One month after the Bush administration and leading Democrats struck a much-touted compromise on trade, the immediate future of US trade policy remains murky. Persistent scepticism in sections of Congress about the benefits of economic globalisation means that support for some bilateral trade deals is far from clear. So too is willingness to renew the president's negotiating authority - necessary for the Doha Round WTO talks.

The compromise, under which the administration agreed to boost protections for the environment, labour standards, and access to medicine in its free trade agreements (FTAs), was expected to smooth the way for Congressional approval of pending bilateral deals with Panama and Peru.

More significantly, it was expected it to pave the way for "restoring the bipartisan consensus on trade," after fears that the Democratic victory in last November's Congressional elections would bring US trade policy to a standstill. It was also seen as a sign that Democrats and Republicans could cooperate on trade despite profound differences on other issues, such as Iraq.

Progress on trade deals, however, is "proving to be a little bit tougher than some of us expected," said Kim Elliott, a joint fellow with the Peterson Institute for International Economics and the Center for Global Development in Washington.

Much of the toughness is the result of the Democratic Party's divisions on trade policy. In the early 1990s, Democrats supported the Uruguay Round accord and the North American Free Trade Agreement, albeit after a wrenching internal debate. Support for trade agreements within the party has since weakened, particularly after the Republicans took control of the White House in 2001. Last fall, anxieties about jobs moving overseas and the soaring trade deficit helped propel the party to power. Indeed, many newly elected Democrats highlighted trade-related concerns during their campaigns.

Despite support from senior lawmakers such as House Ways and Means Committee Chair Charles Rangel (New York), some rank-and-file Democrats expressed dissatisfaction about the recent compromise with the administration.

Korea, Colombia talks bogged down

Experts still expect the Peru and Panama FTAs to win Congressional support, once they are altered to meet the new template for labour, environment, and intellectual property provisions. More economically significant deals with South Korea and Colombia, however, have become bogged down. They were left out of the concord on trade policy, in part due to mighty opposition from organised labour, a traditional Democratic constituency.

Critics in Congress had already been slamming the Korea deal, concluded in April following ten months of intense negotiations, for failing to adequately open the Korean market to US automobiles, as well to clear the path for exports of US beef (see BRIDGES Weekly, 4 April 2007, http://www.ictsd.org/weekly/07-04-04/story1.htm). With strong support from labour groups, many Democrats have said that in order for the Colombia FTA to win Congressional approval, the country must first take steps to improve its record on human rights, ensure greater worker protections, and resolve the alleged death-squad killings of hundreds of union organisers. Sources say that the agreement met a hostile reception in a House subcommittee meeting on 13 June, with administration officials defending the deal from criticism.

The race for the White House next year is also affecting trade politics. Prospects for the Korea deal took another blow last week when Senator Hillary Rodham Clinton, a leading Democratic presidential candidate, denounced the pact on the grounds that it would hurt American workers. Speaking to an audience in Detroit, Michigan, home of the struggling US auto industry, the New York senator said the deal would "hurt the US auto industry, increase our trade deficit, cost us good middle-class jobs and make America less competitive." Former Senator John Edwards has already announced his opposition to the deal, which would be the US' biggest since NAFTA in 1994. Senator Barack Obama has yet to take a position.

As for the US-Colombia deal, officials in Bogota remain hopeful that both sides will be able to resolve their differences. Colombian President Alvaro Uribe, one of Washington's rare staunch allies in the Andean region, was in the US last week on a charm offensive aimed at winning over Democrats reluctant to assent to the FTA. The Peterson Institute's Elliott suggested that if Uribe is able to demonstrate "concrete progress" on the peace process and at prosecuting suspects arrested for the murder of trade unionists, it is possible that Democrats may support the deal later. Although Colombia remains the world's least safe country for labour activists, killings have decreased this year.

End-June important for bilateral FTAs

A crucial deadline for all of these bilateral trade agreements is 1 July, when the Bush administration's trade promotion authority (TPA) will expire. This mandate allows the White House to require Congress to vote either for or against trade agreements without the possibility of amendments. Its imminent expiry does not, however, mean that Congress needs to vote on trade agreements submitted under TPA by the end of June. President George W. Bush simply needs to sign final trade agreements by this time. After that, he will be able to submit them to Congress at a moment of his choosing - this fall, for instance - with lawmakers still subject to TPA rules expediting debate and restricting amendments. The trick, of course, is to ensure that the deals are acceptable to a sufficient number of Democrats to secure their passage. To do this, US trade officials will have to find a way to make the pacts fit the new FTA template in a legally binding fashion.

Washington publication Inside US Trade reported on 12 June that US Trade Representative Susan Schwab said that lawyers from Congress and the administration were close to finalising legal text for modifying the FTAs. The administration inked the pacts with Colombia and Peru well before last month's agreement with the Democrats. The FTAs with Panama and Korea remain to be signed.

