From Protest to Progress - Committee for Economic Development · Library of Congress Cataloging-in-Publication Data Committee for Economic Development. Research and Policy Committee

A Statement by the Research and PolicyCommittee of the Committee forEconomic Development

COMMITTEE FOR ECONOMIC DEVELOPMENT

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www.ced.org

From Protest to ProgressAddressing Labor and Environmental Conditions Through Freer Trade

A Statement by the Research and Policy Committee of the Committee for Economic Development

From Protest to ProgressAddressing Labor and Environmental

Conditions Through Freer Trade

Library of Congress Cataloging-in-Publication Data

Committee for Economic Development. Research and Policy Committee. From protest to progress: addressing labor and enviromentalconditions through freer trade : a statement / by the Research andPolicy Committee of the Committee for Economic Development.

p. cm.At head of title: CED.ISBN 0-87186-142-91. United States—Commercial policy. 2. Foreign trade

regulation—United States. 3. Foreign trade and employment—UnitedStates. 4. Foreign trade and employment—Developing countries. 5. Freetrade—Environmental aspects—United States. 6. Freetrade—Environmental aspects—Developing countries. I. Title.

HF1455 .C63 2001382'.71'0973—dc21

2001042163

First printing in bound-book form: 2001Paperback: $15.00Printed in the United States of AmericaDesign: Rowe Design Group

COMMITTEE FOR ECONOMIC DEVELOPMENT477 Madison Avenue, New York, N.Y. 10022(212) 688-2063

2000 L Street, N.W., Suite 700, Washington, D.C. 20036(202) 296-5860

www.ced.org

iii

CONTENTS

RESPONSIBILITY FOR CED STATEMENTS ON NATIONAL POLICY iv

PURPOSE OF THIS STATEMENT vii

EXECUTIVE SUMMARY viii

INTRODUCTION 1

THE BENEFITS OF TRADE AND ITS RELATIONSHIP TO SOCIAL CONCERNS 3The Economy Overall 3Economic and Social Concerns 4

Workers and Working Conditions 5The Environment 7

ADDRESSING TRADE AND SOCIAL CONCERNS 10Political Engagement and Constraints 10Principles 12Recommendations 13

CONCLUSIONS 20

MEMORANDA OF COMMENT, RESERVATION, OR DISSENT 21

OBJECTIVES OF THE COMMITTEE FOR ECONOMIC DEVELOPMENT 22

The Committee for Economic Develop-ment is an independent research and policyorganization of some 250 business leadersand educators. CED is nonprofit, nonparti-san, and nonpolitical. Its purpose is to pro-pose policies that bring about steady eco-nomic growth at high employment andreasonably stable prices, increased productiv-ity and living standards, greater and moreequal opportunity for every citizen, and animproved quality of life for all.

All CED policy recommendations musthave the approval of trustees on the Researchand Policy Committee. This committee is di-rected under the bylaws, which emphasizethat “all research is to be thoroughly objec-tive in character, and the approach in eachinstance is to be from the standpoint of thegeneral welfare and not from that of anyspecial political or economic group.” Thecommittee is aided by a Research AdvisoryBoard of leading social scientists and by asmall permanent professional staff.

The Research and Policy Committee doesnot attempt to pass judgment on any pend-

ing specific legislative proposals; its purpose isto urge careful consideration of the objectivesset forth in this statement and of the best meansof accomplishing those objectives.

Each statement is preceded by extensivediscussions, meetings, and exchange of memo-randa. The research is undertaken by a sub-committee, assisted by advisors chosen for theircompetence in the field under study.

The full Research and Policy Committeeparticipates in the drafting of recommenda-tions. Likewise, the trustees on the draftingsubcommittee vote to approve or disapprove apolicy statement, and they share with theResearch and Policy Committee the privilegeof submitting individual comments for publi-cation.

The recommendations presented herein arethose of the trustee members of the Research andPolicy Committee and the responsible subcom-mittee. They are not necessarily endorsed by othertrustees or by non-trustee subcommittee members,advisors, contributors, staff members, or othersassociated with CED.

RESPONSIBILITY FOR CED STATEMENTS ON NATIONAL POLICY

iv

RESEARCH AND POLICY COMMITTEE

Co-ChairmenPATRICK W. GROSSFounder and Chairman, Executive

CommitteeAmerican Management Systems, Inc.BRUCE K. MACLAURYPresident EmeritusThe Brookings Institution

Vice ChairmenIAN ARNOFRetired ChairmanBank One, Louisiana, N.A.ROY J. BOSTOCKChairmanB/Com3 Group, Inc.CLIFTON R. WHARTON, JR.Former Chairman and Chief Executive

OfficerTIAA-CREF

REX D. ADAMSDeanThe Fuqua School of BusinessDuke UniversityALAN BELZERRetired President and Chief Operating

OfficerAlliedSignal Inc.PETER A. BENOLIELChairman, Executive CommitteeQuaker Chemical CorporationFLETCHER L. BYROMPresident and Chief Executive OfficerMICASU CorporationDONALD R. CALDWELLChairman and Chief Executive OfficerCross Atlantic Capital PartnersROBERT B. CATELLChairman and Chief Executive OfficerKeySpan CorporationJOHN B. CAVEPrincipalAvenir Group, Inc.CAROLYN CHINChairmanCommtouchChairmanKindmarkA. W. CLAUSENRetired Chairman and Chief Executive

OfficerBankAmerica CorporationJOHN L. CLENDENINRetired ChairmanBellSouth Corporation

GEORGE H. CONRADESChairman and Chief Executive OfficerAkamai Technologies, Inc.RONALD R. DAVENPORTChairman of the BoardSheridan Broadcasting CorporationJOHN DIEBOLDChairmanJohn Diebold IncorporatedFRANK P. DOYLERetired Executive Vice PresidentGET.J. DERMOT DUNPHYChairmanKildare Enterprises, LLCCHRISTOPHER D. EARLManaging DirectorPerseus Capital, LLCW. D. EBERLEChairmanManchester Associates, Ltd.EDMUND B. FITZGERALDManaging DirectorWoodmont AssociatesHARRY L. FREEMANChairThe Mark Twain InstituteRAYMOND V. GILMARTINChairman, President and Chief Executive

OfficerMerck & Co., Inc.BARBARA B. GROGANPresidentWestern Industrial ContractorsRICHARD W. HANSELMANChairmanHealth Net Inc.RODERICK M. HILLSChairmanHills Enterprises, Ltd.MATINA S. HORNERExecutive Vice PresidentTIAA-CREFH.V. JONESOffice Managing DirectorKorn/Ferry International, Inc.EDWARD A. KANGASChairman, RetiredDeloitte Touche TohmatsuJOSEPH E. KASPUTYSChairman, President and Chief Executive

OfficerThomson Financial PrimarkCHARLES E.M. KOLBPresidentCommittee for Economic DevelopmentALLEN J. KROWERetired Vice ChairmanTexaco Inc.

CHARLES R. LEEChairman and Co-Chief Executive OfficerVerizon CommunicationsALONZO L. MCDONALDChairman and Chief Executive OfficerAvenir Group, Inc.NICHOLAS G. MOOREChairmanPricewaterhouseCoopersSTEFFEN E. PALKOVice Chairman and PresidentXTO Energy Inc.CAROL J. PARRYPresidentCorporate Social Responsibility

AssociatesVICTOR A. PELSONSenior AdvisorWarburg Dillon Read LLCPETER G. PETERSONChairmanThe Blackstone GroupS. LAWRENCE PRENDERGASTExecutive Vice President of FinanceLaBranche & Co.NED REGANPresidentBaruch CollegeJAMES Q. RIORDANQuentin Partners Inc.LANDON H. ROWLANDChairman, President and Chief Executive

OfficerStillwell Financial Inc.GEORGE RUPPPresidentColumbia UniversityHENRY B. SCHACHTChairman and Chief Executive OfficerLucent TechnologiesROCCO C. SICILIANOBeverly Hills, CaliforniaMATTHEW J. STOVERPresidentedu.comARNOLD R. WEBERPresident EmeritusNorthwestern UniversityJOSH S. WESTONHonorary ChairmanAutomatic Data Processing, Inc.DOLORES D. WHARTONChairman and Chief Executive OfficerThe Fund for Corporate Initiatives, Inc.MARTIN B. ZIMMERMANVice President, Governmental AffairsFord Motor Company

v

*Voted to approve the policy statement but submitted memoranda of comment, reservation, or dissent. See page 21.

*

SUBCOMMITTEE ON GLOBALIZATION

Co-ChairsEDMUND B. FITZGERALDManaging DirectorWoodmont AssociatesPAULA STERNPresidentThe Stern Group, Inc.

TrusteesREX D. ADAMSDean, The Fuqua School of BusinessDuke UniversityJAMES S. BEARDPresidentCaterpillar Financial Services Corp.THOMAS D. BELL, JR.Special Limited PartnerForstmann Little & Co.THOMAS J. BUCKHOLTZExecutive Vice PresidentBeyond Insight CorporationW. D. EBERLEChairmanManchester Associates, Ltd.HARRY L. FREEMANChairThe Mark Twain InstituteRICHARD W. HANSELMANChairmanHealth Net Inc.RODERICK M. HILLSChairmanHills Enterprises, Ltd.H.V. JONESOffice Managing DirectorKorn/Ferry InternationalCHARLES F. KNIGHTChairman of the BoardEmerson Electric Co.J. TERRENCE LANNIChairman of the BoardMGM MirageWILLIAM W. LEWISDirector, McKinsey Global InstituteMcKinsey & Company, Inc.COLETTE MAHONEYPresident EmeritusMarymount Manhattan CollegeWILLIAM F. MAYChairman and Chief Executive OfficerStatue of Liberty - Ellis Island

Foundation, Inc.MATTHEW NIMETZPartnerGeneral Atlantic Partners, LLC

CAROL J. PARRYPresidentCorporate Social Responsibility

AssociatesDONALD K. PETERSONPresident and Chief Executive OfficerAvaya Inc.ARNOLD B. POLLARDPresident and Chief Executive OfficerChief Executive GroupGEORGE F. RUSSELL, JR.ChairmanFrank Russell CompanySTEPHEN STAMASChairmanThe American AssemblyFREDERICK W. TELLINGVice President Corporate Strategic

Planning & Policy DivisionPfizer Inc.STOKLEY P. TOWLESPartnerBrown Brothers Harriman & Co.MARGARET S. WILSONChairman and Chief Executive OfficerScarbroughsKURT YEAGERPresident and Chief Executive OfficerElectric Power Research Institute

Ex-Officio Members

FRANK P. DOYLERetired Executive Vice PresidentGEPATRICK W. GROSSChairman, Executive CommitteeAmerican Management Systems, Inc.CHARLES E.M. KOLBPresidentCommittee for Economic DevelopmentBRUCE K. MACLAURYPresident EmeritusThe Brookings InstitutionJOSH S. WESTONHonorary ChairmanAutomatic Data Processing, Inc.

Non-Trustee Member

RAYMOND OFFENHEISERPresidentOxfam America

Guest

WILLIAM C. LANEGovernmental Affairs, Washington

DirectorCaterpillar Inc.

ADVISORSCLAUDE BARFIELDResident Scholar and Director of

Science and Technology Policy StudiesAmerican Enterprise InstituteEVERETT EHRLICHPresidentESC Co.ISAIAH FRANKWilliam L. Clayton Professor of

International EconomicsThe Johns Hopkins UniversityROBERT LITANVice President and Director of

Economic StudiesThe Brookings InstitutionBRUCE STOKESSenior FellowCouncil on Foreign Relations

PROJECTDIRECTORELLIOT SCHWARTZVice President and Director of

Economic StudiesCommittee for Economic Development

PROJECTASSOCIATESTAREK ANANDANResearch AssociateCommittee for Economic DevelopmentMICHAEL BERGResearch AssociateCommittee for Economic Development

vi

*Voted to approve the policy statement but submitted memoranda of comment, reservation, or dissent. See page 21.

