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The Fast-Track Trade War

Wednesday, May 7, 2008

No matter how our allies react to the Colombia spat, the politics of FTA passage may have been permanently changed.

Technically, it was only a small change in the internal rules of the House of Representatives. By a vote of 224 to 195, Speaker of the House Nancy Pelosi and the House Democratic leadership pushed through an amendment that eliminated rules requiring Congress to approve or reject the U.S.-Colombia Free Trade Agreement within 90 legislative days after it was formally submitted by the Bush administration. But this “technical” change, made on April 10, set off a political storm in Washington and triggered an acrimonious partisan debate that has raged ever since. Moreover, the international repercussions over the long term may well be more significant than the domestic political spat. 

From his retreat in Crawford, Texas, President Bush charged that “the message the Democrats sent today is that no matter now steadfastly you stand with us, we will turn our backs on you when it is politically convenient.” U.S. Trade Representative (USTR) Susan Schwab labeled the action “unprecedented and unfair…upending decades of U.S. trade policy and U.S. trade law.” The Democrats also took some hits from the press: a Washington Post editorial condemning the House action was headlined “Drop Dead, Colombia.” And a leading U.S. international trade economist, Fred Bergsten, head of the Peterson Institute, called Pelosi’s gambit “a calamity for the world trading system” that suggested U.S. adherence to the “rule of law can change in the wink of an eye.” 

For their part, the Democrats stoutly defended their action. Speaker Pelosi argued that the House was just reasserting its constitutional authority over trade policy. “It’s all a question of who has the leverage,” she said. “We have taken the leverage from the executive office, and we have put it back in the hands of the American working families. She and Senate Finance Committee chairman Max Baucus (D-MT) also charged that the Bush administration had broken faith by sending up the agreement without prior clearance from congressional leaders.

How Did We Get Here?

As always in Washington, the course of events and trends that led to the current imbroglio is a tangled web of acrid partisan politics, genuine principles, and strategic considerations. On the broadest level, the events of the past several weeks provide further evidence that the Democratic Party is continuing its long-term movement toward anti-globalism and economic nationalism. Both Democratic presidential candidates, Senators Hillary Clinton and Barack Obama, have moved far from President Bill Clinton’s free trade agenda and his insistence that the United States must “compete not retreat.” 

The Democratic Party is continuing its long-term movement toward anti-globalism and economic nationalism.

Since the early 1990s, House Democrats generally have opposed new FTAs by substantial margins. Even though the North American Free Trade Agreement (NAFTA) was strongly supported by President Clinton, House Democrats voted against approving it by a margin of 156 to 102; on later votes to renew Clinton’s trade negotiating authority, only 20-odd Democrats voted with large Republican majorities in favor of renewal. The sticking point, according to Democrats, was that, beginning with NAFTA, bilateral FTAs failed to include strong provisos to safeguard labor rights and the environment. Behind this stance was the adamant opposition to all FTAs by two key Democratic constituencies: organized labor and environmental NGOs. 

Thus, the stage was set for substantial changes in U.S. trade policy when the Democrats took over both the House and the Senate at the start of 2007. A sizable majority of the 42 House Democratic freshmen had campaigned explicitly on an anti-trade agenda; these freshman Democrats constitute a solid anti-FTA bloc and also exercise disproportionate clout, since House Democratic leaders want to retain their newly won seats in future elections. 

After some months of sparring, in May 2007 the Bush administration and congressional Democrats reached a tentative agreement on new terms for future FTAs. The administration had negotiated 14 FTAs since 2001; and at the time, four FTAs—with Peru, Panama, Colombia, and South Korea—awaited congressional approval. Bowing to Democratic demands, the administration agreed to force FTA partners to adopt and enforce five so-called core labor standards and the provisions of seven multilateral environmental agreements. 

Though trumpeted as a victory by the administration, congressional leaders made clear that the deal encompassed only the Peru and Panama trade pacts: then, because of internal political complications, Panama was temporarily removed from the list. Congress passed the Peru agreement in December 2007, leaving only Colombia and South Korea on the table. Both of these agreements incorporated the labor and environmental provisions demanded by the Democrats; but in both cases, the Democrats raised additional concerns.

The Standoff over Colombia

Because the Bush administration gave first priority to passage of the Colombia FTA, that agreement became the focal point of the maneuvering that led up to the April 10 House rules change. The substance of the Colombia FTA, signed in November 2006, has been widely and deeply analyzed and is not the focus of this analysis. Suffice it to say that there is little disagreement on the economic payoff: it is largely a one-way street. Since 1991, most of Colombia’s exports have entered the United States duty-free under the Andean Trade Preference Act. The FTA would provide reciprocal duty-free access for almost 90 percent of U.S. exports to Colombia within five years, and it would ensure total free trade within ten years. 

The stage was set for substantial changes in U.S. trade policy when the Democrats took over both the House and the Senate at the start of 2007.

