2009 trade agenda: free trade agreements and preference programs
March 26, 2009
World Trade\Interactive
This article is the second in a three-part series on what are likely to be the major trade issues of 2009, based on recent comments by administration officials and key lawmakers. It focuses on pending and future free trade agreements as well as unilateral trade preference programs. (Click here for the first article in the series.)
Pending Trade Agreements. Both the White House and Congress have indicated that they are willing to advance pending FTAs with Panama, Colombia and Korea provided certain conditions are met. While the Bush administration had pressed for Congress to first take up the Colombia FTA based on the fact that it was concluded before the other two, the consensus view now is that the Panama FTA is the one that, as Senate Finance Committee Chairman Max Baucus put it, is “most ready for action” and “will win the greatest level of support.” U.S. Trade Representative Ron Kirk acknowledged that the Panama FTA “seems to pose the fewest obstacles” and said he will ask USTR staff for an assessment of “what Panama needs to do before we can comfortably send the agreement to Congress.”
While Kirk said his initial conversations with experts indicate that this list “is not long,” there are at least two issues that have come up in recent weeks. One is Panama’s status as an offshore tax haven, an issue where lawmakers are looking to tighten enforcement this year as a way of combating the economic recession. In addition, House Ways and Means Trade Subcommittee Chairman Sander Levin, D-Mich., said in a recent speech to the Washington International Trade Association that he wants to see improvements in Panama’s labor laws, asserting that “certain provisions are clearly in violation of ILO [International Labor Organization] standards.”
Kirk said the administration will have to “present a list to the Panamanians and assess their willingness to address the issues promptly.” He added that “nothing we ask should require a change to the text of the agreement.”
On Colombia, the administration plans to work with Congress to set “benchmarks,” or specific objectives, with respect to labor rights that will have to be met before implementing legislation will be taken up. Levin emphasized that those benchmarks will have to be “incorporated as enforceable commitments in such a way that prevents backsliding.”
Supporters of the Colombia FTA are pushing for congressional approval this year, but Kirk would not definitively say whether the administration shares that goal. He stressed that the concerns that have been expressed regarding Colombia “were not political rhetoric” and “are real” and will need to be addressed “before the agreement is sent forward for approval and before implementation.” However, House Majority Leader Steny Hoyer, D-Md., who will be visiting Colombia in the next few weeks, said recently that he believes it is “appropriate” for Congress to take up the FTA this year.
The Korea FTA appears more problematic, primarily due to concerns about access to that market for U.S. beef and automobiles. While this FTA presents a substantial economic opportunity, Kirk said, “the agreement as it is just simply isn’t fair and if we don’t get that right, we’ll be prepared to step away.” Inside US Trade cited an unnamed U.S. trade official as saying that a renegotiation of the FTA would be a “last resort” and that the outstanding problems “can be fixed outside of the text” of the agreement.
The administration intends to develop benchmarks with respect to the Korea FTA as well, but as with Colombia no further details have yet come to light and officials have refused to commit to a timetable for action. Kirk told Senate Finance Committee Ranking Member Charles Grassley that he does not feel any pressure to push this agreement forward due to Korea’s pending conclusion of an FTA with the European Union, stating that that agreement will take time to implement and that European producers would therefore not have better access to the Korean market “for any significant period of time.”
New Trade Agreements. While the Obama administration has not ruled out negotiating new trade agreements, it has also made clear that this will be a much lower priority than it was under the Bush administration. “I do not come to this job with what I have called in some of our meetings ‘deal fever,’” Kirk told the Finance Committee during his confirmation hearing. Only after ensuring that the rules of existing agreements are being enforced, Kirk said, will the administration turn to advancing the Doha Round negotiations, working to advance pending FTAs “and pursuing new initiatives that will seek to channel trade as a driver of economic progress – if they are done right.”
Once the time does come to consider new trade agreements, the Obama administration is likely to do things differently than its predecessor. For one, the methodology for selecting FTA partners is expected to change somewhat. Whereas the Bush administration’s choices were driven by national security concerns as much as anything else, commercial potential is likely to be the top consideration going forward. Kirk said he would conduct an intensive review of policy options for new trade agreements and that while he is willing to consider bilateral and regional agreements with developing countries, “some points – such as pursuing the largest possible new opportunities for American exporters, establishing high standards for market openness and transparency—will be fundamental.”
Another difference has to do with trade promotion authority, under which Congress can only approve or reject, without amendment, trade agreements negotiated by the administration. Kirk said a request to renew TPA would be made at the appropriate time but that the “constraints” on the administration’s use of TPA will be revised, noting that “if the existing framework for this authority had been sufficient, it is likely that Congress would have already renewed it.”
Nevertheless, the White House is already under some pressure to pursue new trade agreements. Grassley opined that trade-related labor issues have already been addressed through revisions to the pending FTAs and the recent expansion of the Trade Adjustment Assistance program and said that as a result “it’s time now to focus on implementing our pending trade agreements and to negotiate additional market liberalizing trade agreements.” Rep. Kevin Brady, the senior Republican on the House Ways and Means Trade Subcommittee, made similar remarks. While enforcement is “essential,” he said, “it is not the only path to increasing our exports and helping our economy recover,” and efforts to “develop new markets for the exports of American goods and services” must be made as well.
Some Democrats are pushing for more FTAs as well. For example, Baucus said bringing the Trans-Pacific Partnership negotiations to a successful conclusion could help foster a regional deal that encompasses countries with “greater commercial impact” like Japan, Vietnam, Malaysia and Taiwan. Kirk said he shares Baucus’ view on the importance of economic engagement with Asia and that the Obama administration intends to proceed with bilateral investment treaty negotiations with China, India and Vietnam. Greater access to the Japanese market for U.S. goods and services, including beef and insurance, will also be a priority. With respect to the TPP, however, Kirk said only that he will assess continued U.S. participation in those talks.
NAFTA. Obama and officials in his administration have been making a consistent effort to indicate that while the U.S. is interested in improving this 15-year-old pact it will only do so in cooperation with Canada and Mexico. Grassley said he does not see how NAFTA can be reopened without having an adverse effect on trade, and he expressed concern that if the U.S. seeks to reopen NAFTA provisions on labor rights, environmental standards and other issues, Mexico could seek to “rebalance tariff concessions to the detriment of U.S. agricultural exporters.” Kirk responded that he does not see “the levying of additional tariffs [against U.S. goods] as being in the category of strengthening that agreement.”
Preference Programs. Baucus said he will introduce legislation to “reform and reauthorize our preference programs in a way that will ensure that the world’s poorest countries can trade, grow, and prosper.” In response to a question from Grassley on whether preference programs should be limited to least-developed countries, Kirk said “there may be areas or sectors where an advanced developing country is fully competitive and reciprocity in treatment may be required.” He said the U.S. should “evaluate seriously” whether to rescind preferential treatment to what Grassley called “super-competitive products from advanced developing economies such as India and Brazil” but said he would ask for public input and further discussion before making a decision.
Kirk also indicated an openness to legislation that would create a trade preference program for Pakistan and Afghanistan, noting that the administration is “reviewing on a priority basis our options for fostering economic development in these countries” and that his goal is to “identify a common approach as soon as possible.”
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