In an interview with the Association of Women in International Trade, Amb. Hills shares her thoughts about the opportunities and challenges presented by the NAFTA renegotiation, describes the bipartisan approaches that characterized her career, and sheds light on her “velvet crowbar” approach to commercial diplomacy.
You were the lead U.S. negotiator of the original NAFTA, whose renegotiation is now dominating the trade dialogue in Washington. You have been outspoken in your calls to protect the original NAFTA’s gains while pursuing updates to the agreement to reflect the changes that we have seen in trade over the past two-plus decades. What do you see as the biggest opportunities and challenges for these negotiations?
The biggest opportunities in renegotiating the NAFTA also raise substantial challenges. We need to remember that by linking the economies of Canada, Mexico and the United States we created a $19 trillion market with 490 million consumers. All three nations benefited from the removal of tariffs on industrial products and most agricultural products, the opening of a broad range of services, the protection of intellectual property, and a reliable mechanism for resolving differences. Since the agreement was implemented, intraregional trade is up five-fold making North America the most competitive region in the world. Last year more than $1 trillion of goods were traded in North America. America has benefited substantially. Our manufacturing is up 40 percent since we signed the NAFTA, and today 14 million U.S. jobs depend on U.S. trade with our two neighbors. Today one-third of our global trade is with our NAFTA partners. Canada is our largest export market, and Mexico is our second. We sell more to Mexico than to all the rest of Latin America. We don’t simply sell to each other, we make things together. Forty percent of what we import from Mexico consists of U.S. content; it is 25 percent from Canada. By comparison, U.S. content in goods imported from China is 4 percent and from Japan 2 percent.
One challenge is to maintain these benefits while adopting rules to cover digital flows, e-commerce, and telecommunications that are shaping the 21st century economy. Another is that in the nearly twenty-five years since the NAFTA took effect, Mexico has opened its telecommunications and energy markets. These issues plus environment and labor, two subjects that were covered by side agreements, should be brought within NAFTA. Such changes would ensure that the three North American partners could take full advantage of 21st century opportunities. Eroding the benefits that we established in the 20th century, and/or ignoring the 21st century opportunities would be tragic. Reducing the collaboration we have established with our neighbors on security matters, which was built on our strong economic relationship, would compound the tragedy. Much is at stake, and our biggest challenge is to explain to Americans more effectively why it is critical both to keep and build on the benefits of the NAFTA.
You served in two Cabinet-level roles, as Secretary of Housing and Urban Development and as U.S. Trade Representative. In both roles, you and the Administration were working with a Congress led by the other party. Could you talk a bit about collaborative policy efforts during those periods and how you worked across party lines to get things accomplished?
Both times I served in the Cabinet, first as Secretary of Housing and Urban Development (HUD) in President Ford’s administration and second as U.S. Trade Representative in President G. H. W. Bush’s administration (both Republicans), the Democrats held a strong majority in both houses of Congress. The collegiality across party lines was far greater than exists today. President Ford served 24 years in the Congress before his congressional colleagues selected him to replace Vice President Agnew. He was well liked and highly respected on both sides of the political aisle. After becoming President he maintained his relationship with members, playing golf with Speaker of the House Tip O’Neill and having meals with former colleagues in both parties. Similarly in the Bush-41 administration, the relationships were strong regardless of party. President Bush had also served in Congress and often had lunch with former colleagues who were Democrats.
My own approach was to work with members, Democrat and Republican, who could help us get the job done. I recall well while at HUD, Congress passed an Emergency Housing Bill that President Ford vetoed. The bill would have increased inflation and unemployment which were already extremely high. I worked with members of Congress including Congressman Ashley, a Democrat, who publicly said that the bill as drafted “was a turkey that would not fly”. Within a week we had a redrafted bill back on President Ford’s desk which he approved and signed at a ceremony in the Rose Garden to which he invited a number of Democratic members. Similarly as U.S. Trade Representative, I thought it essential to work closely with members of Congress, regardless of party, to secure Trade Promotion Authority (then known as “fast track”) before beginning any trade negotiation, and to regularly brief members in executive session on our progress. Chairman of Ways and Means, Dan Rostenkowski and Sam Gibbons, both long serving Democrats, were extremely helpful in arranging those executive sessions, and it made a real difference.
They used to say that you opened markets with a “velvet crowbar.” Do you agree with that characterization and what does it mean to you?
My job was to open markets beyond our borders that would provide opportunity for our businesses, jobs for our workers, and greater choice for our consumers. Beyond the well documented economic advantages, we recognized that trade reduced poverty. Dr. William Cline, a respected economist at the Peterson Institute for International Economics, calculates that a percentage increase in trade of a developing country reduces its poverty by an equivalent percentage. We also recognized that poverty reduction enhances our security for poor countries often cannot secure their borders and can become havens for international crime.
We understood that every government confronts political as well as economic challenges in reducing market restrictions. To persuade nations, rich and poor, to open their markets requires listening and understanding their challenges and striving to find paths that lead to win-win outcomes. Hence the “velvet crowbar” came about: seek to pry open the market, steadily, collaboratively, and consistently, without leaving harmful scars. That approach guaranteed the best results on all sides.