Even if the Colombia FTA goes unapproved in the short term, the country may not lose the near-unrestricted access to the US it currently enjoys under a soon-to-expire unilateral preference system for Andean nations (along with Peru, Bolivia, and Ecuador). Influential members of Congress, including Rangel, have called for extending the scheme beyond its scheduled expiry at the end of this month.

Ramifications for TPA extension unclear

Some economists argue that the Democrats' concerns about freer trade are more a result of the US' domestic social policy system than of increased cross-border trade. They suggest that the prospect of jobs moving overseas seems especially threatening in the US because employers provide so much of the social safety net - large chunks of healthcare, life insurance, and retirement benefits. These costs can also serve as an incentive against investing in the US. Thus, the argument goes, the US should fret less about erecting barriers to trade and undertake reforms to invest more in human capital and guarantee social benefits independently of employers.

Nevertheless, Democratic scepticism about bilateral trade agreements is both real and politically significant. What remains unclear is whether it will extend to the party's policies in the multilateral arena.

The Bush administration has indicated its intention to seek a new TPA mandate from Congress. This will be critical to concluding a deal in the Doha Round talks: trading partners are not likely to agree to a deal that could later be picked apart by US lawmakers.

Any new TPA mandate will require bipartisan support, as some Democrats will likely oppose all trade deals. Indeed, seven senators have vowed to "aggressively oppose" the White House's proposal to extend the mandate (see BRIDGES Weekly, 14 February 2007, http://www.ictsd.org/weekly/07-02-14/story2.htm). This is further complicated by the fact that hesitation about the effects of unfettered trade is hardly limited to the Democratic Party. Prominent Republicans have been at the forefront of bipartisan demands for the Bush administration to pressure China to revalue its currency, blaming an artificially low renminbi for the US' yawning bilateral trade deficit. Even in the previous Congress, trade legislation passed by razor-thin margins.

On the other hand, prominent Democrats such as Representative Rangel have already called for a Doha-specific TPA extension. No attempts at developing new TPA legislation are likely before after Congress' August recess.

Elliott noted that Democrats are generally far more wary of bilateral FTAs, particularly with low-wage countries, than of multilateral negotiations. She suggested that more Democrats might have voted in favour of TPA for the Bush administration in 2002 had it not been for concerns about their ability to include environmental and labour issues in bilateral pacts. The recent deal with the administration may have helped assuage such fears. Some analysts believe that the Democrats would be relatively reluctant to be seen to sink a potential multilateral accord, as compared to bilateral ones.

US trade officials have maintained that a negotiating 'breakthrough' that puts a Doha Round agreement within grasp would help convince Congress to agree to extend the administration's TPA.

WTO Director-General Pascal Lamy warned on 12 June that some other countries might take a different view of the absence of clear signs that TPA renewal is in the works. "Many US trading partners will consider that no movement to renew trade promotion authority would signal that the US might have lost faith in the round, and this would certainly have an impact on the dynamics of the negotiations," he told an annual meeting of the Bretton Woods Committee in Washington, reports Reuters.

Many powerful US politicians and commodity lobbies have declared their opposition to the deeper farm subsidy cuts that several other WTO Members say that Washington must make in order to make a Doha agreement possible.

The so-called G-4 -- the US, the EU, India, and Brazil -- are set to meet in Potsdam, Germany from 19 June, in another attempt to bridge their differences. Meanwhile, the WTO Membership at large has been trying to pick up the pace of efforts to strike a deal in Geneva.

ICTSD reporting; "Hillary Clinton slams proposed US-Korea trade pact," REUTERS, 10 June 2007; "USTR Schwab defends Korea FTA from auto industry criticism," YONHAP NEWS, 5 June 2007; "Top U.S. Democrats urge tougher stance toward Colombia," ASSOCIATED PRESS, 8 June 2007; "Statement by AFL-CIO President John Sweeney on Meeting with Colombian President,"AFL-CIO PRESS RELEASE, 2 May 2007; "Uribe, Back in Washington, Lobbies for Trade Accord," BLOOMBERG, 7 June 2007; "Business fights for Colombia deal, labor pushes back," THE HILL, 6 June 2007; "Congress weighs future of Andean trade scheme," REUTERS, 30 May 2007; "Clinton Underscores Party's Angst Over Trade," WALL STREET JOURNAL, 11 June 2007; "Ecuador pursues trade-preference extension but faces critics in Congress," THE HILL, 12 June 2007; "Treasury says no new China legislation needed," REUTERS, 11 June 2007; "Bill would allow US currency intervention," FINANCIAL TIMES, 30 May 2007; "Labor movement dusts off agenda as power shifts in Congress," NEW YORK TIMES, 11 November 2006; "Inaction on US fast track dangerous for Doha-Lamy," REUTERS, 12 June 2007; "Uribe to face tough audience in U.S.," LOS ANGELES TIMES, 7 June 2007.