Implicitly conceding the economic benefits, House Democratic opponents of the agreement have focused on Colombia’s human rights record, arguing that greater progress should be demanded before the FTA is approved. Supporters of the Colombia deal (including the editors of the staunchly Democratic New York Times) admit that violence remains too high in the war-torn country. But they point to hugely positive trend lines since 2002, with kidnapping rates down by over 80 percent, overall homicide rates down by 40 percent, and killings of union leaders down from 196 in 2002 to 26 in 2007. Prosecutions and convictions have climbed steeply, and the government has generously funded a special protection program for both union and non-union citizens at risk, with over 9,000 currently enrolled. In rebuttal, unions (and some Democrats) usually fudge the figures, looking at aggregate violence over the past decade, ignoring the trend lines, and citing individual recent killings.

The Rules of the Game

The special congressional rules for ratification of trade agreements were established in 1974. They came in response to the experience of major U.S. trading partners at the end of the Kennedy Round in the 1960s, when Congress had delayed and then refused to accept the terms negotiated by U.S. trade officials. Our trading partners subsequently demanded that America change its laws and procedures to ensure finality when U.S. trade negotiators signed off on an agreement.

From the outset, the Bush administration pressed Congress to move quickly on the Colombia FTA.

The 1974 trade act did just that. Because of constitutional concerns regarding delegation of congressional authority on trade, the new process was enacted merely as a change in the rules of the House and the Senate, subject to revision independently by either legislative body through a majority vote. Under the “fast-track” legislation, after a trade agreement is sent to Congress the House must vote on it within 60 legislative days, without amendment; then the Senate has 30 days to complete action, which means the whole process must occur within a 90-day window.

However, the law does not give the president a deadline for submitting trade deals, which means that substantial time can elapse between the signing of an agreement and when the fast-track clock starts ticking. By custom, the president and Congress work together to fashion the so-called implementing legislation; they even hold “mock” markup sessions to draft exact language.

The Negotiations

From the outset, the Bush administration pressed Congress to move quickly on the Colombia FTA; but it stepped up the pressure after the May 2007 compromise on labor and environmental provisions. Increasingly, the issue was couched in terms of U.S. national security and diplomatic interests; Secretary of State Condoleezza Rice took the lead, with open allusions to the necessity of thwarting Venezuela’s President Hugo Chávez and defending a democratic ally. According to Bush administration officials, they held some 400 meetings with members of Congress and their staffs. Meanwhile, cabinet officials led ten congressional and business delegations to see Colombia firsthand. The administration also pressed for hearings on the agreement and offered to work with Congress to write specific language for the implementing legislation. 

The fast-track coup was accomplished almost single-handedly by Rules Committee Democrats.

The Democrats set forth two conditions for passage of the agreement: enactment of substantially increased trade adjustment assistance for displaced workers and—more vaguely—evidence from Colombia that there had been significant improvement in the human rights climate, particularly with regard to the safety of union leaders. 

Throughout the remainder of 2007 and into 2008, talks and negotiations continued on both issues. President Bush stated his support for new and expanded trade adjustment assistance, though the administration had problems with some of the Democrats’ legislative proposals. The administration also pushed the House Democratic leadership to establish criteria or standards by which to judge Colombia’s progress on human rights.    

Over the past several months, outside pressures and the ticking of the clock forced both sides to rethink their strategy and maneuvering. For the administration, there was the growing sense that the Democrats were just playing for time. As USTR Schwab would argue, the House leaders “kept moving the goal posts…. We’ve been trying for 16 months to get Congress...to meet its obligations under the TPA…. And what we were told was wait, delay, don’t send it, wait, delay, don’t send it.” 

Behind this frustration was the desire to enhance President Bush’s trade legacy by completing action on Colombia (and on South Korea). It was no coincidence that Bush formally submitted the agreement on the last day that allowed the 90-day deadline to play out before Congress adjourns in the fall. 

For the Democrats, there were conflicting pressures. First, presidential politics was intruding on Speaker Pelosi’s calculations: both potential Democratic presidential contenders had come out strongly against the Colombia FTA. Closer to home, the anti-trade freshmen Democrats also opposed the agreement, in close alliance with the AFL-CIO and other labor groups. The Democratic leadership desperately wanted to avoid a vote—at least before the 2008 elections—since it would have exposed deep splits in the party. (Many former Clinton and Carter administration officials had expressed strong support for the Colombia FTA, as evidenced by an open letter from 35 prominent Democratic leaders, including former cabinet officials and congressmen.)

