WASHINGTON — The new Democratic Congress is reshaping the trade agenda and placing a premium on the American worker’s competitiveness, which has been weakened by globalization.
As part of their evolving agenda, Democrats are placing an emphasis on strengthening workers’ rights at home and abroad, securing stronger enforcement mechanisms, addressing subsidy and currency imbalances with China and expanding and developing policies to assist workers displaced by trade.
At the same time, domestic and international issues like trade, the minimum wage and immigration are being caught up in the power struggle between Democrats and Republicans in Washington.
Democratic leaders are trying to find middle ground to move the trade agenda forward, and most trade experts maintain there has merely been a pause in the agenda, not a turn to trade protectionism.
The myriad issues being hammered out against the backdrop of an increasingly unpopular war in Iraq has clouded the trade picture and left many in the fashion industry a little wary of the direction Democrats are taking. Despite the mixed messages emanating from the Democratic caucus, many industry officials and trade veterans still expect Congress to move some trade legislation this year.
“The current Democratic leadership has not shut down trade policy, as some had feared they might,” said Brian Pomper, formerly chief international trade counsel with the Senate Finance Committee and now a partner with Parven Pomper Schuyler Inc.
“But on the other hand, they don’t want to break arms and pass things by one vote,” he said, referring to Republicans, who have passed contentious trade agreements by thin margins during their past 12 years in power in Congress and are often accused of strong-arming members.
“What they are doing is putting a pause on the trade agenda,” said Gary Hufbauer, senior fellow at the Peterson Institute for International Economics. “The question looking ahead is, how many other issues and what other issues will have to be part of the trade agenda and trade agreements to go forward?”
There are some signs, however, that the trade agenda could recapture some momentum.
Rep. Charles Rangel (D., N.Y.) has become a central figure in the trade dialogue in his role as chairman of the House Ways and Means Committee in the first quarter, although his counterpart in the Senate, Sen. Max Baucus (D., Mont.), has also lent his voice to the debate.
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At times, Rangel and Baucus paint a different picture of the trade agenda, as do the freshmen Democrats in the House who were elected on “fair trade” platforms that promised a halt to freewheeling trade deals of the past and more help for workers at home.
Baucus has said renewal of the President’s trade promotion authority, which allows U.S. trade negotiators to craft a trade pact without Congress being able to amend it, was unnecessary in the absence of any new trade agreements or a global trade accord.
He is also leading an effort in the Senate to overhaul the Trade Adjustment Assistance program that allocates federal funds to workers displaced by imports and is involved with Sens. Chuck Grassley (R., Iowa), Charles Schumer (D., N.Y.) and Lindsey Graham (R., S.C.) in crafting legislation targeting China’s currency policies.
Rangel, on the other hand, recently said he was prepared to extend limited “fast-track” trade authority to the administration, strictly for the global round of trade talks.
He spearheaded an effort to forge a compromise trade policy agreement announced Thursday with U.S. Trade Representative Susan Schwab and Treasury Secretary Henry Paulson Jr. that will strengthen labor and environmental provisions in pending trade agreements with Peru, Colombia, Panama and South Korea, make the rules more enforceable and help move the broader U.S. trade agenda forward.
Rangel and Rep. Sander Levin (D., Mich.,), who also is a prominent voice in the trade debate, unveiled a trade blueprint in late March outlining several conditions the Bush administration would need to meet in order to move four pending trade pacts through Congress and begin the debate on renewing TPA, which expires June 30.
Rangel is under pressure from freshmen Democrats who in a recent letter urged him not to soften his position on the blueprint in order to reach a compromise with the Bush administration. He must balance those voices with those of his party’s leadership in the House — Speaker Nancy Pelosi (D., Calif.) and Majority Leader Steny Hoyer (D., Md.), and key Republican members on Ways and Means.
Most trade veterans argue that Rangel has a desire to cement a compromise with the administration, at least as part of his agenda, to show that he can bring home a deal and boost his own credentials as the new chairman.
