US Bilateral Trade Agenda: Lowered Expectations

Washington Post

22 April 2004

Lowered Expectations

By Paul Blustein

The way U.S. Trade Representative Robert B. Zoellick jets around the
world, seeking to cut deals that would knock down trade barriers at home
and abroad, it might seem as if the political furor over free trade and
job losses at home were a minor flap.

Immediately after concluding negotiations for a free-trade agreement
between the United States and Australia in February, Zoellick hopped on
a plane and logged 32,000 miles on a trip aimed at reviving World Trade
Organization talks to lower global trade obstacles. That was just weeks
after he had struck a free-trade pact with five Central American nations.
He reckons that he has traveled overseas more than any other Cabinet
member.

"In an environment where there are a lot of voices out there trying to
wall off America from the international economy, our view is, the best
approach is to stay on offense," Zoellick said in an interview.

But what does all this globetrotting signify? As devoutly as Zoellick
might wish otherwise, progress toward free trade is bogged down in
Congress, in large part because of public anxiety about the loss of jobs
to foreign competition. On other fronts, the administration’s trade
agenda is badly behind schedule.

Voter sentiment is running high against trade with low-wage countries,
and the White House is leery of even trying for congressional approval
of the Central American Free Trade Agreement (CAFTA) before the November
election. The only free-trade accords that stand a chance of getting
through Congress in coming months are the one with Australia and a
similar one with Morocco, according to congressional staffers and trade
lobbyists.

That is a far cry from where Zoellick once hoped to be by now.

The end of President Bush’s first term is in sight — a point at which
Cabinet members often leave or change jobs — and Zoellick is still well
short of wrapping up a big agreement of the sort his predecessors
struck, such as the North American Free Trade Agreement, or the 1994
Uruguay Round of global trade negotiations, or the 1999 accord with
China that paved the way for its entry into the WTO.

The agreements Zoellick has reached with individual countries involve
relatively small markets and are thus unlikely to have a noticeable
impact on the $10 trillion-plus U.S. economy. They could add up to a
disappointing legacy for a man who came to office in 2001 with a
reputation as one of the most masterful strategists ever to hold the
trade representative’s job.

Zoellick, who was an undersecretary of state in the administration of
Bush’s father, set an ambitious agenda aimed at significantly expanding
U.S. trade with other nations. Opening markets wider and forging new
trade agreements, he said in speeches and testimony, would lead not only
to "better jobs with bigger paychecks" and "lower prices for
hardworking families" but also to greater personal liberty and national
security.

To that end, he won congressional authority in August 2002 to negotiate
trade agreements — authority that had lapsed during the second half of
the Clinton administration — and aimed to complete two major deals by
the end of this year, a self-imposed deadline. One was the WTO’s Doha
Round of negotiations to expand trade worldwide, which Zoellick played a
key role in launching. The other was the Free Trade Area of the
Americas, which would extend NAFTA to all the democracies in Central and
South America and the Caribbean. Pursuing bilateral deals as well, he
argued, would help spur progress on the bigger negotiations because many
nations would worry about losing the competitive race in the giant U.S.
market to countries that had bilateral arrangements with Washington.

The Western hemisphere free-trade pact is going nowhere, mainly because
of disputes between the United States and Brazil over the deal’s
fundamental shape. The Doha Round ran aground last September when a
meeting of WTO members in Cancun, Mexico, collapsed. Although Zoellick
has embarked on an initiative to restart the WTO talks that looks as if
it may succeed, the most anyone is hoping for this year is a commitment
that would leave the talks behind where they were supposed to be in
March 2003.

"Bob Zoellick has been a busy guy, and he’s worked very hard, and he’s
got some stuff to show for it," said Brink Lindsey, a trade specialist
at the Cato Institute. "But . . . the biggest and most ambitious goals
remain on the horizon. And it is unlikely that he will serve long enough
to see them brought to fruition."

Lindsey said Zoellick can’t be faulted for the reluctance of other
countries to make concessions and strike deals, but some of that problem
can be traced to the administration’s catering to certain domestic
interests in ways that other nations view as antithetical to free trade.
An example is the heavy subsidies American farmers got in the 2002 farm
bill.

Gary Hufbauer and Yee Wong of the Institute for International
Economics made a similar assessment. "Upon evaluation, President Bush’s
trade legacy will be listed among aspirations, not accomplishments,"
they wrote in an article to be published in the Harvard International
Review.

Zoellick’s personal legacy on trade could magnify, of course, if Bush
is reelected and keeps him in the trade representative’s office. Asked
about his plans for next year, Zoellick did not rule out the possibility
that he might stay. "I’m here to serve the president," he said. But he
suggested that even if he were to leave, he would be more than satisfied
with having filled the trade pipeline with agreements that are in
various stages of completion and congressional action.