*

*

vii

From the date of its founding duringWorld War II, the Committee for EconomicDevelopment (CED) has concerned itselfwith international economic institutions andpolicies designed to foster steady economicgrowth at high employment and reasonablystable prices, increased productivity andliving standards, greater and more equal op-portunity for every citizen, and improvedquality of life for all.

This dedication to international economicpolicies to further economic well-being isevidenced by CED policy statements such as:Transnational Corporations and DevelopingCountries (1981), Finance and Third WorldEconomic Growth (1987), Breaking New Groundin U.S. Trade Policy (1990), The United Statesin the New Global Economy (1992), U.S. TradePolicy Beyond the Uruguay Round (1994), andImproving Global Financial Stability (2000).

In early 2001, a CED subcommittee wasformed to focus on the subject of furthereconomic globalization, as reflected in bothinternational trade and foreign direct invest-ment. However, it quickly became apparentto this subcommittee that there was a moreurgent need for a new CED policy statementsupporting the resumption of multilateraltrade negotiations and addressing the conse-quences of continued inaction.

CED’s goal in authoring this paper is tocut through the knot of social issues thathave eroded the domestic constituency forinternational trade, to help lead the discus-sion toward a more successful approach, andto support the granting of trade negotiationauthority to the President. A CED policystatement on the broader issues of economicglobalization and its potential for enhancingeconomic welfare will follow at a later date.

ACKNOWLEDGMENTSThis policy statement was developed by

the committed and knowledgeable group ofbusiness, academic, and policy leaders listedon page vi. We are grateful for the time,effort, and care that each put into the devel-opment of this report.

Special thanks go to the subcommitteeco-chairs, Edmund B. Fitzgerald, ManagingDirector of Woodmont Associates, and PaulaStern, President of the Stern Group, Inc., fortheir guidance and leadership. We are alsoindebted to Elliot Schwartz, Vice Presidentand Director of Economic Studies at CED;Van Doorn Ooms, CED’s Senior Vice Presi-dent and Director of Research; and IsaiahFrank, CED’s Advisor on InternationalEconomic Policy, for their contributions,and to Tarek Anandan and Michael Bergfor research assistance.

Patrick W. Gross, Co-ChairResearch and Policy CommitteeFounder and Chairman, Executive CommitteeAmerican Management Systems, Inc.

Bruce K. MacLaury, Co-ChairResearch and Policy CommitteePresident EmeritusThe Brookings Institution

Purpose of This Statement

This paper addresses U.S. trade policy andthe need for new authority to negotiate tradeagreements. The time has come for theUnited States to renew its commitment to theglobal trading system and to lead the inter-national community in resolving issues thatblock the path to more open markets andgreater prosperity. While other countrieshave signed preferential bilateral and re-gional trade agreements, the United Stateshas sat on the sidelines in recent years. Tradepromotion authority is an important signal toother nations that the United States is com-mitted to the multilateral trading system andto negotiations to lower trade barriers fur-ther. The U.S. Congress should thereforegrant the President the trade promotionauthority he needs to negotiate new tradeagreements.

Open markets for trade and investmentsignificantly improve economic well-beingboth in the United States and in other coun-tries. The reduction of trade barriers hasplayed a key role in helping countries aroundthe world to increase economic growth andreduce poverty. In the United States, en-hanced access to global markets has meantbetter jobs, higher wages, and improved liv-ing standards.

Poverty, harsh working conditions, andenvironmental problems are prevalent in low-income countries and in sectors of the devel-oped world. In every country that opens itsborders, the issues of trade and foreign in-vestment are superimposed on these existingproblems and draw public attention to them.But while trade and investment are not uni-versal remedies for social ills, they are not thecause of those endemic problems. Indeed,trade and investment offer low-income coun-tries, especially those with sound domesticpolicies, a major opportunity to reduce those

problems through economic development.Developing economies open to trade andinvestment that follow sound economicpolicies typically enjoy higher wages andsignificantly better labor and environmentalstandards. Experience shows that livingconditions in developing countries improveand labor and environmental standards areraised as income rises.

To break the domestic political stalematethat has emerged and move forward, theUnited States must take the lead in promot-ing solutions to economic and social prob-lems that many trade opponents associatewith trade and foreign investment, notablyunsatisfactory labor and environmental con-ditions. Even if a country pursues all the ap-propriate policies—open trade, sound macro-economic policies, good governance, andsound safety-net programs—social improve-ments take time. In addition, economic de-velopment may highlight and even tempo-rarily aggravate existing problems. Thus, theUnited States, working through appropriateinternational institutions, should fulfill Presi-dent Bush’s pledge that, “Our commitmentto open trade must be matched by a strongcommitment to protecting our environmentand improving labor standards.” Further-more, as CED has observed in previous policystatements, we need to do more at home toease the economic adjustment of the smallproportion of American workers who sustainmaterial and enduring losses from job dis-placement.

CED specifically recommends the follow-ing:

• The President and other government andprivate-sector leaders should visibly andvigorously communicate the vital roleplayed by global trade in increasing stan-

viii

Executive Summary

dards of living at home and abroad. Theyshould also make clear and effective theirsupport for continual worldwide improve-ments in labor and environmental condi-tions and the reduction of poverty. In thiscontext, Congress should grant the Presi-dent authority to negotiate new tradeagreements under fast-track rules.*(See page 13.)

• Formulation of policies for trade, labor,and environmental issues, and enforce-ment of agreed actions, should lie withinthe purview of the relevant national andinternational bodies. Trade issues belongin the World Trade Organization (WTO),labor issues in the International LaborOrganization (ILO), and non-trade envi-ronment issues in the United NationsEnvironment Program (UNEP) and simi-lar forums. To deal effectively with suchissues, those agencies should be strength-ened and supported through U.S. leader-ship and funding. (See pages 13-14.)

• International economic organizationsshould increase their openness and trans-parency to the public. In particular, theWTO dispute-resolution process shouldbe opened to public scrutiny. (See page14.)

• Developing countries should be allowedto pursue their own labor and environ-mental standards, which are likely to riseas their incomes rise. However, theyshould be encouraged to enforce thosestandards, to raise them to internationallyrecognized levels, and to adhere to rel-evant agreements. Trade agreementsshould incorporate the principle thatcountries will not weaken their existinglabor and environmental rules or theirenforcement to gain an advantage in

international trade or investment. (Seepage 14.)

• Specialized international agencies (ILOand UNEP) should strengthen the promo-tion of internationally recognized stan-dards to which countries can subscribe,taking account of differences in levels ofdevelopment. These standards should beenforced by means that do not diminishtrade and its potential to support eco-nomic development. Enforcement couldproceed first through public disclosureand then through a menu of economicremedies, which should include positiveinducements as well as disciplinary mea-sures such as fines. (See pages 14-15.)

• Policy makers should avail themselves ofopportunities, such as those presented bythe bilateral agreement with Jordan, nego-tiations with Chile and Singapore, and mul-tilateral negotiations for a Free Trade Areaof the Americas, to take incremental andexperimental steps to resolve policy con-flicts between trade, labor, and environ-mental issues. (See pages 15-16.)

• To reduce worker anxiety about economicchange, the United States should adopt amodest system of temporary supplementalwage and health assistance along the linessuggested by the U.S. Trade Deficit ReviewCommission. The program should be opento workers who are “displaced” based onDepartment of Labor criteria and re-employed at less than their previous wage.It should be capped at an appropriate leveland percentage of lost income. It shouldapply to all job displacement, not just thatrelated to trade. The system should beadministered by the states and fundedfrom general federal government revenuesrather than by payroll taxes. (See pages16-19.)

ix

*See memorandum by COLETTE MAHONEY (page 21).

International trade and investmentimprove global economic welfare throughspecialization, increased competition,economies of scale, and smoother economicadjustment. Changes in the technologies ofcommunication, transportation, and informa-tion processing have made the world seemsmaller and have accelerated the effects ofeconomic decisions. The case for global eco-nomic integration based on policies that sup-port open markets for trade and investmentis formidable and, to us, compelling. Thispaper addresses one aspect of globalization,international trade. International trade andtrade negotiations have become targets forthose who either wrongly perceive them tobe detrimental to labor and the environmentor significantly undervalue their contribu-tions to social improvement. In addition,some opponents of trade think that dampen-ing economic competition would betteradvance their social concerns.

We share many of the same social goalsand objectives as the opponents of trade. Asbusiness and educational leaders, we havelong recommended policies to promote eco-nomic growth with greater opportunity andan improved quality of life for all. More openand competitive markets advance those goals.High employment and increasing incomesare much more likely to be achieved by acountry that has markets open to internation-al competition than by one that impedes eco-nomic progress by protecting domestic firms.Social goals of freedom, self-determination,equal opportunity, and enhanced quality of

life are more likely to be fulfilled in a coun-try that allows its citizens the right to chooseamong all of the world’s products and ser-vices than one that narrows the set of choicesby imposing rules to favor domestic produc-ers. Those concerned that foreign nations orinternational organizations will somehowgain an ability to undermine domestic poli-cies or dictate the scope of U.S. laws and reg-ulations, including those protecting domesticlabor and environmental standards, shouldrecognize that international trade and therules that govern it cannot in themselveshave that effect. Only the United States hasthe power to alter its own domestic laws andregulations.

President Bush has called for authority tonegotiate new trade agreements under so-called fast-track authority (now renamed“trade promotion authority”), a legislativeprocedure that allows the President, aftermany consultations with public advisory com-missions and congressional committees, tosubmit a bill to the Congress for an up ordown vote (without amendment). Trade pro-motion authority is an important signal toother nations that we are committed to themultilateral trading system and to successfuland productive trade negotiations.

International trade and the institutionthat governs it, the World Trade Organiza-tion (WTO), have become contentious politi-cal issues in the United States. Over the lastseveral years, disagreement over the relation-ship of labor and environmental concerns totrade has stymied efforts to authorize trade

1

Introduction

negotiations and fast-track procedures. Whileother nations have benefited from the pur-suit of bilateral and regional free trade agree-ments, the United States has not. Althoughwe believe strongly that the case for a liberaltrade policy can be made on its own merits,we recognize that we must also demonstratemore clearly how trade interacts with andimproves labor and environmental condi-tions and engage in constructive dialoguewith those who believe otherwise.*

2

From Protest to Progress

*See memorandum by HARRY L. FREEMAN (Page 21).

We support expansion of trade throughmultilateral negotiations such as those underthe auspices of the World Trade Organization(WTO) because of the clear and convincingevidence that trade is good for both theUnited States and the countries with whichwe trade. The multilateral trading systemunder the WTO and its predecessor, theGeneral Agreement on Tariffs and Trade(GATT), has played a key role in reducingtrade barriers, strengthening the rule of law,and encouraging economic development inlow-income countries. We recognize thatmany other issues related to trade and eco-nomic growth remain to be addressed,including the need for improvements in theways both national and international institu-tions function (including their transparency),the treatment of international labor and environmental concerns, and the ease withwhich adjustment to all sources of economicchange occurs within the United States. TheUnited States is the world’s largest economyand leading trader in goods and services, andthe stakes for U.S. businesses, workers, andconsumers in the global economy have neverbeen greater.

The United States must lead the interna-tional community in resolving the issues thatare blocking the way toward more open mar-kets and greater prosperity. That effortrequires rebuilding a domestic constituencyfor liberal trade based on a better under-standing of the value to the United States ofthe global trading system.

THE ECONOMY OVERALLThe benefits of trade in general and trade

across political boundaries in particular havebeen recognized for a very long time. Theprinciples of specialization and comparativeadvantage are well known and verified byexperience. Each of us does not have to pro-duce all of the goods and services he or sheconsumes. Neither does each country needto be self-sufficient. Differences in resourcesand the capacity to use them make it mostefficient for workers, businesses, and nationsto specialize in the activities that they do bestand trade with others for remaining needs.The output that can be generated throughtrade among specialized economies is sub-stantially greater than if nations were toattempt to be self-sufficient. Perhaps mostimportant, global competition promotes effi-ciency, innovation, and capital investment asdomestic firms strive to become more effi-cient than their foreign rivals. Global compe-tition has driven advances in technology andimprovements in productivity, which underlieincreases in incomes and higher standards ofliving.

