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For the past two decades, trade policy has been high on the American political agenda, thanks to the growing integration of the United States into the global economy and the wealth of debate this development has sparked. Although scholars have explored many aspects of U.S. trade policy, there has been little study of the role played by party politics. With Trading Blows, James Shoch fills that gap.

Shoch offers detailed case studies of almost all of the major trade issues of the Reagan, Bush, and Clinton eras, including administrative and legislative efforts to curb auto, steel, and other imports and to open up markets in Japan and elsewhere, as well as free-trade initiatives such as the North American Free Trade Agreement (NAFTA), the General Agreement on Tariffs and Trade (GATT) treaty that concluded the Uruguay Round of international trade talks, the extension of presidential fast-track trade negotiating authority, and the approval of permanent normal trade relations with China. In so doing, he explains the complex patterns of party competition over U.S. trade policy since 1980 and demonstrates the significant impact that party politics has had on the nation's recent trade policy decisions.

David W. Brady

The central thesis of this original and important work is that with the advance of globalization since 1980, trade policy has moved to the forefront of American politics, resulting in an increased role for parties in trade conflicts. Constituency pressure, personal ideology, and partisan electoral ambition have all contributed to heightened partisanship over trade issues.

Louis Ferleger

With this volume, Shoch has greatly enriched our understanding of both the dynamics of American party competition and the nature of the U.S. foreign economic policy process.

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During the quarter-century-long "golden age" that followed World War II, the U.S. position as the world's dominant economic power allowed a succession of American governments to take the lead in promoting multilateral trade liberalization. But by the late 1960s, American firms found themselves increasingly challenged in domestic and global markets by Japanese and Western European producers, whose war-devastated home economies had been rebuilt. The resulting protectionist pressures were largely contained in the 1970s by the decline in the value of the dollar in the early part of the decade. But the soaring dollar of the first half of the 1980s combined with preexisting problems of competitiveness to produce an explosion of the U.S. trade deficit. Imports surged, especially from Japan and other newly industrializing East Asian countries, and exports sagged, contributing to the erosion of the nation's core mass production industries. This prompted widespread fears of "deindustrialization" and new demands for a tougher trade policy.

Much of this pressure in the early and mid-1980s was directed toward curbing the rising tide of imports. While various bills to limit the import of specific products either never passed both houses of Congress or were vetoed by President Ronald Reagan, a number of significant "voluntary restraint" and other agreements were reached with foreign countries to slow the import of cars, steel, textiles, machine tools, semiconductors, and lumber.

During the second half of the 1980s and continuing into the following decade, trade-related stress spread from the nation's basic industries to formerly competitive high-technology sectors, due in part to the inability of high-tech firms to penetrate the relatively closed Japanese market. The focus of U.S. trade policy now shifted toward the export side, as the government increasingly resorted to the practice of "aggressive unilateralism" or "aggressive reciprocity." Washington tried to pry open closed foreign markets through the threatened retaliatory imposition of U.S. import barriers if negotiations failed to convince other countries to reduce their own barriers. This principle was most famously embodied in the "Super 301" provision of the Omnibus Trade and Competitiveness Act of 1988. Under Super 301, Japan—whose growing economic might provoked considerable public and governmental anxiety—was cited in 1989 by President George Bush for its failure to open its markets for a number of goods to foreign producers. Such pressure on Japan, especially for access to its auto and auto parts markets, continued during the first three years of the Clinton administration, which during this time pursued what was termed a "results-oriented" trade policy.

Due both to the post-1985 fall in the value of the dollar and the restructuring and revived competitiveness of many American firms, the U.S. trade deficit declined in the late 1980s and early 1990s. As a result, U.S. trade policy saw another partial shift of focus, this time toward further trade (and investment) liberalization via the negotiation of regional and multilateral agreements, often with low-wage countries, which sparked furious battles over what was now widely called economic "globalization." Following an intense congressional struggle, in late 1993 the Clinton administration, strongly backed by internationally oriented business interests, won approval of the North American Free Trade Agreement (NAFTA) and then more easily a year later achieved ratification of a new General Agreement on Tariffs and Trade (GATT) treaty.

