Trade
Agenda 2005: What's in Store for Consumers?
Dominican Republic-Central America Free Trade Agreement (DR-CAFTA)
At some point in 2005, Congress will vote on whether or not to approve the DR-CAFTA. This agreement negotiated between the United States and Guatemala, Honduras, Costa Rica, Nicaragua, El Salvador and the Dominican Republic is a political hot potato for a number of reasons.
Some domestic producers insist that increased competition from that region will threaten their businesses and cost American jobs. But that's just rhetoric. In fact, Congress already provides a special trade program for all of these six countries that allows them to ship many products to our shores without any import taxes being applied. This "preferential duty-free" program has been in place for many of these nations for many years. Converting this "special access program" (which gets U.S. exporters nothing) into a bilateral free trade agreement could have positive impacts on many U.S. export industries.
Most controversial in this free trade agreement is the provision for increasing sugar imports even though it is among the least liberalizing of the agreement's provisions. In fact, the DR-CAFTA will eventually phase out import restrictions on all products except sugar, but that hasn't stopped sugar interests from lining up in opposition, because it would slightly increase sugar imports. In the first year after the agreement goes into effect, the six DR-CAFTA countries will be allowed to increase their sugar exports to the U.S. by 1.3 percent of total U.S. production. After 15 years, they will be allowed to export up to 1.9 percent of total U.S. production. It is difficult to believe the U.S. sugar producing industry's claim that they'll be harmed by these additional imports when you consider that the two corporations in Florida that produce half of that state's sugar and one eighth of the U.S. supply received $120 million in revenues as a result of U.S. government support.
Congress should pass this trade agreement for several reasons. First, from a consumer perspective, competition is beneficial because it provides increased product choices and puts downward pressure on prices. Second, passing this FTA would indicate to the world that we are serious about lowering barriers to agricultural trade in the multilateral round of trade talks currently being conducted by the World Trade Organization. Third, if we exclude certain sectors in trade agreements, our partners will feel free to do the same. Exclusion of sugar or any other commodity jeopardizes our ability to conclude trade agreements that benefit every segment of our economy including consumers, workers, farmers, and employers. Fourth, sugar farmers account for only 1 percent of U.S. farm revenue and defeating DR-CAFTA to protect their interests prevents other high-value segments of our economy, including U.S. manufacturing exporters, from benefiting from the agreement. Should the entire U.S. economy pay to protect the interests of a handful of sugar farmers?
Please contact your representatives in the House and Senate and urge them to vote "yes" on DR-CAFTA. You may look up their contact information at www.House.gov and www.Senate.gov. To view a fact sheet on the DR-CAFTA click here.
Renewal of Trade Promotion Authority
Under the terms of the U.S. Constitution, the President of the United States has the latitude to negotiate treaties with other countries. However, he still has to seek approval from Congress for any treaty he might negotiate. When it comes to international trade treaties that cover aspects of U.S. domestic law and tax policy, Congress has the last word. Indeed, if Congress won't or can't muster the votes to implement a trade agreement, then the agreement will fail.
When you consider the number of special interest groups that circle around trade agreement legislation--powerful interests like sugar and dairy farmers who don't like trade agreements that reduce import taxes or otherwise undo their cushy status-quo--it's easy to understand why it's so hard to make progress on free trade. If the U.S. Senate were to consider every trade agreement under its normal rules--where members can filibuster, bring up extraneous amendments, and generally halt proceedings--the United States might never be able to implement a trade agreement.
And that's where Trade Promotion Authority (TPA) comes in. TPA is a kind of promise made between Congress and the President with respect to how trade agreements will be considered, once they reach Congress. On the President's part, he must notify Congress when he's about to enter into a negotiation, let Congress know what he's negotiating, check in from time-to-time with Congress to make sure they have no objections. In return, the President gets the promise that the legislation enacting trade agreements will be brought to the House and Senate floors in a manner that limits the number of extraneous amendments and the ability of special interests to create mischief. Congress still gets to write the legislation in committee, but the ability of special interests to sabotage an agreement--especially on the U.S. Senate floor--is eliminated.
In 2002 Congress granted TPA to President Bush and it will be up for renewal this year. If Congress agrees to extend TPA, the president can continue on his present course of negotiations. But without TPA, the President faces a real tough road. Why bother negotiating free trade agreements if he knows that special interests in Congress will do them in?
The President has accomplished much since he was granted TPA in 2002. For example, our agreement with Chile increased exports to that country 22.6 percent in 2003 and a further 24 percent in 2004. Our access to the Singaporean market has increased substantially since ratifying an agreement with Singapore, and that tiny economic powerhouse of a nation is now our 12th largest trading partner. A recent agreement with Australia has eliminated all tariffs on our manufactured goods. Conversely, we have opened our market to the products of these nations to the benefit of American consumers and importing industries. A recent economic report distributed by the office of the U.S. Trade Representative states "Consumers are able to enjoy more goods and services per hour worked, and international trade has played a considerable role in attaining these benefits for the American consumer."
Our legislators need to hear from their constituents on TPA. Please call or write your representative and urge them to renew TPA when the time comes.
Continued WTO Membership
Every few years Congress must vote on whether to continue its membership in the World Trade Organization (WTO). The WTO administers several key international trade agreements that set the rules for global trade. Chief among these agreements is The General Agreement on Tariffs and Trade (GATT), the seminal international agreement covering international trade that came out of the years just after World War II. Like other Bretton Woods agreements that established the United Nations and the International Monetary Fund, GATT has shaped the economic order in the last half of the twentieth century and contributed enormously to world peace.
For many years, the WTO was known simply as the GATT Secretariat. That changed in 1993, when the organization was formally named the World Trade Organization, to reflect its status, and the fact that it now administers treaties covering investment, intellectual property and trade in services. One-hundred-and fifty nations belong to the WTO.
The rules-based trading system created by the GATT and the WTO has enormously benefited both the U.S. economy and the economies of other participating nations. The WTO provides a multilateral forum in which reduction or elimination of trade-distorting barriers, such as tariffs and quotas, can be negotiated. Ten years ago, the "Uruguay Round" resulted in significant removal of barriers to trade in products like toys and wearing apparel. The current round of negotiations, known as the "Doha Development Agenda" (DDA) is attempting to reduce agricultural barriers.
As equally important is the WTO's dispute settlement mechanism which provides a forum for nations to challenge other nations' trade practices which they consider to violate the agreed-upon rules.
Continued participation
in the WTO is vital to U.S. interests. Please encourage your representative
to vote in favor of our continued membership.