In the last 50 years, U.S. barriers to inter-national trade have fallen steadily. Today,most imports either enter the United Statesduty-free or are subject to very low tariffs.Other nations have lowered their barriers aswell. But much more remains to be done.The developing countries in particular havemuch to gain from expanding trade andgaining greater access to developed countrymarkets. Because trade benefits both parties,

3

The Benefits of Trade and Its Relationshipto Social Concerns

another country’s gain is not our loss. Wealso are better off when other countries pros-per.

Expanded trade and economic growth,which have gone hand-in-hand, have directlybenefited both consumers, who have gaineda wider selection of goods and services atlower prices, and producers, who haveexpanded markets, lowered costs, andincreased incomes. The direct advantage oftrade to workers in the United States is evi-dent in the wage premiums that workers inexport industries earn; workers in jobs relat-ed to exported goods earn approximately 15percent more on average than otherworkers.1

The value of trade is clear to the develop-ing countries; over 100 of them have chosento become members of the WTO, and anoth-er 29 countries, including China and Russia,seek membership. Developing countries havelearned through experience that economicgrowth comes through expanded trade.Empirical research in the past decade hasshown a positive and strong association oververy long periods between openness to tradeand economic growth.2 Although many fac-tors are at work, countries that are stronglyoutward-oriented have had significantly high-er rates of growth in the past quarter-century,while the most inward-oriented countrieshave suffered real income losses. In countriesthat grew rapidly, openness to trade was animportant element in a comprehensive set ofpolicies, including investment of a high per-centage of GDP, maintenance of macroeco-nomic stability, and strengthened politicalinstitutions to promote good governance and

root out corruption.3 Without sound eco-nomic policies and domestic institutions, thepotential benefits of increased trade wouldlikely go untapped.

Foreign trade and investment have playedkey roles in helping less-developed nationsemerge from poverty and improve living con-ditions. Trade and investment give suchnations access to goods and services, such asintermediate inputs and business services,that they would otherwise lack or have avail-able only at much higher cost. Most signifi-cantly, the same forces of competition thatbenefit the advanced economies apply with atleast equal strength in less developedeconomies; small nations in particular cangain from economies of scale due to theavailability of export markets. Moreover,openness to the world economy increases theincentives for developing countries to createmore transparent political processes, estab-lish more predictable and reliable legal sys-tems, clean up government corruption, andinvest more in education, health care, andthe environment. Those steps help make acountry more attractive to foreign investorsand its industries more efficient and competi-tive in world markets.

ECONOMIC AND SOCIALCONCERNS

Trade and foreign investment havebecome the focal points for complaints abouteconomic and social conditions domesticallyand worldwide. Although trade is a powerfuleconomic force, it is not the source of pover-ty and unsatisfactory labor and environmen-tal conditions. These problems are very real,but reducing trade will not resolve any ofthem and, in fact, is likely to exacerbatethem. In the United States, skill-biased tech-

4


1. Council of Economic Advisers. Economic Report of thePresident: 1998. Washington, D.C.: Government Printing Office.February 1998. p. 241.

2. A good summary of the link between trade and growth,including a bibliography of research on this topic can be obtained at <www.worldbank.org/wbiep/tradeTradePolicy.htm>. See also International Monetary Fund.World Economic Outlook. Washington, D.C.: IMF. May 1993. p. 75.

3. Rodrik, Dani. The New Global Economy and DevelopingCountries: Making Openness Work. Overseas DevelopmentCouncil. Policy Essay Number 24. January 1999.

nological change is a far greater source ofeconomic dislocation and income disparitythan is trade. In the developing countries,poverty is endemic. The economic and socialchanges associated with expanded trade maytemporarily aggravate such problems but, intime, those changes will both reduce povertyand improve social conditions. In most cases,these issues should be viewed in the overallcontext of economic development, of whichtrade is only a part.

Workers and Working ConditionsTwo distinct issues dominate concerns for

workers. First, a significant issue in theUnited States is the adjustment of workers tochanges in market conditions outside theircontrol. This concern extends to worker dis-placement generally, not only that related totrade. Second is the problem of labor condi-tions and the setting and enforcement oflabor standards in developing countries. Thisissue relates to both the specific conditions ofwork in low-income countries and the effectthat those conditions might have on workersin the United States.

Domestic adjustment. Although tradebenefits most workers and leads directly to arise in average income, it affects differentworkers differently. Nor are the benefitsalways immediate or achievable without costs.Some workers lose their jobs in the shortrun, and many have to make new investmentsin their education or skills training beforethey find reemployment.

In the large and dynamic U.S. economy,enormous numbers of jobs are both createdand destroyed by economic change. In 2000,the U.S. economy employed about 135 mil-lion people, 20 million more than ten yearsearlier. The average net addition of abouttwo million jobs per year during the 1990s,however, occurred in a labor market inwhich, on average, approximately 16 millionjobs disappeared while 18 million new jobswere created each year. Job change is far

more common than most people realize. In2000, one-quarter of all workers had beenwith their current employer 12 months orless, and the median tenure of employmentwas about 3.5 years.4 Over one-third of allworkers—nearly 45 million individuals—either change employers or enter or leaveemployment each year, excluding changeslike short-term layoffs that are reversed dur-ing the year.5 International trade is but oneof many causes of such economic change inthe United States. Technological change,which shifts the demand for labor in thedirection of high-skilled workers, causes amuch larger percentage of such job change.6

A little more than 18 percent of the work-ers whose jobs disappeared, or an estimatedthree million people annually, are classifiedby the U.S. Department of Labor as “dis-placed workers—those who lost or left jobsbecause their plant or company closed ormoved, there was insufficient work for themto do, or their position or shift wasabolished.” 7

For some displaced workers the process offinding reemployment is slow, difficult, andcostly. Data on the reemployment of dis-placed workers show that about one-quarterof workers displaced from all causes areunable to find reemployment within twoyears of losing their job.8 Less-educated andolder workers are particularly affected by job

5

The Benefits of Trade and Its Relationship to Social Concerns

4. U.S. Department of Labor, Bureau of Labor Statistics.“Employee Tenure in 2000,” BLS Press Release. August 29,2000. <stats.bls.gov/newsrels.htm>.

5. See Committee for Economic Development, AmericanWorkers and Economic Change, 1996, p.5. Based on research byDavis, Stephen J. and Haltiwanger, John. “Measuring GrossWorker and Job Flows.” National Bureau of EconomicResearch. Working Paper Number 5133. May 1995.

6. See Council of Economic Advisers, Economic Report of thePresident: 1998, p. 244.

7. The annual stock of displaced workers is about eight mil-lion people who were separated from their jobs sometime inthe previous three years.

8. U.S. Department of Labor, Bureau of Labor Statistics.Displaced Worker Survey. February 2000.<ferret.bls.census.gov>.

displacement. Nearly two-thirds of those whofind reemployment accept a lower initialwage than in their previous job. Reemployedmanufacturing workers, for example, lose anaverage of 16 percent of weekly earnings.9

Moreover, when large numbers of workersbecome unemployed and plants or entirebusinesses close, the consequences for localcommunities can be severe. Economic losseseasily spill over to businesses that rely on thelocal base of commerce, and governmentresources become strained as demands onsocial services increase while revenues arefalling.

In a growing economy, those losses aremore than offset by gains elsewhere, andmeasures to limit the losses by protectingmarkets and impeding adjustment reducethose gains. The unemployment rate in theUnited States fell from 7.5 percent in 1992 to4.0 percent in 2000 despite technologicalchanges, corporate mergers, and tradeexpansion that displaced millions of workers.When a firm is unable to compete successful-ly in the marketplace, it may lay off workersor go out of business completely. When thathappens, the labor and capital that arereleased can be redeployed to more valuableactivities. This process of resource redeploy-ment is essential to economic growth. In theend, it leads to better jobs in more successfulindustries and higher incomes with betterstandards of living. These gains for the soci-ety at large make it both equitable and possi-ble to assist those displaced by economicchange.

Standards in developing countries. Devel-oping nations gain from trade through bothincreases in income and improvements inlabor conditions. In fact, the relationshipbetween trade, income, and labor conditions

is strong. Although working conditions inexport-related industries in developing coun-tries appear harsh by U.S. standards, jobs inthe export sector generally pay better andoffer better working conditions than alterna-tive employment opportunities, especially insubsistence agriculture and services.10

Income growth goes hand in hand withimproved working conditions, including ashortening of the workweek and easing ofthe most onerous forms of work. As nationsbecome wealthier, their children go toschool, their working conditions improve,and the social standards that govern laborand employment norms rise. Employment ofchildren (aged 14 and under) is most preva-lent in the least developed economies; it is ashigh as 49 percent in Burundi which has aGDP per capita of $105, and relatively rare ineconomies where GDP per capita exceeds$5000.11 Since opening its economy to inter-national trade, China has experienced a rateof decline in child labor, especially in exportindustries, faster than it had previously andfaster than other developing countries.12

Research on the relationship between eco-nomic development and working conditionsshows that in the high-growth East Asiancountries (Hong Kong, South Korea,Singapore, and Taiwan), working condi-tions—measured in terms of unemployment,composition of employment, real earnings,

6


9. Kletzer, Lori and Robert Litan. “A Prescription to RelieveWorker Anxiety.” Brookings Policy Briefs. Number 73. March2001.

10. Aggarwal, Mita. International Trade, Labor Standards, andLabor Market Conditions: An Evaluation of the Linkages. Office ofEconomics Working Paper 95-06-C. Washington, D.C.: Officeof U.S. International Trade Commission, 1995, as cited inCarnegie Endowment for International Peace and Inter-American Dialogue. “Breaking the Labor-Trade Deadlock.”Carnegie Endowment Working Papers. Number 17. February 2001.

11. Krueger, Alan B. “Observations on International LaborStandards and Trade.” National Bureau of Economic Research.Working Paper Number 5632. June 1996; Source of BurundiGDP calculation: World Bank. World Development IndicatorsDatabase. 2000. <www.worldbank.org>.

12. Lindert, Peter and Jeffrey Williamson, “Does GlobalizationMake the World More Unequal?” National Bureau ofEconomic Research. Working Paper Number 8228. April 2001.p. 30.

and absolute poverty—generally improved as income grew.13

One motivation for concern over laborstandards in developing countries comesfrom those in the United States and otherdeveloped countries who fear that lax stan-dards in low-wage countries will undermineconditions in their own countries. Some citeevidence of actual or threatened plant clos-ings to support their concerns. Employersdo, of course, sometimes close domesticplants and open foreign ones. However, agreat many factors go into such decisions,and the outcome is rarely determined bylabor standards. Most significant are wageand productivity differentials, transportationand communication costs, proximity either tofast growing markets or materials used inproduction, natural advantages such as near-ness to a harbor, and conditions of gover-nance. In addition, most foreign investmentby U.S. companies goes to other advancednations, which have labor and environmentalstandards comparable to those in the UnitedStates, if not more stringent. Neither eco-nomic theory nor empirical investigationsindicate that U.S. workers as a whole wouldbe significantly helped by the adoption ofhigher labor standards in developing coun-tries.14

Rising incomes, better working condi-tions, and more responsive political institu-tions make possible the institutionalization ofhigher labor standards. The InternationalLabor Organization (ILO) has played animportant role in establishing a set of core

labor standards that have been recognized bymany countries. These standards have helpedcountries to institutionalize safeguards forworkers. The standards focus on four topics:freedom of association and collective bar-gaining, elimination of forced or compulsorylabor, abolition of child labor, and elimina-tion of employment or occupational discrimi-nation. Each of the core standards is com-prised of two fundamental conventions. Werecognize that ratification by itself does notguarantee that a country will enforce a con-vention. Neither does its failure to ratifymean that a country, such as the UnitedStates, does not maintain standards as least ashigh as those embodied in the convention.Nevertheless, ratification does signal somedegree of acceptance of a convention andrecognition of its value. As of April 2001, 43nations, including 31 non-OECD economies,had ratified all eight of the fundamental con-ventions, and an additional 50 nations hadratified seven.15

The Environment Environmental concerns about interna-

tional trade take several forms. Some arefocused on economic growth, which oftenuses more raw material inputs and createsmore by-product outputs. Another concern,similar to that regarding labor conditions, isthat competition among countries to attractinvestment and expand exports will drive a“race to the bottom” that reduces environ-mental standards worldwide. Finally, manyenvironmentalists have expressed the con-cern that the WTO dispute-resolution processundermines environmental regulations whenthey conflict with trading rules.

