Buried
in the new Clinton administration budget is an additional $21
million for enforcing trade agreements. From the perspective
of the entire budget, it barely qualifies as a rounding error.
Nonetheless, if spent correctly and backed up with a commitment
to take action, it could be one of the wisest investments in
the spending plan
Trade agreements are the core of U.S. international trade policy.
Virtually every trade problem the United States confronts is
ultimately addressed through some form of a trade agreement
with its trading partners.
Unfortunately, the record of foreign compliance with those
agreements has not always been good. Over the last 20 years,
the United States has experienced serious compliance/enforcement
problems with trade agreements with virtually all of its major
trading partners, including Japan, China and South Korea.
The record of trade accords has been so rocky that some have
argued that the United States should rely less upon them. Those
critics look longingly to the "informal,'' government-to-government
and industry-to-industry arrangements at which Japan is thought
to particularly excel; they argue that trade agreements are
really just another feature of the litigious, lawyer- dominated
culture in America.
What these critics ignore is that the United States cannot
and should not try to pursue this type of informal diplomacy
as a substitute for trade accords. The industry-to-industry
trade agreements that the Japanese steel industry and its counterparts
in other countries are said to have would be illegal under U.S.
antitrust law.
A reliance on informal agreements that are shielded from public
scrutiny but that inevitably impact the economic prospects of
many companies and thousands of workers cannot be allowed. At
least in the United States, secrecy beyond what is needed to
negotiate almost invariably results in poorly bargained and
unenforceable "understandings.''
This means that America will continue to rely upon trade agreements
as the primary vehicle for conducting trade policy.
Historically, however, U.S. trade negotiators have often made
the incredibly naive assumption that negotiating an agreement
was the end of the process. Time and time again over the years,
an accord was struck with Japan, China, or another trading partner,
an announcement was issued, and the agreement was simply forgotten.
When the U.S. Chamber of Commerce in Japan chose to review
the record of past U.S.-Japan trade agreements, it made some
disturbing findings. It found that most of them had little impact
upon the trade problems in Japan they were aimed at eliminating.
What is worse, so little attention was given to follow-up that
some of the so-called agreements could not even be located.
A few months ago, the U.S. General Accounting Office found that
records had improved, but there were still substantial gaps.
This sign-it-and-forget-it strategy is obviously doomed. For
the most part, the only trade agreements that have shown results
on difficult issues, such as the U.S.-Japan Semiconductor Trade
Agreement and the U.S.-China Agreement on Intellectual Property
Protection, have done so only after extensive enforcement efforts,
often backed up by trade sanctions. Even in these cases, the
results have been far from perfect.
China is a particular problem in this regard. There have been
serious enforcement/compliance problems with every trade agreement
the United States has struck with China in the last 10 years.
Doubtlessly, one motivation for the Clinton administration's
increased enforcement effort is to reassure a skeptical Congress
that the recent World Trade Organization accession trade agreement
with China will be enforced.
Unfortunately, budget is only one barrier to effective enforcement
of trade accords. At least as serious a problem is the opposition
of U.S. companies that are doing well selling products in the
country in question in a sector not related to the trade agreement.
Inevitably, and with some justification, these companies fear
that they will be the victims of counter-retaliation if the
United States imposes trade sanctions to enforce an agreement.
Similarly, there are agencies within the United States government
that are more concerned with military and diplomatic matters
than trade. In their view, the threat of trade sanctions always
risks disrupting relations and endangering a military base or
a U.N. vote. To be effective, any trade- agreement enforcement
strategy must address these systemic problems.
Recognizing those very real limitations, the Clinton administration
still deserves praise for making the effort to create new offices
and devote new resources to the enforcement of trade agreements.
These moves are a start. Hopefully, the United States will
eventually come to realize that, without enforcement, U.S. trade
strategy is truly a paper tiger.