WASHINGTON—June 2007 most likely will be remembered as the month when the U.S. Congress failed to renew the Trade Promotion Authority (TPA) and when the Doha Development Round (Doha) negotiations received their final death knell.
TPA gives the U.S. president power to negotiate trade deals with other nations without having to go through extensive congressional scrutiny. However, Congress retained the ability to approve or reject individual agreements.
The Doha Rounds negotiations sought to lower or eliminate trade barriers in industries such as agriculture, service, and manufacturing between the developed countries (the United States, Japan, and the EU) and developing countries (G20 nations, including India, Brazil, and China).
Developing countries requested lower trade barriers for agricultural, textile, and apparel products, while more prosperous nations requested countries such as India and China to cut barriers in non-agriculture sectors.
Demise of TPA Daunting
"The prospects of TPA being renewed, as is, are nil," said Daniel T. Griswold, a director at the Cato Institute, in a recent article published by the Council on Foreign Relations. "It wasn't trade that elected the Democratic Congress, but the Democratic Congress is firmly committed to a departure from the Bush administration's trade policy. That includes fast-track," he said.
The death of the TPA most likely was due to stalled congressional negotiations. Democrats insisted that international labor laws and environmental norms be part of the negotiations. Despite heavy lobbying by Susan Schwab, U.S. Trade Representative, and Hank Paulson, U.S. Treasury Secretary, a compromise could not be reached.
"At the end of the day, fast-track is about trust," said Harvard professor Robert Z. Lawrence in the article. "There isn't a lot of trust between Congress and the President."
TPA was hailed by analysts as the only tool that kept trade pacts out of the clutches of congressional hawks who want to include or take out sections of the agreement. But, the experts agree that there will still be future large trade deals—such as NAFTA—though smaller ones may fall by the wayside.
Under TPA, the President could negotiate a new trade deal, and submit it to Congress for a "simple yes-or-no vote," reasoned Lee Hudson Teslik, editor at the Council on Foreign Relations in a recent article. He continued that TPA allowed the President to forestall "the complicated process of congressional markup that can prove a death sentence for trade pacts."
Teslik explains that letting TPA lapse puts at risk future trade negotiations, as well as completed trade negotiations under TPA that are currently awaiting congressional approval. U.S. President George W. Bush had sent to the Congress a free trade agreement with South Korea, hailed by Teslik as "the largest trade deal since the 1994 North American Free Trade Agreement," along with other pacts with Panama, Peru, and Colombia.
The article suggests that the Panama and Peru pacts would be approved by Congress as the Bush Administration included tougher labor laws as demanded by Congress.
The Colombia agreement is most likely doomed because of political unrest and the recent murder of union leaders. The South Korean trade pact may also fall through due to the competition between U.S. and South Korean auto manufacturers.
Doha Rounds Successful Without Final Deal
While many bemoan the passing of TPA, Jagdish Bhagwati, senior fellow for international economics at the Council of Foreign Relations, argued in a recent published interview, that five years of Doha is enough. Bhagwati says that Doha has run its course and achieved quite a lot, even if it did not clinch a final deal.
Daniel Ikenson, analyst at the Cato Institute, disagrees with Bhagwati. "We [the U.S.] have a huge competitive advantage in many of those [service] industries, but it is difficult for Americans to compete in these markets without a new deal lowering barriers," Ikenson said in a recent Council article.
The Doha Rounds started out with 30 countries, and ended with a group of four nations at the negotiation table—the United States, the European Union, India, and Brazil. Bhagwati explains that all secondary items had been dealt with successfully, and only the most significant items—namely farm subsidies and tariff negotiations—remained unresolved.
In 2005, the developed nations agreed to eliminate all farm subsidies by 2013. However, a caveat was included. Countries such as China and India must stop "hidden export subsidies in credit, food aid, and the sales of exporting state enterprises," according to another Council article.
Ikenson suggests that the United States and EU should blaze the way and eliminate barriers. He argues that the developing nations "are worried about an influx of cheap manufactured goods from China if they open up their markets, and are watching U.S.-EU policy toward China with interest," in a recent Council article.
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