By Edward Alden in Washington | December 10, 2001
With the Senate set to start debate this week on granting new trade negotiating authority to President George W. Bush, America's trading partners could be forgiven a bit of confusion over just where the US stands on trade liberalisation.
Last month, at Doha, the US helped launch a new round of world trade negotiations, pledging to tear down barriers to freer commerce among nations. But last week, in Washington, the Bush administration squeaked a one-vote victory on fast-track trade authority in the House of Representatives by agreeing to do quite the opposite.
In a series of deals involving US producers of steel, textiles and import-sensitive agricultural products, the administration has agreed either to impose new barriers against imports or to resist removing such barriers in future trade negotiations.
The deals underscore US ambivalence about whether the world's largest economy should remain a forceful advocate for trade liberalisation. While a consensus remains that freer trade is generally good for the economy, the clamour to help sectors on the losing end of trade has become irresistible.
"This is the new game of trade," said Gary Hufbauer, a senior fellow at the Institute of International Economics. "You've got to pay to play."
The price, however, may be so high as to complicate greatly efforts to push ahead with the ambitious trade liberalisation agreements favoured by the Bush administration. While negotiating those deals will take several years, the commitments to Congress will start reducing imports by early next year, angering many of the countries where the US wants trade barriers removed.
The biggest impact will be in steel. To win support for fast-track from powerful steel state legislators, the administration has said it will temporarily curb steel imports.
On Friday the International Trade Commission, an independent US agency that rules on import restraints, recommended that tariffs of up to 40 per cent be imposed for four years. The administration faces enormous pressure to accede: of the 51 Republicans in the House steel caucus, many of whom dislike freer trade, only six voted against fast-track.
Faced with the weakest Democratic support yet on a trade vote - only 21 voted for the fast-track bill - Republicans needed further deals to secure the victory. On textiles, the administration agreed last week to an eight-point plan to help the industry. Among the key commitments were that the US would insist on "reciprocal market access" in further negotiations to reduce high textile and apparel tariffs in developing countries like India and Pakistan.
But that still fell short. With defeat looming, House Republican leaders agreed finally to claw back some trade benefits that were granted last year to countries in the Caribbean and sub-Saharan Africa.
The Caribbean agreement allowed duty-free imports of apparel manufactured with US-made fabric. The US Customs Service ruled this year that enhancements to the fabric such as dyeing, finishing and printing could be done offshore, a decision that angered US textile-makers.
In the final minutes of the vote, the Republicans agreed to seek a change in the law so that all those enhancements must be done in the US.
An angry Charles Rangel, a leading House Democrat who authored the Caribbean-Africa bill, called the move "blatant protectionism in the name of free trade and at the expense of the Caribbean nations".
The other key deal was made with Florida Republicans who have close ties to the state's citrus industry. Florida orange growers fear that if the US agrees to free trade in the Americas, future competition from Brazil and other Latin American nations will drive them out of business. The administration resisted extreme demands to exempt the sector from future trade agreements, but did agree to set a series of hurdles that will make it difficult to cut tariffs on those products.
One US food industry lobbyist, who wants to see European agriculture markets opened in the next round, said the precedent could be disastrous. "Every agriculture-producing country has import sensitive commodities," she said. "The EU's going to start taking dairy off the table and I'm going to have a fit over that."
The deal-making may not be finished either. The Senate must still act on the bill and, if it passes a different version, another vote would be required in the House.
In deciding to push for a fast-track vote this year, the Bush administration said it needed Congress to give US negotiators a free hand in the global trade negotiations that will start next year.
But Clyde Prestowitz, president of the Economic Strategy Institute in Congress, said the close vote "may actually give more leverage to Congress" over future trade negotiations. For America's trading partners, that is unlikely to be reassuring.By Edward Alden in Washington:
