BUSH: THINKING BIG ON TRADE
Byline: Joanna Ramey
WASHINGTON — The Bush administration is treating its trade agenda like someone who is running last in a marathon but intends to finish first.
As the new White House trade team sees it, during the last eight years, countries throughout the world have been forging free-trade agreements — 128 in all — while the U.S. has ratified just two, the NAFTA pact with Mexico and Canada, and one with Israel.
There are several reasons why the U.S. has had few chances at bat, the main one being discord in Congress as to how trade policy should be carried out in this era of globalization. The principal stumbling block among lawmakers is whether the U.S. should require countries to improve their labor and environmental records in exchange for open-market access.
But even though such obstacles are a long way from being resolved, President Bush has set his sights high, with an ambitious trade agenda starting with completion of a Free Trade Agreement of the Americas (FTAA) and possibly extending to similar trade pacts in Asia.
“We will seek to negotiate regional and bilateral agreements to open markets around the world,” is how U.S. Trade Representative Robert Zoellick summed up the administration’s trade goals during his confirmation hearing last month before the Senate Finance Committee.
“There are opportunities in Asia Pacific, and I hope with APEC,” Zoellick told the committee in reference to the 20-country member Asian-Pacific Economic Cooperation, of which the U.S. is a member, “as India reforms its economy and taps its great potential, we should explore ways to achieve mutual benefits.”
Bush also has enhancing trade with the European Union on his list. Saying “it would be folly” to not increase the $300 billion in two-way investment and trade between the two economic powers, Zoellick in his Senate testimony seemed confident the administration can overcome what he called the “vexing disputes” in which the U.S. and EU remain embroiled. These disputes include arguments over EU market barriers to bananas and hormone-treated beef from U.S. companies.
Meanwhile, completion of a free-trade pact between the 34 countries in the Western Hemisphere is Bush’s priority. The technical groundwork for such an agreement has already been laid by the Clinton administration and now it’s up to Bush to tackle the nitty gritty — negotiating tariff phaseouts by product category.
A hemispheric trade pact would have huge implications for the U.S. retail industry, which now imports more than two-thirds of all apparel it sells.
Nailing down free-trade commitments from all countries in the hemisphere will be quite a feat, given how Latin American countries have already negotiated several free-trade arrangements with varying tariff rates and standards that would conflict with an FTAA.
But the U.S. Congress may prove to be the most difficult roadblock regarding the FTAA or any such two-way trade pact. Before negotiators can even get down to business, Latin American countries want Congress to grant the Bush administration what’s known as fast-track negotiating authority. The authority would mean Congress wouldn’t be able to change the pact through amendments, but only vote to approve or disapprove it.
Having lawmakers approve fast-track authority might seem rather straightforward given the widespread support on Capitol Hill for the U.S. expanding trade. However, interwoven in the fast-track debate is the knotty issue of whether, in granting the authority, Congress should also require the administration to negotiate labor and environmental standards in trade pacts. Supporters say such conditions would insure developing countries wouldn’t exploit workers or natural resources to gain a competitive edge.
Congressional leaders have said that fast-track authority will be on their agenda by this summer, but neither they nor the Bush administration have said how they’ll finesse the labor-and-environment issue. The administration is in a tight spot since its supporters in business are opposed to any conditions being placed on opening markets. Also, many developing countries have rejected any labor-environment quid pro quo.
Fast-track authority is an issue that’s ready to boil over on Capitol Hill, which John Howard, director of policy in the International Division at the U.S. Chamber of Commerce, said “will take a lot of hard work and political will on both sides.”
Sen. Max Baucus (D., Mont.) the lead Democrat on the Senate Finance Committee and a free-trade booster, warned recently that the U.S. trade agenda could stall if the Bush administration seeks fast-track authority without coming to terms with the volatile issues of labor and the environment.
“Like it or not, environment and labor issues are firmly on the trade agenda,” Baucus said on the Senate floor, adding that he would work to defeat the authority if the twin issues aren’t “meaningfully addressed.”
The twin issues also crop up in the U.S. free-trade pact with Jordan, forged under the Clinton administration and that is poised to be sent to Congress for a vote. The Jordan FTA was seen by many as the Clinton administration’s prototype for future trade agreements.
The Jordan FTA remains in flux. In the agreement, “we don’t know if the Bush administration wants to go back to work with those [labor and environmental] provisions or not,” said Jonathan Gold, director of international trade policy at the International Mass Retail Association. “We don’t want the Jordan agreement as a model for future agreements.”
Another Clinton administration trade leftover is an accord establishing normal trade relations between the U.S. and Vietnam. Other Clinton loose ends are possible free-trade agreements with Singapore and Chile, which were announced at the end of his presidency. Bush hasn’t said whether he will follow through with the Singapore pact and, in the case of Chile, may just fold it into the FTAA.
One Latin American trade initiative generated on Capitol Hill, and which the Bush administration has signaled possible support, is expanding the scope of the Andean Trade Preference Act to include some kind of trade preferences for apparel. The pact, which covers Colombia, Bolivia, Ecuador and Peru, is set to expire this year and Venezuela is lobbying for inclusion. The initial agreement was signed in 1992 by Bush’s father and gives duty breaks to cut flowers, precious metals, jewelry and fish.
Sen. Bob Graham (D., Fla.) is sponsoring a bill that would give duty-free treatment to Andean apparel imports made of U.S. textiles. The measure has received support from Republican leadership and is being positioned as a needed means to boost the legitimate economy of Colombia to help counter the narco-terrorism in the country.
Since the Bush administration has just entered its second month and its agenda is now focused on getting Congress to approve a $1.6 billion tax cut, it’s unclear how the President’s trade agenda will unfold.