New U.S. president will follow pro-trade policies, expert says

U.S. trade policy will differ little in a Barack Obama or John McCain administration, according to a trade attorney who until recently helped negotiate free trade agreements for the Office of the U.S. Trade Representative.

Protectionist rhetoric by Democrats catering to blue-collar constituencies was a way to secure the party nomination, but once in office Obama is likely to follow the same mainstream trade policies as McCain, said Jay Eizenstat of Miller & Chevalier.

I take with a grain of salt all this free trade bashing in the primary season. It's pandering to unions, the former director of customs affairs at USTR said in a presentation last Tuesday to the American Association of Exporters and Importers conference in New York. Obama will embrace free trade agreements and the World Trade Organization's Doha round of global negotiations to reduce trade barriers, he predicted.

It may take awhile for a Democratic administration to show its free trade proclivities, but the fact is we talk to trade partners every day, Eizenstat said.

U.S. and EU negotiators last week warned that the Doha talks could collapse because of the intransigence of some big developing countries over rules on industrial goods. Those countries are equally upset that developed countries continue to protect their agriculture markets.

Eizenstat predicted that Democrats would pick up a dozen to two dozen seats in the House and three to six seats in the Senate in the November election, giving party leaders more leverage and limiting the next president's ability to dictate trade policy.

Congress is very much in the driver's seat, he said, pointing the special influence of Senate Finance Committee Chairman Max Baucus, D-Montana; Sen. Carl Levin, D-Mich.; and House Ways and Means Chairman Charles Rangel, D-N.Y.

Progress on several trade deals and policies is still possible in the waning months of the Bush administration. Eizenstat said Congress could consider the pending free trade agreement with Panama in the fall. Democrats, who control Congress, refuse to vote on the treaty as long as the president of the Panamanian national assembly remains in office because he is wanted in the United States for the murder of two U.S. servicemen. The situation changes on Sept. 1 when the assembly president's term expires, opening the door for Congress to vote on the deal.

The best-case scenario for the stalled Colombia free trade agreement is that an expanded Trade Adjustment Assistance program for displaced workers -- which Baucus, and ranking member Charles Grassley, R-Iowa, have made a condition for passage -- is approved before the August recess and then voted on in the fall, Eizenstat said. Some on Capitol Hill have talked about pairing Trade Adjustment Assistance with a possible second economic stimulus package.

A trade deal with Korea is in limbo because of ongoing Korean restrictions on U.S. beef and auto part imports. Korea has banned American beef for the better part of four years because of fears of mad cow disease. In April, Korea agreed to allow all beef imports from the United States, regardless of age, but then later urged individual exporters to refrain from sending beef from older cattle. Last week, the South Korean government said it would delay for an undisclosed period the planned resumption of U.S. beef imports. Baucus has declared that if Korea doesn't start allowing beef imports a free trade agreement will remain on hold.

Eizenstat said election year politics and the short legislative calendar would prevent the U.S.-Korea FTA from being debated this year in Congress. Korea will not agree to reopen the trade deal, but said a side arrangement on access for U.S. auto parts could be reached in the next administration to help get the pact ratified.

Reauthorizing trade promotion authority that gives the president freedom to negotiate without Congress amending any deal is essential for promoting a free trade policy, the former USTR official said. The fast-track negotiating authority expired last summer.

The USTR under a McCain or Obama administration would likely focus on expanding free trade agreements in Asia, especially concluding a deal with Malaysia, possible restart of talks with Thailand, potential trade deals with Indonesia and the Philippines and a regional FTA, Eizenstat said. They would also increase free trade agreements with Arab states in the Gulf, as well as possibly Tunisia and Algeria, and turn attention to sub-Saharan Africa too, he forecast. The United States has neglected Africa in its free trade agenda, a situation Eizenstat called immoral.

Trade deals have foreign policy benefits that go beyond pure trade gains, he noted.

Obama has also talked during the primary about renegotiating the 15-year-old North American Free Trade Agreement to get a deal with stronger labor and environmental provisions. Opening up the trade pact could set a bad precedent and backfire on the United States because Canada, which has stricter environmental and labor protections, and Mexico would insist on meeting their own demands, said Karen Kelly, head of trade compliance for North America at Becton, Dickson & Co., during the panel presentation.

Eizenstat said he doubted the trade treaty would be reopened because it has been of such great benefit to U.S. exporters. There may be an attempt to deal with some issues outside the walls of the trade agreement itself, he said.

The trade attorney said his vision, after the political dust settles in a couple of years, is to integrate the existing Central and South American free trade agreements -- Peru, CAFTA-DR (Honduras, Costa Rica, El Salvador, Guatemala, Nicaragua, and Dominican Republic), Chile, as well as Panama and Colombia if they are approved and implemented. The goal is an arrangement whereby U.S. hemispheric partners on free trade work to merge together into one giant free trade agreement. Mexico and Canada would not be included in such an effort, he explained.

Source: American Shipper