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The Coming Trade Agenda: Climb Every Mountain
by Russell Smith
The concept of open trade, the rule of law, and the world trading system are going through their best and worst times now, and the ultimate outcome of the challenges they are facing is not predictable. Each new initiative and commitment toward an open and stable world trading system seems to be creating a corresponding real or potential setback. Will we move two steps forward for every step backward, or will we lose ground even as we struggle to address our problems?
All trade observers know that as world trade leaders hesitantly headed for Doha, it was not easy to see how a meaningful consensus on new global trade initiatives would emerge from the meeting. While there was a draft declaration with which many WTO member nations agreed in principle in major areas, each trading bloc, and many influential, individual countries, had their own agendas or their own limits. These individual demands threatened whatever consensus existed at the beginning of the conference.
This delicate climate makes the outcome of Doha all that much more extraordinary. The easy, and expected result would have been a relatively bland agenda of "built-in" items and a few add-ons that everyone could accept with few ruffled feathers. Instead, USTR Robert Zoellick led an effort to bring the conflicting agendas together. This the negotiators did beyond the expectations of almost everyone in the world trading community. The Doha Declaration holds out the promise of meaningful progress on agricultural subsidies, dumping and countervailing duties, services, developing country issues, and much more. The masterful crafting of a compromise that was both diplomatic and substantive represents a significant rejection of the anti-globalization movement and the new protectionism.
Doha has been followed by the wholly unexpected U.S. House of Representatives passage of Trade Promotion Authority ("TPA") legislation. TPA provides new trade negotiating authority for the President, and sets the priorities for negotiations, including those in the WTO and efforts to conclude a Free Trade Agreement of the Americas ("FTAA"). TPA also provides that any agreement the President brings to Congress for approval cannot be amended, and must be voted "up" or "down" after limited debate. The single vote margin by which TPA passed, after two prior failures, demonstrates the determination of President Bush and his Administration, and the Republican leadership in the House, to affirm the outcome at Doha.
It is important to note that while the Bush Administration and Congressional leaders did some very narrow, sector-specific "horse trading" to obtain the necessary votes to pass TPA in the House, they did not promise, and were not even asked, to agree to adverse changes in U.S. trade remedy laws, or to take any key negotiating point "off the table" in either the WTO or the Free Trade Agreement of the Americas. Those who recall the "fast track" and Uruguay Round legislative battles of 1988 and 1994 know that the usual price for these victories was substantial U.S. backtracking on key issues like dumping, subsidies, and unilateral retaliation (the infamous "Section 301").
However, the same one-vote margin also makes clear the determination and strength of the opponents of open trade. These interest groups have loudly and roundly condemned the Doha Declaration. They have vowed revenge on every Member of Congress who votes in favor of TPA. They have extracted concessions, albeit limited, that will complicate the negotiating process--and they have succeeded in all but stopping further progress on removing trade barriers for textiles and apparel. This latter setback is most disappointing, since the U.S. textile industry is now following the very successful campaign of the U.S. steel industry for new protection and subsidies when the Agreement on Textiles and Clothing expires at the end of 2004. Textiles and apparel will be the next major trade battleground. Finding a way to address the problems it can create is a trade policy challenge for the U.S., its major trading partners, and the developing countries.
Those opposed to open trade are determined to prevent the U.S. Senate from adopting TPA. Ironically, the victory in the House seems to have energized some in the Senate to seek to craft acceptable compromise legislation which follows the House-passed more closely than might have been expected. That is in part because the House bill truly represents a concession to many traditional demands for attention to labor and the environment, greater Congressional oversight, and reform of the WTO processes. At the same time, there are individual Senators who have no interest in either open trade or compromise, and they have announced their intention to block any trade bill from coming to the Senate floor. Whether the Administration and the U.S. business community can gather 60 votes to overcome these obstructionists will be the key trade test of 2002. The failure of TPA in the U.S. Senate will not prevent WTO negotiations from moving forward, but it will undermine dramatically the prospects for the success of those negotiations. Passing TPA will further strengthen the U.S. leadership position.
The same can be said for the effort to conclude an FTAA. Liberalizing U.S. trade with the Americas has been the centerpiece of President Bush’s efforts to strengthen U.S. relationships in the region overall. A successful FTAA will reinforce the progress that Brazil, Argentina, and other Latin American countries have made in eliminating highly protectionist trade regimes, state-dominated economies, and heavy subsidies. But even with TPA, concluding an FTAA is itself a challenge. Many Latin American products are subject to trade restrictions in the U.S., and unless the U.S. is willing to be flexible in dealing with these specific restrictions, most major trading partners in the Americas believe they will gain little from a new agreement. The restricted U.S. products are, of course, those with the most politically powerful constituencies, so, as in Doha, success will depend on how well the Bush Administration balances these competing demands.
TPA is not the only challenge that will impact on the successful implementation of the Doha Declaration and the FTAA. The U.S. farm bill that will be enacted into law in 2002 presents both the opportunity to affirm the need to eliminate agricultural subsidies that is incorporated into the Doha Declaration, and the very substantial risk that instead the U.S. will set a precedent for new subsidy programs that will sacrifice its global and regional leadership on this issue. Reaching a balance that can be "sold" to the larger U.S. agricultural community is the responsibility of the Bush Administration and a very few Members of Congress who understand the debilitating effect of endless subsidies on world food production and trade.
The final problem is steel trade, and even here, while the probability of new U.S. import restrictions is high, so is the possibility that there will be progress on addressing global structure and capacity issues.
The short term challenges to open trade continue to threaten to obstruct and even stop the long term progress that has been made over the last few months. Right now, there is reason for optimism, which can be capitalized upon to make progress before protectionist forces can regroup. The coming year will prove whether 2001 was a watershed in trade policy or a one-time success, not to be repeated.
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Editor: Dr. Scott B. MacDonald, Sr. Consultant
Deputy Editor: Dr. Jonathan Lemco, Director and Sr. Consultant
Associate Editors: Robert Windorf, Darin Feldman
Publisher: Keith W. Rabin, President
Web Design: Michael Feldman, Sr. Consultant
Contributing Writers to this Edition: Scott B. MacDonald, Keith W. Rabin, Uwe Bott, Jonathan Lemco, Jim Johnson, Andrew Novo, Joe Moroney, Russell Smith, and Jon Hartzell
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