Weakened Bush must wage fight for free trade

Having failed to convince fellow Republicans of the merits of comprehensive immigration reform, President Bush now faces the even more difficult task of defending free trade against protectionist Democrats.

A tide of populism, protectionism, nationalism and xenophobia is washing over the country, fueled by right-wing radio talk-show hosts, CNN firebrand Lou Dobbs – and legitimate concerns that U.S. workers are falling behind in the global struggle for jobs and good wages.

Anti-globalization is a worldwide phenomenon, in fact, that’s being exploited by populist demagogues such as Venezuela’s Hugo Chavez, whose influence is spreading in Latin America.

Even though his influence is at its all-time lowest ebb, Bush somehow needs to mount a campaign to convince Americans that their continued prosperity depends on an open world-trading system.

Election exit polls confirmed that the country generally supports Bush on immigration – 57 percent of voters said illegal workers should have a chance to stay in the country – but other polls indicate Americans are fearful about trade.

A Gallup Poll in April showed that by a margin of 65 percent to 30 percent, Americans believe workers are “mostly hurt by increased trade between the United States and other countries.”

Last July, the House passed the Central American Free Trade Agreement by a mere two votes, with only 15 Democrats in support. That history bodes ill for Bush’s upcoming trade agenda, including renewal of “fast-track” negotiating authority and the already negotiated agreements with Peru and Colombia.

The House last week even declined to pass an agreement with Vietnam that totally benefited the United States by opening Vietnam’s markets to U.S. goods, in the process embarrassing Bush as he was headed to the Asian economic summit in Hanoi.

The rejection stemmed partly from other reasons, such as antipathy toward the high-handedness of outgoing House Ways and Means Chairman Bill Thomas, R-Calif., and the bill is slated to pass eventually. But it was still a symbolic post-election bash to the idea of free trade.

By one estimate, 27 victorious Democratic House candidates campaigned at least partly against free trade. Ohio’s winning Senate candidate, Rep. Sherrod Brown (D), is one of Congress’ most vociferous opponents of trade agreements, including those promoted by the administration of former President Bill Clinton.

What’s more, with the ascendancy of China critic Rep. Nancy Pelosi, D-Calif., to Speaker, U.S. relations with that trading giant likely will come under pressure. Congress may well pass an across-the-board 27.5 percent tariff on Chinese imports as punishment for China’s manipulation of its currency.

Bush almost certainly would veto the measure, which is sponsored by Sens. Charles Schumer, D-N.Y., and Lindsey Graham, R-S.C., but the exercise will put the administration on defense.

Moreover, a Democratic Congress is likely to increase farm subsidies, making it all the more difficult to win the market-opening concessions from Europe that are needed to revive the stagnant Doha round of world trade negotiations.

The administration needs to mount a four-part strategy: a vigorous public-education process to change attitudes on the merits of trade; an aggressive effort to fight trade cheating by China and other rivals; a serious upgrade of programs to help workers cope with the effects of trade; and a change of policy on including labor and environmental standards in future trade agreements.

Bush, Treasury Secretary Henry Paulson and others have delivered their share of speeches on trade, but Bush needs to devote a substantial portion of his State of the Union address to the subject and motivate pro-trade forces in the country to educate the public.

The fact is, exports of goods and services accounted for 10.4 percent of U.S. gross domestic product in 2005 and 20 percent of GDP growth for the year.

Manufacturing exports have increased 82 percent over the past decade, and they provide more than 5.2 million jobs, one-sixth of all the manufacturing jobs in the country. One-third of all agricultural acreage in the United States is planted for export.

Moreover, imports help control prices in the United States – a benefit that makes Wal-Mart a boon to the middle class, not a blight – and U.S. investments in the United States (”in-sourcing”) are responsible for 6.4 million jobs.

If U.S. markets are closed to foreign products, other countries will close their markets to U.S. exports, costing jobs and economic growth both here and all over the world. Developing countries, especially, will be doomed to poverty – and discord – if they cannot sell their products in the developed world.

Bush administration officials insist they are doing all they can to combat unfair trade practices by China and other countries, but they will have to be more public – and, if needed, confrontational – as part of an effort to win public support for free trade.

As even Paulson acknowledged in his first public speech in August, “Many Americans aren’t feeling the benefits” of the expanding U.S. economy. Productivity gains are benefiting upper-income and well-educated Americans, but not average workers.

Wage growth was stagnant for the first five years of the Bush administration. Real wage growth for the past year was 2.8 percent, but it has come late in the recovery, amid signs that the economy already is softening.

Administration officials say the productivity-wage lag for less-educated workers is a 25-year phenomenon and that the answer is improving worker skills. If that is the administration’s only answer, it needs to be more aggressive in promoting it.

At the same time, it ought to work with Democrats to find other solutions, such as Brookings Institution scholar William Galston’s idea for a wage-insurance program, akin to the unemployment-insurance system, which would protect workers against income losses.

In the new Congress, incoming House Ways and Means Chairman Charlie Rangel, D-N.Y., says he foresees cooperating with the administration on trade, but Democrats will demand more attention to trading partners’ labor and environmental standards.

Administration officials say other nations aren’t willing to have the United States dictate their wage rates or emissions levels – as the AFL-CIO seems to demand – but the United States will have to win some new concessions or risk having trade pacts rejected by Congress.

Expansions in free trade have caused the United States and the world to advance economically and politically since the end of World War II, but those gains are in danger of coming to a crashing halt unless there’s a counter to ascendant protectionism.

(Morton Kondracke is executive editor of Roll Call, the newspaper of Capitol Hill.)

Copyright 2006, Roll Call Newspaper

Distributed by Newspaper Enterprise Assn.

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