WASHINGTON — The evolutionary course toward greater trade liberalization in U.S. trade policy is expected to yield more regional and sectoral agreements in the next decade rather than any landmark global accords.
Apparel brands and retailers have significant exposure to shifts in U.S. and global trade policy, with $81 billion in imports in the balance. The pursuit of more regional deals would expand export markets for everything from T-shirts to pants, and mean more duty free benefits for a wide range of importers and foreign suppliers.
It could also result in more trouble for the shrinking domestic textile industry, which has waged many trade battles against several administrations and lawmakers to stop the tide of free trade deals it claims can erode their competitiveness.
“What you have seen in trade policy literally since 1947 in every administration, Democrat or Republican, and regardless of campaign rhetoric, is a continuation of market opening and greater global economic integration,” said Charlene Barshefsky, U.S. Trade Representative in the Clinton administration from 1997 to 2001 and now a partner at the Wilmer Hale law firm in Washington. “Now, different administrations place an emphasis on different programs, may have different priorities and may move a bit faster or slower, but the trend line is unmistakable and that is toward freer trade.”
Barshefsky said the same holds true for President Obama, who talked tough on international trade and its impact on U.S. jobs during the campaign and early days of his presidency. But he has since launched an initiative to double U.S. exports in five years and also said he will move forward on a regional Asia-Pacific trade agreement, known as the “Trade Pacific Partnership.”
Trade is linked inextricably with U.S. foreign policy goals and several past administrations have used it in an attempt to bolster fledgling democracies, stabilize war torn regions, provide aid to countries recovering from disasters and build stronger ties with allies. Despite the strong antitrade talk often heard on the campaign trail from Democratic candidates, including Obama, U.S. trade policy has slowly liberalized over the years and trade experts expect that trend to continue in the next decade.
Trade veterans say Obama’s commitment to the TPP agreement signals a new chapter in U.S. trade policy and possibly a new model for trade negotiations. Obama said his administration will work to shape a broader agreement out of an existing TPP free trade area that was forged in 2006 between Singapore, Brunei Darussalam, New Zealand and Chile. The U.S., Australia, Peru and Vietnam have expressed an interest in joining the agreement. Negotiations began this month.
“I think the intent is to drive a closer relationship with the Asia-Pacific region and I do think the announcement of this focus is a positive sign for trade policy generally,” said Barshefsky.
However, she said it will be a “complicated undertaking” and she does not expect to see an agreement emerge for the next several years “at a minimum.”
Thea Lee, deputy chief of staff for the AFL-CIO, said the TPP represents a new regional trade model that is open-ended and allows countries to dock on or join once they have accepted a certain set of criteria and conditions.
“Going step by step with one country at a time is pretty time consuming, yet with the multilateral agenda [at the World Trade Organization] you need to reach a consensus with 150 countries, which also seems out of reach,” Lee said. “A plurilateral agreement,” which is a treaty negotiated in one sector such as telecommunications among a core group of countries that have a stake in it, “is the answer to both problems if it works.”
Some economists and trade veterans said regional and “plurilateral” agreements could replace the WTO rounds of broader global trade negotiations.
“I have spent enough time on multilateral agreements to have become skeptical about the ability to make big progress with 150 countries, which doesn’t mean we will not close a Doha deal,” said Uri Dadush, director of the Carnegie International Economics program at the Carnegie Endowment for International Peace.
The Doha Round of global trade talks, named after the city in Qatar in which they were launched in November 2001, has been mired in disputes between rich and poor nations over agriculture subsidies.
“I do think regionals have more of a chance and I also think that in a post-Doha world it will almost inevitably be looking at a WTO which promotes more limited, or plurilateral, agreements in specific sectors,” said Dadush.
Barshefsky, who was involved in forging a sectoral agreement covering telecommunications in the Nineties, said, “Sectoral agreements are highly focused and therefore timely, which is a key here and I believe should and could be a trend recaptured from the 1990s.”
Many anticipate some sort of global trade accord to come from the Doha Round, although it could take another five to 10 years of negotiations. The prospects for enactment of three pending trade agreements with Colombia, South Korea and Panama, negotiated by the Bush administration, are expected to improve as the economy strengthens.
The U.S. has continued a slow drum beat toward market opening and tariff dropping agreements for four decades under Democratic and Republican control of Congress, the White House and sometimes both branches of government. The U.S. has enacted 10 bilateral trade deals, with three more pending, two regional trade pacts and five trade preference programs.
The administration of President George W. Bush was the most prolific in forging bilateral trade accords. His administration negotiated seven of the country’s 10 bilateral free trade agreements, trade pacts with Colombia, Panama and South Korea that have not passed Congress, and one regional trade deal, the Central America Free Trade Agreement.
The state of the economy and job market in the U.S. and globally will factor heavily in the direction U.S. trade policy takes. Even a change in parties from Democrats to Republicans, which has generally been more free-trade oriented in recent times, in the White House or Congress in future elections will not necessarily mean more aggressive pursuit of trade.
Some experts feel the skepticism about the value of trade and globalization will go down only when unemployment decreases. The pace of job losses has slowed considerably in the past few months and the unemployment rate in the U.S. is at 9.7 percent, which is still considered alarmingly high by economists.
“We need a stronger job market to have progress on trade,” said Phillip Swagel, a visiting professor at the McDonough School of Business at Georgetown University, and director of the school’s Center for Financial Institutions, Policy and Governance. “If the job market is strong in 2012, then the next president will move forward on trade. That is the deciding factor.”
Stephanie Lester, vice president of international trade at the Retail Industry Leaders Association, said she expects trade initiatives to remain flat in the next two years.
“The optimist in me would like to think we could implement the Panama free trade agreement, but I’m not sure how we get to where we need to be with Colombia and South Korea,” Lester said. “Not for a lack of trying or importance, but I think the politics will not align to allow those [two] agreements to go forward.”
Lester predicts “small achievements” on trade in the short term, such as increased trade aid for Haiti, which along with sub-Saharan Africa, the Caribbean and four Andean countries, has special trade preference programs with the U.S. that provide duty free benefits on products imported to the U.S. Most trade analysts said that trend will continue, although some changes could be made to the existing preference programs.
“I believe these programs…will be retained and I don’t see a trend against them,” said Barshefsky. “The big question is do you begin graduating countries from programs like India and Brazil that remain large beneficiaries under [Generalized System of Preferences] but might not still need assistance.”
Barshefsky also said the hope is that the U.S. will look to “enhance” its focus beyond least developed countries and “look at reform countries in greater Muslim Middle East and sub-Saharan Africa and Latin America.”
Dadush of Carnegie said preference programs will continue because “the schemes are perceived to be blunt and relatively costless with countries on the other side struggling to export anything.”
A large contingent of importers has pushed to expand and streamline the preference programs and create a single rule of origin to simplify the costs of doing business in those regions. But that effort has met strong resistance from domestic interests.
Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition, said he believes U.S. trade policy will continue to focus on aiding developing countries, which often opens the door to countries like China or Bangladesh or Cambodia, which he said do not need assistance from the U.S. and pose a competitive danger to U.S. textile producers.
“I think you can look at a heavy emphasis on poor and least developed countries and an emphasis on regions where some U.S. security interests are and obviously Afghanistan and Pakistan fall into that category,” said Tantillo.
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