Iraq, immigration and energy issues have consumed much of the congressional agenda so far this year, but another critical issue—free trade—is also looming large.
In May, the Bush administration and leaders of the Democratic-controlled Congress announced a trade agenda breakthrough that injected major momentum into free trade agreements with Peru, Panama, Colombia and South Korea.
But two other major trade-related sticking points—Trade Promotion Authority, which allows the president to negotiate fast track trade agreements, and an Andean preferences program—have remained unresolved.
Trade Promotion Authority (TPA) was set to expire at the end of June, but Gretchen Hamel, a spokeswoman for the Office of the U.S. Trade Representative, said the administration is optimistic that Congress would extend it—as it has for presidents since the 1970s. “We’re continuing to work with congressional leaders,” Hamel told The Washington Diplomat in June.
Fast track authority gives the president the ability to negotiate international trade deals that can be approved or rejected by Congress, but not amended or filibustered. If TPA is allowed to expire, many U.S. trade experts worry that the nation’s ability to negotiate trade deals—including the Doha trade talks, which are already in a precarious position—could be jeopardized.
Sallie James, a trade expert at the Cato Institute, which strongly advocates minimal government intervention and broad free trade policies, said it is important that Congress renew Trade Promotion Authority “as quickly as possible for the longest extent possible and with the fewest restrictions as possible.”
She said members of Congress who are beholden to small constituencies—such as a Michigan senator who represents the automobile industry—might be intensely interested in limiting free trade to save jobs in their district, but that might not be the best policy for the country as a whole. She argues that TPA allows the president to act with the entire nation’s interest in mind.
“The administration, by definition, takes a national view,” James said. “They are able to look at a trade deal and see what is good for the country as a whole. Congressmen tend to be a little more parochial in their interests, which is not always a good thing. They sometimes don’t see the benefits of trade—they just hear from tiny pockets of people who want to see their trade protection privileges renewed and enhanced.”
Susan Schwab, U.S. trade representative, said the agreements with South Korea, Columbia, Peru and Panama are a good start and can help to ensure the extension of the president’s Trade Promotion Authority.
“The administration and congressional leaders from both parties know that the sideline is no place for the United States of America to be when it comes to international trade,” Schwab said in May, when the renewed trade agenda was announced. “Prosperity at home and economic development opportunities overseas depend on U.S. leadership and engagement in the international marketplace.
“The new trade policy template opens the way for bipartisan work on Trade Promotion Authority,” she added. “This will ensure the creation of new economic opportunities for American farmers, ranchers, manufacturers, service providers, more choices for consumers, and help guarantee that the benefits of trade extend to all people.”
For the past 35 years, Congress has granted each U.S. president the authority to negotiate free trade agreements for congressional approval within a 45-day time frame. The president’s Trade Promotion Authority lapsed after the 1994 passage of the Uruguay Round legislation that established the World Trade Organization.
Years of lobbying by the U.S. Chamber of Commerce and others helped to get TPA restored in 2002, and since then, the United States has entered into free trade agreements with Chile, Morocco, Australia and Singapore, as well as the Central American-Dominican Republic Free Trade Agreement (CAFTA).
Two of the four previously mentioned pending bilateral trade agreements—Peru and Colombia—have already been signed but are awaiting ratification from Congress. The Peruvian deal, signed in December 2005, would lower tariffs for U.S. exports by an average of 12 percent. Many American trade experts see the deal as especially important given the rise of Venezuelan President Hugo Chávez and his anti-globalization policies. But the deal didn’t come easy.
The AFL-CIO and environmental groups have blasted the proposed agreement for not providing enough protections even though it has been altered to address their concerns. The amended agreement would meet International Labour Organization standards, but detractors say Peru does not meet the standards in practice.
The U.S. State Department has publicly claimed that Peruvian companies illegally prohibit workers from joining labor unions and circumvent healthcare and paid vacations by hiring workers informally. A State Department report also found that approximately 30,000 people, including children, are forced to work against their will, mostly in the logging industry. Nevertheless, supporters of the free trade agreement argue that the deal will pressure Peru to better enforce International Labour Organization laws.
Meanwhile, the trade agreement with Colombia was signed by the two governments in late November 2006. The multibillion-dollar deal is hardly a darling of the U.S. Congress, however. Legislators have complained that it doesn’t strengthen internationally negotiated protections against child labor, workplace discrimination or freedom to join unions. Some critics also contend that deals such as those negotiated with Peru and Colombia don’t offer U.S. companies any protections against unfair trade practices.
However, Colombia’s former ambassador in Washington, Andrés Pastrana, speaking at a Washington think tank late last year, said the deal would be good for both countries. “This agreement benefits both our nations, not only in advancing bilateral trade and investment, but in solidifying the partnership between our two countries in democracy, security and stability,” Pastrana said during a speech at the Center for American Progress, adding that the deal could slash unemployment in Colombia in half, from 10 percent to 5 percent.
The other two pending agreements—Panama and South Korea—have not yet been signed. The South Korean deal in particular would represent the most far-reaching trade pact since the North American Free Trade Agreement, linking the world’s largest and 11th-largest economies.
Hamel, the spokeswoman for the U.S. Trade Representative Office, said those two agreements are on the right track and should be signed by the publication of this article. “Right now, they intend to sign Panama and Korea at the end of the month,” Hamel told The Diplomat in mid-May.
New trade deals with Bolivia and Ecuador are also pending, but relations between Washington and these two countries have deteriorated since each elected leftist presidents.
A deal with Ecuador is also complicated by the country’s apparent reluctance to allow U.S. military surveillance aircraft to use an air base at Manta to detect and intercept drug-trafficking flights in the area. The agreement expires in 2009, and President Rafael Correa has taken the position that the air base agreement should not be renewed.
James, the CATO trade expert, encouraged the U.S. Congress to give the president the authority he needs to exercise trade deals around the globe. Otherwise, she predicted that countries will not want to negotiate with the United States.
“It’s almost a given that no country will enter into negotiations if the president doesn’t have Trade Promotion Authority,” she said, referring to the ability to reach an agreement that can’t be altered by Congress. “You can imagine how frustrating it would be to sit down to negotiate the deals, come to agreement, and send it to Congress only to have them pick it apart. No country—I don’t think—is going to want to negotiate with the United States unless there is trade promotion in place.”
She also cautioned that it is not good policy to forgo trade with nations that don’t adhere to U.S. ideals of workplace protections. “I don’t think it should be a precondition of trade,” she said. “I think it’s in America’s interest to engage with these countries and trade with them because that is the best known way of leading to development. Development and higher standards follow trade, not the other way around.”
About the Author
Michael Coleman is a contributing writer for The Washington Diplomat.