The Showdown

Tellingly, the planning of the coup against the fast-track process came, not from the House Ways and Means Committee, which has jurisdiction over trade, but rather from the Rules Committee. According to reporters Patrick O’Connor and Martin Kady of The Politico, Rules Committee chairwoman Louise Slaughter (D-NY) and Rep. James McGovern (D-MA) had discussed the option of stripping time requirements from the fast-track process since January. When the administration signaled that it would forward the agreement even without a sign-off by congressional Democratic leaders, Slaughter and McGovern seized the opportunity. On Tuesday, April 8, the president formally sent up the agreement and supporting documents; that same evening, Slaughter and McGovern presented the deadline-stripping plan to Speaker Pelosi, who, after meeting with other members of her leadership team, the next day backed the changes in a larger Democratic caucus. And on Thursday, as noted above, the House Democratic majority rammed through the amendments to House rules, effectively gutting the fast-track process for the Colombia FTA. 

There seems to have been no serious discussion of the far-reaching implications of overturning three decades of U.S. trade policy.

The entire episode transpired over a 48-hour period, and it left the White House and pro-FTA business lobbyists stunned and disarmed. In defense of their action, Pelosi and other House Democratic leaders argued that the administration had broken faith with the spirit of the rules by sending the agreement up without gaining the speaker’s consent. The White House, in turn, mounted a furious verbal counterattack. On April 14, President Bush stated that the agreement was “dead” unless Pelosi intervened, and he condemned the Democrats for having “stiffed” a key U.S. ally. Meanwhile, USTR Schwab argued that it was House Democrats who had broken faith on fast track: for more than 16 months, Schwab said, Democrats had refused to give consent to advance the process and had refused to provide the criteria for judging Colombia’s human rights progress. 

At this point, most analysts believe that Congress will not take up the Colombia FTA until after the presidential election (if at all); but there is deep disagreement about whether it will be possible to reach a compromise during the post-election, lame-duck session. 

Lessons from the Fast-Track Trade War

The story of the 2008 fast-track revolution is still unfolding, so the following observations and conclusions are tentative and may be revised substantially before the final history of this episode is written. But here is what has been notable, thus far. 

First, the fast-track coup was accomplished almost single-handedly by Rules Committee Democrats (with the crucial support of Speaker Pelosi). The absence of the traditionally powerful Ways and Means Committee and its chairman, Rep. Charles Rangel (D-NY), is striking. Rangel seems to have been presented with a fait accompli, though undoubtedly he was consulted at some point late in the process. According to some House staff members, however, the episode is part of a pattern, at least on trade policy, in which Rangel has told members that he is “only a traffic cop” and that the Speaker exercises real control in this area. One business official noted that such a turn of events would have been “impossible under a Bill Thomas or Danny Rostenkowski” (two former Ways and Means chairmen). In effect, Rangel is wedged between Pelosi and Rep. Sander Levin (D-MI), the more vocal and hardline chairman of the Ways and Means trade panel. Significantly, it was Levin who appeared on “The NewsHour with Jim Lehrer” to defend the fast-track coup the day it occurred. 

Second, there seems to have been no serious discussion of the far-reaching implications of overturning three decades of U.S. trade policy. Indeed, the Politico article cited above was an admiring analysis of how the House Democrats finally took control of the agenda, after having “learned a few lessons.” 

No matter how U.S. allies react, the politics of FTA passage may have been permanently changed.

Third, and of greater long-term significance, many trade policy experts are now saying that “the dirty little secret is out.” In other words, the weakness of the fast-track “firewall” has been exposed. Until now, many foreign trade ministers surely had no idea how fragile the process is—that it is subject to the whim of either body of Congress. By coincidence, in the week after the rule change, a large number of U.S. business groups went to Geneva to lobby for a successful conclusion of the World Trade Organization’s Doha Round. They were quizzed repeatedly as to whether the demise of fast track for Colombia signaled a larger refusal of the U.S. Congress to be bound by negotiated texts. 

Fourth, at least initially, powerful U.S. foreign policy and security arguments fell on deaf congressional ears. There could be no starker example of a beleaguered U.S. ally, flanked by regimes (Venezuela, Ecuador, Bolivia) increasingly hostile to U.S. interests, than Colombia. Yet despite a drumfire of warnings from the administration (and quiet prodding from other Latin American countries), the House Democratic leadership fulfilled former House speaker Tip O’Neill’s dictum that “All politics is local.” Pelosi assured the Colombian ambassador that the destruction of fast track was not meant as an “affront” to her nation. But several days later, the speaker of the Colombian House of Representatives described the U.S. House action as “colonial treatment.” 

Finally, no matter how U.S. allies react, the politics of FTA passage may have been permanently changed, especially if Congress remains under Democratic control after the 2008 elections. Political deal-making has always been a part of congressional FTA debates (a little textile protection here, a bit of pork for a congressman there). But House Democrats have raised the stakes. They say that consideration of trade pacts is now contingent on a bevy of domestic legislation, including possibly an additional economic stimulus package, a child health measure, mortgage relief, and new expenditures on public works and infrastructure. Should these demands prove to be more than just rhetoric, it may be a long time before U.S. trade policy moves forward again. 

Claude Barfield is a resident scholar at the American Enterprise Institute.

Image by Shutterstock/Darren Wamboldt.

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