When the Bush administration took over, he noted, the United States had
entered into just two free-trade deals — NAFTA and a pact with Israel
— in which the goal was not merely to lower barriers to trade among
participating countries but to erase them completely. Long-planned
negotiations for a similar accord with Chile had just begun, as had
talks with Singapore. (The Chile and Singapore deals, which Zoellick
negotiated, were approved by Congress in 2003.)

"In the past three or four months, we’ve completed free trade
agreements with eight countries," Zoellick said, referring to Australia,
the five Central American nations, the Dominican Republic and Morocco.
"People now think this is a pattern of life — which is good!"

Looking to the future, he said, "we would like to create a dynamic that
extends well beyond this term, a dynamic internationally, where more
and more countries say, ’Well, X is doing it; what about us?’ "

A sign of his success, Zoellick added, would be if journalists "were
asking my successor, ’Hey, when are you going to get new free trade
agreements through?’ "

Zoellick pointed out that it isn’t easy to find big economies that are
suitable for bilateral arrangements with the United States. Washington
already has free-trade pacts with its two biggest trading partners (Canada
and Mexico), and two other major partners, Japan and the European Union,
would balk at opening their agriculture markets.

So in choosing among the remaining candidates, Zoellick has tended to
focus on countries that are of geopolitical importance to Washington,
such as Middle Eastern democracies and allies in the wars on terror and
drugs. That pleases many in the foreign policy establishment who share
Zoellick’s view that free-trade deals can promote economic reform and
American values, but the dollar amounts are of limited interest to the U.S.
business community.

"People just don’t think they amount to very much," said one veteran
industry lobbyist who, like others voicing criticism, insisted on
anonymity to avoid incurring the administration’s wrath. "The Australia
deal is useful, in that it adds 5 percent to your bottom line if you
export to Australia [because of the elimination of tariffs on U.S. goods].
But it’s not going to lead to any major boom in U.S. exports." Of the
other countries whose deals have been completed or where Zoellick has
announced plans to negotiate, most are "truly inconsequential," the
lobbyist said. "Bahrain, Colombia, the other Andean countries — nobody
really cares that much."

Added together, U.S. exports totaled about $66 billion last year to
all the countries that have finished or may soon start bilateral free-trade
negotiations with the Bush administration. That’s about 9 percent of
all U.S. exports.

Then there is the question of how many deals could pass congressional
muster amid growing public antipathy toward trade. Even the U.S.-Australian
agreement has drawn fire from the AFL-CIO for failing to include
rigorous provisions protecting worker rights, and the opposition to that
deal is nothing compared with the problems facing CAFTA. White House
officials and pro-trade congressional leaders are using the excuse of a
tight congressional calendar to defer a vote on the Central American
pact that they would almost surely lose. They think more lawmakers might
vote for the pact after the election.

"You’ll have to see whether [the vote] will be before the election or
after the election," Zoellick said. "But our goal is to see it gets
passed ultimately."

One area where Zoellick could make significant progress this year, and
where the eventual economic impact could be substantial, is his effort
to revive the WTO’s Doha Round. Crafting a deal that commands consensus
among the 148 WTO member countries is an enormous challenge; each nation
must believe that it will win more by gaining new trade opportunities
than it will lose politically by sacrificing protection for powerful
interest groups. The difficulties were readily apparent at Cancun, where
developing countries accused the United States, European Union and
other rich countries of showing insufficient willingness to cut
subsidies for farmers, while rich nations complained that poor countries
were looking for excuses to keep their trade barriers high.

Confounding expectations that the talks would go nowhere for a while,
Zoellick exhorted other countries not to let the year go to waste and
indicated some willingness to offer concessions on the farm issue. The
result is that a meeting tentatively scheduled for July could succeed
where Cancun failed, in agreeing on the overall approach for how
agricultural subsidies would be curbed. But even if the July meeting
attains its goal, that goal doesn’t include reaching agreement on
specific subsidy cuts, which was supposed to have been achieved by early
2003, according to the original Doha Round timetable.

Adding to the problems facing the talks is the looming departure in
October of Pascal Lamy, Zoellick’s EU counterpart, who has worked
closely with him on Doha Round negotiations.

Another Bush trade priority, the Free Trade Area of the Americas, is
showing no signs of moving toward Washington’s original vision for it.
To avoid another Cancun-style debacle, Zoellick was forced to agree at a
meeting last November in Miami on an outline for a watered-down version
of the accord that would allow individual countries to opt out of
certain provisions, such as those protecting patents and copyrights. A
few days ago, prospects turned even dimmer when a meeting planned for
late April was postponed as the main participants are greatly divided.

Despite such setbacks, Zoellick maintained that the trade talks he set
in motion will produce results — if not this year, then in years to
come. "I think in portfolio terms," he said. "You’ve got multiple
investments, and some of them will pay off at different times, with
different maturities."

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