Notebook > Money

Deal breakers

Money | Democrats may push to end market-opening agreements

Issue: "Looking at India," Dec. 9, 2006

Some of the biggest losers in the Nov. 7 election may be poor people in countries like Colombia and Peru. The reason: Those countries are next in line for free-trade agreements with the United States, agreements that look to be dead on arrival now that Democrats have taken control of the House and the Senate.

Only 15 Democrats in the House voted to pass the Central American Free Trade Agreement in July 2005, and last month's elections added to the ranks of ardent protectionists on Capitol Hill. This not only puts already-negotiated trade deals in jeopardy, it also reduces the likelihood that Congress in mid-2007 will reauthorize President Bush's "fast-track" authority to negotiate new agreements.

The United States has passed 13 trade deals since 2001, a wave of market-opening measures that has proved popular with workers worldwide. "The further you get from the West, the more positive people are toward globalization, toward more business and trade ties with the rest of the world," Swedish author and activist Johan Norberg told Reason magazine.

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The trade deals have also benefited the United States. They've brought lower prices for Americans and more jobs in export industries. The U.S. Chamber of Commerce estimates that exports now account for more than one-tenth of the U.S. gross domestic product. Moreover, exports have increased twice as quickly with nations that have trade agreements with the United States than with nations that do not.

But America's big labor unions aren't concerned about overseas demand, instead focusing on maintaining a dominant position in U.S. markets. They only support trade deals that include labor and environment regulations-rules that poor countries say will price them out of markets and, ironically, keep them from developing beyond sweatshop levels of productivity. And after Nov. 7, unions may now be able to enforce their demands.

"Labor is in a good position," congressional analyst Norman Ornstein told the Associated Press. "They were a major player in the turnout effort in an election with many close races. When they weigh in, they're going to be listened to." The end result is that the strongest engine of economic progress for the world's poor may be stalled for the next two years.

Balance sheet

ENERGY: Farmers next year may plant the largest corn crop in 60 years, but a lot of it won't ever be eaten. Instead, a big part of the crop will go to produce ethanol, a fuel additive made popular by high oil prices. "It's a wonderful time for corn producers," said Purdue University agricultural economist Chris Hurt. "They're extremely excited but they're also apprehensive because they've seen booms before and they don't last."

ECONOMY: The U.S. economy did better last summer than previously thought. The Commerce Department reported on Nov. 29 that GDP grew at an annual rate of 2.2 percent during the third quarter, not the 1.6 percent rate reported earlier. The new rate still represented a drop from 2.6 percent in the second quarter and 5.6 percent in the first quarter.

HOUSING: The U.S. housing market could be described as both hot and cold. The Commerce Department reported that prices for new homes in October increased 1.9 percent over a year earlier. But the actual sales of new homes at the same time dropped by 3.2 percent.

Timothy Lamer
Timothy Lamer

Tim is managing editor of WORLD magazine.

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