After the approval of the GATT deal, however, and with the trade deficit rising again, progress toward further trade liberalization stalled. In particular, two attempts to renew Clinton's "fast-track" negotiating authority—which require that free-trade agreements be awarded quick up-or-down votes in Congress, without amendments that could unhinge such pacts—were defeated in the House of Representatives in 1997 and 1998.

But in yet another turnaround that appeared to restore some momentum to the trade liberalization process, after another tough fight in the House, Congress in 2000 approved permanent normal trade relations (PNTR) with China,[2] a step thought to be necessary if American firms were to receive the wide range of market-opening and investment concessions made by Beijing in a recent agreement with the United States in order to get into the World Trade Organization (WTO).

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Trading Blows
Party Competition and U.S. Trade Policy in a Globalizing Era

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By James Shoch

University of North Carolina Press

Copyright © 2001 The University of North Carolina Press.
All rights reserved.
ISBN: 0807826464

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Introduction

Since the late 1970s, and for the third time in the past one hundred years, the world has witnessed a major wave of economic "globalization"—of trade, production, and finance.[1] During this period, as both imports and exports grew as proportions of American national wealth creation, trade policy in particular was often forced to the top of the daily economic headlines and to the forefront of American political debate.

During the quarter-century-long "golden age" that followed World War II, the U.S. position as the world's dominant economic power allowed a succession of American governments to take the lead in promoting multilateral trade liberalization. But by the late 1960s, American firms found themselves increasingly challenged in domestic and global markets by Japanese and Western European producers, whose war-devastated home economies had been rebuilt. The resulting protectionist pressures were largely contained in the 1970s by the decline in the value of the dollar in the early part of the decade. But the soaring dollar of the first half of the 1980s combined with preexisting problems of competitiveness to produce an explosion of the U.S. trade deficit. Imports surged, especially from Japan and other newly industrializing East Asian countries, and exports sagged, contributing to the erosion of the nation's core mass production industries. This prompted widespread fears of "deindustrialization" and new demands for a tougher trade policy.

Much of this pressure in the early and mid-1980s was directed toward curbing the rising tide of imports. While various bills to limit the import of specific products either never passed both houses of Congress or were vetoed by President Ronald Reagan, a number of significant "voluntary restraint" and other agreements were reached with foreign countries to slow the import of cars, steel, textiles, machine tools, semiconductors, and lumber.

During the second half of the 1980s and continuing into the following decade, trade-related stress spread from the nation's basic industries to formerly competitive high-technology sectors, due in part to the inability of high-tech firms to penetrate the relatively closed Japanese market. The focus of U.S. trade policy now shifted toward the export side, as the government increasingly resorted to the practice of "aggressive unilateralism" or "aggressive reciprocity." Washington tried to pry open closed foreign markets through the threatened retaliatory imposition of U.S. import barriers if negotiations failed to convince other countries to reduce their own barriers. This principle was most famously embodied in the "Super 301" provision of the Omnibus Trade and Competitiveness Act of 1988. Under Super 301, Japan—whose growing economic might provoked considerable public and governmental anxiety—was cited in 1989 by President George Bush for its failure to open its markets for a number of goods to foreign producers. Such pressure on Japan, especially for access to its auto and auto parts markets, continued during the first three years of the Clinton administration, which during this time pursued what was termed a "results-oriented" trade policy.

Due both to the post-1985 fall in the value of the dollar and the restructuring and revived competitiveness of many American firms, the U.S. trade deficit declined in the late 1980s and early 1990s. As a result, U.S. trade policy saw another partial shift of focus, this time toward further trade (and investment) liberalization via the negotiation of regional and multilateral agreements, often with low-wage countries, which sparked furious battles over what was now widely called economic "globalization." Following an intense congressional struggle, in late 1993 the Clinton administration, strongly backed by internationally oriented business interests, won approval of the North American Free Trade Agreement (NAFTA) and then more easily a year later achieved ratification of a new General Agreement on Tariffs and Trade (GATT) treaty.

After the approval of the GATT deal, however, and with the trade deficit rising again, progress toward further trade liberalization stalled. In particular, two attempts to renew Clinton's "fast-track" negotiating authority—which require that free-trade agreements be awarded quick up-or-down votes in Congress, without amendments that could unhinge such pacts—were defeated in the House of Representatives in 1997 and 1998.