Environmental issues are already recog-nized by the WTO in several ways, and many

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13. See “Promoting Worker Rights in Developing Countries:U.S. Policies and Their Rationale.” Congressional BudgetOffice. April 1997. p. 16, and Fields, Gary. “Employment,Income Distribution and Economic Growth in Seven SmallOpen Economies.” Economic Journal. Volume 94. Issue 373.March 1984. pp. 74-83.

14. See, “Promoting Worker Rights in Developing Countries:U.S. Policies and Their Rationale,” p. 11; and in particular,Krueger, “Observations on International Labor Standards andTrade.”

15. International Labor Organization. “Ratifications of theILO Fundamental Conventions.” International LaborStandards Department. April 2001. <www.ilo.org>. The UnitedStates has ratified two of the fundamental conventions.

environmental agreements recognize theimportance of trade. Article XX of the WTOallows restrictions on trade based on “mea-sures to protect human, animal or plant lifeor health” and “relating to the conservationof exhaustible natural resources.” In addi-tion, specific agreements under the WTOcontain environmental provisions, notablythe agreements on Technical Barriers toTrade and on Sanitary and PhytosanitaryStandards and sections of agreements onagriculture, trade in services, trade-relatedinvestment measures, government procure-ment, and intellectual property rights.Moreover, WTO has established a Committeeon Trade and the Environment to investigatethe relationship between trade and environ-mental measures and make recommenda-tions as appropriate. Within the UnitedStates, the White House Council onEnvironmental Quality ensures considerationof the environmental impacts of trade agree-ments and identifies complementary policiesthat address trade and environmental objec-tives.

Economic growth. Environmental issuesinvolve questions of priorities and the timingof costs and benefits. Trade can have a posi-tive effect on the environment over time byfacilitating economic development and creat-ing both the income and the institutionalstructures to address environmental issues. Asincome increases, the capacity and willing-ness of societies to sacrifice consumption forenvironmental protection tends to increase.Higher incomes, better functioning markets,and stronger political institutions improvepeople’s ability to secure a better environ-ment by purchasing environmentally favor-able products and lobbying their govern-ments for improved environmental condi-tions.

In the short run, however, economicgrowth can create environmental problems.A growing economy puts pressure on theenvironment both by using more resources as

inputs in production and by creating agricul-tural and industrial waste and other by-prod-ucts. But it is hardly surprising that for mil-lions of people living close to subsistence,environmental protection is of necessity alower priority than basic food, clothing, andshelter. In our view environmental improve-ments are more likely to occur—and to occurfaster—in a developing economy with grow-ing income. 16

In addition, trade can produce someshort-run environmental benefits. Increasedtrade allows the transfer of environmentallyfriendly goods and technologies fromadvanced economies to the developing coun-tries and induces developing countries toproduce exports that meet the more strin-gent environmental standards of the econom-ically advanced countries. Imported industri-al equipment and processes can help controlthe creation of industrial by-products, includ-ing waste, water and air pollution, and toxinsand hazardous materials. Smokestack “scrub-bers” can minimize sulfur dioxide (SO2) andnitrogen oxide (NO) emissions, and fuelcells and solar power equipment can reducethe use of oil, natural gas, and coal. Tradealso makes it easier for developing countriesto adopt policies and programs that havebeen successful in minimizing environmentalproblems elsewhere. The combination ofimproved economic policies and the importa-tion of innovative technologies can helpaddress many of the environmental threatsfaced by developing countries, such as defor-estation, over-fishing and -harvesting, andexcessive fuel use.

Lowering environmental standards.Although the claim has been made repeated-ly that competition for economic activity

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16. Some empirical evidence supports the existence of an“inverted-U” shaped curve, which describes environmentalimpact as a function of per capita income. See World Bank.World Development Report: 1992. New York: Oxford UniversityPress. 1992, and World Trade Organization. Special Studies 4 - Trade and Environment. Switzerland: WTO. 1999. pp. 35-46.

leads countries to lower their environmentalstandards, very little evidence exists to sup-port that contention. As indicated previously,firms locate in specific sites for a variety ofreasons. Environmental regulations are a verysmall consideration. There is little evidencethat polluting industries migrate from devel-oped to developing countries to reduce envi-ronmental compliance costs, although thereare occasional exceptions.17

Economic integration can be credited, inpart, with encouraging greater internationalcooperation in environmental matters.Nations have gradually become engaged incooperative multilateral environmentalagreements (MEAs), which deal with environ-mental concerns that transcend geographicboundaries, such as water and air pollution.Over 200 MEAs already exist, including theMontreal Protocol (ozone layer protection),the Basel Convention (transportation of haz-ardous materials across international waters),and the Convention on International Tradein Endangered Species (CITES).18 About 20of these agreements include provisions relat-ed to trade, for example allowing a ban ontrade in products under the purview of theagreement.

Dispute Resolution. Many of the com-plaints about the trading system in general,and the WTO in particular, derive from trade

disputes that have involved environmentalissues. Objections have been voiced to theresults of those disputes, which have under-cut some environmental regulations, as wellas to the secretive process by which the WTOresolution procedure works. An examinationof some of the key cases that have angeredenvironmentalists, notably the U.S. ban ontuna caught in nets that kill dolphins, indi-cates that the WTO (at that time, the GATT)has accepted the validity of some environ-mental policies. Specifically, in the tuna-dol-phin case, GATT endorsed product labelingto notify consumers that the tuna was “dol-phin safe,” although it concluded that U.S.policies discriminated against imports byimposing U.S. regulation of a productionprocess on foreign producers. In this andother cases, the international trade agencieshave unleashed a storm of protests by appear-ing to put international trade rules abovedomestic environmental policies.

Although international agreements can-not overturn U.S. law, they do create a needto reevaluate laws, such as those in the tuna-dolphin case, in a broader economic context.What was once a settled domestic issue cannow be reopened because of a WTO ruling,and political forces can be significantly differ-ent when the issue is readdressed. TheUnited States, of course, can choose toignore a WTO ruling and submit to a tradesanction rather than change its law. However,this option does not change the fact that thepolitical system will be required to choosebetween the conflicting goals of trade bene-fits and environmental benefits.

9


17. World Trade Organization. Special Studies 4 - Trade andEnvironment, p. 5.

18. “Beyond the Agreements: The Environment—A New High Profile.” World Trade Organization. April 2001.<www.wto.org>.

The recent polarization of attitudestoward international trade has stymied effortsto renew the President’s authority to negoti-ate trade agreements and submit them forfast-track approval. That authority is of criti-cal importance because other countries areusually uninterested in negotiating with theUnited States unless the President hasauthority to reach agreements that cannot be amended later by the Congress (althoughthey can be voted down). In addition, thelack of such authority puts U.S. negotiatorsin a weak position, since it reflects a lack ofpublic and congressional support for market-opening measures. Finally, the lack of suchauthority puts U.S. exporters at a disadvan-tage in many of the world’s markets, sincethe European Union and others have movedahead to negotiate preferential trade dealsand we have not.

Since the conclusion of Uruguay Roundtrade negotiations in 1994, over 100 regionaltrade agreements have been completed. Inall, over 130 free trade agreements currentlyexist, with the United States a member inonly two: the North American Free TradeAgreement (NAFTA) and the U.S.-Israel FreeTrade Agreement. (A third, the U.S.-JordanAgreement, still awaits congressionalapproval.) U.S. exporters and their workersare put at a competitive disadvantage in everypreferential trade agreement to which theUnited States is not a party. In those markets,foreign-based firms gain improved marketaccess, while U.S. producers remain subjectto discriminatory practices, including quotasand tariffs.

POLITICAL ENGAGEMENT ANDCONSTRAINTS

As a nation, we need to engage the politi-cal process more actively to narrow the differ-ences between those who, like us, see trade as promoting economic and social gains, andthose who see trade as part of the problemrather than the solution. The constraintsimposed by domestic and international politi-cal realities, existing law, and internationalagreements make the achievement of anygains in launching new trade negotiationsextremely difficult—but not impossible. Therevival of U.S. support for global trade isneeded for the United States to reassert lead-ership in shaping the rules that govern globalmarkets and to benefit from trade liberaliz-ing measures in other countries.

The domestic politics of trade havebecome extraordinarily polarized. On oneside, labor and environment interests haveblocked a needed granting of trade promo-tion authority to the President unless theauthorization includes provisions for enforceable labor and environment provi-sions in the trade agreement. On the otherside, free-trade interests, including promi-nent business groups, have blocked the samegranting of authority when it has includedsuch provisions. The result has been a seven-year deadlock between these powerful politi-cal forces and a lack of progress in opening anew round of negotiations under the WTOand in concluding a regional pact for theFree Trade Area of the Americas (FTAA).

10

Addressing Trade and Social Concerns

Internationally, the problem is almost as deadlocked. Developing countries under-standably are adamantly opposed to efforts to tie labor and environmental standards totrade agreements or to use trade sanctions asa means of enforcing non-trade agreements.They regard these efforts as a unilateralattempt by the advanced nations to take backor undermine market-access provisions theybargained for and won in the UruguayRound. If developed-world labor standardswere applied to much poorer developingcountries, it could create a significant eco-nomic disadvantage for them because itwould substantially add to their costs of pro-duction, making their exports less competi-tive. In addition, raising the cost of employ-ing low-productivity workers will increaseunemployment if employers substitute capitalfor more expensive labor or if export salesdecline. Similarly, imposing developed-worldenvironmental standards can lead to highercosts, reduced exports, and higher unem-ployment.

Because trade is such a powerful and ben-eficial economic force, many advocates ofvarious social causes rightly regard the denialof access to markets as a powerful politicaltool that can be used to further their goals.In the international setting, trade sanctionsare often proposed as the “stick” to be usedto discipline deviant countries. In particular,some have suggested that developing coun-tries that fail to adhere to international laborstandards should be denied the benefits oftrade agreements or that new agreementsshould not be forged with such countries.Since 1984, the Generalized System ofPreferences (GSP) program, which signifi-cantly lowers U.S. tariffs on imports from theleast developed countries, has contained aprovision to deny trade preferences to coun-tries that fail to meet certain labor standards.But those preferences are granted unilateral-ly, which is very different from negotiatingrights under an international agreement.

Aside from the direct economic conse-quences of a sanction, two issues concern us.First, it is often unclear that a trade sanctionwill achieve the social policy goal for which itis being used. A sanction may impose costswithout necessarily producing commensuratebenefits. Consider the threat of a trade sanc-tion that persuades a country to increase orbetter enforce restrictions on child labor.What happens next depends a great deal onother conditions in the country. One shouldnot assume that unemployed children begingoing to school; in some cases, they may turnto more hazardous unsanctioned, or evenillegal, occupations.19 In other cases, they andtheir families may be impoverished becauseadults are unable to replace the lost incomefrom the child’s work.

