2007's challenges for free trade

2007's challenges for free trade

Trade will remain a major issue for international business, the Bush administration and the new Congress in 2007. U.S. companies with business interests in overseas markets will stand to benefit from the Bush administration's continued proactive pursuit of free-trade agreements. These agreements help create opportunities for U.S. companies by removing tariffs, regulatory and technical barriers, strengthening the protection for U.S. investments and intellectual property in overseas markets, and opening markets in express delivery, energy, environmental services, government procurement, telecommunications and other sectors.

This year's U.S. trade agenda will be driven by the pending expiration of the president's trade promotion authority. The other new factor to the equation is the Democratic-led Congress, which has criticized key elements of the administration's trade policy and has raised concerns about pending free-trade agreements.

The administration's top trade-related priorities for the first half of 2007 will be the renewal of trade promotion authority; congressional approval of the free-trade agreements with Peru, Colombia and Panama; the successful conclusion of talks with South Korea and Malaysia; and a successful restart of the stalled WTO Doha negotiations to further liberalize markets for manufactured goods, agricultural products and services.

The degree of success in concluding any trade agreements in 2007 will depend in large part on whether Congress renews trade promotion authority. Under TPA, the administration can negotiate trade agreements with the certainty that Congress must consider the agreement promptly and give either an up-or-down vote without any amendments. The current TPA will expire at the end of June.

The TPA requires the president to notify Congress 90 days before an agreement is signed. That means free-trade agreements agreements with Korea and Malaysia must be completed by March 31 to meet the June 30 deadline to qualify for the TPA "fast-track" approval process in Congress.

Completing the Korea and/or Malaysia negotiations by March 31 will be a significant challenge, given the lack of agreement to date in most key sectors.

With regard to the Doha negotiations, the beginning of this year has seen a renewed effort from U.S. and European Union leaders to restart the stalled talks and a firm commitment to successfully conclude the negotiations. However, the renewal of TPA will loom large because even if the Doha negotiations were successfully restarted, it would be difficult for the U.S. to make any commitments without trade promotion authority.

Throughout 2006, it was widely believed that Congress would not renew trade promotion authority, especially if the Democratic Party held a majority in Congress. However, since the beginning of this year, Sen. Max Baucus of Montana, who heads the Senate Finance Committee, and Rep. Charles Rangel of New York, chairman of the House Ways and Means Committee, have stated that they would support TPA renewal as long as it has additional provisions related to the protection of labor standards and the environment, as well as stronger trade enforcement.

Another factor that could strengthen support for TPA renewal is if the administration can demonstrate that sufficient progress has been made in the Korea trade talks and Doha negotiations to justify at least an ex-tension of TPA to ensure a successful conclusion of the two economically significant agreements, which enjoy broad support among U.S. industries.

The key to renewal will be whether Republicans and the administration will be able to accept the additional labor and environment-related provisions that the Democrats will push, or formulate an acceptable compromise between the two parties.

With regard to the pending trade agreements awaiting congressional approval, several Democrats have criticized the labor and environment provisions of the free-trade agreements with Peru and Colombia, with some calling for a reopening of negotiations for these provisions. The administration will have to find a way to address these concerns to achieve passage of these free-trade agreements by spring.

Two things are clear: The Bush administration will have to work more closely with Democrats to achieve any progress on trade agreements, and the Democratic-led Congress will insist on greater congressional oversight in formulating U.S. trade policy.