By Elana Schor - 12/08/05 12:00 AM EST
All eyes in Congress and the corporate world will be on Hong Kong next week as U.S. negotiators attempt to jump-start flagging world trade talks and produce a free-trade agreement that will not set off a political firestorm during the 2006 midterms.
While the World Trade Organization’s Doha round of talks was anticipated as a leap forward for globalization, progress ground to a halt when the European Union chafed at steep agricultural-subsidy cuts pitched by U.S. Trade Representative — and former member of House leadership — Rob Portman (R-Ohio).
Now Portman faces pressure from business lobbyists to make significant progress in Hong Kong and prevent an agricultural tug of war with the Europeans from dooming deals in the manufacturing and services sectors.
“There is not going to be a [manufacturing] or services deal without an agricultural deal,” said William Reinsch, president of the National Foreign Trade Council (NFTC). “What we want Portman to do is keep our offer on the table, not fall back, and continue to press the EU to step up.”
The NFTC is a leading player in the American Business Coalition for Doha, also known as ABC Doha, a group of more than 100 corporations and trade associations formed in October to spur the Doha talks forward. ABC Doha members are highly conscious of the shrinking window for congressional passage of a new free-trade agreement, as the “fast track” rules that expedite passage will expire in July 2007.
Business lobbyists fear a crippling stalemate if expectations are not kept high among Portman, the Europeans and the “Group of 20” advanced developing countries that includes rising rivals China and India.
“Such an outcome would fall far short of the U.S. business community’s goals,” ABC Doha members wrote in a letter to Congress earlier this week. “We believe it vitally important to conclude the round by the end of 2006.”
The partisan fireworks set off this summer over the Central America Free Trade Agreement (CAFTA) could repeat themselves in November 2006, when the Doha round is scheduled to wrap up just as Congress gets to work on a new farm bill. But nonagricultural lobbyists disputed the potential for some lawmakers’ blossoming protectionism to endanger the next blockbuster free-trade agreement.
“There is a lot of support for a good WTO deal in Congress. The concerns over free-trade agreements were misplaced,” said Frank Vargo, top trade lobbyist at the National Association of Manufacturers (NAM). “But I do think that for Congress to go along with a deal it has to be one that goes along with their economic interests.”
Vargo pinpointed three conditions necessary for swift congressional approval of the Doha agreement: reduction in real tariffs imposed on U.S. manufactured goods, liberalization in the services sector and, most vital to the agricultural groups that inveighed against CAFTA, reduction in foreign trade barriers to U.S. agriculture exports.
Portman’s subsidy-reduction plan included removal of tariffs on sugar products. Though the sugar lobby was one of CAFTA’s most vocal foes, raising the specter of another hard-fought trade spat on Capitol Hill, ABC Doha spokesman Eric Thomas said the coalition would support and work with Portman on the thorny issue.
“There are a lot of issues with agriculture, sugar included, that need to be resolved,” Thomas said. “The U.S. economy has so much to gain that we will support Portman to get done whatever he needs to with those subsidies.”
Thomas also dismissed the chances for free-trade agreements to materialize as an issue for the midterm elections, saying the expiration of fast-track rules was of greater concern.
“I don’t think the negotiation of this agreement is going to affect congressional elections next year, necessarily, because it’s going to take all year for the WTO to get through what they need to do,” Thomas said.
But some in the agricultural industry are resigned to another free-trade fight once the Doha round is finally complete, regardless of the date.
“Having them vote on it right before the first Tuesday of November in ’06 is probably not a good plan,” said M. Ann Tutwiler, head of the International Food & Agricultural Trade Policy Council.
“It may be better to wait to submit it to Congress until 2007, when [lawmakers] are not feeling so much pressure. Whenever it’s done, it is going to be a political issue because with trade it’s just the nature of the beast,” Tutwiler added.
The best-case scenario, lobbyists agreed, is if the Europeans agree to match Portman’s proposed subsidy cuts.
“If that doesn’t happen, developing countries will say, ‘We won’t get access to U.S. and EU markets,’ and the whole round will collapse,” Vargo said.
A study released last week by the German Marshall Fund suggested that thinking big would pay off. The Fund found that trade liberalization of 60-plus percent, such as that suggested by Portman, would result in a global economic boost of $103.7 billion annually over the next 15 years, transferring agricultural production from wealthy to developing nations.
A less ambitious projection of only 26 percent trade liberalization, the study found, would produce $41.5 billion in annual worldwide gains.