November 25, 2006

 

US election will affect Canada...

From: The Wall Street Journal

Democratic Gains Raise Roadblocks To Free-Trade Push
Party's Majority in Congress, Helped by Trade Critics, May Hamper Pending Deals

By: GREG HITT and NEIL KING , JR.
November 11, 2006; Page A1

WASHINGTON -- The Democrats' sweep of Congress is set to deliver a blow to President Bush's free-trade ambitions and could hamper impending trade deals both big and small.

Democrats' stances against free trade helped build the party's success at the polls and could tip the balance on trade matters. The new dynamic could put a definitive end to the already troubled effort to reach a global agreement to reduce tariffs and open markets, known as the Doha round. It also could put in jeopardy smaller deals such as those the U.S. has crafted with Peru and Colombia, intended to boost two-way trade by lowering tariffs and increasing intellectual-property protections.

Two dozen tightly contested races turned partly on Democrats' protectionist platforms, according to Public Citizen, a liberal advocacy group. All told, 16 incoming "trade skeptics" are set to replace "trade friendly" Republicans in the House, according to a study by the Swiss Institute for International Economics at the University of St. Gallen. Five new Senate Democrats are viewed as more critical on trade than were their opponents.

"The House and Senate are going to exert themselves on trade much more aggressively," vows Ohio Democrat Sherrod Brown, whose successful campaign against free-trade Republican Sen. Mike DeWine was built on opposition to the Bush trade agenda. In one television advertisement he stood before an abandoned local factory, contending Mr. DeWine had supported trade agreements that cost the state jobs. "Congress has given too much of its authority to the president," he says. "We've just ceded our power."

A lame-duck session of the current Congress is set to vote as early as next week on whether to lift Cold War-era economic restrictions on Vietnam, which has just joined the World Trade Organization, and grant it the same benefits as other U.S. trading partners. That vote is expected to pass easily, despite some opposition in the textile industry.

After that, Democrats are gearing up for a major pushback against the Bush administration on other trade fronts, most notably on a vote next year on whether to renew the president's authority to negotiate trade deals with other countries, without amendment from Congress. That authority expires in the summer.

The U.S. in the past 20 years has championed global and regional trade deals that have significantly lowered tariffs and have helped spur a boom in global trade. Advocates assert that the U.S. would benefit from more liberalization, both to bring in lower-cost imports and to increase exports. Opponents argue lowering trade barriers has hollowed out the U.S. manufacturing base and done lasting harm to many pockets of the economy.

Special presidential trade-negotiating authority, often called "fast track," is critical to getting deals done. Other countries are reluctant to negotiate with the U.S. if there is a chance the deals could changed by Congress instead of just approved or rejected. Democratic critics have long complained that the Republican Congress gave too much negotiating latitude to Mr. Bush and want to rein the president in.

Trade experts say Democrats may try to exact concessions from President Bush that would render a deal on fast-track nearly impossible. For instance, some Democrats have suggested significantly increasing the $1 billion the government gives yearly to workers displaced by foreign competition. Others are proposing compromises such as limiting fast-track authority only to the Doha talks.

Some business officials expressed cautious optimism that trade liberalization won't grind to a halt in the next Congress. "The trade agenda may change, may be done in a different way, but it isn't going to end altogether," says Bill Miller, a congressional liaison for the U.S. Chamber of Commerce. He and others said past Republican dismissiveness of Democratic concerns on recent trade legislation - such as labor rights and environmental protection in recent trade bills - may have stirred some of the deepest opposition. A more cooperative environment could make a difference, they said.

Charlene Barshefsky, President Clinton's trade representative, agrees, predicting Democrats could show real cooperation to try to secure the Doha round. "I see tougher sailing ahead, but not necessarily history-altering events," she said.

The first test may be the U.S.'s proposed trade pact with Peru, which the Bush administration had hoped would be voted on this fall, before the new Congress is sworn in. Many Democrats oppose the deal, including Rep. Charles Rangel, a New York Democrat who is poised to take over the House Ways and Means Committee. Mr. Rangel wants labor protections to be included. Though no final decisions have been made, Republican leaders are wary of bringing the deal forward for a vote, especially after the signal sent by Tuesday's vote.

Even in states that historically have rejected anti-free-trade campaigns, such as Iowa, Kansas and Missouri, candidates who ran heavily on such a platform won. While the dominant themes of the campaign were Iraq, terror and scandal, there were plenty of signs that economic insecurity was coloring voters' decisions.

In exit polls, half of voters said they felt the "state of the national economy" was "not so good," or "poor." Economic concerns were particularly big in the industrial Midwest, where free-trade critics won some of their biggest gains and voters in some states put economic concerns first.

Mr. Rangel said he wants to renew the president's fast-track authority but that the president would need to consider Democratic priorities in return. Extending the authority depends on whether Mr. Bush "wants both parties to participate in discussions," Mr. Rangel said in an interview before the election.

After the new Congress is seated in January, Democrats are all but certain to seek modifications to a trade deal with Columbia. As with the Peru deal, they are likely to push for stronger language on worker protections. Both pacts would give them their first real opportunity to wrangle more concessions in an area over which their party and Republicans have been fighting for years.

Another big issue is agriculture: Congress next year must either renew or rewrite the current farm bill, a huge mass of legislation that covers all U.S. farm policy, including subsidies. The biggest sticking point within the Doha round is the big subsidies the Europeans, Japanese and U.S. give to support farmers. Developing countries argue these payments distort the export market.

To reinvigorate the Doha talks, Democrats would have to be willing to enact steep farm-subsidy cuts, a move many analysts doubt they will take.

Democrats also could push tough measures of their own. They have floated various bills to squeeze imports from China or to try to manage the country's trade imbalance. Others seek to impose various restrictions or punishments for intellectual-property violations or its failure to allow its currency, the yuan, to strengthen further. Those have been shelved until now, partly because of a lack of support from the Republican leadership and the White House.

Congressional Democrats have long been moving away from free-trade support. In the 1990s, dozens of House Democrats regularly supported free-trade initiatives like the North American Free Trade Agreement backed by then-President Clinton, which won 102 Democratic votes. But only 15 Democrats backed the Central American Free Trade Agreement negotiated by the Bush administration in 2005.

The incoming batch of trade skeptics that unseated incumbent Republicans largely represents a new breed. Many are conservative on issues such as gun ownership and abortion and on economic issues like taxes, but veer populist on trade issues.

In the union-heavy areas north and east of Pittsburgh, Democrat Jason Altmire struck a starkly antitrade tone in his bid for a House seat, beating Republican Rep. Melissa Hart, who had ran on an overt free-trade plank. "I'm not protectionist, but my view is that future trade deals can't just give the store away," Mr. Altmire says.

Indiana's Joe Donnelly pointed to job losses in his own district and promised to insist on strong labor and environmental protections in future deals. He said he would have voted against Cafta and recent trade deals with Chile and Singapore.

In North Carolina, former National Football League quarterback Heath Shuler won on a campaign that was pro-guns and anti-abortion but also strongly anti-trade. He beat up on his opponent, Rep. Charles Taylor, for having cast no vote at all when Cafta squeaked through, which Mr. Taylor blamed on a technical glitch.

Write to Greg Hitt at greg.hitt@wsj.com and Neil King at neil.king@wsj.com


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