critical of his policy stances, and he has drawn the condemnation of several top Republican leaders. William Bennett, former secretary of education and a prominent conservative, has described Mr. Buchanan's views as "flirting with fascism." Speaker of the House Newt Gingrich (Ga.) has denounced the Republican candidate as a "reactionary." After dropping out of the GOP nomination race following a poor showing in the February 12 Iowa caucus, Sen. Phil Gramm (Tex.) declared, "Our party can never follow the path of protectionism. I believe Pat Buchanan's stand on protectionism is at variance with our party's commitment to job creation and freedom." Another candidate vying for the GOP presidential nomination, Lamar Alexander, a former governor of Tennessee and education secretary during the Reagan administration, echoed this theme by arguing, "We can never raise our standard of living by ... building a wall around the country. That's not putting America first, that's putting America last."

Polls suggest, however, that Mr. Buchanan's proposals have a certain popular appeal — even if they probably are not well understood (see JEI Report No. 6A, February 16, 1996). Instead of seeking to explain the issues, other candidates appear to have taken up ambiguous positions that at times recall Mr. Buchanan's rhetoric. Even Mr. Gramm was noticeably silent on trade issues during the final weeks of his campaign, although his departing remarks centered on a defense of free trade.

Senate Majority Leader Robert Dole of Kansas, considered by most analysts to be the leading contender for the GOP presidential nomination, has presented the most hazy rhetoric on trade issues. Mr. Dole traditionally has been viewed as a free trader, and the majority leader backed passage of both NAFTA and the Uruguay Round implementing legislation. At the time the latter bill was under consideration he conditioned his support on the creation of a commission that would review rulings of the WTO that went against American interests — an acknowledgement of the criticism of the new dispute-settlement process and an indication perhaps that he thought the issue would be likely to reemerge during the presidential campaign. According to the Dole proposal, which currently is pending in the Senate, the United States could withdraw from the WTO if the panel found that the international trade body had "exceeded its mandate" in ruling against the United States on three separate occasions (see JEI Report No. 46B, December 9, 1994).

Mr. Dole's statements in the last few months continue to display this ambivalence toward free trade, a trend that many analysts have interpreted as an attempt to protect himself from Mr. Buchanan's attacks. In November, for instance, Mr. Dole proclaimed his opposition to renewing the president's "fast track" authority — despite support for this move from many prominent GOP leaders in the House (see JEI Report No. 43B, November 17, 1995). That authority, which allows the president to submit trade agreements to Congress for a simple up-or-down vote without amendment, is considered an essential negotiating tool for the White House; without it discussions surrounding Chile's accession to NAFTA, for example, largely have collapsed. Mr. Dole's most recent rhetoric on the campaign trail also increasingly echoes Mr. Buchanan's themes. The Senate majority leader even has leveled criticism against "Wall Street," despite the traditional ties between big business and the Republican Party. In a recent speech in New Hampshire the GOP front-runner defended free trade by asserting, "We don't need to hunker down behind a wall around America." He also stated, however, "A Dole administration will quickly declare an end to the Clinton trade policy of surrender and sign on the dotted line. The president of the United States ought to ensure that America keeps her wealth and the jobs that go with it here at home."

Even President Clinton, while currently striving to stay above the Republican fray, arguably has moved to protect himself from criticism on trade issues. Responding to the perceived popular sentiment against free trade, the president's advisers reportedly have urged him to limit discussion of the NAFTA and the Uruguay Round accords — despite the fact that many analysts consider those trade agreements to be among Mr. Clinton's most significant accomplishments. In addition, in striking contrast to the first two years of the Clinton administration, the White House lately has scaled back its harsh criticism of foreign trade barriers. In its place the administration has begun to emphasize enforcement of current market-opening agreements. The Office of the U.S. Trade Representative announced January 5, for example, the creation of a permanent trade monitoring and enforcement unit to ensure foreign adherence to existing market access agreements and implementation of U.S. trade laws, a step that presumably will allow Mr. Clinton to declare that his administration still is being tough with America's trading partners. Among the trade policy statements that occasionally emerge from the White House a December "fact sheet" described the administration's "175 trade agreements ... [that are] laying the groundwork for an explosion of global trade that will create jobs here at home and promote economic opportunities around the world." The document further asserts that Mr. Clinton's trade policies have contributed to "an unprecedented export boom."

It is, of course, too early to say whether trade will become a major issue in the presidential campaign. Many analysts point out that Mr. Buchanan's support stems as much from his hard-line, conservative stances on social issues as from his populist defense of working-class interests. One observer even suggested that Mr. Buchanan's protectionist positions prevented him from winning in the Iowa caucuses; according to this view, the GOP candidate's stance on trade drove away many would-be supporters who otherwise agreed with his position on social issues. Other observers argue, however, that Mr. Buchanan's populist rhetoric has found a broad, lasting appeal among the large portions of the American public increasingly uncertain about their economic future. Even if Mr. Buchanan is not successful in his drive to win the Republican nomination, whoever becomes the GOP nominee may find it politically expedient to adopt positions broadly congruent with — if not as extreme as — those of the former television commentator.

At the very least Mr. Buchanan's emergence as a major figure in the Republican Party illustrates the current turmoil in American politics. With Mr. Clinton echoing long-standing Republican themes in recently declaring the end of "big government" and Mr. Buchanan staking out anticorporate and antitrade positions with which left-wing Democrats might agree, the traditional "liberal" and "conservative" labels assigned to the nation's political spectrum appear increasingly devoid of meaning.

The views expressed in this report are those of the author
and do not necessarily represent those of the Japan Economic Institute

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