01-05-2002
ECONOMICS: Not So Quiet on the Trade Front
Around the international trade community, 2001 may be remembered mostly
for action on two of President Bush's initiatives: the launching of the
once-aborted round of international trade talks and, after two false
starts, the House's approval of presidential trade-negotiating
authority.
Each of these initiatives was largely symbolic. The Bush team's real
challenges come this year. They're out to push negotiating authority
through the Democratic-controlled Senate; resolve major trade disputes
that are finally coming to the fore; and pursue ongoing bilateral,
regional, and global trade negotiations that are finally getting down to
the nut-cracking issues. That's no slim agenda. And when future historians
get around to assessing how the George W. Bush Administration coped with
globalization, its record on these highly important issues will count the
most.
Finally nailing down presidential trade-negotiating authority won't be a
snap. Senate Democrats have no particular incentives for approving it;
their core constituencies-organized labor and environmental groups-are
dead-set against it. Senate Majority Leader Thomas A. Daschle, D-S.D.,
doesn't have the votes to block passage, but he could delay it for months.
The Bush Administration wants quick Senate action before the extraordinary
vote-buying deals it struck to get narrow House approval of the measure
begin to unravel. Look for White House moves both to placate the textile
industry and thus hold on to GOP votes, and to beef up unemployment
insurance and worker retraining and thus get "New Democrats" on
board.
A pending White House decision on limiting steel imports could also sway
the outcome of the final negotiating-authority vote. In mid-February,
President Bush must act on the federal International Trade Commission's
recommendations to slap substantial tariffs on a range of steel imports. A
number of steel-state legislators who voted for negotiating authority
will, naturally, be watching closely. But erecting an even higher fence
around domestic steelmakers may alienate foreign steel
exporters-especially supporters of America's war on terrorism. U.S. steel
workers have proposed a possible way around the dilemma: Washington picks
up the cost of retirement and health care expenses for laid-off steel
workers, easing the pain of industry contraction. But such subsidies
offend many leading GOP conservatives. The Administration has already
gotten foreign producers to agree to cut output, but that step may be too
little, too late in the view of American steelmakers, which are filing for
Chapter 11 protection at a record pace.
At the same time, the Bush Administration is anticipating a mid-January
World Trade Organization ruling against the U.S. government's practice of
allowing off-shore entities called "foreign sales corporations"
to shelter U.S. corporate income from taxation. If the United States loses
the case, the European Union, the complainant, will be in a position to
impose up to $4 billion in tariffs on U.S. exports, touching off what
could be the broadest trade war in history. The Bush Administration wants
to negotiate out such differences in tax regimes in the coming
international trade talks. With Brussels likely to be holding all the
cards, however, the White House may have to pay a high price for EU
forbearance. The Administration may have to pledge to push for rewriting
U.S. tax law or agree to yield ground on steel imports or other thorny
matters that would surface in a new round of global trade talks.
Meanwhile, negotiations on a U.S.-Chilean free-trade agreement are likely
to conclude this spring. Although the deal has bipartisan support on
Capitol Hill, touchy agricultural issues-involving fruit and wine-and
financial services concerns will have to be finessed. The pact's greatest
significance may be as a template for a pending free-trade deal with
Singapore. Most important, a Chilean agreement would signal the rest of
Latin America that it's time to get serious in current negotiations aimed
at making the Western Hemisphere a free-trade zone.
In May, those Western Hemisphere talks will enter a new phase, focusing on
market access and agriculture, the toughies. The President has called a
hemispheric agreement his highest trade priority. But the Brazilians are
already carping that White House concessions to get trade-negotiating
authority from Congress have sabotaged progress toward restriction-free
commerce in farm goods, a Brazilian objective. "It's a race against
the clock," said Richard Fisher, the former deputy U.S. trade
representative who shepherded this process along in the Clinton years.
"The question is whether you can proceed in a turbulent political and
economic environment."
Finally, having papered over differences with other countries in its
effort to get new international trade talks under way, the Administration
now has to keep remaining disagreements over the environment,
anti-dumping, competition, and investment from derailing the talks. With a
three-year deadline, there's not much time for diplomatic
niceties.
During its first two years, the Clinton Administration nailed down both
the North American Free Trade Agreement and the Uruguay Round of trade
talks. But the Clinton team's subsequent accomplishments-and they were
many-paled in comparison. The Bush Administration must tread warily to
avoid ending up with a similarly mixed, ultimately unsatisfying
record.
Bruce Stokes
National Journal
