Return of the Cowboy
Friday, December 15, 2006
The President could act alone to make progress on free trade.
The incoming Democratic majority in both chambers of Congress promises to serve as a substantial roadblock to the implementation of free trade agreements. Asian allies are distressed by the apparent emergence of a protectionist majority within the Democratic majority. Free trade may founder in Latin America thanks to well-worn concerns over labor and environmental standards—concerns that only seem to pop up when there is a trade agreement for Congress to consider.
How to fix this situation? The Bush Administration—an important if inconstant force for free trade—should bring its famously expansive view of executive power to the trade policy arena.
Most trade agreements are congressional-executive agreements that require the approval of simple majorities in both chambers of Congress. Getting majorities for executive agreements is certainly easier than getting the constitutionally required two-thirds majority for a treaty, which is why presidents have historically preferred trade agreements to be in congressional-executive agreement form rather than in treaty form. But with the incoming Democratic majorities in both chambers of Congress, getting legislative majorities behind trade agreements will be exceedingly difficult. Getting them through without poison pill amendments concerning labor or environmental standards may well be impossible, as the incoming Congress appears to be in no mood to give the President the fast-track legislative authority required to get trade agreements passed without amendments.
But even if the President finds it difficult to pass trade agreements through the next Congress, he may still have the power to allow the free trade argument some breathing space. Robert Wigton notes the features of Section 301 of the 1974 Trade Act which requires the president to impose retaliatory tariffs against what the U.S. Trade Representative finds to be “unjustifiable” burdens on American foreign trade. If the burdens are found to be merely “unreasonable” then the president is afforded broader discretion on the issue of whether to retaliate.
In 1988, the Trade Act was amended “to encourage presidents to pursue an activist foreign trade policy, including retaliatory measures under Section 301.” But Presidents have been able to refrain from employing the Act’s retaliatory and protectionist measures. Quoting Wigton:
The dispute over when and how to invoke Super 301 climaxed during the Bush administration as congressional supporters of the provision sought to force Bush to invoke the procedure against Japan and the European Community [by initiating an official USTR inquiries, whose findings could lead to mandatory retaliation]. In May 1989 the Bush administration named three countries (Japan, India, and Brazil) as targets under Super 301. However, the administration simultaneously announced its Structural Impediments Initiative (SII) talks with Japan on structural trade and commercial barriers. It soon became obvious that the SII negotiations were the administration's way of avoiding invocation of the stiffer penalties and timetables associated with Super 301.
As congressional pressure on Bush built in the spring of 1990 for stronger measures against Japan, the administration tried to forestall congressional moves by announcing progress in the SII talks. The 1988 version of Super 301 was set to expire in 1990, so the Bush administration was able to simply delay issuing Section 301 sanctions until the statute lapsed.
Up until now, George W. Bush has been startlingly unwilling to wield the veto power in the name of free trade, free markets and smaller government. The advent of a Democratic Congress with its destructive protectionist sentiments gives the administration the perfect opportunity to revive its free trade credentials with executive maneuvering to avoid the triggering of Section 301 penalties.
The Bush Administration should bring its famously expansive view of executive power to the trade policy arena.
Additionally, the Bush Administration can take action at the executive level on agricultural subsidies. As Doug Cameron points out, the Administration would do well to phase out the distortion of farm subsidies over a five-year period. This would further serve to revive the Doha round of trade talks with the developing world while maintaining American control over the policy mechanisms required to phase out such distortions. Failing to phase out agricultural subsidies will eventually trigger sanctions from the World Trade Organization, thus causing the United States to “lose control of key farm policy tools and miss the export expansion opportunities in emerging markets that a successful Doha round could bring,” in the words of former United States Department of Agriculture Under-Secretary Gus Schumacher.
There is no getting around the fact that the loss of Congress to the Democrats puts a severe crimp in the effort to advance free trade. But that does not imply a lack of options on the Executive Branch level to further the cause of free trade. George W. Bush has been attacked almost from the beginning of his Presidency for his supposedly excessive unilateralism. In the realm of trade policy, unilateralism would be most welcome, however, to stem the protectionist tide of legislation and obstruction a new Democratic Congress so ominously promises to advocates of free trade.
Image credit: "Passing Trade" by Flickr user RuthieLacey