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Foot-Dragging on Free Trade
Strengthening exports would be an economic boon. So why the delay?


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Andrew Stiles

‘Tonight, we set a new goal,” President Obama declared in his 2010 State of the Union address. “We will double our exports over the next five years, an increase that will support 2 million jobs in America.”

A critical step toward achieving that goal, Obama went on to say, would be to strengthen trade relations “with key partners like South Korea and Panama and Colombia” — countries with which the United States had pending free-trade agreements (FTAs) that were originally negotiated during the George W. Bush administration but had yet to be ratified.

It is more than a year and a half later, and Obama has yet to even submit the agreements to Congress for ratification. This delay was pushed off the radar screen by the debt-ceiling debate, although most analysts believe that ratification of the agreements would increase U.S. exports by about $10 billion annually and create up to 100,000 jobs. Finally, just before adjourning for the August recess, Senate leaders Harry Reid (D., Nev.) and Mitch McConnell (R., Ky.) announced a “path forward . . . for passage” of the outstanding FTAs when Congress returns next month. And while the timely ratification of these agreements should be welcome news to all, the story behind the delay is worth examining, as it provides an instructive glimpse into the administration’s true priorities.

A primary point of contention stems from the Obama administration’s efforts to attach a Trade Adjustment Assistance (TAA) measure to the South Korean FTA, which if ratified will be the largest trade deal since NAFTA in 1994. Thus the Democrats — having already shown their contempt for the Budget Act of 1974 by failing to submit a budget in more than two years — apparently decided that they would rather not adhere to the Bipartisan Trade Act of 2002, which stipulates that bills designed to implement trade agreements may contain only provisions that are “necessary and appropriate” to implement the agreement. TAA, in contrast, is essentially a domestic-spending program that would provide $1 billion in “assistance” — in the form of training and income support — to workers who lose their jobs because of foreign competition. It has absolutely no impact on implementation of the agreement.

While not a new concept, TAA has been generously redefined under the Obama administration. Proponents point out that NAFTA included a TAA program. But as Sen. Orrin Hatch (R., Utah) recently put it in a speech at the American Enterprise Institute, “NAFTA is the exception that proves the rule. As a general rule, TAA does not get paired with trade agreements.”

Not only that, but the version of TAA that was a part of NAFTA was narrowly tailored to cover only those workers, primarily in the manufacturing sector, who were deemed to have lost their jobs as a direct result of increased competition from Mexico or Canada, the countries involved in the agreement. The 2009 stimulus package, however, expanded the array and application of benefits under TAA by opening the program to workers in the (mostly unionized) service industries and broadly defining “foreign competition” to include just about every country in the world. This is the version of TAA the administration sought to attach the South Korean agreement.

Hatch, as ranking member of the Senate Finance Committee, the panel that overseas such trade agreements, has emerged as the primary Republican critic of the president’s foot-dragging on the pending FTAs. He calls TAA a “poison pill” and accuses the administration of using the agreements as leverage to gain benefits for their union benefactors and push for additional stimulus spending. “I thought that I had seen it all,” Hatch said in his AEI speech, “but the administration’s efforts at getting these agreements across the finish line is bordering on malpractice. I would say that this is bush league, but that would be unfair to the bush leagues.”

Hatch and other TAA opponents have scored a victory, it would appear, as Democrats have finally relented and decided to hold a stand-alone vote on the spending measure, before moving to consideration of the trade agreements. A senior GOP aide tells National Review Online that just as Republicans during the debt-ceiling debate aimed to establish a precedent of never raising the debt ceiling without cutting spending by a great amount, so the TAA dispute was an attempt by the administration to establish a precedent on trade by attaching the new, broadly defined assistance measure to the FTAs.

TAA now looks likely to pass on its own, not least because it has the support of a number of moderate, especially Midwestern, Republicans in the Senate, as well as Rep. Dave Camp (R., Mich.), chairman of the House Ways and Means Committee, who helped negotiate a bipartisan compromise on TAA with Senate Finance Committee chairman Max Baucus (D., Mont.). In Late July, Sens. Roy Blunt (R., Mo.) and Rob Portman (R., Ohio), who was U.S. trade representative under George W. Bush, sent a letter signed by themselves and ten other Republicans promising support for TAA. “This provides more than enough votes to ensure the reformed TAA bill can pass the Senate,” Portman told reporters. “In our view there are no more excuses.”

— Andrew Stiles is a 2011 Franklin fellow.



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