Second, we view the use of trade sanctionsfor non-trade goals as inappropriate for theWTO as an institution. Its value in facilitatingtrade could easily be lost if we were to over-burden it with other goals. This sentimentwas put best by its former director general,Renato Ruggiero:

“We cannot—and should not—ask theWTO to also become a developmentagency, an environmental policeman, or a watchdog for labor and human rights.This organization cannot be allowed togradually drift away from its trade voca-tion. It would serve neither the WTO norany other cause if it were to pretend itcould offer solutions to every nontradeissue.” 20

A significant problem with trade sanctionsis that they can too easily be misused as aprotection against competition from imports,rather than for their stated goal. We do notdoubt that many supporters of raising labor

11


19. See Lindert and Williamson, “Does Globalization Makethe World More Unequal?”

20. Ruggiero, Renato. “Reflections from Seattle.” Forward toThe WTO After Seattle. Schott, Jeffrey, Ed. Washington, D.C.:Institute for International Economics. July 2000.

standards in developing countries are moti-vated by the deplorable conditions underwhich many workers in those countries toil.We also recognize, however, that some hopethat the imposition of higher costs onexports from developing countries willundermine their competitiveness in worldmarkets and benefit competing firms andworkers in advanced nations. The suspicionthat such standards are being promoted as ameans of hobbling foreign competition wasaptly captured by the trade minister of Egypt,who recently asked, “Why all of a sudden,when third world labor has proved to becompetitive, do the advanced nations startfeeling concern for our workers?” 21

The opposition of developing countries toincluding social issues in trade agreementsand using trade sanctions as an enforcementmechanism is more than a mere negotiatingproblem. Because the WTO makes decisionsby consensus rather than majority vote, thedetermined opposition of only a few coun-tries will block any consideration of laborand environment provisions in future negoti-ations. A leading cause of the failure tolaunch a new round of trade negotiations inSeattle in 1999 was the disagreementbetween the United States and developingcountry governments over including laborstandards in WTO negotiations. That dis-agreement was brought to the fore byPresident Clinton’s statement that he favoredboth including such provisions in tradeagreements and, as a long-term goal, theirenforcement through sanctions.22 Developingcountry delegates voiced strong opposition tothat idea. Whatever the wishes of the United

States or other developed countries withregard to the consideration of labor andenvironmental standards in the WTO, theopposition of the developing countries makessuch an outcome highly unlikely and wouldeffectively preclude new trade agreementsincorporating trade sanctions.

PRINCIPLES In fashioning recommendations for

action, we have found it useful to be guidedby a set of underlying principles. These are:

• Raising standards of living is a paramountgoal. A country with a higher per capitaincome can solve more of its problems.We should pursue policies that help poorcountries grow, not those that protect narrow domestic constituencies at theexpense of low-income individuals indeveloping countries.

• Global trade is an important vehicle foraccelerating economic development. Weprefer market-opening multilateral tradeagreements to bilateral agreements or uni-lateral actions because multilateral agree-ments reduce the distortions inherent inmultiple preferential arrangements. Inaddition, the mutual lowering of barriersin a multilateral context helps cement therights and obligations of countries withinthe international trading system.

• Negotiated agreements should includesome form of enforcement. Like all agree-ments, trade agreements are essentiallycontracts; contracts typically require somemeans of enforcement.

• For the most part, sovereign nations havethe right to pursue domestic policies asthey see fit. Although we have strong pref-erences for the direction of policies insuch areas as labor rights, education,health, environment, judicial effective-ness, and government corruption, we rec-

12


21. Youssef Boutros-Ghali, as quoted in Sanger, David. “AGrand Trade Bargain.” Foreign Affairs. Volume 80. Number 1.January/February 2001. pp. 66-67.

22. Seattle Post-Intelligencer, December 1, 1999. p. 1, as cited inElliot, Kimberly Ann, “Getting Beyond No. . .! PromotingWorker Rights and Trade,” in The WTO After Seattle. Schott,Jeffrey, Ed. Washington, D.C.: Institute for InternationalEconomics. July 2000.

ognize the right of individual nations tomake their own choices. When the effectsof domestic policies spill over to othercountries, negotiations should lead toagreement on specific solutions to thoseproblems.

• Enforcement of international economicagreements among sovereign nationsneed not—indeed, should not—mean the imposition of WTO trade sanctions.Reducing trade hurts both the targetcountry and the country imposing thesanction. Other means of enforcement orinducement to compliance are available.

• The ultimate responsibility for adjustmentto changed economic conditions restswith the affected individuals, businesses,and communities. A society that gainsfrom economic change, however, has acollective interest and responsibility inassisting those hurt by such change toadjust to the new conditions.

RECOMMENDATIONSRaising the visibility and changing the

tone of the national discourse on tradewould be important steps toward building adomestic constituency for further trade liber-alization. Support for open trade has suf-fered from a lack of sustained high-qualitypublic discussion. The subject has often beenreduced to sound bites and videos of streetdemonstrations. These issues deserve greaterattention and more open and forcefuldebate. Supporters of free trade can improvethe tone of public discourse by recognizingthe validity of social concerns and becomingmore engaged in efforts to improve socialoutcomes. Groups and individuals who havefelt that trade does not benefit them or meettheir concerns are more likely to discuss theissues and engage in the legitimate politicalprocess if they feel that the political-econom-ic system is responding to their concerns.

Although there is likely to be continuingdisagreement about how the political systemshould deal with social concerns in the con-text of trade, it cannot be denied that thereis an economic connection between thoseconcerns and the trading system. At therecent Summit of the Americas, PresidentBush took an important step by stating that,“Our commitment to open trade must bematched by a strong commitment to protect-ing our environment and improving laborstandards.” 23 The President and other govern-ment and private-sector leaders should visiblyand vigorously communicate the vital roleplayed by global trade in increasing standardsof living at home and abroad. They shouldalso make clear and effective their supportfor continual worldwide improvements inlabor and environmental conditions and thereduction of poverty. In this context,Congress should grant the President authori-ty to negotiate new trade agreements underfast-track rules.* Such authority might bemodeled on previous trade acts, which estab-lished negotiating objectives that includedrespect for worker rights and other issues.24

Acknowledging connections among theseissues does not mean that they should all betreated in the same forum or under the sameagreement. If all issues were negotiatedsimultaneously under one agreement,progress would never be made. Experiencehas shown that specific issues can be negoti-ated and agreements reached under the aus-pices of specialized international agencies. Atpresent, specialized organizations alreadyexist with missions to advance labor and envi-ronmental concerns. Formulation of policiesfor trade, labor, and environmental issues,

13


23. Reported in Blustein, Paul. “Protests A Success of Sorts:Labor; Environment On Leaders’ Agenda.” The WashingtonPost. April 23, 2001. p. A11.

24. Trade Act of 1974, section 121(a)(4); P.L. 93-618, 88 Stat.1986; and Omnibus Trade and Competitiveness Act of 1988,section 1101 (b)(14); 19 U.S.C. 2901(b)(14), 102 Stat. 1125.

*See memorandum by COLETTE MAHONEY (Page 21).

and enforcement of agreed actions, shouldlie within the purview of the relevant nationaland international bodies. Trade issues belong in the World Trade Organization(WTO), labor issues in the InternationalLabor Organization (ILO), and non-tradeenvironment issues in the United NationsEnvironment Program (UNEP) and similarforums. To deal effectively with such issues,those agencies should be strengthened andsupported through U.S. leadership and funding. In recent years, the United Stateshas increased its presence in the ILO and hasstepped up its funding, in particular for theInternational Program on the Elimination of Child Labor. At a minimum, we shouldmaintain current funding levels and policyengagement by the United States. An impor-tant step for the United States would be theratification of all of the ILO’s core labor standards.

Secrecy engenders suspicion and mistrust.The organizations with responsibilities forinternational economic issues, in particular,have much to gain by becoming less secre-tive. Much of the public distrust of the WTOcan be traced to the closed nature of its proceedings. While we do not believe naivelythat openness by itself will lead to an accep-tance of the WTO by those opposing it, it canhelp assuage those concerns and build sup-port in the public at large. International economic organizations should increase theiropenness and transparency to the public. In particular, the WTO dispute-resolutionprocess should be opened to public scrutiny.

Over many years, CED has expressed itssupport for the development of the world’slow-income countries. We have on manyoccasions recommended that those countriestake the necessary steps to improve their economic and political institutions. We havealso emphasized the important role that edu-cation plays in raising income and the needfor developing countries to rid themselves of the pernicious effects of corruption. In

general, developing countries should beadopting internationally agreed upon stan-dards and best practices. In the economicarena, they have strong incentives to do so,since movement towards higher internationalstandards induces increased investment andtrade. Our experience has been that betterperformance in reaching or exceeding market-oriented standards, such as thoseemphasizing transparency, accountability,and anti-corruption, goes hand in hand withincreasing incomes. One of the keys to reach-ing those standards, however, is that they arevoluntary and accepted by the countriesthemselves as serving their own interests,rather than being imposed by foreign governments. Developing countries shouldbe allowed to pursue their own labor andenvironmental standards, which are likely to rise as their incomes rise. However, theyshould be encouraged to enforce those standards, to raise them to internationallyrecognized levels, and to adhere to relevantagreements. Trade agreements should incorporate the principle that countries will not weaken their existing labor and envi-ronmental rules or their enforcement to gain an advantage in international trade orinvestment.

One way to help countries raise their stan-dards is for international organizations to setbenchmarks of performance. Benchmarksalso provide vehicles for countries to volun-tarily pledge their compliance, when they seean advantage in doing so. Similar mecha-nisms are used domestically by businesses inthe United States and other countries toestablish codes of conduct or voluntary stan-dards of practice; examples are the BetterBusiness Bureau, Internet privacy codes, orthe motion picture and television rating sys-tems. These systems work best when theyinclude some form of discipline or enforce-ment once an entity has agreed to join andabide by its standards. Such systems can beused in the international arena to help raise

14


labor and environmental standards. The ILO in large part does this now

through the establishment of standards andconventions, formal monitoring, reporting,and technical assistance. We believe that theILO holds great promise for helping coun-tries to raise labor standards. Yet, we recog-nize that the ILO is an imperfect mechanismfor positive change and that much moreremains to be done to make it effective.

The example of ILO’s efforts to deal withBurma is instructive.25 In 1996, worker dele-gates of the ILO filed a complaint regarding alongstanding problem with forced labor inBurma, and the ILO began an investigation.Attempts to resolve the problems directly withthe government of Burma initially failed.However, after the ILO threatened a prohibi-tion of technical assistance and bannedBurma from ILO meetings, its responsivenessimproved. Burma has since opened its dis-cussions with the ILO and has shown an interest in improving its standards. The pro-gress made in this case is encouraging.Nevertheless, it also reveals some problems.Progress has been slow and limited, partiallybecause countries have been unwilling toimplement direct measures against Burma,but also because the threat of external forcerarely compels a nation to make domestic policy changes that it would not otherwisemake based on internal considerations.

Specialized international agencies (ILOand UNEP) should strengthen the promotionof internationally recognized standards towhich countries can subscribe, taking account of differences in levels of develop-ment. These standards should be enforced by means that do not diminish trade and itspotential to support economic development.Enforcement could proceed first through

public disclosure and then through a menuof economic remedies, which should includepositive inducements as well as disciplinarymeasures such as fines. 26 Some attention hasbeen directed recently to a variety of optionsthat could substitute for trade sanctions toenforce international agreements. Fines areincorporated into the NAFTA side agreementon labor and a similar agreement betweenCanada and Chile. A variety of options areavailable to implement a fine-based enforce-ment system; for example, fines could remainwithin the country and be used for remedia-tion.27 The ILO and other agencies also havethe option of providing technical assistanceand other forms of positive reinforcement toinduce compliance rather than coerce it.

A complementary path to raising laborand environmental standards is to engage inan incremental strategy of trial and experi-mentation. In addition to testing the efficacyof various approaches to the problem, such astrategy could help build good will and confi-dence on the part of participants. That is oneof the aims of a proposal by the Trade andPolicy Group of the Inter-American Dialogue(IAD) and the Economic Reform Project ofthe Carnegie Endowment for InternationalPeace (CEIP).28 (See box, “Breaking theLabor-Trade Deadlock” for a summary oftheir proposal.) The IAD/CEIP proposal isspecifically aimed at breaking the policy log-jam in the FTAA negotiations. If successful,the approach could be extended to other

15


25. For more on the Burma case, see Elliot, Kimberly Ann.“The ILO and Enforcement of Core Labor Standards.”Institute for International Economics. April 2001 update ofPolicy Brief No. 00-6. July 2000.

26. Individual countries, including the United States, alwaysretain the ability to act unilaterally when their national inter-ests justify it. Such unilateral actions differ from measures thatmight be taken by international agencies to enforce multilater-al agreements.

