The North American Free Trade Agreement (NAFTA) was created to open vast new markets for American companies and generate economic prosperity across the entire continent. In recent weeks, however, the Clinton administration has undertaken negotiations to radically overhaul the treaty in ways that have nothing to do with free trade.
Side agreements the administration has been negotiating threaten to undermine the free trade components and transform NAFTA into a labor and environmental treaty. Some leading NAFTA supporters in Congress, such as Missouri Senator John Danforth, may even switch and vote "NO" because of these distortions of NAFTA's original intent.
In order to placate anti-NAFTA members of his own party in Congress, President Clinton has been pressuring Canada and Mexico to form powerful supra-national commissions to govern labor and environmental issues under NAFTA. Each commission would be given an independent force of bureaucrats empowered to investigate allegations of lax enforcement of each nation's own labor or environmental laws. If Mexico, for example, were unable to use these commissions to modify U.S. enforcement policies in its favor, it could resort to trade sanctions under the Clinton proposal.
Including such provisions in NAFTA would deal a stunning blow to free trade, which is supposed to reduce government intervention and eliminate trade barriers. The international commissions in the Clinton proposal could second-guess our own national laws and create needless confusion for businesses trying to comply with environmental and worker safety regulations. These regulatory hindrances could destroy many of the very jobs NAFTA was intended to create.
The merging of the environmental and labor laws of three nations is a recipe for endless and expensive litigation--a bonanza for lawyers who specialize in international red tape. The deliberations and decisions of the new multinational commissions are not likely to be guided by U.S. trade law precedents familiar to American businesses. Indeed, as Representative James Kolbe of Arizona has stated, the NAFTA side agreements threaten to "add another layer of regulation that burdens the U.S. economy and impinges on the state-federal relationship."
Trade sanctions and broad new investigatory powers envisioned in the side agreement talks, Kolbe observes, would open a Pandora's Box. Canada could make an international trade dispute out of differences in employer-provided health care coverage between our two countries.
Likewise, the environmental lobby could argue that failure to spend more money to clean up a polluted river furnishes the U.S. an unfair trade advantage. NAFTA could then be used to compel federal and state authorities to spend additional sums, curb economic development, or even shut down factories and entire industries.
This is not at all far-fetched: part of the function of the environmental commission, to be called the North American Commission on the Environment, will be to allow "public" participation of groups such as Greenpeace to provide "expert" advice about regulating businesses. The effects of logging in the Pacific Northwest on the spotted owl's habitat could someday become the basis of a cross-border trade war.
NAFTA, it should be noted, already gives precedence to existing international environmental agreements over any provisions of the treaty itself. Some economists have argued persuasively that those agreements often waste resources for dubious or immeasurable benefit; vesting expanded environmental authority in a new layer of international bureaucracy would only make matters worse. And American workers don't need foreign tampering with the domestic laws that govern their contracts, conditions, or compensation in the workplace.
What started out as a time-honored good idea--free trade--is now mutating into a regulatory monster, all because the Clinton administration apparently feels it necessary to attract the support of certain labor and environmental lobbies who exert influence in Congress. Unless the President reverses himself, the prospect of free trade from the Yukon to the Yucatan will evaporate before our eyes.
The Mackinac Center for Public Policy is a nonprofit research and educational institute that advances the principles of free markets and limited government. Through our research and education programs, we challenge government overreach and advocate for a free-market approach to public policy that frees people to realize their potential and dreams.
Please consider contributing to our work to advance a freer and more prosperous state.
