Obama administration may portend shift in trade policy

McClatchy NewspapersDecember 4, 2008 

WASHINGTON — U.S. trade strategy probably will change dramatically when the Obama administration and new Congress take power in January, with U.S. negotiators forgoing the kinds of bilateral free-trade agreements popular with the Bush administration, according to Democratic officials and experts.

Such a switch could put at risk agreements with Colombia, Panama and South Korea that already have been signed and are awaiting Congress' approval.

The Colombia agreement, in particular, has received intense public scrutiny as Democratic leaders cite a rash of killings of Colombian union activists as reasons for holding off on approving it.

The political differences, however, reach more deeply than just the three pending agreements. Many congressional leaders haven't been happy with the Bush strategy of negotiating individual treaties with small countries, saying that it's sapped momentum for regional trade pacts such as the long-delayed Free Trade Area of the Americas.

Many experts speak of the Bush administration constructing a "spaghetti bowl" of bilateral trade agreements rather than a more solid global structure.

"There's a very strong sentiment under the Democrats that (the bilateral strategy) was not a good thing," said Paul Blustein, journalist in residence and trade expert at the Washington-based research center the Brookings Institution.

"The idea was that these bilateral deals would be building blocks for a bigger deal. That policy was a complete failure."

U.S. Rep. Jim McCrery, R-La., the ranking Republican on the House Ways and Means Committee, countered that President-elect Barack Obama would be letting competitors such as China pass the United States by if he stopped striking such bilateral deals.

Unable to complete multilateral trade negotiations because of objections from large economies such as Brazil, the Bush administration signed about a dozen bilateral agreements with countries such as Peru, Singapore and Australia, which slashed tariffs and opened markets. The agreements included a free trade pact with Central American countries and the Dominican Republic.

Chinese negotiators did the same by striking bilateral agreements all over the world. Last month, President Hu Jintao finalized negotiations on his country's latest free trade agreement with Peru.

Meanwhile, progress has ground to a halt on the Free Trade Area of the Americas, which would create a hemispherewide tax-free trade zone, and on the long-delayed Doha round of World Trade Organization trade talks, which would lower tariffs worldwide.

McCrery said the need for increased trade had only grown with the economic crisis, and he championed free trade as a development tool for emerging economies.

"We can do both types of agreements," McCrery said. "There's still plenty of impetus for multilateral agreements and for keeping those talks alive, because the underlying reasons for those talks are still there."

Economists agreed that striking new trade deals would have to wait until the next government figures out what to do with the three that are pending. Legislators also would have to grant Obama trade-promotion authority, which would let him negotiate new treaties.

The Obama administration probably will focus on domestic problems first, but many observers are counting on a more multilateral approach when Obama turns his attention to foreign trade.

"I hope they seek a broader approach," said Christopher Sabatini, senior policy director at the business group the Council of the Americas. "I hope there's an effort to treat large trading partners as partners rather than competitors."

The current Congress still might approve the pending agreements when it meets later this month, although that isn't considered likely.

The importance of the issue to President George W. Bush was underlined last month when he reportedly urged Obama to pass the Colombia accord during their first post-Election Day meeting.

The vast majority of Colombian goods already enter the United States tax-free because of an Andean trade pact between the United States and four South American countries, including Colombia. Two-way trade between the United States and Colombia reached about $17 billion last year.

The pending Colombian free-trade agreement would eliminate import taxes for more than 80 percent of U.S. industrial and consumer goods entering Colombia, with the treaty eventually covering all U.S. imports, according to a White House analysis.

McCrery called approving the Colombia trade deal, which the U.S. and Colombian governments signed in 2006, a "no-brainer."

A Democratic official, who spoke only on the condition of anonymity because of the matter's sensitivity, said congressional leaders would work with the Colombian government to put more human rights protections in the agreement.

"If that succeeds, there will be some movement," the official said.

Blustein said the Democrats eventually would approve the Colombia deal as a reward for one of the United States' top allies in Latin America.

Congressional approval of the pending agreement with Panama became more likely after Pedro Miguel Gonzalez, whom a U.S. court has indicted on charges of killing a U.S. soldier in 1992, stepped down as his country's National Assembly president in August. U.S. leaders had held back on approving the agreement to protest Gonzalez's alleged role in the killing.

Approving the agreement with South Korea, however, will remain difficult, as leaders from both political parties complain that it doesn't do enough to open U.S. access to the South Korean market, especially for automobiles.

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McClatchy Newspapers 2008

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