But in yet another turnaround that appeared to restore some momentum to the trade liberalization process, after another tough fight in the House, Congress in 2000 approved permanent normal trade relations (PNTR) with China,[2] a step thought to be necessary if American firms were to receive the wide range of market-opening and investment concessions made by Beijing in a recent agreement with the United States in order to get into the World Trade Organization (WTO).

The Changing Politics of Trade

The politics surrounding many of these issues has differed in important ways from that characteristic of trade policy-making before 1980. From World War II through the 1970s, U.S. trade policy was largely the preserve of a relative handful of affected business interests, executive branch officials, and congressional committee leaders. After 1980, however, trade was drawn into the realm of highly public "macropolitics," as conflict over import curbs, unilateral market-opening actions, fast-track proposals, and free-trade agreements often engaged the energies of the president, the entire Congress, a wide range of interest groups, and even sectors of the general electorate.

Most important for our purposes here, trade policy also became more partisan after 1980. Between the Civil War and the Great Depression, trade was the principal issue dividing Democrats from Republicans. Following the experiences of depression, world war, cold war, and postwar prosperity, however, a bipartisan consensus in support of liberal trade gradually emerged, especially at the presidential level, that lasted through the 1960s. But beginning in the early 1970s and notably in the 1980s, trade once again became the subject of intense partisan contention.

Analysts have identified a range of causal factors in determining recent American trade policy. International relations scholars have focused on "structural" or "systemic" factors, including the relative size and productivity of competing national economies, the international division of labor, interstate bargaining, international regimes and norms, and international security structures. Other observers, recognizing the limitations of such approaches, which treat the state as a unitary actor, have called for a "return to domestic factors" or the opening of the "black box" of domestic politics.[3] Thus, they have explored the influence in the trade policy-making process of economic interest groups and coalitions, the autonomy of state actors, the structure of electoral and state institutions, economic ideas, and even public or voter opinion.

Yet relatively little attention has been paid to the role of political parties.[4] This perhaps is not surprising, since until fairly recently most scholars have understood American parties in this century to be in secular, irreversible decline in the electorate, as organizations, and in government, while trade has been viewed as the preeminent nonpartisan issue since the end of World War II. The scant discussion of this topic that has occurred suggests that party competition has had little impact on U.S. trade policy choices or outputs since 1980.

This book is intended to fill the current gap in scholarship by examining the nature, determinants, and impact of party competition on U.S. trade policy during the past two decades. It joins with other recent works in arguing that although parties may have grown weaker in some respects—in their ability to recruit candidates and to mobilize blocs of electoral support and in the strength of voters' partisan attachments—in other respects, parties have actually grown stronger in the past quarter century; party coalitions have become more socially and ideologically distinctive; the parties in government, or at least in Congress, have become more polarized; and national party organizations, again especially in Congress, have become more active and effective.[5]

Party Trade Policy Positions and Their Determinants

One of the reasons for the academic neglect of this subject may be that the dynamics of party competition over trade in the United States in the 1980s and 1990s have been disconcertingly diverse and complex. This has produced considerable disagreement among those few scholars who have studied the topic.

With respect to the evolution of party positions on trade, some scholars have been impressed by the degree to which U.S. trade policy since 1980 has remained relatively bipartisan in nature.[6] Noting opposition to product-specific protectionism and support for the NAFTA, GATT, and China accords by Reagan, Bush, and Clinton, many writers argue that U.S. presidents regardless of party are almost always free traders, due to their diverse national constituencies and their foreign policy responsibilities. Other analysts see presidential selection imperatives sometimes forcing both Democratic and Republican presidents to support protectionist or fair-trade policies, the latter intended to combat foreign "dumping,"[7] subsidies, and nontariff barriers (NTBs) to imports.[8]

Various authors have also noted the substantial support in Congress by both parties for the 1984 Trade Act, for the final version of the landmark 1988 Trade Act, for the 1988 Canada-U.S. Free Trade Agreement, for the 1994 GATT agreement, and at least in the Senate for PNTR with China, as well as for more aggressive executive action on imports and exports alike. Some are struck by the extent to which Republican as well as Democratic lawmakers continue to back an open, liberal trading order, due either to (1) the persisting "lessons" of the infamous Smoot-Hawley Tariff Act of 1930: that protectionism produces trade wars, economic collapse, and the repudiation of the party it is associated with,[9] or (2) pressure from internationally oriented business interests on both sides of the aisle.[10] Other analysts take note of growing bipartisan support for tougher trade policies and slowed trade liberalization.[11] In either case, ideological commitments and constituency pressures are said to have influenced legislators' trade policy preferences without respect to their party membership.

