Trading down

International | As a deal with Korea faces an uphill battle, Bush loses a key trade tool

Issue: "All heart," July 14, 2007

This month George W. Bush became only the second U.S. president to lose "fast-track" trade promotion authority, which allows a president to negotiate free-trade deals that lawmakers can only reject or accept, but not amend.

Congress took it away from Bill Clinton in 1994 and Bush got it back in 2002; now, without fast-track, negotiated trade deals are unlikely to stick, since lawmakers can unstitch details they dislike and demand new negotiations, which discourages countries from working with the United States at all.

One immediate loss may be the trade deal signed with Korea last month: It would add an estimated $20 billion a year in trade with Korea, give Americans new business opportunities, and make Kias and Hyundais cheaper to buy in the United States, but a trade-leery Democratic Congress is unlikely to pass the pact or three others just signed with Colombia, Peru, and Panama. "The Democrats who are somewhat ambivalent about trade don't trust this president," said Kimberly Elliott, a senior fellow at the Peter G. Peterson Institute for International Economics.

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Democrats are not the only ones who see too many losers in free trade: In Korea, farmers, auto workers and other labor unions held massive protests in heavy rain against the new trade pact. Even Korean movie stars joined in, worried that Hollywood films might eclipse the local film industry. Stateside, U.S. auto makers such as Ford are also grumbling that their Korean counterparts will get more advantages: Last year, Koreans imported only 5,000 American cars compared to the 700,000 they exported to the United States.

But halting the advance of free trade also produces losers. To understand how free trade has already helped poor Latin Americans, Colombia provides a good example. Colombia exports more than four-fifths of its cut flowers to the United States-roses, carnations, chrysanthemums-and its industry is second only to the Netherlands. A previous Andean trade agreement helped it blossom, and it now employs mostly poor women. The new trade deal up for approval would likely encourage even more investment and the creation of more jobs.

The loss of fast-track may also hurt the United States diplomatically. Not only could the United States lose future markets for its exports, it could lose influence in the world as well. Many of the deals penned during the Bush years have been with smaller countries that brought new political alliances.

Though the Bush administration has largely supported free trade, it has dawdled on important talks such as the Doha round of the World Trade Organization, which began in 2001 but has made little progress. Doha's most recent meeting, held in Germany in late June, dissolved in disagreement, leaving many issues unsettled. The United States was partly to blame: It agreed to lower its agricultural subsidies from about $20 billion to $17 billion a year, too little for other developing countries.

The Bush administration did offer to lower further its most trade-distorting subsidies, but that should have come a year ago, Elliott said. And with fast-track gone, the United States will find it hard to negotiate in the 150-member WTO arena. Part of the problem, explains Hudson Institute scholar Irwin Stelzer, is that Bush officials have "failed to develop policies to share benefits of trade so there wouldn't be a backlash." To get government help now, for example, displaced blue-collar workers have to wade through much paperwork.

It would be better, Stelzer suggests, to give out training vouchers workers could use more easily to find new jobs. In any case, he said, trade deals were already in trouble with a more protectionist Congress. Not everyone wants a cheaper Kia.


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