WorldCity Business Magazine

Defining U.S. trade policy

by Jeffrey Sparshott

The Bush administration is hard to categorize: It calls for free trade, yet permits subsidies and tariff relief.

Early in his presidency, many economic purists branded George Bush a protectionist.

In March 2002, Bush threw up wide-ranging steel tariffs as dozens of U.S. steel makers were going bankrupt. The tariffs gave the industry a little breathing room, but irked international trade partners, ran afoul of the World Trade Organization and forced the president to do something he hates to do backtrack. He lifted the tariffs in December 2003, well before they were set to expire.

The Bush administration also has thrown up barriers to Vietnamese catfish, Thai shrimp, South Korean computer chips and Chinese textiles and bedroom furniture. It has imposed enough duties on Canadian lumber to make that issue a focal point of anti-American sentiment in our northern neighbor. And don’t forget a farm bill that dumps trade-distorting subsidies into some of the country’s biggest commodity producers.

“U.S. credibility on trade issues is waning at a time when strong leadership is desperately needed,” Daniel Ikenson, a policy analyst for the Cato Institute’s Center for Trade Policy Studies, said last year during an analysis of the U.S.-Canada lumber dispute.

The administration’s track record, however, is not easily pigeonholed into the protectionist slot.

The president has won approval for more free-trade agreements than any predecessor. He stood up to the powerful U.S. sugar lobby, made ambitious proposals to kick-start WTO negotiations and won repeal of two laws that were popular in Congress but violated WTO rules. He has rejected numerous calls for broadly punitive measures against China.

Bush, for example, has consistently rejected narrowly targeted U.S. steel industry petitions to stop imports of particular Chinese products. The most recent decision came in late December when the president said he would not place quotas on imports of steel pipe, effectively killing a more than 3-year-old law known as section 421 that targeted China.

“It’s clear that President Bush has told American workers that he’s not on their side when it comes to advocating a message of fair trade with China,” Leo Gerard, international president of the United Steelworkers, said after the decision.

So, if both free trade purists and protectionists are miffed, where does the administration stand on trade and where is it heading?

First and foremost, WTO negotiations remain a priority. The talks, which sputtered ahead at a December summit, have strong support from business and offer potentially significant payoff for the U.S. economy. U.S. leadership has been genuine, and a new set of trade rules would burnish Bush’s economic legacy. Unfortunately, prospects for an ambitious agreement are bleak.

Second, the administration is not standing still with smaller trade deals. Peru and Oman should see votes in Congress this year. Look for progress on Thailand, Panama and the United Arab Emirates. And a possible launch of negotiations with South Korea, Switzerland, Malaysia or Egypt. Talks with southern African nations, Colombia and Ecuador face obstacles but may make some progress. The Free Trade Area of the Americas is stalled.

Third, China is likely to be the source of the most volatile trade issues confronting the administration. Expect Congress to try to impose some tariffs on the country, and the administration to resist any blunt instruments.

But don’t expect free trade orthodoxy an absolute aversion to any trade barriers. The administration may file a case against China at the WTO the second ever against the rising economic powerhouse. This one would focus on intellectual property rights, a sore issue with U.S. companies that have invested billions in brand names and world-beating products, only to see them knocked off in China. China also is likely to face niggling trade barriers on narrow ranges of products through anti-dumping laws, a political process that bears the stamp of Bush’s Commerce Department, but not the White House itself.

High-profile WTO cases between the United States and the European Union also are proceeding, with potentially significant impact on the commercial aircraft industry and biotech crops two sectors where the U.S. maintains a positive trade balance.

On the big picture, then, the administration is adhering to its free-trade goals. But it is also maintaining political support among well-connected constituencies and important members of Congress by playing narrowly to a protectionist base.

It’s been the Republican script for at least the past quarter century, and the Bush administration seems to be following it closely.