Competing Visions of the Environment
In U.S. Trade Promotion Authority

A Statement by Timothy E. Deal
Senior Vice President
U.S. Council for International Business to
The Carnegie Endowment for International Peace
November 7, 2001

I am pleased to have the opportunity to address this group on the environmental aspects of trade legislation now under consideration on Capitol Hill.  Thanks to John Audley for organizing this meeting.

First, some background on who we are and why we take such an active interest in TPA.   USCIB is an active member of USTrade, a broad-based coalition of agricultural, high technology, manufacturing, retail and services companies and organizations, which have endorsed H.R. 3005, the Bipartisan Trade Promotion Authority Act of 2001.  USCIB’s membership includes about 200 leading U.S. companies with combined annual revenues in excess of $3 trillion, all of whom are actively engaged in international trade and investment, as well as a number of professional services firms and professional associations. 

In an October 29 letter to all Members of Congress, the 350 members of the USTrade coalition urged support for the legislation, which we see as a well-balanced bill that would allow the U.S. to move ahead with trade agreements while also promoting worker rights and environmental protection.  USCIB – and the American business community generally – took this position after careful consideration of the bill’s contents, recognizing that it went much further in terms of its labor and environmental provisions than previous trade bills.

As I made clear in testimony before the Senate Finance Committee in March regarding the U.S.-Jordan Free Trade Agreement, we have long been concerned about the inclusion of environmental and labor provisions in the operational part of trade agreements.  We have argued since NAFTA that such issues were more properly addressed in side agreements.  Furthermore, we took exception to the notion of using trade sanctions to enforce those provisions of the agreement.  The Bush Administration ultimately decided to approve the Jordan agreement as negotiated, but concluded a separate understanding with the Government of Jordan that neither side intended to enforce the labor or environmental provisions with trade sanctions, a position we advocated at the time of the hearings.

With respect to the environment, the Thomas Bill (H.R. 3005) draws on language from the U.S.-Jordan FTA.  However, its dispute settlement and enforcement provisions are more far-reaching than the FTA, creating parity among all trade negotiating objectives, including environment and labor, and subjecting them to equivalent procedures and remedies. 

So having said what I did about the Jordan FTA, you might well ask why USCIB and other business organizations and companies have come out in favor of the Thomas bill.  The short answer is that we see the Thomas bill as a reasonable and responsible compromise to a complicated and controversial set of issues.  We believe its passage will spur economic growth and provide new opportunities for American companies and their workers and families.  Without this or similar legislation, the U.S. will lose economic opportunities and a chance to raise living standards at a time when growth has stalled.

Fast Track authority – or TPA – lapsed in 1994.  In the last seven years, we have seen the erosion of American international economic leadership.  Both Presidents Clinton and Bush have found themselves without the authority to negotiate and obtain Congressional approval for market-opening trade agreements with the sole exception of the Jordan agreement.  In the meantime, our trading partners, including the EU, Mexico, and Canada, have concluded numerous preferential trade agreements that put U.S. exporters at a serious competitive disadvantage.

We believe it is time for the U.S. to get back in the game.  Chairman Thomas’s bill is the right vehicle at the right time.  Of course, as a compromise bill, no one group, sector, or special interest got all that it wanted.  But that is the nature of political compromise.  Business accepts that reality.  What surprises me is that most environmental groups oppose the legislation even though one can legitimately argue that what the legislation includes in the area of environment is “Jordan plus.”

We need TPA to capitalize on new market opportunities, global and regional, that will arise with the launch of a new round of WTO negotiations and ongoing regional activities such as the FTAA talks.  Without that authority, our trading partners will not negotiate seriously with us.  What was possible in the case of Jordan, where the economic stakes were low and the political objectives were high, would be impossible for major multilateral negotiations in the WTO or elsewhere.

Let me now turn to the environmental aspects of the Thomas bill and explain why I believe that this legislation should appeal to all those genuinely concerned about protecting the environment. 

First, in a precedent-setting move, the bill includes environmental objectives in the mandate for all U.S. trade negotiations. Furthermore, the bill establishes the goal of parity among trade, environment, and labor objectives.

Second, the bill calls on U.S. negotiators to ensure that America’s trading partners do not fail to enforce their environmental laws.  This obligation is enforceable and defined in such a way to allow reasonable exercise of governmental discretion.

Third, the environment provisions will encourage countries to improve their environmental laws without compromising their sovereignty.  These provisions do not infringe in any way on U.S. sovereignty.  No WTO or other international panel can tell the U.S. to raise or lower its environmental standards.

Fourth, the bill establishes as a principal negotiating objective the requirement that the U.S. use trade negotiations to reduce or eliminate government practices that threaten sustainable development, for example, harmful fishing subsidies provided by the EU, Japan, and others.

Fifth, the bill directs U.S. negotiators to seek greater market access for U.S. environmental technologies, goods, and services through the elimination of tariff and non-tariff barriers.

And, sixth, while not directly related to the environment but vital nonetheless, the bill’s dispute settlement and enforcement provisions break new ground in emphasizing the importance of promoting compliance with trade agreements as distinct from simply penalizing countries for non-compliance.  It’s a positive approach to dispute settlement that gives priority to trade expansion rather than self-defeating retaliation. 