Still other scholars have underlined the significance of intraparty divisions and cross-partisan coalitions on trade, which are said to have regional, ideological, or institutional sources.[12] These splits and coalitions have been observed in congressional voting on commodity-specific legislation like the various textile quota bills of the 1980s or on George Bush's 1991 fast-track bill and the NAFTA, GATT, and China agreements, during the last four presidential primary campaigns, and between the pro-free-trade presidential and the more protectionist-leaning congressional wings of each party.

Against these views, although in agreement with still other authors, I will argue that since 1980 there has been a significant differentiation of the parties' trade policy stances, albeit much more in Congress and especially in the House, than at the executive level.[13] In Congress, the Democrats have fought for tougher fair-trade and even protectionist policies and against various trade liberalization initiatives, while the Republicans have more consistently backed free trade. Fairly sharp partisan divisions have been manifested, for example, during fights over the auto "domestic content" bill in 1982, various drafts of the Omnibus Trade and Competitiveness Act of 1988, and the 1997 and 1998 fast-track bills. Even voting on product-specific quota legislation and on the 1991 fast-track bill, the NAFTA agreement, and the PNTR bill was at least partially partisan in nature.[14]

Democratic and Republican presidents and White House candidates have similarly differed over trade, both on the campaign trail and in office, although such differences have been less sharp than those between the congressional parties. Democrat Bill Clinton initially assumed a tougher stance toward Japan than had his Republican predecessors Ronald Reagan and George Bush. The Clinton administration also helped pass a North American Free Trade Agreement that was accompanied by stronger labor and environmental side agreements than Reagan or Bush would have accepted and pushed (unsuccessfully) to add a fast-track provision with labor and environmental standards to the 1994 GATT implementing bill. Finally, the Clinton administration slowed its drive for further trade liberalization in 1995-96 and backed away from launching a new round of international trade negotiations at a WTO meeting in Seattle in late 1999.

The sources of this new partisan division on trade, one that has actually involved a reversal of the parties' historic positions, lie in constituency pressures, personal ideologies, and partisan electoral ambitions. Before the 1930s, the Democrats had been the party of southern agricultural export interests and thus also of low tariffs, a stance the party continued to adhere to into the 1960s. But shortly thereafter and intensifying in the 1980s, the Democrats embraced an "economic nationalist" or even a protectionist position due to pressure from their core labor constituents, their ideological commitment to an active government role in the economy, and, during the Reagan-Bush years, their hopes that trade could work as a popular campaign issue to help their party strengthen its position in Congress and regain control of the White House. As for the Republicans, before the depression they had been the party of northern manufacturers and high protective tariffs. Following World War II, however, the Republicans became more closely tied to internationally oriented business interests and middle-class consumers and more ideologically committed to a more limited government economic role. Thus gradually since about 1950 and more decisively since 1970, the GOP has emerged as the party of free trade.

I would certainly not want to deny that the past two decades have seen important instances of bipartisanship on and intraparty conflict over trade policy. Instead, I will reconcile various apparently contradictory empirical findings by arguing first that for reasons of constituency, ideology, and campaign issue creation, the main tendency in Congress with respect to trade policy, again mainly in the House, has been toward partisan differentiation. The degree of differentiation has varied, depending on (1) the distributive characteristics of different policy proposals, and particularly the degree to which such proposals divide capital and labor, the core constituencies of the Republican and Democratic parties respectively, (2) the balance of business and labor influences inside both parties, (3) the salience of the proposals under debate to key swing constituencies, (4) the ideological composition of the two congressional party caucuses, (5) the propensity of members of the president's party to support, and of opposition party members to oppose, the president's position, (6) the related inclination of the president and members of the two congressional parties either to compromise or to pursue "strategies of disagreement," (7) the lobbying efforts of the president and congressional party leaders, and, sometimes, (8) whether partisan control of the White House and the two houses of Congress is unified or divided.

