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Ron Wyden: Free Trader?

Saturday, April 19, 2014

Senator Wyden has recently begun to clarify where he will attempt to take trade policy: it’s a mixed bag of attitudes and proposals, though by no means antithetical to a free market agenda.

It’s a new ball game in the Senate on trade: Senator Ron Wyden (D-Oregon), who has succeeded Senator Max Baucus (D-Montana), as chairman of the Finance Committee, seems understandably determined to place his own stamp on trade policy — including on legislation to provide special procedures for congressional vetting of new trade agreements (so-called Trade Promotion Authority), and on the substance of the agreements now being negotiated. The new chairman has made it clear he would scrap, or substantially alter, the bipartisan TPA bill crafted by Senator Baucus, in alliance with House Ways and Means Committee Chairman David Camp (R-Michigan), and Sen. Orrin Hatch (R-Utah). Until recently, Wyden was reticent about disclosing his own specific views on urgent, pending issues, but last week he gave a speech in which he began to clarify where he will attempt to take trade policy: it’s a mixed bag of attitudes and proposals, though by no means antithetical to a free market agenda.

First, some good news: Wyden chose to make his policy debut before the American Apparel and Footwear Association, a lobbying organization for the multinational companies and groups that import clothing and shoes, either as finished goods or as components: these groups have a big stake in knocking down barriers. Wyden took on the powerful, protectionist textile/apparel and footwear lobbies, arguing for lower tariffs: “Trade agreements need to be equally ambitious on footwear and apparel … reflect[ing] those industries as they are in this century — not as they were in the last one.” Before getting too righteous here, it should be noted that multinational Nike is based in Wyden’s home state, Oregon — which pits it (and Wyden) against “Made in America” New Balance, located in Maine and strongly championed and protected by that state’s senators and congressmen from both parties.

Showing his high-tech, West Coast background, Wyden also gave a strong plug for open digital markets and trade, arguing that 21st-century agreements should protect the free flow of data and resist attempts to confine data and servers within national boundaries. No doubt causing heartburn for the U.S. entertainment and internet content providers, the chairman also took aim at moves to make the internet highway companies (viz, Google, Facebook) legally responsible for content (he specifically called out recent legislative proposals such as SOPA and PIPA as examples). He concluded: “It’s as simple as this: the internet, which is really the shipping lane of the 21st century, has to be kept open and free.”

Wyden took on the powerful, protectionist textile/apparel and footwear lobbies, arguing for lower tariffs.

Calling his forthcoming TPA proposal a “smart track” alternative to earlier “fast track” and “no track” (i.e, no TPA at all) approaches, Wyden asserted that his legislation increases the role of Congress and the public in negotiating and passing future trade agreements: “A smart track will hold trade negotiators more accountable to Congress [and] more accountable to the American people … and not just the special interest groups.” With regard to a stepped up congressional role, he signaled that while he would keep the expedited procedures embodied in previous TPA legislation, his own proposal would also include provisions that would “enable the Congress to right the ship if trade negotiators go off course.” While not specific, the chairman was apparently suggesting the reinstitution of a provision in earlier TPA legislation that granted the Finance and Ways and Means Committees authority to intervene and revoke TPA authority if they felt negotiators were not following the specific mandates set forth by Congress.  It should be noted that the pending bipartisan bill also beefed up congressional input, establishing new House and Senate trade advisory groups on negotiations that would be open to any member. The bill also tightens consultation obligations for the executive.

On another front, the bipartisan bill already expands the list of congressional negotiating priorities to take into account the evolution of the trading system since the last TPA legislation in 2002. “21st Century” priorities include (among others) investment provisions, services, regulatory practices, global value chains, increased intellectual property protection, due process and the rule of law, and currency issues. Wyden will likely endorse these new priorities, adding his own preferences. In his speech, he laid particular emphasis rules for state-owned-enterprises, new predatory practices (read: China, through dumping products and indigenous innovations policies that subsidize and protect high-tech industries), and, as aforementioned, digital trade and the internet. Interestingly, Wyden cites the problem of currency manipulation in connection with China, but does not here espouse mandates for retaliation.

More troubling for passage of a future TPA bill were the chairman’s statements on the role of labor and environmental rules in U.S. trade agreements.  Not unexpectedly for a liberal Democrat, he paid homage to his “friend Leo Gerard from the United Steelworkers” and he went out of his way to suggest that he would champion new mandates for enforceable labor and environmental protections in future agreements. He promised that new trade agreements, pursuant to TPA mandates, will “raise the bar for labor” and “promote environmental protections … by setting and enforcing high standards” against countries that allow a race to the bottom.

It is certainly possible for Chairman Wyden to place his stamp on trade policy without destroying prospects for success.

At this point a bit of background history will be helpful. Republicans and Democrats have fought over the place of labor and environmental standards since the NAFTA negotiations. The current compromise was crafted in 2007 between the Bush administration and House Democrats, led by Nancy Pelosi. Under the agreement (known as the May 10th agreements, after the date is was reached), labor and environmental provisions are included in the body of a trade agreement and are subject to the same dispute settlement rules as other chapters of the pact. For labor rights, there is a reference to attempting to live up to a 1998 ILO Declaration on Fundamental Principles and Rights at Work. This Declaration is merely hortatory, and does not bind signatories to the agreements as would the specific ILO conventions. With regard to environmental standards, the May 10 agreement listed 7 UN environmental treaties (viz, endangered species, marine pollution, ozone depletion) by which signatories to U.S. trade agreements must agree to abide.

Though some Republicans still harbor reservations about the May 10 agreement, the House and Ways and Means Republican leadership has made it clear to the Obama administration that attempts to go beyond May 10 will drive House and Senate Republicans into opposition. They note that a union-backed commitment to the ILO labor rights conventions themselves would trigger a wholesale revision of U.S. labor law — something they will not countenance. So whatever his personal views, Wyden faces an unbridgeable gauntlet on these issues.

What does all of this portend for the future of trade legislation and policy? Wyden opened his speech by associating himself with President John Kennedy’s strong affirmation that trade policy is an “inextricable aspect of foreign policy” and with Kennedy’s call at the time for a “new American trade initiative ... to meet the challenges and opportunities of a rapidly changing world economy.”  The world and the Democratic Party have changed greatly since the 1960s. Still, it is certainly possible for Chairman Wyden to place his stamp on trade policy without destroying prospects for success. Much will depend on his ability to walk a fine line on satisfying trade skeptics in his own party, while adapting to the reality that on TPA and future trade agreements Republicans will have to provide the majority of the votes in both Houses.

Claude Barfield is a resident scholar at the American Enterprise Institute.

FURTHER READING: Barfield also writes "Crunch Time for the Trans-Pacific Pact — and for U.S. Leadership in Asia," "Sorting Out the High-Tech Patent Mess," and "The G8’s Exercise in Nostalgia." Philip I. Levy asks "Who's Stalling Whom on Trade?" Mark J. Perry contributes "Why We Should Thank the Chinese Currency Manipulators."

Image by Dianna Ingram / Bergman Group

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