The Beginning (and End) of a Free Trade Agenda

In Washington the final negotiations for the three long-awaited free trade agreements (FTA) seem complete. Initially penned by the Bush administration in 2007, the South Korea, Colombia, and Panama FTAs languished for over three years due to Democratic (and some Republican) concerns over labor and human rights, environmental standards and tax haven laws.

These agreements are now finally on their way to approval. Most expect them to pass before the end of the year – perhaps even by the summer. For South Korea, the main issues over Korean cars and U.S. beef have been resolved. For Colombia, an agreement on better protections and enforcement of labor rights (while still with its critics) has been enough to overcome the final hurdles. For Panama, a tax information sharing agreement sealed the deal. Sent together (as Republicans insisted), the package will also restart Trade Adjustment Assistance —which expired in February— easing the costs for the “losers” from free trade.

There is in fact a lot that all sides can support in the final result. The trade agreement with Colombia should boost U.S. exports by over $1 billion a year (up from $12 billion last year), benefiting small and medium-sized companies as well as large agribusiness ventures (exporting grain and cotton) and flagship corporations such as Caterpillar, GE and WalMart. It will end the previously required yearly renewal process for trade privileges, locking in protections for companies in both countries to plan – and invest – for future production and trade. Likewise, the Korea pact should add over $10 billion annually in U.S. exports, opening up markets for farm products as well as financial, engineering and other service companies.

These trade agreements should boost manufacturing jobs. For instance, Caterpillar’s exports to Latin America are exploding – up nearly 60% in the last year. Manufacturing jobs making bulldozers, trucks and excavators in Peoria, Illinois, increasingly depend on trade to places such as Panama and Colombia. The boost in trade to Korea should also protect and/or add thousands of jobs.

Even with this belated success, free trade supporters shouldn’t start celebrating just yet. This last week marked the (likely) death of the World Trade Organization’s (WTO) Doha Round.  After ten long years, the deepening rifts between not just developed and developing nations, but many within those blocks now look insurmountable. While some talk of make-or-break negotiations this week in Geneva, many nations have already moved on to Plan B, negotiating bilateral and regional trade deals. Indeed, the Europeans and others already are pursuing active policies in this direction.

At first glance, it would seem the United States will move in this direction as well. The Obama administration has staked economic growth on increasing trade, pledging in the State of the Union to “double exports over the next five years." The current U.S. Congress is the most trade friendly in at least five years - indeed, trade remains one of the only areas where Congressional representatives seem to have any inclination to reach across the aisles.

Yet the lessons learned for potential trade partners from the Korea, Colombia, and Panama deals is that the United States – though tempting as the largest world market - is a fickle partner. Future trade deals will likely become more —not less— onerous to negotiate and complete.  A real trade agenda will require more than a few feelers across the political aisle— an unlikely prospect today. And, without “fast track” authority (that would allow the President to negotiate a deal that will then be voted up or down without amendments), Obama today (and whoever is in office come 2012) can’t credibly negotiate with other nations. As the worldwide momentum shifts to bilateral and regional deals, the United States is going to find it difficult to keep up.