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Congress factor in trade pacts

New Straits Times, Malaysia

Congress factor in trade pacts

By Narissa Rahan

23 February 2012

Learn from South Korea’s experience in its protracted FTA talks with the US

The passing by the United States Congress of the three free trade agreements (FTAs) the US concluded with Colombia, Panama and South Korea respectively last October was a long time coming.

Over four years, in fact. Despite the delay, the passage of these FTAs proves significant.

It signals commitment to keeping trading lanes open and an acknowledgement of the need to seek new overseas markets at a time when domestic politics are fraught with partisanship.

For trading partners negotiating with the US under the Trans-Pacific Partnership (TPP), Malaysia included, this development is key: it provides reassurance that the US Congress will follow through on approving concluded trade pacts.

It gives confidence that there is readiness by the US administration to overcome possible legislative hurdles to ensure that the America’s political and economic objectives will eventually move in the same direction. This is critical as TPP negotiations take the next step to develop a road map to conclude the deal expeditiously.

Despite changes in administrations from the period of negotiations to approval of the pacts, this development also indicates that there can be continuity in the US stance in its international trade agenda.

During an election year for the US, there should at least be a tacit understanding that ongoing TPP efforts would not be hampered by attempts to reinvent the wheel in the future, and talks would continue to build on outcomes achieved thus far should negotiations proceed beyond this year.

This does not mean that there is nothing to watch out for, of course.

Even if the same American administration stays through post-elections, Congressional composition will change in the coming years. TPP partners like Malaysia should be aware that what any US administration can achieve under a trade pact will rely on how it can push things successfully through in Congress, hinging on what Congress finds palatable.

As we now know, this could take a much longer time than anticipated. In the case of the last three FTAs, bipartisan support for their passage was only cleared after agreement was achieved to renew the trade adjustment assistance programme, a programme focused on providing job retraining and temporary income support to American workers who lose their jobs as a result of FTAs.

Moreover, with the US, a signed FTA is never done and dusted until Congress approves it. It would be prudent for TPP partners to expect and perhaps even prepare for possible changes until that happens.

The experience of South Korea, in particular, demonstrates how an initial FTA signed in 2007 albeit without Congressional approval — while not unravelled — can still lead to a new agreement being negotiated by 2010.

New provisions were added, among others, for American auto companies to gain greater access into Korea.

Substantial lobbying was also expended to promote the passage of the three FTAs, for the most part by business organisations representing large US firms. Unique in this case was how intense the lobbying was from the trading partner side, especially Korea.

Korea reportedly spent millions in lobbying and public relation fees in the years running up to last year.

But Korean pressure also came from other angles and quarters: with Korean politicians writing to the press for ratification in newspapers widely circulated on the Hill, and Korean President Lee Myung-bak coinciding a US state visit when the House and Senate voted to approve the pact.

When the time comes, TPP partners like Malaysia may find that we need to do things a little differently, too, to push things along in Congress.

It may not be enough to just leave the burden to the US while keeping our fingers crossed — if only to make sure that all our efforts put into securing a deal will not fall by the wayside.

As Malaysia continues to negotiate with the US under the TPP, we should not forget Congress in strategising for what we hope to achieve from the trade deal or in offering concessions.

After all, would we not want to avoid the frustration of being endlessly on the hook before seeing any gains from the FTA come to fruition?

Read more: Congress factor in trade pacts - Columnist - New Straits Times