27. See Elliott, Kimberly Ann. “Fin(d)ing Our Way on Tradeand Labor Standards?” International Economics Policy Briefs.Number 01-5. April 2001. <www.iie.com/policybriefs/news01-5.htm>.

28. Carnegie Endowment for International Peace and Inter-American Dialogue. “Breaking the Labor-Trade Deadlock.”Carnegie Endowment Working Papers. Number 17. February 2001.<www.ceip.org/files/Publications/wp17.asp>.

16


Summary of a Working Paper of the Inter-American Dialogue and the Carnegie Endowment for International Peace

The current stalemate preventing the advancement of the trade agenda results from dis-agreements over the role that internationally recognized core labor standards should play intrade negotiations. Some groups in the developed nations want the linkage between laborissues and trade to be recognized and demand mechanisms, such as trade sanctions, toensure that core labor standards will be enforced in all countries. Developing countries,however, oppose bringing labor issues into trade agreements and fear that trade sanctionswill be improperly used as protectionism. A new approach would be to create a system capa-ble of improving the coverage and enforcement of internationally recognized core laborstandards without resorting to the use of trade sanctions.

The IAD/CEIP has proposed a model that separates the discussion of labor issues fromtrade negotiations. The plan, which could most easily be implemented by the FTAA coun-tries, would center on the creation of a discussion/negotiation process among the nations’labor ministers. The group would examine the treatment of labor standards in the hemi-sphere and, in time, begin a series of negotiations on labor issues, which could be conduct-ed in parallel with the FTAA process. By delinking the labor issue from regional trade nego-tiations, more rapid progress could be achieved on both fronts.

The IAD/CEIP proposal would expand the authority of the group of labor ministersestablished at the 1998 Summit of the Americas Meeting in Santiago to include analysis ofthe promotion and enforcement of labor standards in the hemisphere and possibly theimplementation of such standards throughout the hemisphere. Initially, the group couldcreate three study areas: private-sector remedies, technical assistance and transparency mea-sures, and the examination of active labor market policies. They could then use their studygroups’ results to conduct negotiations aimed at securing adequate coverage and enforce-ment of internationally recognized core labor standards.

The Western Hemisphere would seem to be an ideal trial area. On one hand, because ofsimilar constitutions, societal ideas, and open-market economies, the FTAA nations might bemore capable of generating rapid results. At the same time, because the group includescountries that have been highly involved on opposite sides of the labor debate (namely theUnited States and Brazil), its results would not be weighted towards either the developed ordeveloping nations’ interests. If successful, the process could serve as a building block inefforts to establish worldwide consensus on the appropriate enforcement of internationallyrecognized core labor standards.

BREAKING THE LABOR-TRADE DEADLOCK

arenas. In brief, it calls for the establishmentof a process of analysis and negotiation overinternationally recognized core labor stand-ards in the Western Hemisphere in parallelwith the FTAA trade negotiations. Consistent with CED’s recommendations above, theIAD/CEIP proposal would not use trade sanc-tions to enforce a labor standards agreement,but would allow the use of monetary fines.Policy makers should avail themselves of

opportunities, such as those presented by thebilateral agreement with Jordan, negotiationswith Chile and Singapore, and multilateralnegotiations for a Free Trade Area of theAmericas (FTAA), to take incremental andexperimental steps to resolve policy conflictsbetween trade and labor and environmentalissues.

Economic progress depends on the capac-ity of labor and capital to move to new activi-

ties that can realize the opportunities createdby new technology. Society as a whole gainsfrom such mobility, but the reallocation oflabor entails costs that are largely borne bydisplaced workers. A portion of these costsshould be borne by society, both as a matterof equity and as a pragmatic necessity foralleviating worker anxieties that could blockmarket liberalization.

A temporary supplemental wage andhealth assistance program, such as the “wageinsurance” program recently suggested by abipartisan blue-ribbon panel investigatingtrade issues, could go a long way towardsboth providing an increased incentive for dis-placed workers to find reemployment andovercoming some of the anxiety-based resis-tance of workers to the causes of economicchanges.29 The U.S. Trade Deficit ReviewCommission has called for Congress toaddress the “broader costs of job displace-ment,” including reducing the earnings losscreated when new jobs initially pay less thanprevious jobs, and noted that “wage insur-ance is one such option.” In the view of theCommission and others who have examinedwage insurance, an advantage is that it can bestructured to encourage displaced workers toaccept new jobs more rapidly even if thewage is lower than in former jobs.30 In addi-tion, it provides workers of different agesbenefits that are related to the stages of their

careers. Younger workers may be provided anincentive to return to work promptly, wherethey can receive valuable on-the-job training,whereas older workers may be provided a lessdifficult transition to retirement. TheCommission cautioned that careful attentionshould be given to containing the costs of awage insurance proposal and to possibleadverse incentive effects that often arise ininsurance programs. One prominent propos-al for wage and health insurance is designedto maximize coverage for those most in needwhile containing costs and minimizingadverse incentives. (See box, “Wage andHealth Insurance: Addressing WorkerAnxiety.”) To reduce worker anxiety abouteconomic change, the United States shouldadopt a modest system of temporary supple-mental wage and health assistance along thelines suggested by the U.S. Trade DeficitReview Commission. The program should beopen to workers who are “displaced” basedon Department of Labor criteria and reem-ployed at less than their previous wage. Itshould be capped at an appropriate level andpercentage of lost income. It should apply toall job displacement, not just that related totrade. The system should be administered bythe states and funded from general federalgovernment revenues, rather than by payrolltaxes.

17


29. See U.S. Trade Deficit Review Commission. “WorkerAdjustment Assistance.” The Trade Deficit: Causes, Consequences,and Recommendations for Action. Washington, D.C.: GPO.October 2000. pp. 161-176. The bipartisan panel was chairedby Murray Weidenbaum and included, among other members,the current U.S. Trade Representative, Robert Zoellick.

30. An experimental program of a similar type in Canadademonstrated the feasibility of the concept, although theimpact of the program on mobility was small. This small effectmay be related to the fact that the program was designed as anadd-on to Canada’s relatively generous long-term unemploy-ment compensation program.

18


Summary of a Proposal by Lori Kletzer and Robert Litana

Wage and health insurance has been proposed to share the costs of economic changeincurred by displaced workers and to encourage them to quickly seek reemployment.b

Accounting for a modest increase in the current unemployment rate, the joint programs areestimated to cost roughly $3.5 billion annually. Some of their costs could be offset if the pro-gram replaced specialized adjustment assistance programs for trade and other identifiedcauses of job displacement, such as military base closings.

The Need for a New ProgramIn addition to the immediate loss of income, involuntary unemployment inflicts costs on

workers such as the loss of health insurance and the costs of finding reemployment. Even forthose who quickly secure a new job, losses often persist in the form of lower wages. With jobloss and turnover increasing as a result of factors such as technological innovation, immigra-tion, and increased foreign competition, the number of displaced workers in the UnitedStates exceeded eight million in 1999, even as the economy grew by 4.2 percent per year.c

Unforeseen job loss is particularly alarming to older and unskilled workers, who have beenhardest hit. In a slowing economy, these groups will experience even greater job turnover.

Without savings, these workers have few options when unemployed. UnemploymentInsurance (UI) provides 26 weeks of cash benefits to workers who are laid off through nofault of their own. Additionally, workers may be entitled to another year of income throughthe Trade Adjustment Assistance (TAA) program, which was created in 1962 to provide ben-efits to individuals who were hurt by the nation’s trade policy. The program (and its newercounterpart initiated for the North American Free Trade Agreement) is essentially based onproviding income support and training to individuals who lost their jobs because of foreigncompetition.d Thus, it provides benefits only to individuals who can prove that their job lossresulted from increased imports or a shift of production outside the country and that theyare enrolled in a training course. TAA programs are not available to most displaced workers.

In general, these programs reimburse workers for 50 percent of lost income. At the sametime, however, they disregard the loss of health insurance, encourage enrollment in trainingcourses that are less valuable than on-the-job-training, and neglect workers who accept jobsat lower salaries. As a result, these programs provide little incentive for workers to activelyseek reemployment.

Wage InsuranceUnlike these current programs, wage insurance would provide incentives for workers to

quickly seek reemployment, regardless of their new income level. At a modest cost, a wage

WAGE AND HEALTH INSURANCE: ADDRESSING WORKER ANXIETY

19


insurance proposal would: encourage workers to seek reemployment by paying a fraction oftheir income loss for a two-year period following the initial date of job loss; provide funds fordisplaced workers, regardless of the reason for their displacement; and provide a healthinsurance subsidy for a six-month period or until the date of reemployment (whichevercomes first).

Workers accepting a new lower-paying job would receive a fraction of their income lossfor a two-year period following the initial date of job loss. Such income, however, would notbe paid until a new job is found, thereby encouraging individuals to seek reemployment. Attheir new jobs, individuals would receive crucial on-the-job-training and thus acquire skillsthat would make them more productive, and more valuable, in the long run. In addition toits improved system of incentives, the program’s non-discriminatory nature is better suitedfor today’s economy than the TAA programs. These single out trade as a cause for action,whereas technological change and immigration are more significant causes of job displace-ment.

Both the wage insurance and complementary health insurance programs would be paidfor out of general revenue and administered through state unemployment offices. To con-tain costs, wage insurance benefits would be provided only to previously full-time workerswho were at their old job for two years or more (about 20 percent of all displaced workers in1999). Assuming a 50 percent reimbursement of wage losses and an increase in unemploy-ment to the 1997 level, the program would cost about $3.5 billion, roughly one-sixth the costof UI.e Furthermore, the program might replace the TAA programs, whose costs have steadi-ly increased to nearly $300 million annually, and are expected to exceed $400 million by2005.f

a. Kletzer and Litan, “A Prescription to Relieve Worker Anxiety.”

b. Displaced workers are defined by the Bureau of Labor Statistics in its Displaced Workers Surveys as those “persons 20 years of age and older who [in the last 3 years] lost or left jobs because their plant or company closedor moved, there was insufficient work for them to do, or their position or shift was abolished.”

c. U.S. Department of Labor, Displaced Worker and Employee Tenure Surveys.

d. The NAFTA-TAA program was created as a result of the NAFTA Implementation Act of 1993. Workers are eligible for benefits provided certification of loss of job to Canada or Mexico.

e. Kletzer and Litan, “A Prescription to Relieve Worker Anxiety.”

f. Budget Options. Congressional Budget Office. Washington, D.C.: GPO. February 2001. p. 324.

CED strongly supports international eco-nomic integration through open markets fortrade and investment to improve global eco-nomic well-being. The time has come for theU.S. Congress to grant the President authori-ty to negotiate new trade agreements underfast-track procedures. Although we recognizethe economic relationship between trade andsocial goals, such as improving labor andenvironmental conditions, the World TradeOrganization should not become theenforcement mechanism for social prioritiesthat are not primarily related to trade. Moreprogress towards our social goals ultimately

will be made if the United States works dili-gently through international bodies that arefocused directly on achieving gains in theseareas. Access to markets should not be usedas a stick to impose conditions on the devel-oping countries. Experience shows that con-ditions in those countries will improve andstandards will be raised as their income rises. The surest route to raising per capitaincomes in developing countries that followsound economic policies is through the reci-procal opening of borders to trade andinvestment.

20

Conclusions

Page 2, HARRY L. FREEMAN

I strongly support the CED position ontrade. However, a few points need moreemphasis. By referring questions of laborstandards and environmental issues to theILO and UNEP, and similar internationalorganizations, we must do more than try toimprove the power of those institutions. Weneed to correct the lagging enthusiasm for,say, the ILO and a revamping of its Articles;but we need a linkage of timetables so that astronger ILO emerges, with U.S. support, nolater than the end of a multilateral WTOround. Would those who argue for a strongerILO accept a bland promise from the U.S. tomake it stronger when the U.S. has, as a prac-tical matter, not even supported the organiza-tion? We need time frame linkage.

This is a very well-written paper; however,we must find a way to show the public that weare more than “just another business organi-zation arguing for free trade.” Voting to pub-lish it should be a mid point, not the finalpoint.

