The Washington Post | By Paul Blustein | November 14, 2003
Just a few days ago, Bush administration officials warned China that it had better open its market in accord with its obligations under the World Trade Organization. "Our patience is wearing thin," Commerce Secretary Donald L. Evans admonished Chinese policymakers.
Now the shoe is on the other foot. The tariffs that President Bush imposed on foreign steel 20 months ago have been ruled illegal by a WTO panel, and steel exporters -- including the European Union and China -- demand that Washington remove them in accord with the decision.
The trade game is like that: To force others to play by the rules, the United States has to play by them too, and to induce others to open their markets, it has to dismantle protection for some of its most politically sensitive sectors. For Bush, those simple verities translate into a tough predicament as he heads into his reelection campaign.
The president has cast himself as a champion of free trade, prying markets open abroad for U.S. exports and forging new trade pacts on global and regional levels. But with record trade deficits -- the government yesterday reported a $ 41.3 billion trade gap for September -- popular discontent is rising about the loss of jobs to overseas competition, especially in electoral battleground states in the Midwest and Southeast. That increases the pressure on Bush to protect powerful domestic interests such as the steel industry, despite the incongruity with his broader trade goals.
Next week, the boldness of the administration's trade agenda will be on display -- presenting a visible target for protesters of the president's policies -- when trade ministers from 34 Western Hemisphere countries are scheduled to meet in Miami. The purpose of the meeting is to set the parameters for final negotiations on a Free Trade Area of the Americas, which would essentially extend the North American Free Trade Agreement to the rest of Latin America and the Caribbean.
The FTAA, a signature issue for Bush, is just one of the trade accords the administration is pursuing. U.S. Trade Representative Robert B. Zoellick took the lead at a WTO meeting in Doha, Qatar, in 2001 that launched negotiations aimed at lowering barriers to commerce worldwide. The administration won congressional approval this year for bilateral free-trade deals with Chile and Singapore, and aims to finish several more by year-end, with Australia, Morocco, and five Central American countries.
But to secure the market-opening measures from other countries that make such deals appealing to American business, the United States has to offer concessions that risk backlash at home. The reluctance of the White House to confront industries with clout, critics say, helps explain why some of its trade objectives appear to be in danger -- in particular the WTO talks, which collapsed in disarray at a meeting in Cancun, Mexico, in September.
"On numerous fronts, the administration has pushed ahead with a pro-trade agenda, but it has not shown a willingness to put its money where its mouth is," said Brink Lindsey, a trade specialist at the Cato Institute. "It is trying to run trade negotiations without much willingness to step on the toes of domestic constituencies, and it is having a hard time making progress. It's one thing to negotiate bilateral free trade agreements with small countries where we can tell them 'take it or leave it,' but in these larger, more ambitious affairs like the WTO and the FTAA, we can't do that."
Developing countries in particular want the United States and other rich nations to get rid of subsidies for farmers that encourage overproduction of crops such as cotton and drive down world prices. They want changes in U.S. anti-dumping laws, which they say make it too easy for domestic industries like steel to obtain stiff duties against imports that they say are sold at unfairly low prices. And they want reduced protection for sectors in which high tariffs and other barriers still shelter U.S. producers against low-cost foreign competition, such as textiles, citrus fruit and sugar.
Front and center at the FTAA meeting in Miami will be the citrus and sugar issues. Both industries are big employers in politically pivotal Florida, and both have been running ad campaigns in local markets warning that domestic producers will go out of business if Washington accepts the demands by Brazil and other Latin American nations for the elimination of tariffs on products such as orange juice.
Their success at winning support from Gov. Jeb Bush, the president's brother -- who recently promised the state's fruit and vegetable growers that he would "shamelessly" protect them "against all comers," according to the Miami Herald -- has raised new doubts among Latin American policymakers about what benefits a hemispheric trade pact would provide them. As a result, the specter looms that the Miami meeting could end like the Cancun gathering did.
Fortunately for the White House, the Miami meeting is only supposed to establish a negotiating framework for an accord rather than specify details such as how fast orange juice tariffs would phase out. But the meeting will put U.S. officials in an uncomfortable spot when they are confronted with questions about issues such as citrus imports.
And they face a challenge in keeping Brazil, which led a rebellion among developing countries at Cancun, from doing so again in Miami. The Brazilians, upset over the U.S. position that farm subsidies and anti-dumping must be negotiated in the global talks rather than regionally, have insisted that the FTAA should exclude provisions dear to Washington's heart, including a hemisphere-wide code on cross-border investment and protection of copyrights and patents.
Administration policymakers believe they are close to an understanding with Brazil, which has proposed that member countries could opt out of certain provisions of an FTAA agreement. "If it means other countries need to come along at a slower pace, that's something people have to be willing to take a hard look at," said Grant Aldonas, the undersecretary of commerce for international trade. But going in that direction risks losing the vital support of American multinational corporations, which want a NAFTA-like pact covering all member nations with investment and intellectual property rules included.
On steel, the administration does not have the luxury of postponing detailed decisions as it does with the FTAA. The ruling by a WTO appeals panel against the United States gives the green light for steel-exporting nations to impose retaliatory duties on U.S. goods shipped abroad unless Bush revokes the steel tariffs, and the EU says it will start applying duties as high as 30 percent next month on $ 2.2 billion in American exports as varied as billiard tables, lawn mowers, motorboats and orange and grapefruit juice produced in Florida.
By revoking the steel tariffs, Bush would avoid the pain that retaliation would inflict and he would ease tension with Europe, Brazil and other trading partners, boosting the U.S. negotiating position in trade talks. But he would also infuriate steelmaking communities that were promised the tariffs to give the industry a breather from imports until March 2005.
Unsurprisingly, administration officials are looking for some sort of sweetener they could offer steelmakers to soften the blow from repealing the tariffs. But appealing options are scant. One proposal to change the way anti-dumping duties are applied, which might offer U.S. steelmakers extra protection, "doesn't weigh on the same scale" as the tariffs, said Terrence D. Straub, United States Steel Corp.'s chief Washington representative.
Perhaps the most contentious trade issue of all facing the White House is how to handle the burgeoning trade deficit with China, whose export machine has soaked up millions of jobs from around the world.
Now that China has become a WTO member with rights to normal trading relations, the Washington must bring its complaints about Beijing's trade practices to the Geneva-based trade body rather than simply threaten to slap tariffs on Chinese goods the way it did in the mid-1990s. (That hasn't stopped members of Congress from proposing legislation to raise duties on Chinese goods to punish Beijing for its cheap currency.)
Administration officials have said they are likely to take steps before long to haul China before the WTO on issues such as the piracy of movies and compact discs. And by Monday, a U.S. government interagency committee is expected to respond positively to three petitions by the beleaguered textile and apparel industry for restrictions on imports of Chinese-made bras, dressing gowns and knit fabric. The industry hopes that the restrictions -- which are allowed under a special "safeguard" rule against surges in Chinese textile imports -- will induce Beijing to limit its shipments to the United States lest it face more such measures.
Such a decision won't inspire confidence among developing countries that the United is prepared to lower barriers to foreign textiles in exchange for trade agreements. But even Julia Hughes, a Washington representative for U.S. apparel importers, who have been fighting the restrictions, acknowledged that the political pressure is overwhelming. "I don't think there's any doubt that at least one if not all three of the petitions will be approved," she said.The Washington Post:
