The Trade Battle
By E. J. Dionne Jr.
Tuesday, January 26, 1999

Among the stories buried under the past year's obsession with President
Clinton's scandal is a remarkable transformation in the debate over the
global economy and its effect on the jobs and incomes of Americans.

While everyone talks about history's verdict on Clinton and impeachment,
the change in our approach to organizing the world's commerce bids to
play a larger role in defining this era's historical legacy.

Clinton hinted at this in his State of the Union message. "I think trade
has divided us and divided Americans outside this chamber for too long,"
he told Congress. "Somehow we have to find a common ground. . . .
We have got to put a human face on the global economy."

Clinton went on to embrace a new International Labor Organization
initiative "to raise labor standards around the world" and pledged to
work for a treaty "to ban abusive child labor everywhere in the world."
He promised trade rules that would promote "the dignity of work and the
rights of workers" and "protect the environment."

Behind these words is a battle that has been waged in Washington,
largely out of public view, since the 1997 defeat of a bill that would
have given Clinton the authority to negotiate trade treaties on a "fast
track."

The fast-track defeat demonstrated that liberal, pro-labor Democrats now
have veto power over legislation to promote free trade and to support
global economic institutions such as the World Bank and the
International Monetary Fund. Without the liberals, there aren't enough
votes in Congress to pass such initiatives. These pro-labor Democrats
have used their newly found influence to push for more assistance to
workers who are hurt by freer trade and for stronger international rules
to protect workers' rights and the environment.

Rep. Barney Frank (D-Mass.) says the new situation can be explained by
the division of Congress into three groups. There are, in his terms: (1)
"isolationists" who are skeptical of all international institutions and
free trade; (2) "trickle downers" who favor free trade and free markets
but oppose any rules to regulate the global economy; and (3)
"international New Dealers" who accept the global market as a reality
but care passionately about lifting labor standards and wages, in the
United States and elsewhere.

Because the "trickle downers" lack the votes to pass free trade or
support international institutions on their own, they need the "New
Dealers" to create a majority.

The Clinton administration, particularly Treasury Secretary Robert
Rubin, came to realize this and opened negotiations last year with Frank
and his allies -- they include House Minority Whip David Bonior
(D-Mich.) and Rep. Nancy Pelosi (D-Calif.). In October, Rubin sent a
letter to Frank making important concessions in pursuit of the group's
votes on new financing for the IMF.

"I believe that one of the ways to build the confidence of workers is to
seek the adoption and promotion of policies abroad that will enhance the
respect for core labor standards," Rubin wrote.

"The United States," he went on, "will work to affect the policy
dialogue between the IMF and borrowing countries so that recipient
countries commit to affording workers the right to free association and
collective bargaining through unions of their choosing." Rubin also
pledged to push the global financial institutions "to encourage sound
environmental policies."

Clinton's State of the Union pledges were the logical next step in this
running negotiation. Frank saw Clinton's promise to work against
"abusive child labor" as especially significant. "It's important for
some of the labor people, and it's one of the most visible examples that
you can do something" to regulate the workings of the global
marketplace.

C. Fred Bergsten, director of the Institute for International Economics,
thinks the trade debate has changed fundamentally.

"Most trade types thought the merits of free trade were so obvious, the
benefits were so clear, that you didn't have to worry about adjustments
-- you could just let the free market take care of it," he says. "The
sheer political gains of the anti-globalization side in the last few
years have made the free trade side realize that they have to do
something to deal with the losers from free trade and the dislocations
generated by globalization."

This battle has only begun and the common ground that Clinton says he
seeks could prove elusive. "The jury is still out," Frank says,
referring to the administration's intentions. But creating a global
economy that promotes growth with a measure of social justice is a big
and worthy project -- yes, the sort of thing that might matter more to
historians than our current preoccupations.

Copyright 1999 The Washington Post Company