CLOUDS LOOM OVER US TRADE POLICY, DESPITE SUCCESSFUL RE-NEGOTIATION OF FTAs

The US presidential administration last week finalised free trade agreements (FTA) with Peru, Colombia, Panama, and Korea just ahead of the expiry of its 'trade promotion authority' mandate on 30 June. Negotiators managed to agree on last-minute changes to environmental, labour, and intellectual property provisions aimed at boosting the accords' chances of securing legislative approval in Washington.

TPA not among Dems' priorities

Nevertheless, political support for the Bush administration's trade agenda does not look promising. Lawmakers' support for the agreements remains far from clear. This was driven home the following day, when top Congressional Democrats including House Speaker Nancy Pelosi (California) and Ways and Means Committee Chair Charles Rangel (New York) declared that they would oppose the Korea and Colombia FTAs.

Perhaps more significantly, they said that renewing the White House's trade promotion authority, as sought by the administration, was not among their "legislative priorities." However, they did not rule it out altogether.

Democratic scepticism about the Colombia and Korea FTAs was well-established. The two accords had been specifically excluded from a trade policy compromise between senior Democrats and the administration in May; the former over labour rights, the latter primarily due to concerns about auto and beef trade.

But Rangel, whose powerful committee is responsible for trade policy, had previously suggested that he might put his weight behind renewing the administration's mandate to negotiate trade agreements and submit them to Congress for a yes-or-no vote without amendments, at least for the WTO talks. Such an extension is widely considered essential for the faltering Doha Round of multilateral trade talks to have any chance of success in the foreseeable future.

Trade promotion authority (TPA) is technically only required when Congress is actually ratifying agreements - other governments want to be sure that US lawmakers cannot pick apart already-agreed deals, as they would otherwise be able to do. However, trade diplomats from many other countries view support for 'fast-track' renewal as a barometer of Washington's seriousness about concluding a Doha Round accord - and of its credibility at the bargaining table.

Many see the Democrats' announcement on TPA as reducing what little chances were left for salvaging a WTO agreement in the foreseeable future after the acrimonious breakdown of high-level talks among the EU, the US, Brazil, and India in Potsdam, Germany two weeks ago (see BRIDGES Weekly, 27 June 2007).

Kim Elliott, a joint fellow with the Peterson Institute for International Economics and the Center for Global Development in Washington, said that the early collapse of the 'G-4' meeting left her with the feeling that the Doha Round was "going into hibernation for at least a couple of years." And even if one thought that a deal might emerge from the draft agreement texts currently being drafted by the chairs of the agriculture and industrial goods negotiations at WTO headquarters in Geneva, "this makes it an even harder row to hoe," she said, fittingly using an agricultural metaphor.

FTAs successfully re-negotiated

Not all trade legislation is as contentious. Congress on 28 June voted overwhelmingly for an eight-month extension to trade preferences for four Andean nations (Bolivia, Colombia, Ecuador, and Peru), two days before they were set to expire. And Pelosi and Rangel, along with other members of the House leadership, did suggest that the freshly-amended FTAs with Peru and Panama were worthy of support.

This was made possible by the successful re-negotiation of sections of already-concluded FTAs to conform to the May compromise on trade policy.

Washington and all four FTA partners managed to agree to a series of revised rules, including binding references to key International Labour Organisation (ILO) standards, and the enforcement of environmental laws and seven major multilateral environmental agreements to which they are already party (see BRIDGES Weekly, 16 May 2007).

While past US FTAs have generally made labour and environmental requirements of the 'best-endeavour' sort, they have now been elevated to core obligations, subject to dispute settlement (albeit only after several intermediate stages aimed at producing compliance). Biodiversity protection clauses, however, remain hortatory.

Peru's FTA now includes a specific annex on forest sector governance, with mandatory provisions, including specific implementation periods, on fighting illegal logging and wildlife trade in wildlife.

IP rules softened for access to drugs

In a substantial departure from past practice, the US relaxed several patent-related intellectual property rules in the agreements with Colombia, Panama, and Peru, in order to address Democratic concerns that the accords would threaten access to medicine.

Recent US bilateral and regional FTAs have typically incorporated patent protections that go well beyond WTO standards. These rules, public health advocates claim, delay and complicate the production of cheap generics and raise drug prices. With the changes, the intellectual property provisions of the new accords are now less expansive than those in Washington's Central American Free Trade Agreement (CAFTA).

For example, language on requirements to compensate would-be patent-holders for delays in processing their applications has been softened, going from compulsory to optional. Protections for clinical test data have been narrowed, and the door is opened to deviations from the five-year exclusivity period - which could speed the arrival of generics to the market. Furthermore, parties' ability to use public health-related flexibilities present in WTO agreements has now been reaffirmed in the actual text of the three FTAs.

Although the revised clauses remain more far-reaching than WTO rules, say US-based Health GAP and Essential Action, they "are less bad than the original versions, in some notable ways." The two advocacy groups suggest that the changes could become a new ceiling for 'TRIPS-plus' measures in US FTAs, with the possibility that Congressional Democrats might push for future agreements to be more public health-friendly.

