In an upbeat speech to the U.S. Chamber of Commerce, U.S. Trade Representative Susan Schwab recently predicted that President Bush and a new Democratic Congress would work together in the next two years on a range of trade legislation.
Supporters of trade expansion can only hope she is right, but political winds point toward rough waters ahead.
Democratic control of the 110th Congress will mean a chilly reception for the Bush administration’s agenda of promoting free trade agreements.
According to post‐election analysis by The Wall Street Journal, skeptics of trade gained about 16 votes in the House and five in the Senate.
Core Democratic constituencies, such as organized labor and environmentalists, will demand opposition to new trade agreements as a reward for their support.
The first casualty of the new Congress will be trade promotion authority, due to expire at the end of June 2007.
Approved in 2002, TPA authorizes the president to negotiate free trade agreements and present them to Congress for an up‐or‐down vote without amendment.
Under TPA, Congress approved such deals as the Chile and Singapore free trade agreements in 2003, the Australia agreement in 2004 and the Central American Free Trade Agreement in 2005.
Renewal of TPA was doubtful even before the election, given the narrow margin by which it passed in 2002, but the Democratic sweep has sealed its fate for at least the next two years.
Democrats have also staked out a skeptical line against free trade agreements still in the pipeline with our Latin American neighbors Colombia and Peru.
The mantra of the party and its organized‐labor backers is that these agreements fail to protect the environment and labor rights.
Those demands are based on the misguided belief that developing countries will only raise their workplace standards under threat of trade sanctions, when in reality, expanding trade has been a powerful engine to that end.
The one area where the new Congress may be more pro‐trade than the old will be on Cuba.
Large majorities of Democrats have voted against the trade embargo and travel restrictions.
Unfortunately, President Bush is wedded to defending the failed, four‐decade‐old policy of trying to change Cuba through economic isolation. The new Congress may chip around the edges but will probably not be able to repeal the embargo.
Thanks to the American system of checks and balances, a Democratic Congress will find it difficult to enact outright protectionist legislation, such as sweeping tariffs against goods from China.
President Bush does (in theory, anyway) wield the veto pen.
In the Senate, Democrats will need to muster a 60‐vote supermajority for any trade bills, a real barrier against protectionism in a chamber that is normally more pro‐trade than the House.
Thus the most likely outcome for the next two years will be a rise in anti‐trade rhetoric and proposals coming out of Washington, but no bold changes in actual policy.
Meanwhile, the American people will go on voting with their dollars for more engagement in the global economy. Americans have never earned or spent a higher share of their income in the global economy than they do today. Imports, exports, and foreign investment are setting records.
Despite their campaign rhetoric on trade, the Democrats would be wise not to disrupt those positive trends.