Pages ix and 13, COLETTE MAHONEY

I approve of the statement on free tradeand with the recommendations with oneexception. I do not agree, and dissent, fromthe sentence in the first recommendation,suggesting that Congress should grant fast-track authority to the President. I do so forseveral reasons, not the least of which is thatsuch action will deter the “constructive dia-logue” recommended by the statement.

21

Memoranda of Comment, Reservation, or Dissent

22

OBJECTIVES OF THE COMMITTEE FOR ECONOMIC DEVELOPMENT

For nearly 60 years, the Committee for Eco-nomic Development has been a respectedinfluence on the formation of business andpublic policy. CED is devoted to these two ob-jectives:

To develop, through objective research andinformed discussion, findings and recommenda-tions for private and public policy that will contrib-ute to preserving and strengthening our free society,achieving steady economic growth at high employ-ment and reasonably stable prices, increasing pro-ductivity and living standards, providing greaterand more equal opportunity for every citizen, andimproving the quality of life for all.

To bring about increasing understanding bypresent and future leaders in business, government,and education, and among concerned citizens, of theimportance of these objectives and the ways in whichthey can be achieved.

CED’s work is supported by private volun-tary contributions from business and industry,

foundations, and individuals. It is independent,nonprofit, nonpartisan, and nonpolitical.

Through this business-academic partner-ship, CED endeavors to develop policy state-ments and other research materials thatcommend themselves as guides to public andbusiness policy; that can be used as texts incollege economics and political science coursesand in management training courses; thatwill be considered and discussed by newspaperand magazine editors, columnists, and com-mentators; and that are distributed abroad topromote better understanding of the Ameri-can economic system.

CED believes that by enabling businessleaders to demonstrate constructively their con-cern for the general welfare, it is helping busi-ness to earn and maintain the national andcommunity respect essential to the successfulfunctioning of the free enterprise capitalistsystem.

*Life Trustee

ChairmanFRANK P. DOYLE, Retired Executive Vice PresidentGE

Vice ChairmenROY J. BOSTOCK, ChairmanB/Com3 Group, Inc.JOHN H. BRYAN, Chairman of the BoardSara Lee CorporationDONALD R. CALDWELL, Chairman and Chief

Executive OfficerCross Atlantic Capital PartnersRAYMOND V. GILMARTIN, Chairman, President

and Chief Executive OfficerMerck & Co., Inc.

TreasurerREGINA DOLANExecutive Vice President, Chief Financial Officer and

Chief Administrative OfficerUBS PaineWebber Group, Inc.

ROGER G. ACKERMAN, Chairman and ChiefExecutive Officer

Corning IncorporatedREX D. ADAMS, DeanThe Fuqua School of BusinessDuke UniversityPAUL A. ALLAIRE, ChairmanXerox CorporationIAN ARNOF, Retired ChairmanBank One, Louisiana, N.A.JAMES S. BEARD, PresidentCaterpillar Financial Services Corp.HENRY P. BECTON, JR., President and

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Operating OfficerAlliedSignal Inc.PETER A. BENOLIEL, Chairman, Executive

CommitteeQuaker Chemical CorporationMELVYN E. BERGSTEIN, Chairman and Chief

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*

*

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JOHN DIEBOLD, ChairmanJohn Diebold IncorporatedLINDA M. DISTLERATH, Vice President, Global

Health PolicyPresident, The Merck Company FoundationMerck & Co., Inc.REGINA DOLAN, Executive Vice President, Chief

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Chief Executive OfficerPublic Service Enterprise Group Inc.EDMUND B. FITZGERALD, Managing DirectorWoodmont AssociatesHARRY L. FREEMAN, ChairThe Mark Twain InstituteMITCHELL S. FROMSTEIN, Chairman EmeritusManpower Inc.JOSEPH GANTZ, PartnerGG Capital, LLCE. GORDON GEE, ChancellorVanderbilt UniversityTHOMAS P. GERRITY, Dean EmeritusThe Wharton SchoolUniversity of PennsylvaniaRAYMOND V. GILMARTIN, Chairman, President and

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*

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Consolidated Edison Company of New York, Inc.DAVID E. MCKINNEY, PresidentThe Metropolitan Museum of ArtDEBORAH HICKS MIDANEK, PrincipalGlass & Associates, Inc.HARVEY R. MILLER, Senior PartnerWeil, Gotshal & MangesNICHOLAS G. MOORE, ChairmanPricewaterhouseCoopersDIANA S. NATALICIO, PresidentThe University of Texas at El PasoMARILYN CARLSON NELSON, Chairman, President

and Chief Executive OfficerCarlson Companies, Inc.MATTHEW NIMETZ, PartnerGeneral Atlantic PartnersTHOMAS H. O’BRIEN, Chairman of the BoardPNC Financial Services Group, Inc.DEAN R. O’HARE, Chairman and Chief

Executive OfficerChubb CorporationRONALD L. OLSON, PartnerMunger, Tolles & OlsonROBERT J. O'TOOLE, Vice Chairman and Chief

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Investment OfficerThe Commonfund Asset Management Co., Inc.RAYMOND PLANK, Chairman and Chief

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Executive OfficerThe Chief Executive GroupS. LAWRENCE PRENDERGAST, Executive Vice

President of FinanceLaBranche & Co.HUGH B. PRICE, President and Chief

Executive OfficerNational Urban LeagueNED REGAN, PresidentBaruch College

*Life Trustee

WILLIAM R. RHODES, Vice ChairmanCitigroup Inc.JAMES Q. RIORDANQuentin Partners Inc.E. B. ROBINSON, JR., Chairman EmeritusDeposit Guaranty CorporationROY ROMERFormer Governor of ColoradoSuperintendent, Los Angeles Unified School DistrictDANIEL ROSE, ChairmanRose Associates, Inc.HOWARD M. ROSENKRANTZ, Chief Executive OfficerGrey Flannel AuctionsLANDON H. ROWLAND, Chairman, President and

Chief Executive OfficerStillwell Financial Inc.NEIL L. RUDENSTINE, President EmeritusHarvard UniversityWILLIAM RUDER, PresidentWilliam Ruder IncorporatedGEORGE RUPP, PresidentColumbia UniversityGEORGE F. RUSSELL, JR., ChairmanFrank Russell CompanyEDWARD B. RUST, JR., Chairman and Chief

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Chief Financial OfficerThe Boeing CompanyWALTER H. SHORENSTEIN, Chairman of the BoardThe Shorenstein CompanyGEORGE P. SHULTZ, Distinguished FellowThe Hoover InstitutionStanford UniversityJOHN C. SICILIANO, Vice President, InternationalDimensional Fund AdvisorsRUTH J. SIMMONS, PresidentSmith CollegeFREDERICK W. SMITH, Chairman, President and

Chief Executive OfficerFederal Express CorporationALAN G. SPOON, Managing General PartnerPolaris Ventures

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American Home Products CorporationSTEPHEN STAMAS, ChairmanThe American AssemblyJOHN L. STEFFENS, Vice ChairmanMerrill Lynch & Co., Inc.PAULA STERN, PresidentThe Stern Group, Inc.DONALD M. STEWART, President and Chief

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Executive OfficerFoster Wheeler CorporationRICHARD F. SYRON, President and Chief

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EngineeringUniversity of California, BerkeleyTHOMAS J. TIERNEY, Director (former Chief Executive)Bain & CompanySTOKLEY P. TOWLES, PartnerBrown Brothers Harriman & Co.STEPHEN JOEL TRACHTENBERG, PresidentGeorge Washington UniversityJAMES L. VINCENT, Chairman of the BoardBiogen, Inc.ROBERT C. WAGGONER, President and Chief

Executive OfficerBurrelle’s Information Services LLCDONALD C. WAITE, III, DirectorMcKinsey & Company, Inc.HERMINE WARREN, PresidentHermine Warren Associates, Inc.ARNOLD R. WEBER, President EmeritusNorthwestern UniversityJOHN F. WELCH, JR., Chairman and Chief

Executive OfficerGEJOSH S. WESTON, Honorary ChairmanAutomatic Data Processing, Inc.

*

*Life Trustee

CLIFTON R. WHARTON, JR., Former Chairmanand Chief Executive Officer

TIAA-CREFDOLORES D. WHARTON, Chairman and Chief

Executive OfficerThe Fund for Corporate Initiatives, Inc.MICHAEL W. WICKHAM, Chairman and Chief

Executive OfficerRoadway Express, Inc.HAROLD M. WILLIAMS, President EmeritusThe J. Paul Getty TrustJ. KELLEY WILLIAMS, Chairman and Chief

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Executive OfficerScarbroughsKURT E. YEAGER, President and Chief Executive

OfficerElectric Power Research InstituteMARTIN B. ZIMMERMAN, Vice President,

Governmental AffairsFord Motor Company

RAY C. ADAM, Retired ChairmanNL IndustriesO. KELLEY ANDERSONBoston, MassachusettsROBERT O. ANDERSON, Retired ChairmanHondo Oil & Gas CompanyROY L. ASHLos Angeles, CaliforniaSANFORD S. ATWOOD, President EmeritusEmory UniversityROBERT H. B. BALDWIN, Retired ChairmanMorgan Stanley Group Inc.GEORGE F. BENNETT, Chairman EmeritusState Street Investment TrustHAROLD H. BENNETTSalt Lake City, UtahJACK F. BENNETT, Retired Senior Vice PresidentExxon CorporationHOWARD W. BLAUVELTKeswick, VirginiaMARVIN BOWERDelray Beach, FloridaALAN S. BOYDLady Lake, FloridaANDREW F. BRIMMER, PresidentBrimmer & Company, Inc.HARRY G. BUBB, Chairman EmeritusPacific Mutual Life InsuranceTHEODORE A. BURTIS, Retired Chairman

of the BoardSun Company, Inc.PHILIP CALDWELL, Chairman (Retired)Ford Motor CompanyEVERETT N. CASECooperstown, New YorkHUGH M. CHAPMAN, Retired ChairmanNationsBank SouthE. H. CLARK, JR., Chairman and Chief

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CED HONORARY TRUSTEES

JOHN T. FEYPark City, UtahJOHN M. FOXSapphire, North CarolinaDON C. FRISBEE, Chairman EmeritusPacifiCorpRICHARD L. GELB, Chairman EmeritusBristol-Myers Squibb CompanyW. H. KROME GEORGE, Retired ChairmanALCOAWALTER B. GERKEN, Chairman, Executive CommitteePacific Life Insurance CompanyPAUL S. GEROTDelray Beach, FloridaLINCOLN GORDON, Guest ScholarThe Brookings InstitutionKATHARINE GRAHAM, Chairman of the

Executive CommitteeThe Washington Post CompanyJOHN D. GRAY, Chairman EmeritusHartmarx CorporationJOHN R. HALL, Retired ChairmanAshland Inc.RICHARD W. HANSELMAN, ChairmanHealth Net Inc.ROBERT A. HANSON, Retired ChairmanDeere & CompanyROBERT S. HATFIELD, Retired ChairmanThe Continental Group, Inc.ARTHUR HAUSPURG, Member, Board of TrusteesConsolidated Edison Company of New York, Inc.PHILIP M. HAWLEY, Retired Chairman of the BoardCarter Hawley Hale Stores, Inc.ROBERT C. HOLLAND, Senior FellowThe Wharton SchoolUniversity of PennsylvaniaLEON C. HOLT, JR., Retired Vice ChairmanAir Products and Chemicals, Inc.SOL HURWITZ, Retired PresidentCommittee for Economic DevelopmentGEORGE F. JAMESPonte Vedra Beach, FloridaDAVID KEARNS, Chairman EmeritusNew American SchoolsGEORGE M. KELLER, Chairman of the Board, RetiredChevron CorporationFRANKLIN A. LINDSAY, Retired ChairmanItek CorporationROY G. LUCKSSan Francisco, CaliforniaROBERT W. LUNDEEN, Retired ChairmanThe Dow Chemical CompanyIAN MACGREGOR, Retired ChairmanAMAX Inc.RICHARD B. MADDEN, Retired Chairman and

Chief Executive OfficerPotlatch CorporationFRANK L. MAGEEStahlstown, Pennsylvania

