TWN Info Service on WTO and Trade Issues (Feb08/16)

25 February 2008

Fast track at WTO, although no fast track in the US

Published in SUNS #6418 dated 20 February 2008

By Martin Khor, Geneva, 19 Feb 2008

Recent events and reports in the United States have confirmed that it will almost certainly be impossible for a Presidential "fast track trade authority" to be obtained from Congress during the remaining term of President George W. Bush, thus bringing into serious doubt the status and value of the United States' negotiating positions in the WTO.

The absence of US fast track is in sharp and ironic contrast to the highly accelerated time schedule set for WTO members by its Director-General Pascal Lamy, in which the discussion on the revised draft texts of the Agriculture and NAMA Chairs are to be finished as soon as possible so that a "horizontal process" at senior officials' level can start in a week or two, and a mini-Ministerial can be held in mid-March or slightly thereafter to conclude the modalities.

"No fast track authority in the US, but super-fast track talks in the WTO" seems to be at the heart of what a top developing-country diplomat called the "bizarre situation" now prevailing in the WTO's Doha negotiations.

Without fast-track authority, it is very likely that a Doha deal agreed to by the US administration will not get through Congress intact, and could even remain bottled up in some committee or the other in the House or the Senate.

Given the elements introduced by the Democrat-controlled Congress on bilateral FTAs with Peru, Colombia, Panama, and South Korea last year, there will not only be changes made to texts already agreed to with the US's partners, but new clauses or chapters on labour standards and environment will also be added.

It should be noted that these changes were sought on trade pacts that were concluded under the previous fast-track authority (the Trade Promotion Act of 2002) just before it expired. A Doha agreement sent to Congress without a TPA is likely to be pored over and dissected much more intensely, with multiple times more proposed changes, or even remain bottled up in some committee or the other of either House of Congress.

The question then is why US partners, especially the developing countries, should continue to negotiate and risk being pressurized to make further and even more serious concessions (whether in agriculture or NAMA, services or rules, etc), when these may be rejected by the Congress, even if they are accepted by the US negotiators and administration.

Moreover, there is no certainty or even likelihood that any new offers made by the US negotiators, for example, on US agriculture domestic subsidies, will be endorsed by Congress.

Thus, assuming the Doha negotiations actually conclude, the agreement may be re-opened again at a future date, and what the developing countries agreed to may be considered insufficient by the present or a future US Congress, and they may have to "top up" their offers again, and perhaps yet again, as the recent FTA cases show.

Even assured (in terms of the TPA of 2002) of fast-track treatment (with only a yes or no vote) within a statutorily prescribed time-limit, only the US FTA with Peru has passed through Congress; and there is little likelihood of the others (Colombia, Panama, and South Korea) being approved during this Administration, even after many changes were made.

On 15 February, the Washington Post carried an article entitled "In US, Trade Hits Stiff Head Wind - Proposed Deals Face Resistance." It reported that the Bush administration is facing "high resistance" to its moves to push through Congress the FTAs with Colombia, Panama and South Korea.

"It happens as the administration is confronting the most hostile domestic environment toward free trade in years," said the article. "Recent polls suggest more Americans than ever view globalization as negative, blaming free trade for the loss of millions of manufacturing jobs that have moved overseas.

"As the economy falters, populist pundits of the Lou Dobbsian school are blaming reckless trade deals. In a hotly contested election year, Democratic candidates are jockeying for the labour vote, questioning the wisdom of such accords as the North American Free Trade Agreement."

Noting the new anti-globalization public sentiments, the Washington Post quotes Commerce Secretary Carlos M. Gutierrez as saying: "It's very alarming. This is the very time for us not to have second thoughts or convey a lack of confidence in free trade to the world."

Democrat Senators Byron L. Dorgan and Sherrod Brown presented legislation last week that would make it more difficult to pass trade agreements unless they are accompanied by a more thorough financial analysis. It would mandate inclusion of what they call essential data, such as estimates of how many US jobs would be lost or gained.

Representative Sander Levin (D-Mich.), chairman of the trade sub-committee, said: "What's happening here is that we've had years of a passive trade approach from this administration. They have had a mindless policy that even if trade is one sided, it's better than nothing."

The Post concludes that "Given the opposition to the agreements, both are likely to remain on ice until at least after the US elections in November."