With support from the Congressional Democratic leadership, the agreements with Peru and Panama have a reasonable chance of passage, analysts say. However, with some Democrats adamantly opposed to any trade agreements, the necessary bipartisan support is by no means guaranteed: the unpopular administration recently recently failed to convince enough Republicans to support its proposed immigration reform.

Pelosi and Rangel said that they "cannot support the Korea FTA as currently negotiated," since it would not sufficiently alter the lopsided trade balance in bilateral automobile trade. As for the Colombia pact, they said "concrete evidence" of reduced violence against labour unionists there would be necessary for them to support it.

Now that the FTAs have been finalised in time for the TPA expiry, President George W. Bush - or even his successor - will be able to submit them to Congress at a moment of his choosing, with lawmakers still bound by the rules expediting debate and restricting amendments. However, he is unlikely to do so unless he is reasonably sure of their approval.

Unless the FTAs enter into force, Colombia and Peru, along with Bolivia and Ecuador (which have not negotiated two-way deals), stand to lose duty-free access to the US market at the end of February 2008, when the Andean trade preferences are now scheduled to expire.

US farm subsidies face new opponents

The latest setback in the Doha Round negotiations came as a relief to opponents of farm subsidy reform in the US, since new binding caps on spending now seem an even more distant prospect. On 19 June, two days before the Potsdam summit collapsed, an influential House agriculture subcommittee effectively called for extending existing subsidy programmes that have been in place since 2002. The current farm bill expires in September; Congress is working to create a new law mapping out agricultural spending for the next five years.

There is a circular debate on the relationship between subsidy reform and the WTO talks. Oxfam America said that the complete absence of "positive signals of reform coming out of the House agriculture committee" compelled the US "to defend its bloated farm bill" in Potsdam, thus condemning the meeting to failure. Supporters of the current subsidy programmes say that the Doha Round deadlock means that spending can continue more or less as is, or at most with minor changes.

The Peterson Institute's Elliott said that the House agriculture committee's moves had been "disappointing, but not surprising," given that its members overwhelmingly support current policies. She suggested that a support for substantial subsidy reform was growing, both in the rest of the House and elsewhere. Fewer votes than ever before are reliant on farm aid, she said. According to the Environmental Working Group, over half of all farm payments go to only 19 of the 435 Congressional districts.

Elliott added that the tight budgetary situation was putting downward pressure on farm spending. Furthermore, she said that the old coalition in favour of farm subsidies is breaking down: pro-subsidy lobbyists now face conflicting demands from a wide range of civil society activists, from anti-poverty groups such as Oxfam and Bread for the World, to conservation and nutrition groups who blame current practices for environmental degradation and obesity. Fruit and vegetable farmers are also asking for a piece of the pie. Right now, virtually all subsidies go to five 'programme crops' - corn, cotton, rice, soybeans, and wheat. The administration's own farm bill proposal calls for some shifts in spending, primarily to immunise payments from WTO complaints (see BRIDGES Weekly, 7 February 2007).

According to the Institute for Agriculture and Trade Policy, the American Public Health Association, and the Johns Hopkins Bloomberg School of Public Health, farm bill policies have worked against the government's own dietary recommendations, "by encouraging the over-production of a few raw commodity grain crops." The groups estimate that fruit and vegetable prices rose by nearly 40 percent from 1985 to 2000, while the real cost of sugars and fats dropped by 7 to 14 percent.

Inside the House - though outside the agriculture committee - Wisconsin Democrat Ron Kind is pushing an alternative farm bill proposal that would dramatically reorient spending towards conservation, nutrition, and rural development initiatives. It calls for safeguarding farmers' incomes by creating savings accounts that they would pay into when prices were high, and then draw from in the event of low prices or a natural disaster.

According to Brownfield, a US agriculture news service, Kind says that the current high prices create a good opportunity for wholescale change. "Reform is going to occur one way or the other," he said. "I'd rather be in control and have the Congress deal with some of the reform proposals rather than have it done for us by outside entities through these challenges with the World Trade Organization."

ICTSD reporting; "Farm Bill causing family feud," BROWNFIELD NETWORK, 5 June 2007; "Farm Bill's Funding Squeeze Could Mean Long-Term Trouble for Democrats," CONGRESSIONAL QUARTERLY, 28 June 2007; "The Debate Over Subsidizing Snacks," NEW YORK TIMES, 4 July 2007; "US, Colombia reach labor agreement," KANSAS CITY STAR, 28 June 2007; "US, Panama sign free trade pact just in time," REUTERS, 28 June 2007; "South Korea, US sign free trade agreement," ASSOCIATED PRESS, 1 July 2007; "Staying alive," THE ECONOMIST, 2 July 2007; "Kind defends farm bill reform," LA CROSSE TRIBUNE, 27 June 2007; "House panel votes to extend 2002 crop subsidies," REUTERS, 19 June 2007.