ROBERT M. PRICE, Retired Chairman andChief Executive Officer

Control Data CorporationR. STEWART RAUCH, Former ChairmanThe Philadelphia Savings Fund SocietyJAMES J. RENIERRenier & AssociatesIAN M. ROLLAND, Former Chairman and Chief

Executive OfficerLincoln National CorporationAXEL G. ROSIN, Retired ChairmanBook-of-the-Month Club, Inc.WILLIAM M. ROTHPrinceton, New JerseyRALPH S. SAUL, Former Chairman of the BoardCIGNA CompaniesGEORGE A. SCHAEFER, Retired Chairman of the BoardCaterpillar, Inc.ROBERT G. SCHWARTZNew York, New YorkMARK SHEPHERD, JR., Retired ChairmanTexas Instruments, Inc.ROCCO C. SICILIANOBeverly Hills, CaliforniaDAVIDSON SOMMERSWashington, D.C.ELMER B. STAATS, Former Controller

General of the United StatesFRANK STANTON, Former PresidentCBS, Inc.EDGAR B. STERN, JR., Chairman of the BoardRoyal Street CorporationALEXANDER L. STOTTFairfield, ConnecticutWAYNE E. THOMPSON, Past ChairmanMerritt Peralta Medical CenterHOWARD S. TURNER, Retired ChairmanTurner Construction CompanyTHOMAS A. VANDERSLICETAV AssociatesJAMES E. WEBBWashington, D.C.SIDNEY J. WEINBERG, JR., Senior PartnerThe Goldman Sachs Group, L.P.ROBERT C. WINTERS, Chairman EmeritusPrudential Insurance Company of AmericaARTHUR M. WOODChicago, IllinoisRICHARD D. WOOD, DirectorEli Lilly and CompanyCHARLES J. ZWICKCoral Gables, Florida

STANLEY MARCUS, ConsultantStanley Marcus ConsultancyAUGUSTINE R. MARUSILake Wales, FloridaWILLIAM F. MAY, Chairman and Chief

Executive OfficerStatue of Liberty-Ellis Island Foundation, Inc.OSCAR G. MAYER, Retired ChairmanOscar Mayer & Co.GEORGE C. MCGHEE, Former U.S. Ambassador

and Under Secretary of StateJOHN F. MCGILLICUDDY, Retired Chairman

and Chief Executive OfficerChemical Banking CorporationJAMES W. MCKEE, JR., Retired ChairmanCPC International, Inc.CHAMPNEY A. MCNAIR, Retired Vice ChairmanTrust Company of GeorgiaJ. W. MCSWINEY, Retired Chairman of the BoardThe Mead CorporationROBERT E. MERCER, Retired ChairmanThe Goodyear Tire & Rubber Co.RUBEN F. METTLER, Retired Chairman and

Chief Executive OfficerTRW Inc.LEE L. MORGAN, Former Chairman of the BoardCaterpillar, Inc.ROBERT R. NATHAN, ChairmanNathan Associates, Inc.J. WILSON NEWMAN, Retired ChairmanDun & Bradstreet CorporationJAMES J. O’CONNOR, Former Chairman and Chief

Executive OfficerUnicom CorporationLEIF H. OLSEN, PresidentLHO GroupNORMA PACE, PresidentPaper Analytics AssociatesCHARLES W. PARRY, Retired ChairmanALCOAWILLIAM R. PEARCE, DirectorAmerican Express Mutual FundsJOHN H. PERKINS, Former PresidentContinental Illinois National Bank and Trust CompanyRUDOLPH A. PETERSON, President and Chief

Executive Officer (Emeritus)BankAmerica CorporationDEAN P. PHYPERSNew Canaan, ConnecticutEDMUND T. PRATT, JR., Retired Chairman and

Chief Executive OfficerPfizer Inc.

CED RESEARCH ADVISORY BOARD

ChairmanJOHN P. WHITELecturer in Public PolicyJohn F. Kennedy School of GovernmentHarvard University

JAGDISH BHAGWATIArthur Lehman Professor of EconomicsColumbia University

RALPH D. CHRISTYJ. Thomas Clark ProfessorDepartment of Agricultural, Resource, and Managerial EconomicsCornell University

JOHN COGANSenior FellowThe Hoover InstitutionStanford University

ALAIN C. ENTHOVENMarriner S. Eccles Professor of Public

and Private ManagementStanford UniversityGraduate School of Business

RONALD F. FERGUSONLecturer in Public PolicyJohn F. Kennedy School of GovernmentHarvard University

BENJAMIN M. FRIEDMANWilliam Joseph Maier Professor of Political EconomyHarvard University

ROBERT W. HAHNResident ScholarAmerican Enterprise Institute

HELEN F. LADDProfessor of Public Policy Studies and

EconomicsSanford Institute of Public PolicyDuke University

LINDA YUEN-CHING LIMAssociate Professor of Corporate Strategy

and International BusinessUniversity of Michigan Business School

ROBERT LITANVice President, Director of Economic

StudiesThe Brookings Institution

PAUL ROMERSTANCO 25 Professor of EconomicsStanford UniversityGraduate School of Business

CECILIA E. ROUSEAssociate Professor of Economics

and Public AffairsWoodrow Wilson SchoolPrinceton University

DAVID WESSELAssistant Bureau Chief/ColumnistThe Wall Street Journal

CHARLES E.M. KOLBPresident

CED PROFESSIONAL AND ADMINISTRATIVE STAFF

Communications/Government RelationsCLAUDIA P. FEUREYVice President for Communications

and Corporate Affairs

MICHAEL J. PETROVice President and Director of Business and Government Policy

and Chief of Staff

CHRIS DREIBELBISBusiness and Government Policy

Associate

VALERIE MENDELSOHNConference Manager and Secretary of

the Research and Policy Committee

ROBIN SAMERSAssistant Director of Communications

THOMAS NELSONPublic Affairs and Communcations

Manager

DevelopmentMARTHA E. HOULEVice President for Development and

Secretary of the Board of Trustees

GLORIA Y. CALHOUNDevelopment Assistant

JIM KAPSISDevelopment Associate

SANDRA L. MARTINEZDevelopment Associate

CAROLINA LOPEZDevelopment Consultant

RICHARD M. RODEROAssistant Director of Development

Finance and AdministrationKAREN CASTRODirector of Finance and Administration

SHARON A. FOWKESExecutive Assistant to the President

ARLENE M. MURPHYExecutive Assistant to the President and Office Manager

DENISE SMITHPublic Affairs and Development Assistant

AMANDA TURNEROffice Manager

ResearchVAN DOORN OOMSSenior Vice President and

Director of Research

JANET HANSENVice President and Director

of Education Studies

ELLIOT SCHWARTZVice President and Director

of Economic Studies

TAREK ANANDANResearch Associate

MICHAEL BERGResearch Associate

Advisor on InternationalEconomic PolicyISAIAH FRANKWilliam L. Clayton Professor

of International EconomicsThe Johns Hopkins University

*Statements issued in association with CED counterpart organizations in foreign countries.

STATEMENTS ON NATIONAL POLICY ISSUED BY THECOMMITTEE FOR ECONOMIC DEVELOPMENT

SELECTED PUBLICATIONS:

The Digital Economy: Promoting Competition, Innovation, and Opportunity (2001)Reforming Immigration: Helping Meet America's Need for a Skilled Workforce (2001)Measuring What Matters: Using Assessment and Accountability to Improve Student Learning (2001)Improving Global Financial Stability (2000)The Case for Permanent Normal Trade Relations with China (2000)Welfare Reform and Beyond: Making Work Work (2000)Breaking the Litigation Habit: Economic Incentives for Legal Reform (2000)New Opportunities for Older Workers (1999)Investing in the People's Business: A Business Proposal for Campaign Finance Reform (1999)The Employer’s Role in Linking School and Work (1998)Employer Roles in Linking School and Work: Lessons from Four Urban Communities (1998)America’s Basic Research: Prosperity Through Discovery (1998)Modernizing Government Regulation: The Need For Action (1998)U.S. Economic Policy Toward The Asia-Pacific Region (1997)Connecting Inner-City Youth To The World of Work (1997)Fixing Social Security (1997)Growth With Opportunity (1997)American Workers and Economic Change (1996)Connecting Students to a Changing World: A Technology Strategy for Improving Mathematics and

Science Education (1995)Cut Spending First: Tax Cuts Should Be Deferred to Ensure a Balanced Budget (1995)Rebuilding Inner-City Communities: A New Approach to the Nation’s Urban Crisis (1995)Who Will Pay For Your Retirement? The Looming Crisis (1995)Putting Learning First: Governing and Managing the Schools for High Achievement (1994)Prescription for Progress: The Uruguay Round in the New Global Economy (1994)*From Promise to Progress: Towards a New Stage in U.S.-Japan Economic Relations (1994)U.S. Trade Policy Beyond The Uruguay Round (1994)In Our Best Interest: NAFTA and the New American Economy (1993)What Price Clean Air? A Market Approach to Energy and Environmental Policy (1993)Why Child Care Matters: Preparing Young Children For A More Productive America (1993)Restoring Prosperity: Budget Choices for Economic Growth (1992)The United States in the New Global Economy: A Rallier of Nations (1992)The Economy and National Defense: Adjusting to Cutbacks in the Post-Cold War Era (1991)Politics, Tax Cuts and the Peace Dividend (1991)The Unfinished Agenda: A New Vision for Child Development and Education (1991)

Foreign Investment in the United States: What Does It Signal? (1990)An America That Works: The Life-Cycle Approach to a Competitive Work Force (1990)Breaking New Ground in U.S. Trade Policy (1990)Battling America's Budget Deficits (1989)*Strengthening U.S.-Japan Economic Relations (1989)Who Should Be Liable? A Guide to Policy for Dealing with Risk (1989)Investing in America's Future: Challenges and Opportunities for Public Sector Economic

Policies (1988)Children in Need: Investment Strategies for the Educationally Disadvantaged (1987)Finance and Third World Economic Growth (1987)Reforming Health Care: A Market Prescription (1987)Work and Change: Labor Market Adjustment Policies in a Competitive World (1987)Leadership for Dynamic State Economies (1986)Investing in Our Children: Business and the Public Schools (1985)Fighting Federal Deficits: The Time for Hard Choices (1985)Strategy for U.S. Industrial Competitiveness (1984)Productivity Policy: Key to the Nation's Economic Future (1983)Energy Prices and Public Policy (1982)Public-Private Partnership: An Opportunity for Urban Communities (1982)Reforming Retirement Policies (1981)Transnational Corporations and Developing Countries: New Policies for a Changing

World Economy (1981)Stimulating Technological Progress (1980)Redefining Government's Role in the Market System (1979)Jobs for the Hard-to-Employ: New Directions for a Public-Private Partnership (1978)

CE Circulo de Empresarios

Madrid, Spain

CEDA Committee for Economic Development of Australia

Sydney, Australia

EVA Centre for Finnish Business and Policy Studies

Helsinki, Finland

FAE Forum de Administradores de Empresas

Lisbon, Portugal

FDE Belgian Enterprise Foundation

Brussels, Belgium

IDEP Institut de l’Entreprise

Paris, France

IW Institut der Deutschen Wirtschaft

Cologne, Germany

Keizai Doyukai

Tokyo, Japan

SMO Stichting Maatschappij en Onderneming

The Netherlands

SNS Studieförbundet Naringsliv och Samhälle

Stockholm, Sweden

CED COUNTERPART ORGANIZATIONS

Close relations exist between the Committee for Economic Development andindependent, nonpolitical research organizations in other countries. Such counter-part groups are composed of business executives and scholars and have objec-tives similar to those of CED, which they pursue by similarly objective methods.CED cooperates with these organizations on research and study projects ofcommon interest to the various countries concerned. This program has resultedin a number of joint policy statements involving such international matters asenergy, East-West trade, assistance to developing countries, and the reductionof nontariff barriers to trade.

Documents

From Protest to Progress - Committee for Economic Development · Library of Congress Cataloging-in-Publication Data Committee for Economic Development. Research and Policy Committee