I will also contend that although there has been some partisan differentiation over trade policy at the executive level, this has been moderated on the one hand by the president's role as representative of the interests of the nation as a whole, which inclines him toward free trade, and on the other hand by electorally driven pressures on presidents of both parties to sometimes support protectionism or more often fair trade.

The Impact of Parties on Trade Policy Choices and Outputs

The preceding paragraphs have discussed only the determinants of party trade policy positions. In the American system of separated powers, party influence on trade policies themselves is institutionally mediated by the interaction between Congress and the executive. Here again, scholars disagree over the extent to which parties matter to actual trade policy choices and outputs.

Most of those authors who see no—or only rhetorical—differences in the parties' positions on trade or who mainly see intraparty divisions naturally also find no partisan policy effects.[15] Other analysts, perceiving more significant differences between the parties on trade, although usually only in Congress, have explored whether it matters to the substance of trade policies if partisan control of Congress and the executive is unified or divided. Some argue that divided government produces tougher or more restrictive policies than does unified government, while others find no consistent effects.[16]

In the following chapters I will both argue and demonstrate that since 1980 party competition has in fact significantly affected U.S. trade policy choices and outputs, albeit in different ways under varying determinant conditions. More specifically, the nature and magnitude of these partisan effects have depended on (1) the preferences of the president (not always for unmitigated free trade), (2) the preferences, size, and internal cohesion of the congressional party caucuses, (3) the willingness of the president and the congressional parties to compromise, and, under certain conditions, (4) whether control of government is unified or divided.

I will show first that under the conditions of divided government that prevailed during the Reagan-Bush years, strategic interaction between the parties produced a moderate but real toughening of U.S. trade policy. With the unraveling of the New Deal political order during the "stagflation" crisis of the 1970s and the subsequent explosion of the U.S. trade deficit in the early 1980s,[17] the Democrats embraced elements of an "economic nationalist" accumulation strategy to improve their sagging political fortunes. During this period Democrats sought both to defend their core labor constituents and, via a tactic I label "heresthetics," to exploit the trade issue for still wider partisan advantage among key swing voters and groups, including blue-collar "Reagan Democrats" and even some business interests, by raising the relative salience of the issue on the nation's political agenda. Toward these ends, Democratic presidential candidates pressed the trade issue on the hustings, while congressional Democrats used their control of one or both houses of Congress to introduce and actually pass popular trade bills.

Through a process of what I call "policy contagion," this Democratic pressure in turn forced reluctant Republican presidents to strategically retreat from their normal free-trade commitments. Thus, Reagan signed the Omnibus Trade and Competitiveness Act of 1988, and both he and Bush took import-curbing or market-opening administrative actions to reduce GOP electoral vulnerability and quell party-amplified pressures for still more protectionist actions.

The return of unified Democratic government during the first two years of Bill Clinton's presidency also had real if complex effects on the conduct of U.S. trade policy, as Clinton—"triangulating" or "tacking" between free and fair trade—pursued "export-led growth" as a central element of an activist new accumulation strategy that he hoped would revive the Democrats' fortunes. In interaction with the Democrat-controlled Congress, Clinton's induced and personal preferences produced trade policies that were paradoxically both more aggressive and more liberal than were the policies that the Reagan and Bush administrations pursued under divided government or that a second Bush administration could have followed had Bush been reelected.

On the one hand, Clinton launched a "results-oriented" Japan trade policy, intended to pry open Tokyo's unfairly closed markets, that at least from 1993 to 1995 was more aggressive than the one that either Reagan or Bush had conducted. Not a simon-pure free trader, Clinton was prompted to adopt such an approach by several party-related factors: the preferences of his own core labor backers along with those of the blue-collar swing voters who had supported Ross Perot or even George Bush, his desire to strengthen his relations with liberal congressional Democrats, his ideological commitments to an active government, and his personal belief that Japan was a "different" kind of industrial power.

