The Politics of US Trade Policy Making

Slow to announce the appointment of a new trade representative, the Bush Administration hinted that it was considering the elimination of USTR's cabinet status. This understandably raised eyebrows both in the US and foreign capitals. The issue finally was clarified with an assurance USTR would not be downgraded. However, there is a lingering concern that the mere consideration of the downgrade option reveals something about the general priority of international trade policy for President Bush.

That concern has lead quickly to calls for President Bush to make cooing sounds regarding the multilateral trading system. As well, there is the disturbing possibility that negotiations on trade in agriculture and services could be deadlocked by mid 2002, unless a new round agenda is agreed upon at the 4th Ministerial Conference to be held in Qatar this coming November. This work - building a trade negotiations agenda - is a principle focus for WTO members in 2001.

Earlier this month, Dr. Supachai Panichpakdi urged the President to endorse a new round of trade negotiations. He said that without a renewed expression of interest by the United States, the anticipated launching of a new round may not occur. Dr Supachai emphasised that a new trade round agenda would have to take into account the concerns of developing countries. In his view, the US must show greater flexibility and come out in clear support of developing countries.

Supachai has on occasion characterised the focus on development as equivalent to highlighting the impact of globalisation on developing nations. He is also known to be predisposed to the view that developing countries must be compensated for losses they suffered due to commitments made in the Uruguay Round. In calling for a round, Dr. Supachi's focus on development issues is a bottom line element for a new round to proceed.

He can press for this further movement by the US because the fundamental objective - derailing consideration of environmental and labour standards - has been virtually assured by the Bush Administration without any concessions from the developing countries.

President Bush has indicated that he does not favour including restrictive labour or environmental standards in trade agreements. His choice for USTR, Robert Zoellick, has staked a similar position in recent years, and most vigorously following the disaster in Seattle.

However, it is clear that any prospect of securing fast track trade negotiating authority for a new WTO round will require concessions to the Congressional Democrats, who are already suggesting that labour and environment are relevant trade related issues for negotiation. Zoellick must not only manage the Republican trade agenda, he must also avoid becoming a lightening rod for Bush opponents in the labour and environmental camps.

While much remains to be done over the next two years, the initial shape of a viable political compromise is already becoming apparent. There is a possibility that over the longer term Zoellick and Supachi can agree on marginalising labour and environment, while Supachi can also agree with Lamy on the importance of a broad based development round. The fly in the ointment will be a too hearty pro-poor stance by Supachi that alienates a potentially protectionist Congress.

In the event, President Bush will be faced with the dilemma of proceeding with a broad new round including investment and competition policy just as the US economy is slipping into recession, or holding out for a narrower traditional agenda and being stuck with a WTO management team more disposed to developing world concerns.

Dr. Supachai attended the World Economic Forum in Davos, Switzerland. Before leaving for Davos, he told reporters in Bangkok that he expected to meet a number of trade ministers at the forum to exchange views on the possibility of a launch this year. He is thought to have taken a sounding on his proposal to hold a labour and trade conference to highlight the positive impact of trade on domestic labour markets in developed and developing countries. Significantly, in Davos Moore acknowledged that a new round might proceed without labour as a trade agenda item.

In this context, the choice by President Bush is to focus American trade policy on the western hemisphere. The priority is to enhance the North American Free Trade Agreement (NAFTA) and build a new free trade zone encompassing the whole of South America in the Free Trade Area of the Americas (FTAA). This is a choice that makes sense for the Bush Administration, even if it draws momentum away from advancing the cause of a new round in Geneva.

It is politically astute inasmuch as there are no convincing signs that any of the key players are prepared to demonstrate the flexibility necessary to launch a new multilateral trade round. Moreover, the emerging consensus to complete FTAA negotiations by 2003 will reinforce the hemispheric trade priority.

Even though US business constituencies will have significant influence on the Administration's thinking about international trade, the fix is in regarding labour and environment in the Summit of the Americas context. The FTAA negotiations specifically provide for the consideration of these issues, not the least through the civil society consultative mechanism. In other words, President Bush makes no concession to the Democrats in exchange for fast track associated with the FTAA.

This would not be the case in the event the Administration was intent on pursuing a multilateral negotiations programme. Bush and Zoellick will be inclined to hold off on prioritising a new WTO round until after the mid-term Congressional elections, in the hopes of improving their strength in the House and Senate.

In this regard, one should be circumspect concerning the widespread intimation that because Robert Zoellick "knows" Pascal Lamy, all is well on the transatlantic trade front. As comforting as it is sometimes is to see familiar faces in meeting rooms, these gentlemen are both hard-nosed realists when it comes to core economic interests.

It is likely that Mr. Zoellick will take a hard line in pressing the US trade liberalisation agenda. This means there will continue to be a clash of commercial interests, economic principles, and social values between the US and Europe, Japan, and developing countries. This year's trade dispute groaning board is already quite full: US anti-dumping rules, Airbus subsidies, Japan's auto import regime, US tax breaks for multinational companies, and other issues. Of course, the fundamental differences that separate the EU and US regarding the scope of a new round will also act against an early resolution to agenda building.

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