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Remembering NAFTA Gives Insight Into Why Trade Deals Are Kept Secret


The big news in government this week is trade and secrecy. President Obama's been pushing for fast-track authority to negotiate a big trade deal with Asia. Most of the negotiations for the Trans-Pacific Partnership have happened behind closed doors with opponents saying why all the secrecy? Stacy Vanek Smith from our Planet Money podcast takes a look at what really happens in the back rooms of a trade deal.

STACEY VANEK SMITH, BYLINE: They called themselves the Watergate 300. Negotiators from Mexico, Canada and the U.S. took over the Watergate Hotel in Washington, D.C. to finish NAFTA negotiations. It was 1992, late July. It was hot, humid. And they planned on wrapping everything up in two days.

ANDREW SHOYER: We just took over many, many hotel rooms. The hotel just pulled out all the furniture. We would just set up a circle of chairs.

SMITH: Andrew Shoyer was one of the Watergate 300.

SHOYER: You could walk down a hallway, and there are negotiations going on, really, in each room.

SMITH: In one room, people were arguing about sugar, in another room, cars, in another room, textiles. Ron Sorini was in that room. He was the chief textile negotiator for the U.S. He was 30 years old.

RON SORINI: I was nervous, right, but I knew that my issue could potentially be the one to derail the agreement.

SMITH: The issue threatening the multitrillion dollar trade deal?Wool suits from Canada.

Why were wool suits such a big deal? That seemed like - Canadian wool suits, I've never thought of Canada as a big suit maker.

SORINI: There is a company in Canada. I still think they exist. They are Peerless. They are starting to compete very intensely with Hart Schaffner Marx, all the major suit manufacturers.

SMITH: Canadian suit maker Peerless had figured something out. It could import wool from Italy duty free, make a suit, and sell it in the U.S. without paying taxes. U.S. suit makers, like Hart Schaffner Marx, were paying a 30 percent tariff to import wool from Italy. Because of this trade quirk, Canadian companies could sell suits in the U.S. for a lot less. Head Canadian negotiator Michael Wilson says one U.S. colleague summed it up this way.

MICHAEL WILSON: He said all I can find in my tailor shop in Washington were Canadian suits made in Montreal.

SMITH: Every day, Ron Sorini would sit in a little room drinking coffee and going through the latest draft of textile deals with the Canadians and the Mexicans.

Can you give me some of the tricks you used back then?

SORINI: I played a lot of poker (laughter), so I think that helped.

SMITH: One of Sorini's favorite poker moves - go ask your boss.

SORINI: You, too, as the negotiator reporting to the ministers, you don't want to bring everything to your ministers, so that puts a little pressure on you to be reasonable.

SMITH: Oh, it's like saying can I please speak with your supervisor (laughter)?

SORINI: Exactly. Right, exactly.

SMITH: Once they reached a deal, Sorini would walk down the hall to the U.S. minister.

SORINI: There would be congressional staff that were waiting outside to be briefed, hovering over lobbyists, you know, representing the iron spinners or Fairies fabric makers.

SMITH: Just like hanging out outside of the room?

SORINI: Right.

SMITH: The two days at the Watergate turned into two weeks, and the pressure was on. The president at the time, the first George Bush, really wanted to announce the deal at the Republican National Convention, and that was coming up in less than a week. But one thing still hadn't been settled - Canadian suits. So 30-year-old Ron Sorini found himself in a room with the head negotiators from all the countries, including Carla Hills with the U.S.

SORINI: I said I better not screw this up. Then, the minister from Canada turned to me and said, OK, so, Ron, what can we do on this issue? And Carla leaned over and whispered in my ear I'm not feeling very generous. Be very careful. And I knew what our upper limit was. So I went in and proposed something like halfway between.

SMITH: The Canadians wanted 3 million wool suits to come into the U.S. every year, duty-free. The U.S. wanted none. But the U.S. needed the deal done that day. So Sorini proposed 1.4 million.

SORINI: And I said, I'm sorry, that's all the room, I think, that we'd have to maneuver. And Carla said that's right. That's it. And we settled.

SMITH: To this day, Sorini laughs thinking about that bluff. But in the end, 1.4 million suits was enough. Peerless, the Canadian company, boomed. They now make the suits for Calvin Klein, DKNY, Ralph Lauren, Hugo Boss. Its American counterpart, Hart Schaffner Marx, declared bankruptcy in 2012, and Peerless bought it. Stacy Vanek Smith, NPR News. Transcript provided by NPR, Copyright NPR.

Stacey Vanek Smith is the co-host of NPR's The Indicator from Planet Money. She's also a correspondent for Planet Money, where she covers business and economics. In this role, Smith has followed economic stories down the muddy back roads of Oklahoma to buy 100 barrels of oil; she's traveled to Pune, India, to track down the man who pitched the country's dramatic currency devaluation to the prime minister; and she's spoken with a North Korean woman who made a small fortune smuggling artificial sweetener in from China.