NAFTA has become Clinton's nightmare

Robert Kuttner

September 14, 1993|By Robert Kuttner

WHATEVER you think of the North American Free Trade Agreement (NAFTA) as an economic idea, it is becoming a political nightmare for the Clinton administration. A basically Republican idea is weakening the president's links with the Democratic Congress.

This would be damaging enough all by itself, but NAFTA also complicates the administration's other big autumn initiative -- health reform -- in ways that harm the prospects of both.

Candidate Clinton supported NAFTA to underscore his posture as a "New Democrat" and to attract business backing. However, he insisted that his support was conditional on negotiating side deals on labor and environmental standards. These were supposed to win over skeptical Democrats.

Token side deals have now been concluded, and they have persuaded very few Democratic legislators. The deals allow challenges only to Mexico's failure to enforce its own labor and environmental laws, but they do nothing to raise the standards of those laws.

Meanwhile, the administration is putting the final touches on its health reform plan. While most Democratic liberals applaud the general goal of the plan -- comprehensive health insurance at a fairly high level of coverage -- many liberals are less than thrilled with all the details.

For example, the administration program will phase in over several years. It allows large employers to sponsor their own health plans, which sometimes limits your freedom to pick your own doctor.

The administration also decided to finance health reform by requiring employers to pay a payroll charge, which raises the cost of employing new workers. And it removes the tax deductibility of any health insurance coverage more generous than that of the benchmark plan.

Unions in particular have problems with this last feature, since many union contracts include hard-won generous health packages. Nonetheless, most union presidents are sympathetic to the administration's broad strategy and its calculation that this plan is probably the best one that can make it through Congress.

So union leaders such as Gerald McEntee of the American Federation of State, County and Municipal Employees (AFSCME) and Owen Bieber of the United Auto Workers (UAW) are loyally working to persuade their rank and file to support the administration's basic approach, and taking great political risks to do so.

Unfortunately, health reform is not their top priority. Defeating NAFTA is their top priority.

Scarce union dollars and political resources, which might be spent rounding up support for the administration's health plan, are instead going to defeat NAFTA. Unionists and their congressional allies who are working hand in glove to devise a common legislative strategy on health reform are sworn enemies on NAFTA, which can hardly build either enthusiasm or trust.

Given that the budget passed by just one vote in the Senate and two in the House, this conflict is creating a strain on intraparty good will that the president can scarcely afford. The Clinton White House can ask congressional Democrats to walk only so many planks for the sake of party unity.

Dozens of skeptical legislators have already risked an unpopular vote to give Mr. Clinton his budget. Democrats the president desperately needs on health reform he is likely to lose on NAFTA -- and vice versa.

This incipient donnybrook was altogether unnecessary. NAFTA was George Bush's initiative. The ideology was entirely Republican.

While Democrats as well as Republicans have historically supported freer global trade, the idea of a preferential "North American" trade bloc with special privileges for cheap Mexican labor actually violates the principles of global free trade. It was devised mainly to reward Mexican President Carlos Salinas de Gortari for being loyal to the economic policies of Presidents Reagan and Bush.

Mr. Clinton could easily have made a good faith effort to enact tough agreements raising Mexican environmental and labor standards. When that failed (and it did fail), he could have backed away from the Bush administration's draft NAFTA agreement.

Instead, he settled for very weak agreements that few Democrats in Congress take seriously. If NAFTA is now approved in a very slow economy and if jobs shift to Mexico at an accelerating rate, Mr. Clinton will reap the political blame.

In two senses, it would be salutary if NAFTA were voted down. Economically, it would spare the country a dubious policy likely to cost American workers' jobs. Politically, it would remind Mr. Clinton that the liberals in his own party have been his most reliable supporters on most issues, and that he cannot take that support for granted.

An even better outcome would be for Mr. Clinton to inform Mexico that he has taken a head count and, regrettably, there are not the votes in Congress for NAFTA's enactment. The president could then withdraw the proposed agreement and negotiate a new trade liberalization pact, gradually lowering trade barriers as Mexico delivers on its pledge to raise labor and environmental standards.

This would put a Democratic spin on a Republican idea, and win wide backing in his own party. It would also be cause for cheer in the Mexican barrios, where raw sewage and toxic chemicals run in the streets and where wages are at starvation levels -- conditions unlikely to be improved by the present version of NAFTA.

Robert Kuttner writes a column on economic matters.

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