Trickery Wins Over Trade

By Michael Duffy/Washington

It is not often that Washington inspires American business leaders to rise from their seats and dream out loud about the economic frontiers that suits and pols can conquer together. But the prospect that Congress was coming closer last week to approving the new global trade treaty -- one of the most far-reaching acts of economic legislation in U.S. history -- had the chief economist for one of the nation's biggest food exporters talking the language of Manifest Destiny. "We're going to grow more grain. We're going to grow more beef. We're going to be slaughtering more hogs. We're going to grow more poultry. We're gonna get that European market!" said Dick Gady of ConAgra.

Gady had meat on his mind. The Clinton Administration had visions of 300,000 new jobs at home by 2004. But instead, members of Congress did what they have been doing a lot lately: they obstructed for the sake of obstructing. For months, House Republican whip Newt Gingrich had assured White House officials in private that he would vote for GATT, the General Agreement on Tariffs and Trade, which, according to the White House, could mean the equivalent of a $750 billion worldwide tax cut over the next 10 years through the reduction in the prices of imported goods. Sure, Gingrich had helped kill Clinton's health- care plan and nearly prevented an ambitious crime bill from becoming law. Just last week he derailed a minimalist lobbying-reform bill, largely because Democrats were for it. But all that was obstructionism as usual. When it came to a trade pact that was seven years in the making, the part-time history professor longed to be a statesman.

That incarnation will have to wait. Less than 24 hours before the House of Representatives was set to act on the treaty, Gingrich blocked a vote until after the November elections. He juggled several excuses for his U-turn in public, but his chief explanation in private was that Ross Perot made him do it. Gingrich lamented to Democratic leaders that the Texas industrialist was bombarding him with telephone calls last Tuesday. Apparently that was enough for Gingrich to cave in. "I know," Gingrich told the leaders afterward, "that there's some distrust on your side about me." That, a Democratic staffer said later, was "the understatement of the year."

Gingrich and Speaker Tom Foley agreed to return to Washington in November to vote on the legislation, and insisted that they can pass it easily. But if voters ever needed a reason to seethe at a do-little Congress, they need look no further than its refusal to take action on GATT. If carried out, the treaty would place the equivalent of $1,700 into the bank account of the average American working family during a 10-year period, according to a White House estimate. While most Americans might not yet appreciate the benefits of the agreement, the latest delay dismayed industry executives whose companies stand to gain most immediately from its adoption. "This is the opportunity of the century," sighed Dwayne Andreas, the chairman of Archer Daniels Midland, the vast Illinois-based food-products and grain company. "This is the biggest step toward free trade that has ever been taken in the history of the world." Said Maurice ("Hank") Greenberg, chairman of American International Group, the giant insurance company: "If the United States Congress fails to ratify the Uruguay Round, it will set back any hope of financial services being liberalized." Worse, he said, it would "tarnish" the image of his company. "We have been representing the argument in favor of freer trade, and here our own country has failed to support that viewpoint! Our credibility would be impeached."

The setback was equally unsettling to the White House. Since taking office, Bill Clinton has consistently been successful as a champion of increased foreign trade, one of the few areas where he has earned his stripes as a New Democrat. He first toughened George Bush's strategy toward closed Japanese markets and, after some hesitation, took on his own party's left wing when he fought for -- and won -- congressional approval of the North American Free Trade Agreement.

Clinton's reasons for bucking party doctrine and backing free trade were both practical and political: in a tight fiscal environment, a President has few opportunities to stimulate the economy. Creating export-related jobs, which pay 17% more than the average U.S. job, is one way to accomplish this, and the President was reminded last week of how urgently he needs to do it. The Census Bureau reported that median household income fell last year $312, or 1%, while the number of Americans living in poverty -- below $14,763 a year for a family of four -- grew 1.3 million and now accounts for 15% of the population. This news came as a surprise to those economists who counted about 2 million new jobs last year and pronounced the economy to be in its second full year of expansion following the 1990-91 recession. But it does help explain why surly voters are preparing to take out their frustration on congressional Democrats next month.

