Idea of the Week: A Fresh Start For Trade Policy
The 2007 trade policy debate kicked off earlier this week, with the first House Ways and Means hearing under Democratic auspices in a dozen years. This debate, of course, is part of a larger national conversation about America's place in the global economy. As it begins, we are optimistic about the chance for Democrats to lead in shaping a new trade policy, resting on historic progressive-internationalist principles adapted to a new world. But it's clear the damage done to America's position in international trade under the Bush administration must be quickly reversed, and a new domestic bargain must be struck to restore public confidence in our country's ability to remain competitive in the global economy. In the meantime, Congress should take one immediate step to keep our global posture from deteriorating even further: a short-term extension of trade negotiating authority for the sole purpose of keeping the crucial Doha Round of multilateral trade talks alive.
While the president has always been rhetorically pro-trade, he's presided over a long series of blunders and lost opportunities for trade expansion.
He was granted Trade Promotion Authority -- basically the ability to submit trade agreements to Congress for an up-or-down vote -- in 2002 in hopes that he would negotiate big agreements, including the partially negotiated Free Trade Area of the Americas and the World Trade Organization's newly launched Doha Round. Five years later, the FTAA is moribund and the Doha Round is clinging to life, in no small part due to U.S. negligence. The string of smaller bilateral FTAs the administration negotiated instead has galvanized anti-trade sentiment without producing any significant expansion of U.S. economic opportunities. Indeed, many of these agreements have been marked by politically motivated attempts to polarize trade along partisan lines, and to concentrate trade sacrifices in Democratic constituencies while avoiding reform of special privileges for Republican-leaning industrial and agribusiness lobbies.
Meanwhile, bad budget and savings policies at home and ineffective financial policies abroad have steadily pushed up U.S. trade and financial imbalances. Enforcement of bilateral trade agreements or of multilateral trade rules has slackened, with failure to respond to China's flagrant abuse of intellectual property rights being just one example. Powerful new competitive challenges have been met with shrugs. And the administration has shown little or no interest in taking steps to help workers dislocated by trade, much less in addressing the broader challenge of ensuring that globalization works for all citizens instead of feeding inequality. In a country where loss of a job often means the loss of health insurance and pensions, and a calamitous decline in living standards, it's no accident that many Americans perceive national trade policy as indifferent and adrift, and don't trust their leaders to negotiate or enforce sound trade deals.
These are challenges we must meet with tougher policies, and also with some realism. We need to hold China and India to their obligations; we need to open their markets more fully to our exports. But we also need to respect their achievement and meet it with our own. China is good at making things -- American shoppers buy Chinese TV sets and clothes because of their high quality and low price -- and India is using its English-language skills and open society to capitalize on the Internet. Their success is permanent, and we will have to raise our own game in response.
We must also remember the stakes involved in getting trade policy right. Expanded trade was undeniably a key part of the high-growth, low-inflation, high-wage economic expansion of the 1990s; even now it plays a key role in keeping inflation and unemployment at historically impressive levels. "Fair trade" policies that in effect restrict trade hurt far more workers than they purport to help.
While many Democrats find it tempting to "Just Say No" to Bush trade policies and refuse to offer a progressive alternative strategy, this would squander real opportunities to boost U.S. exports, create jobs for middle-class workers, provide tangible help to some of the world's poorest and most unstable regions, and keep this country competitive in a global marketplace from which we cannot possibly isolate ourselves.
Fortunately, key Democrats in Congress -- most notably the chairmen of the House and Senate committees with major jurisdiction over trade policy, Rep. Charles Rangel of New York and Sen. Max Baucus of Montana -- understand the false choices so often posed in the trade debate, and are looking ahead toward new and fresh approaches, combining advocacy of American exports with much greater support for worker and family security at home, and a comprehensive program to upgrade American competitiveness. Here's what we recommend they accomplish this year:
- First, a short-term renewal of Trade Promotion Authority for the sole purpose of concluding the Doha Round. This is the only opportunity to deal with the five major partners -- Canada, Mexico, China, the EU, and Japan -- which account for two-thirds of American trade, along with big developing countries like Brazil and India. In conjunction with a progressive farm bill, completing Doha is the best opportunity to capture new markets and jobs, while providing critical economic help to poor and often unstable countries.
- Second, a significant down-payment on a new social contract. Specifically, with the Internet now bringing export opportunities and import competition to vastly larger swathes of the U.S. economy, Congress should make the support for health insurance and job placement now available to trade-displaced workers through Trade Adjustment Assistance open to all dislocated workers. This, of course, would simply be a first step toward a comprehensive social compact that includes universal health coverage, universal pensions, a reformed unemployment insurance system, and other economic security measures for middle-class families.
- Third, a legislative trade agenda -- whether or not the Doha Round passes -- which includes a new trade preference program for Asian least-developed countries and major Muslim-world states, as Reps. Joe Crowley (D-NY), Adam Smith (D-Wash.), Baucus and others have suggested; permanent normal trade relations for Russia, as Russia completes its WTO accession; and serious bipartisan negotiations over refinements of the administration's five remaining bilateral FTAs.
These steps are a starting point for the sort of comprehensive approach to globalization that Americans want and need, and that most Democrats support as a long-term priority. They are vastly preferable to another year of drift and polarization, as more and more Americans lose faith in their country's ability to both lead and prosper in the global market-place -- and a fresh start for trade policy may give a new president and administration a fresh chance to meet the globalization challenge in 2009.