On the other hand, in successfully pushing NAFTA (and perhaps the GATT treaty) through Congress, Clinton, presiding over a unified Democratic government, won a victory for trade liberalization that a Republican president at that time would probably have been unable to engineer. His tough Japan policy notwithstanding, with his presidential responsibility for the "national interest," Clinton was at heart a free trader, if not an unadulterated one. But as a Democratic president, and with the help of internationally oriented business interests, he was able to persuade at least some normally protectionist members of his congressional party, no longer inclined to posture against him as they had against his GOP predecessors, to join the Republicans and pro-trade New Democrats to provide the critical support necessary to pass NAFTA. This was a feat that neither Reagan nor Bush, facing the same Democrat-controlled Congress, would likely have been able to accomplish.

Also important, the NAFTA struggle continued a pattern begun during the 1991 fast-track fight and that would persist throughout the Clinton years in which the shifting fortunes of trade liberalization initiatives would be largely determined by the preferences and level of cohesion of House Democrats.

Following the Republican takeover of Congress in 1994, partisan factors continued to influence the conduct of U.S. trade policy. The shift to an "inverted" form of divided government did not initially strengthen support for free trade, as might have been expected with Republicans in charge of both the House and the Senate.

In 1995-96, looking toward the upcoming presidential election, Clinton hoped to win back those working-class Democrats and Perot voters who, disgusted by his strong support for the NAFTA and GATT accords, had either sat out the 1994 elections or voted for Republican candidates. The White House therefore escalated the U.S. dispute with Japan in the first half of 1995 and postponed further trade liberalization efforts until after the election.

With his reelection safely secured, Clinton then tried to restart the trade liberalization process with Republican support, but these efforts were blocked by mainly Democratic opposition. In late 1997 House Democrats, joined by a minority bloc of conservative Republican nationalists, united to defeat an administration-sponsored bill to renew Clinton's fast-track negotiating authority that contained no commitment to the inclusion of core international labor and environmental standards in any new free-trade agreements. The solid Democratic opposition was due to the loss of a substantial number of New Democratic seats in the 1994 elections, weak White House and business lobbying efforts, and above all the strong campaign by organized labor against the measure. A year later House Democrats similarly turned back another GOP-sponsored fast-track bill.

Toward the end of his presidency, Bill Clinton, hoping to lighten the stain of impeachment and burnish his historical legacy, launched a final, two-pronged offensive on behalf of free trade. First, in late 1999 he traveled to a WTO meeting in Seattle to start a new round of international trade negotiations. The meeting famously collapsed, again for mostly partisan reasons. With little business enthusiasm for a new round and organized labor still vociferously opposed to his trade agenda, Clinton, anxious to secure labor's support for the presidential campaign of his vice president, Al Gore, chose to blow up the meeting by urging the WTO to seriously address the issue of international labor standards, an idea strongly opposed by developing nations.

The next year, however, Clinton pushed hard on a trade issue that he viewed as sufficiently critical to his overall legacy that he was again willing to provoke a major split in his own party and risk Al Gore's presidential hopes: congressional approval of "permanent normal trade relations" with China. After a battle royal, PNTR was approved in the House thanks to the expanded ranks and activities of the New Democrats, an energetic administration lobbying effort, and especially the massive campaign waged by the business community. Together these forces overwhelmed a somewhat divided labor movement and fractured the Democratic caucus, producing enough Democratic support to pass the PNTR bill (the same measure was later easily passed by the Senate). Yet another restructuring of partisan forces gave new life, if perhaps only temporarily, to the process of trade liberalization.

In the rest of this book I will expand on and substantiate these arguments and claims. In the next chapter I provide a synthetic theoretical framework to help understand the dynamics and impact of party competition over trade policy. I then briefly apply this framework to the history of U.S. trade policy from the Civil War to Ronald Reagan's election as president in 1980. The next three chapters examine trade policy-making during the Reagan era, emphasizing the role of policy contagion in producing a "strategic retreat" from free trade. A similar analysis is then presented of the politics of trade policy during George Bush's presidency. Three chapters then follow on Bill Clinton's triangulations between free and fair trade and the recent congressional battles over trade liberalization. A final chapter summarizes and draws conclusions from the work.

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Excerpted from Trading Blows by James Shoch. Copyright © 2001 by The University of North Carolina Press. Excerpted by permission. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.

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