“For Rangel, it will be the most difficult because a number of people in the Democratic caucus would just as soon as have the whole [free trade agreement] ratification process come aground on labor issues and not go forward,” said Hufbauer. “I think Rangel really wants to go forward. He feels it would be a feather in his cap and it also gives him a lot of credibility and purchasing power in what he sees as the next big goal with the alternative minimum tax issue.”
Grant Aldonas, former undersecretary for international trade at the Commerce Department in the Bush administration, who now holds a Scholl chair in international business at the Center for Strategic & International Studies, said the “missing element” in the trade debate under GOP control was the “lack of a competitive agenda for the American worker,” and he added that Rangel and the Democrats would focus on that component in reshaping the trade debate.
He said the Democrats’ agenda would be much broader than the Republicans’ focus on the benefits of market-opening trade deals and grow to include tax breaks, revamped domestic trade aid programs, expanded health insurance benefits for displaced workers and more comprehensive changes to help mitigate the impact of trade on U.S. workers.
“Ultimately, I don’t think Democrats can go into the 2008 election as the party of protection,” said Aldonas. “Nancy Pelosi understands that and she’s given Charlie Rangel the room to try to create something here precisely so she doesn’t have to face that eventuality.”
Most trade veterans expect some of the four pending trade agreements with Peru, Panama, Colombia and South Korea, as well as a China bill, to move this year if a deal is reached with the administration on labor.
Three House subcommittees summoned administration officials from Treasury, USTR and Commerce to a hearing on currency manipulation and its effects on U.S. business and workers last week, signaling the growing momentum for legislation on Capitol Hill.
Bush, a pro-trade Republican, has shown a willingness to take action against China, as evidenced by three recent cases filed with the World Trade Organization, one targeting illegal subsidies and two targeting intellection property rights violations, to preserve jobs.
The implications of the Democrats’ new trade agenda is significant for the fashion industry’s sourcing schemes.
“I think the first impact will be the timing of the Andean free trade agreements because there is a lot of trade there,” said Stephen Lamar, executive vice president of the American Apparel & Footwear Association. “There is a stop-and-start date at issue going from a preference program, which expires on June 30, to free trade agreements with those Andean countries, which have yet to come before Congress.”
Lamar said there was some concern about the scope of the labor agreement between Rangel and the administration and whether a compromise would apply only to pending deals with Peru and Panama and not Colombia, which is part of the Andean preference program, or South Korea.
He said a compromise on labor would help the overall trade agenda because it could deflate some of the criticism and rhetoric against trade on Capitol Hill.
Cass Johnson, president of the National Council of Textile Organizations, said, “I think one thing people all agree on is that the trade agreements that have been signed have not been enforced strongly enough. The fact that they have not been enforced strongly enough means that too many jobs have been lost, and I think China is a big example.”
Johnson said Democrats were reexamining the negative aspects of trade and looking for mechanisms to soften the impact on U.S. companies and workers.
“I think there is now a realization that enforcement has to come first for a while on the part of Democrats and the administration,” he said.
Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition, said he was concerned over the compromise reached with the administration because it could move the trade agenda forward without addressing the underlying causes of a “flawed” trade policy, such as what he sees as the overreaching authority of the WTO and currency manipulation by China that lowers the value of the yuan and puts U.S. manufacturers at a disadvantage.
“The [concern] I have is, even if we get a rational labor standard in our trade agreements, we will have an overall trade policy that is still dismantling the U.S. manufacturing base,” Tantillo said. “I’m concerned, however, that if the Democrats believe they can just figure out the labor aspect to this, then the agenda can fly. If that is the case, then there will be a lot of very disappointed people in the manufacturing sector.”
From the apparel union’s perspective, the Democrats appear to have strong support for implementing trade agreements “but in a really different way,” said Eric Dirnbach, deputy director of the strategic affairs department for UNITE HERE.
He said the unions had been pressing the Democrats to include a strong enforcement mechanism in trade agreements and substantially strengthen adherence to core international labor standards in trade agreements, in addition to making them binding.
But UNITE HERE will not support a renewal of TPA, said Dirnbach, adding, “There are alternative mechanisms to bring back Congressional oversight to trade agreements.”