was, of course,
directed at the European Union, India, Brazil and
their various allies, who are making the statement
that they are just as determined and just as
self-serving.
These major players all now
recognize that if there is to be some progress,
which is unlikely, it will have to emerge from a
return to
the
old, and supposedly rejected, strategy of
"backroom" negotiations between a very small group
of key nations. Everyone seems to want to seek
some acceptable compromise that will bring the
round to at least a level of accomplishment that
holds some promise for benefits in the future.
With the clear emergence of a strong protectionist
leaning in the recent US elections, the fear is
that open trade will not only not move forward,
but that nations will begin to erect new and
highly counterproductive barriers that perpetuate
poverty and political divisions, inhibit
investment and depress global economic
performance.
Despite these very real and
well understood risks to the world trading system,
Bush, Baucus and Rangel will all face strong
resistance from elements in both parties if the
Bush administration seeks TPA renewal in the next
Congress. Many Republicans believe they lost some
election races to Democrats because voters were
insecure about whether globalization and free
trade were not ultimately costing US jobs rather
than creating a stronger US economy.
Democrats seek stronger language on labor
and environmental protections to be included in
future FTAs. Even if these elements are included,
TPA extension is not going to be an easy task.
From a political standpoint, it is not likely that
Democrats will want to give Bush TPA even under
revised terms. If the Doha WTO talks are not near
a conclusion by the expiration of TPA on June 30,
2007 - a prospect that at this point seems very
unlikely - many members of Congress will see
little or no reason to extend the authority.
A Democratic Congress will place
increasing pressure on the Bush administration to
"get tough" with China on both currency and
specific trade issues. The most immediate ones
will be intellectual property rights, and the
current auto parts dispute in the WTO.
The
Democrats are willing to give Treasury Secretary
Henry Paulson some time to try to use his
relationships with the Chinese leadership to get
results in these areas, but expectations are low,
mistrust of China is high, and Democratic and
Republican patience will run out well before the
end of 2007. This is especially true of the
currency situation, although that does not
necessarily mean that Democrats expect or want a
dramatic and sudden revaluation, but at least some
recognition that the yuan is undervalued.
One thing Congress will agree on will be a
very, very generous farm bill. Democrats, having
concluded that Doha is dead, will go all out to
enrich farm support as much as they can, and the
Bush administration and most of the Republicans
will go along to a great extent. In this area, the
willingness to ignore the complaints of the Cairns
group and the developing world seems to be both
bipartisan and strong. This is especially true
because the US will be going through yet another
crucial election in 2008, where both sides will be
cultivating voters in Iowa and other farm states
who switched from voting Republican to voting
Democratic in November 2006.
Even this
brief analysis indicates the extent to which the
traditional political coalition supporting open
trade has disappeared in Washington, and how the
cumulative result of that political change is
likely to be manifest in a lack of action, or
negative action, by the 110th Congress.
(Posted with permission from KWR
International, Inc, (KWR), a consulting
firm specializing in the delivery of research,
communications and advisory services.)
