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The Americas Prepare for Trade On a Fast Track

Author: Walter Russell Mead, Henry A. Kissinger Senior Fellow for U.S. Foreign Policy
August 5, 2002
The New York Times


In a big and badly needed win for the Bush administration, the House and Senate last week gave the president trade-promotion authority. Future trade agreements negotiated through 2007 can only be approved or rejected by Congress as they stand (no amendments allowed), vastly increasing the ability of the administration to negotiate trade deals with foreign nations.

The bill gave the president virtually everything he wanted. Trade critics dropped amendments that would have given Congress a veto over agreements that might endanger American antidumping rules. Provisions offering greater protection for American workers adversely affected by free trade were curtailed to suit Republicans. Passage of trade-promotion authority contributes to the recent upturn in relations with Europe. Robert Zoellick, the United States trade representative, and his European counterpart, Pascal Lamy, have struggled together to contain an increasingly contentious set of trade irritants -- most recently, European anger over steel-import restrictions imposed by President Bush on March 20. So far, the European Union has resisted pressure to impose draconian sanctions in retaliation; passage of trade-promotion authority makes a trans-Atlantic trade war even less likely.

It will also invigorate the Doha round of negotiations, which aim to liberalize trade among all 144 members of the World Trade Organization. The Doha agenda emphasizes integrating poorer countries into the international system; given that lower wages and other costs are usually critical to the global competitiveness of less developed nations, trade agreements under the Doha rubric may be particularly sensitive in Congress. Trade-promotion authority will make such agreements far more likely.

For now, the new politics of trade may count most in Latin America, now threatened by the worst economic crisis since the Great Depression. With Argentina and Brazil engulfed in economic chaos, with continuing unrest in Venezuela, civil war in Colombia, and political instability in Bolivia, Ecuador and Peru -- and with both Uruguay and Paraguay now embroiled in the aftereffects of the crises in Brazil and Argentina -- the Bush administration faces an extraordinary set of hemispheric challenges.

Trade-promotion authority is a vital tool for dealing with Latin America's economic problems. The one major Latin economy that has so far escaped a meltdown is Mexico -- which is also the one Latin American country that has a free-trade agreement with the United States. Despite initial complications, Mexican access to United States markets has served to keep foreign investors interested and to keep Mexican factories working even as the rest of the region melts down.

Trade-promotion authority is particularly welcome because the Bush administration has reached something of a deadlock with Argentina and Brazil over their requests for additional assistance from the International Monetary Fund. The political instability in both countries makes it virtually impossible for their governments to accept the tough conditions that the I.M.F. and its guiding force, the United States Treasury Department -- justifiably suspicious after so many failures in the past -- want to put on new money. While free trade won't provide a quick fix for these economies, conclusion of an agreement would offer hope in the long and medium terms.

Even trade-promotion authority may not be enough to get a hemispheric Free Trade Area of the Americas pact done by 2005, as the administration still hopes to do. Consider the orange. Currently, Brazilian orange juice exports to the United States must pay $418 a ton in tariffs, roughly equivalent to 40 percent of the value of the juice. With an estimated 90,000 Florida jobs dependent on citrus, a president who carried that state by 537 votes will not be eager to cut orange-juice tariffs.

However, lack of a full blown Free Trade Area of the Americas won't discourage smaller initiatives and may make them seem more urgent. Last week's legislation reauthorizes the Andean Trade Preference Act, which is intended to wean countries like Bolivia and Colombia off drug exports. A promising agreement with Chile should soon be concluded. Although labor rights issues could complicate matters, an agreement with the Central American republics is likely to move forward now.

There is even speculation that Argentina and Brazil will follow Chile and negotiate bilateral agreements with the United States. Their collapsing economies can no longer hope to build their common market, Mercosur, into a strong regional entity that could negotiate on a more equal basis with the United States. As a result, both countries might want to lock in limited, bilateral agreements with the United States now -- as Argentina and Chile already have with the European Union -- while trusting to the Doha negotiations to pressure the United States to open agricultural markets.

All this leaves the United States looking strong. If the European Union or Japan -- or the poorer countries that make up a large majority of the W.T.O.'s membership -- don't make enough concessions to the United States in the Doha talks, Washington can negotiate favorable bilateral deals with countries eager to gain access to its immense consumer market, which is almost 20 percent of world imports.

Last week's trade bill was also a signal victory for the Republican Party (Bill Clinton failed in three tries to get trade-promotion authority through Congress). Trade negotiations are about horse trading; now Republican officials have the chance to decide what products to push and where to make compromises on trade deals that will affect the future of key industries and states. These efforts will be remembered by corporations when it comes time for campaign contributions.

The bill is a major defeat for free-trade critics (or fair-trade advocates) even though its provisions would pay 65 percent of the health-insurance premiums of workers displaced by free trade. Business interests that lobbied for this law will lobby even harder for actual trade agreements that offer them specific benefits. Failure to block trade promotion authority makes it much harder to block future trade agreements.

With plunging stock markets, rising budget deficits, violence in the Middle East, corporate scandals at home and economic meltdowns in Latin America, the world remains a dark and stormy place for the Bush administration. Nevertheless, trade-promotion authority will give the administration some badly needed traction as it grapples with a global economy that is weakening.

Walter Russell Mead, author of "Special Providence: American Foreign Policy and How It Changed the World," is a senior fellow at the Council on Foreign Relations.

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