For timing reasons only, then, the delay on GATT was perhaps the most wounding of Clinton's legislative defeats. Nonetheless, it did expose a weakness in Clinton's trade crusade. Effective as he is at negotiating tougher agreements, the President has had trouble holding together the legislative coalitions he needs to get them approved. Republicans have generally supported his effort because free trade has long been a G.O.P. first principle. But as the 103rd Congress ended last week with what White House chief of staff Leon Panetta called a "cry of anguish," most Republicans were willing to abandon years of doctrine in order to score some political points. And, as was the case on health-care and campaign-finance reform, the President's own party helped derail its leader's program: more than 75 Democrats refused to support GATT, and 50 more were wavering. One Democratic congressional aide watching the votes erode marveled at how powerless the Clinton White House was to stop it. "They are," he said, "uniquely capable of losing the unlosable."

Even so, in a city that has perfected the tactic of trading long-term gain for short-term points, Gingrich's maneuver struck many as the most cynical they had seen in years. For months he worked behind the scenes as a pure free trader, insisting to Administration officials at every turn that he supported the treaty. Indeed, during the summer he won many changes in the measure as it was being drafted. He convinced the White House that U.S. participation in the World Trade Organization, a powerful new international body formed to arbitrate trade disputes, should be subject to a congressional vote every five years. Then, when Home Depot, the hardware superstore chain based in his Georgia district, objected to a Clinton proposal that would have increased taxes on inventory, Gingrich fought to have it removed. "We did that too," sighed an Administration official.

Gingrich's full immersion in the details of GATT made it a little hard for the White House to swallow his sudden complaint last week that the legislation required further study. So did his sudden objection to a provision that would reduce licensing fees for three cellular-telephone companies. White House officials maintained last week that Gingrich knew about the provision all along. Yet he balked because, he said, it favored the Washington Post Co., which owns a controlling interest in one of the cellular operations and was therefore an example of the special breaks contained in the thousand-page legislation that deserved further study. The unnecessary delay left even some Republicans appalled. "Pandering to protectionism -- and to Ross Perot," said Bill Kristol, who runs the Project for the Republican Future, "is bad for the Republican Party and the United States."

Some Republicans saw in Gingrich's delay a possible strategy designed to push Clinton into the hands of his party's left wing next year. Here's how that thinking goes: Clinton will have to ask Republicans and business interests for help with the trade treaty after the election, but that courtship will leave his partners on the left feeling jilted, and they will demand favors of their own. Their IOUs will make it more difficult for Clinton to govern from the center next year, when the 104th Congress turns more moderate. As Wayne Berman, who helped manage trade issues in the Bush Administration, put it, "The Republicans are going to pass the GATT, but they want to make Clinton bleed for it."

For his part, Clinton tried to appear perplexed by all the maneuvering. "I've never come to the end of a full congressional session before," he said, "so for all I know this often happens." Such confusion might be charming if it weren't so disingenuous. For there is another, darker scenario possible: the election results could make it harder for Clinton to win passage of the measure in November, which could kill the treaty altogether. Even if the Democrats don't lose the Senate and the House outright, Republicans are virtually certain to gain effective control of both chambers, particularly on trade issues.

White House officials acknowledge that the Republicans could return to Washington after Thanksgiving and declare that the lame ducks are no longer legitimately able to act in the public interest -- particularly on a pact as vital as GATT. Better to wait until the new Congress is installed, they might say, than let an old one make any more mistakes. Add to the mix the usual round of talk-show shrillness, a few salvos from Perot and the usual White House miscues, and all bets are off. "Anything could happen," admits an Administration official, "because the future of GATT is in Republican hands."

With reporting by Janice Castro/New York, Julie Johnson and Adam Zagorin/Washington