In short, we believe that the Thomas bill is a well-balanced compromise that will allow the U.S. to conclude new trade agreements, while promoting environmental protection.  And we wholeheartedly agree with the bill’s finding that expansion of international trade is vital to U.S. national security.

I would now like to offer a few comments on the Democratic alternative to the Thomas bill.  First, a word of praise for Tim Reif and Congressmen Rangel and Levin for their efforts in fashioning a Fast Track bill.  While we do not support that legislation for reasons I hope to make clear shortly, we continue to believe that passage of any new trade negotiating authority will require bipartisan support.  And the Rangel bill at least shows that both Democratic and Republican legislators are conscious of the need to advance a pro-trade agenda and reengage internationally.

H.R. 3019 is an extremely complicated piece of legislation and therein lies the problem.  The bill establishes overall and principal trade negotiating objectives that are highly specific and demanding compared with the more traditional broad goals set forth in the Thomas and previous Fast Track bills.  Now, as the British would say, I must declare an interest.  Having spent over 30 years in the U.S. Foreign Service, I have an Executive branch bias.  That experience leads me to believe that no U.S. official, no matter how skillful, could negotiate successfully a trade agreement if forced to operate under the burdensome requirements of the Rangel bill in such areas as services, intellectual property, transparency, trade remedies, and labor.  In my view, this is Congressional micro-management of the Executive Branch.  It won’t work.  TPA should empower trade negotiators, not tie them in straitjackets.

Let me now outline our concerns in greater detail.  I recognize that the focus of today’s discussion is on the environmental aspects of proposed trade legislation.  But there are several important, non-environmental matters that affect the business community’s view of the Rangel bill.  Three areas of special concern are:

Labor: The bill calls for the development of a framework of multilateral rules for the enforcement of internationally recognized core labor standards both generally and in an FTAA context.  This objective ignores the simple fact that the U.S. itself has not been able to adopt most ILO conventions covering core labor standards because U.S. labor law and practice are not consistent with the ILO conventions.  The U.S. is a party to only two of the eight ILO conventions that relate to core labor standards.  How could we demand that our trading partners enforce ILO standards and conventions that we ourselves have not ratified

The Rangel bill also calls for the creation of a Working Group on Trade and Labor in the WTO.  This position is anathema to most developing countries, which have consistently and vehemently rejected the idea.  It has no chance whatsoever of acceptance by our trading partners.

Investment: In the section on the FTAA, the bill instructs U.S. negotiators to reach agreement with our hemispheric trading partners that no investor can bring a claim against a foreign state unless the investor first submits that claim to the home government for approval.  This provision undermines the recourse currently available to U.S. companies operating in countries with limited or corrupt judicial systems, while foreign investors in the U.S. would continue to have access to our high-quality courts. It effectively vitiates the rights of an investor to protect his or her property and allows the home government to decide which claims have merit.  Such a condition would subject expropriation claims, for example, to a political litmus test about the possible impact of such a case on bilateral relations.  The long-term goal of U.S. policy in negotiating a series of Bilateral Investment Treaties and NAFTA over the past 40 years has been to keep politics out of the dispute settlement process.  This particular requirement of the Rangel bill would re-inject politics back into the process, and U.S. investors could suffer as a result.

Implementation of Trade Agreements: Perhaps most worrisome of all is the requirement that, before completion of any authorized trade negotiations, a designated set of Congressional trade advisors would have to concur with the President’s certification that the negotiating objectives have been substantially achieved and therefore merit Fast Track treatment.  This provision would allow a small minority in Congress to overturn a negotiated trade agreement without the Congress itself ever voting on the matter.  This is undemocratic and certainly not the right way to increase Congressional participation in the trade negotiating process.

Trade and Environment: Some of the provisions in this section of the bill mirror the language or intent of the Thomas bill.  Thus, our primary concerns about the trade and environment aspects of the Rangel bill are in three areas:

1.       The proposed amendments to Article XX of the GATT and Article XIV of the GATS would exempt trade measures taken in accordance with a Multilateral Environment Agreement (MEA), where both parties are signatories to the agreement, from GATT/WTO rules.  Such a provision would, in effect, allow MEAs to trump WTO rights. 

2.       The negotiating objectives on trade and environment under the FTAA are once again exceptionally wide-ranging and probably non-negotiable.  This is, therefore, another case where Congress would set the bar so high that, realistically, no agreement would be possible.

3.       Regarding sanitary and phytosanitary standards, the Rangel bill states that the U.S. should oppose any effort to reopen the WTO’s SPS Agreement.  While the bill repeats much of the language on precaution from Article 5.7 of the SPS Agreement, it adds a new definition of “reasonable time” for reviews that would appear to undercut the science-based standards of risk assessment of that Article.  Some clarification of the intent of this provision would be desirable.

In conclusion, we need TPA, and we need it now.  The Thomas bill is a good, balanced piece of legislation that merits prompt Congressional approval.  We hope that Democrats will join Republicans in securing its passage on a bipartisan basis.