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March 1, 2010

USTR’s 2010 Trade Policy Agenda: The Good, The Bad, and the Bizarre

Statement of Lori Wallach, Director, Public Citizen’s Global Trade Watch Division

Relative to last year’s March 1 report, the 2010 Trade Policy Agenda released today by the Office of the U.S. Trade Representative (USTR) excludes some troubling elements, such as the call for rapid action on the leftover Bush trade pact with Panama, the demand that climate policy conform to trade rules and the reference to renewed presidential trade authority. But at the same time, the report unfortunately fails to deliver the new fair trade agenda that President Barack Obama promised during the campaign and that is needed for our country’s economic recovery.

It also continues to mimic the misrepresentations that the Bush administration borrowed from the U.S. Chamber of Commerce with respect to only considering the role of exports on U.S job creation, as if the U.S. did not have a massive job-killing trade deficit. An example is the hilarious statement about 10 million U.S. jobs being supported by exports in 2008 - a year we had a $696 billion deficit - without any reference to the net U.S. jobs effect of the flood of imports underlying that deficit. The report also fails to mention that 5 million net U.S manufacturing jobs - one out of every four - have been lost since the World Trade Organization (WTO) and the North American Free Trade Agreement (NAFTA) went into effect, or the downward pressure our current trade policies are putting on wages across the economy.

The Disappointing

Just as disappointing as not having seen action on trade reform from the Obama administration is the 2010 agenda’s lack of such proposals going forward, especially given more than half of the Democrats in the U.S. House of Representatives have explicitly come out in support of real reform by sponsoring the Trade Reform, Accountability, Development and Employment (TRADE) Act. Congress and the many Democratic base organizations and their members who expected President Obama to deliver on his trade reform commitments may have forgiven the tone and content of the “2009 Trade Policy Agenda.” That text, which read as if there had not been an election that ended the Bush administration with a new Democratic president, was released only months after President Obama assumed office, and USTR Ron Kirk had not even been confirmed by the Senate. But a year later, we still have not seen the promised change of course on trade policy. Had Obama’s campaign trade commitments been implemented, China would have been deemed a currency manipulator and countervailing duties put in place to staunch the flood of unfair Chinese imports, while NAFTA would be under renegotiation now, with an eye to balancing out trade in this second largest contributor to the U.S. deficit.

The Bizarre 

What is bizarre are the claims in this year’s report that the proposed agenda has been the subject of inclusive consultation with interested outside parties and enhanced cooperation with Congress, given the USTR has had limited interaction with the large bloc in Congress that is seeking trade reform or with the Democratic base groups most interested in trade. Just last month, the Citizens Trade Campaign sent a letter signed by a long list of  unions and environmental, consumer, faith and family farm groups asking Kirk to follow through on his 2009 pledge to initiate a review and consultation process on trade - making obvious that the promised improvements in transparency and consultation had not occurred to date. Similarly, a large bloc of the House Trade Working Group sent a letter last month asking USTR to initiate consultations with them and other interested members of Congress on the proposed Trans-Pacific Partnership (TPP) negotiations. These facts belie the report’s claim that the decision to engage in a Trans-Pacific Partnership was taken on the basis of broad consultation with Congress.

Trans-Pacific Partnership

USTR says that “after a careful analysis and extensive consultation with Congress and with stakeholders,” it will negotiate a TPP agreement, with Australia, Brunei, Chile, New Zealand, Peru, Singapore and the Socialist Republic of Vietnam. Yet, the administration has yet to meet with the cosponsors of the TRADE Act, which is cosponsored by over half of the Democratic Caucus, including over half of the committee and subcommittee chairs. It has not held any civil society consultations that have included the diverse signatories to the Citizens Trade Campaign letter of January 2009 on the TPP - calling for such consultations. This process begs the question of exactly what “U.S. position” the USTR will be bringing to the first TPP talks March 15 in Australia - and what the political fallout at home could be if the TPP talks fall into the rut of repeating the model of past free trade agreements (FTAs). Moreover, USTR argues that “the TPP is the strongest vehicle for achieving economic integration across the Asia-Pacific region and advancing U.S. economic interests with the fastest-growing economies in the world.” Yet, in fact the United States already has tariff-zeroing FTAs with countries representing over 85 percent of what would be the TPP’s gross domestic product.
 
NAFTA Review/Renegotiation

In this year’s report, USTR twice notes that they have promised a review of NAFTA, but then proceeds to offer no evidence of substantive progress towards that goal, much less a specific plan to conduct a review in the future. In fact, in a later section of the report, USTR goes on to suggest plans to “eliminate unnecessary regulatory differences” between NAFTA countries - an effective expansion of the deal.

The WTO and the Doha Round

Worryingly, rather than calling for reform of the WTO rules that promote financial services deregulation, in the 2010 Report, the USTR explicitly calls for countries to make even deeper commitments to these rules. Following the worst financial crisis in decades, it is simply unacceptable to seek additional WTO disciplines on domestic regulation of services that will make it harder, not easier, to eliminate too big to fail banks and ban risky products - as the administration and many in Congress are proposing to do domestically.

The Leftover Bush FTAs

Congress, labor and other Democratic base groups have rejected the Bush administration’s trade deals with Colombia, Korea and Panama and called for specific fixes to neutralize specific damaging provisions in these pacts’ investment, procurement, product and food safety standards, labor, service sector and intellectual property texts as well as resolution of outstanding issues with each involved country. Yet, the USTR’s agenda document does not reference any plans to renegotiate the Panama and Colombia pacts’ texts and only to fix certain product-specific commercial issues with respect to the Korea FTA. The document notes: “If these outstanding issues can be successfully resolved, we will work with Congress on a timeframe to submit them for Congressional consideration.” But, given the outstanding issues USTR listed fall far short of the minimum fixes identified by members of Congress, and labor, consumer and environmental groups, successfully resolving only USTR’s list of issues means whenever such pacts were brought to Congress, a majority of Democrats would oppose them. As well, with respect to the country specific issues, the USTR goal is lower than the goals stated by Congress and trade reform advocates. On the deal with tax haven Panama, for instance, the administration commits to “pursuing an understanding on tax transparency rules.” But what Rep. Lloyd Doggett (D-Texas) and Sen. Carl Levin (D-Mich.) have called for is the formal Tax Information Exchange Agreement Panama has stalled on for nearly a decade since 2002. As well, some in Congress and fair trade advocates have called for is elimination of the FTA’s investment rules, to make certain that AIG affiliates and other financial services firms will not be able to demand cash compensation from the U.S. government for its anti-tax haven initiatives. Meanwhile, even when under scrutiny by Congress, the government of Panama has threatened to use existing rules under the WTO to launch similar challenges, and has still not made the reforms to be removed from the Organisation of Economic Cooperation and Development’s gray list.

Improvements in the “Trade Policy Agenda” in 2010 relative to 2009

The 2009 document expressed a “hope to move on the Panama Free Trade Agreement (FTA) relatively quickly.” It also explicitly left the door open to “renewed trade negotiating authority.” It also said that the United States “should ensure that climate policies are consistent with our trade obligations.” These problematic passages are absent in the 2010 document, and show that - a year later - congressional and public pressure have been successful in forestalling new NAFTA-style FTAs and Fast Track. In short, while not articulating a change of course reflective of President Obama’s campaign commitments, the “2010 Trade Policy Agenda” does leave the administration room to continue to reform its approach.


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