Chile deal a hot tamale in Congress

0 Comments | Insight on the News, June 12, 1995 | by Tony Munroe

On paper, Chile looks like a great addition to NAFTA. But U.S. politics could get in the way.

Advocates of free trade would have a tough time finding a more suitable country than Chile to join in the North American Free Trade Agreement.

The nation enjoys steady economic growth and a stable currency and has made a mostly smooth transition from military dictatorship to democracy. Better yet, from a trade perspective, Chile has relatively low import tariffs, few exports that compete with American products and, because it's located far from the United States, poses little threat of illegal immigration.

But timing, politics and a protectionist mood among the American electorate threaten to derail what should be a simple deal - at least as far as trade pacts go. "There really is no underlying reason why this should be a controversial issue in the United States," says Andres Velasco, former chief if staff of the Chilean Ministry of Finance and now a member of Chile's NAFTA advisory group.

One sticking point is an ongoing debate between the White House and Congress about "fast track, a strategy that allows the president to negotiate complex trade pacts on which Congress must vote up or down, without amendments. The administration argues that it needs fast-track authority broad enough to negotiate side agreements on labor and the environment; Republican legislators say they will approve fast tracking only for a bare-bones trade treaty.

"The Trade subcommittee views fast-track extension as one of its highest priorities," says Rep. Philip Crane, an Illinois Republican and chairman of that particular Ways and Means panel. "It will not be linked to any specific country" but can aid the Chile-NAFTA discussions. "Republicans, and many Democrats, do not believe fast-track extension should be encumbered with labor and environmental issues unless they are directly related to trade" says Crane. An aide to Rep. Bill Archer, a Texas Republican and chairman of the entire Ways and Means Committee, says that Archer opposes fast-track authority for labor and environmental issues, although he supports Chile's accession to NAFTA.

Yet some Democrats might not vote for a deal without side agreements. "What we have in our hands is not a negotiating problem, it is a ratification problem:" Chile's Velasco says. "The ball is largely in the court of the U.S. Congress."

Despite lukewarm popular support for NAFTA, the Republican congressional leadership generally favors adding Chile to the pact - although Sen. Bob Packwood, an Oregon Republican and chairman of the Finance Committee, says Congress won't approve Chile's accession with labor and environment provisions. U.S. Trade Representative Mickey Kantor believes that bringing Chile into NAFTA without those side agreements would be "asymmetrical" and "impossible." One scenario would be a fast-track bill that does not address labor and the environment; the Clinton administration then would negotiate a pact with Chile to cover labor and environmental matters, hoping it would get a thumbs-up from, congress.

Labor and environmental groups insist that a trade pact with Chile must include side agreements at least as potent as those negotiated under the original pact signed by the United States, Canada and Mexico. "Labor market policy [and] workplace standards are an important component of international commerce" says Mark Anderson, director of international trade for the AFL-CIO. "This is not an extraneous matter. Ideally, we'd like to have labor issues dealt with in the same way that property issues are dealt with." The AFL-CIO would prefer that the United States negotiate a bilateral trade agreement with Chile.

For its part, Chile has no objection to signing the side agreements. "We feel that our labor and environmental legislation is more than up to par," says Velasco. Conservation groups say Chile's environmental laws could be enhanced and that strong NAFTA provisions would help that.

"Once again, I think it is a political question in the United States," says Velasco, adding that he is aware the clock is ticking. "I think that in politics, as in other things in life, you have windows of opportunity." He believes that joining NAFTA will buy Chile prestige and credibility in the world economic and trading arena. "The most important thing is the recognition that comes with joining such a club." More-tangible benefits would be increased investment and trade.

Mexico's recent fiscal meltdown - whatever its relevance to NAFTA - will make free trade tougher than usual to sell if the debate stretches into 1996, a U.S. election year. Chile's peso and economy have emerged from the Mexican crisis unscathed. "If we stick to the economics of the problem," says Velasco, "this should not be a hot potato politically. It is something that should go ahead because it is in everybody's interest."