The low priority accorded by the Congress to considering trade bills was emphasized by Senator Max Baucus, Chairman of the Senate Finance Committee (which has the mandate over trade policy), at a meeting held on 30 January at the pro-free trade think tank, the Peterson Institute for International Economics.

Baucus announced that his top trade priority is to get Congress to adopt a Trade Adjustment Assistance (TAA) program and until an expanded and re-authorized TAA is passed, other issues on the trade agenda like pending free trade agreements with Colombia, South Korea and Panama must take a "back seat." A WTO deal was not even mentioned as being on the agenda.

The TAA is the program that helps workers adversely affected by increased imports and offshoring. The House of Representatives has already passed a TAA reform bill and Senator Baucus has introduced a companion TAA bill in the Senate.

According to the Peterson Institute, a central theme of these bills is expanding TAA coverage to include workers in the services sector, especially those adversely affected by outsourcing and offshoring. The bills would also expand health coverage and wage insurance, and the need for TAA reform is heightened by the current slowdown of the economy.

In the most relevant part of his speech, Senator Baucus said: "Our task is to adopt and implement a TAA program that reflects the 21st century global economy. Let me be very clear. This task, and no other, must be our nation's trade policy priority.

"Until we accomplish it, other issues on today's trade agenda must take the back seat. That includes congressional consideration of pending free trade agreements with Colombia, Korea, and Panama. I simply cannot support, or consider moving these agreements in the Senate, until we realize the goal of expanded and re-authorized Trade Adjustment Assistance."

Meanwhile, at another event at the Peterson Institute on 13 February, the US Trade Representative Susan Schwab, presented her most comprehensive reactions to the revised texts of the Agriculture and NAMA Chairs.

She seemed to complain about "slippages" made by the Chairs to placate developing countries.

She said that "slippage occurs when negotiations are re-framed to placate the outliers, the nay-sayers, and the obstructionists", and gave a warning of "a lowest-common-denominator outcome that fails to generate economic growth."

She resumed her earlier lecturing, or rather a hectoring tone about the need for developing countries who want to be represented at the negotiating table to show "a degree of responsibility and accountability that several advanced developing countries, who have become major players in the global economy, have not yet been willing to undertake."

Trade observers noted that the Schwab tone and posture, as if the presence and representation at the negotiating was something for the US to give or not, is in strange contrast to the actual current overall situation of the US.

On the Agriculture text, Schwab said more work needs to be done before the text is ready for negotiations among Ministers. She identified the key outstanding issues as the magnitude of cuts appropriate to developed and developing country agricultural barriers and trade-distorting subsidies, and how to "ensure that the use of sensitive and special product flexibilities do not negate the market-opening purpose of the Round."

The USTR especially picked on Special Products (SPs) and the Special Safeguard Mechanism as problems for the US, saying that "the current text is particularly alarming as it raises the possibility of excluding special products from tariff cuts and allowing protective duties under the Special Safeguard Mechanism in a way that would result in more, rather than fewer, agricultural barriers."

She was even more caustic regarding the NAMA text. Said Schwab: "Not only does the new text offer a diminution of ambition, it raises new challenges when it comes to clarity for decision-making."

In fact, in its most recent iteration, while the ranges for tariff cuts remain, developing country flexibilities that had been stable since 2004 have now suddenly disappeared.

"This new uncertainty creates the prospect that we must now duke it out over whether there should be more or less flexibility than in the original draft. This is certainly not a step designed to take us closer to Ministers making choices."

She however indicated US interest in giving "extra credit" for countries that renounce flexibilities entirely and that opt for less severe tariff cuts.

Schwab also insisted that the Chair's services paper be revised, to be one where "members make commitments to maintain current levels of market access and to create new market access."

She also wanted "a renewed bilateral and plurilateral consultative process on Services market access among developed and major developing countries. This process should culminate in minister-level engagement that coincides with the conclusion of negotiations on Agriculture and NAMA modalities."

Schwab's speech interestingly did not provide any indication that the US itself is ready to improve its own offers, for example, on agriculture subsidies or services Mode 4.

But it gave clear indication that the US will be tough on developing countries on their market openings in all three areas of agriculture, NAMA and services, in the weeks ahead. +