The 110th Congress: Protectionist Interests May Slow Gains for Consumers
January 18, 2007
The success, this November, of candidates who ran on populist, and even protectionist, platforms suggests that the 110th Congress will be less likely to support trade opening initiatives. Consider Ohio's Senator elect, Sherrod Brown, who soundly criticized his opponent's support of trade agreements. In fact, according to a recent study, sixteen new trade-skeptics will replace sixteen trade-friendly members of the House of Representatives come this January.
Progress on several important issues could be affected by the mid-term defeat of trade-friendly legislators: completing the Doha Round of global free trade talks, completing free trade agreements with some of our leading trading partners like South Korea, and expanding trade preference programs. All of these programs could provide benefits to Consumers.
The completion of the multilateral trade talks has the greatest potential to deliver benefits to consumers through lower prices on a broad range of products. If our trading partners and the Administration are able to jumpstart the Doha talks and complete a deal acceptable to Congress, US consumers may see a drop in import tariffs, which are hidden border taxes that jack up the price of imports. The highest U.S. border taxes just happen to be on those products that every consumer needs, such as food, sugar, shoes and clothing. Special interests, especially the U.S. textile industry would like to keep high taxes in place on clothing. It's important to note that the textile industry doesn't make clothing--just fabric, but the industry continues to insist on keeping tariffs high on imports of finished clothing products. Indeed, the U.S. treasury collects more than $10 billion dollars each year in hidden taxes on the clothing you wear.
If, by some chance, the United States is able to jumpstart the Doha negotiations, which have stalled over agricultural subsidies and tariffs, then eliminating or significantly reducing clothing tariffs will be one of the bargaining chips the U.S. offers to clothing export nations like India and China, in return for concessions on U.S.-made exports. (Not much clothing or footwear is made in the USA anymore.) But special interests in Congress, including some of the freshman class, could put a crimp in those plans.
Of course the trade negotiations
need to get going again before we get to that point. And right now things
are not looking so rosy. The trade talks have been suspended. Last year, the
US proposed to substantially cut agricultural subsidies on agricultural products
in exchange for a reduction in border taxes on many U.S agricultural commodities
imposed by our trading partners--a move that would be good for consumers here
and abroad.
Unfortunately, thought, if Congress doesn't see significant progress in this
round of trade negotiations, many of agricultural subsidies that our trade
negotiators offered to cut may very well be extended in the next farm bill.
While some of these subsidies benefit consumers, the passage of a farm bill
with the current subsidies largely intact will make a completed Doha deal
unlikely anytime soon. And the consumer benefits that would come as a result
of removing price supports as well as border protections (which would be part
of the deal) far outweighs the benefits from continuing these subsidies. A
free international market in food would benefit U.S. farmers and consumers.
The midterm elections have also made the completion of the Doha round more complicated by creating a Congress less likely to extend something called Trade Promotion Authority (TPA). Under the Constitution, the President can always negotiate trade agreements with our trading partners, but under normal procedures the legislation implementing those agreements would have to be written by Congress and subject to the normal debate and amendment process that happens on Capitol Hill. Not a bad thing, of course, but a difficult process when it comes to trade. In the past, presidents as far back as John Kennedy had difficulties getting Congress to pass legislation to implement trade agreements without ripping those agreements apart in the process.
So, starting in the 1970s, Congress has, from time-to-time, agreed to suspend its rules for considering legislation. This is what Trade Promotion Authority is all about. It's a deal--if you will-between Congress and the President that requires the President to notify Congress when he begins negotiating a trade treaty, report regularly on the status of the negotiations, and include Congress in the drafting of the implementing legislation. In return, Congress agrees to consider the treaty in its entirety, without any amendment. Trade treaties negotiated under TPA are subject to only an up or down vote in the House and Senate.
It's fair to say that no trade agreement can get through Congress without this special procedure. The President's current Trade Promotion Authority will expire in June 2007, and unless its extended most pundits believe that all trade negotiations will simply cease. This is what happened during a long stretch in the Clinton Administration.
The odds-makers are saying that extension of TPA this June is unlikely given the results of the mid-term elections. If any progress is made, it will likely come with a number of damaging concessions, such as requiring that future free trade agreements (FTAs)--or the Doha Round--include environment and labor standards. Congress could also prohibit the administration from negotiating any changes to trade remedy laws, or any reductions on certain kinds of tariffs and border taxes. Of course the Administration might not accept TPA with strings attached.
So, the coming months
could be ones of continuing stalemate. Not just on the international fight
over agriculture, but back at home as the new Congress flexes its not-so-free-trade
muscles.