US Trade Pacts with Colombia, Korea, Panama Face New Setback

1 June 2011

The pending free trade agreements that the US is pursuing with Colombia, Panama, and South Korea hit another roadblock this past week, as US President Barack Obama's administration insisted that the US Congress reauthorise the Trade Adjustment Assistance (TAA) programme before ratifying any of the deals.

Obama's announcement was followed by a public letter of support signed by 41 Senate Democrats - an indication of the overwhelming support that the TAA has within that party. Those senators stated that, despite their "differing views on elements of the trade agenda," they were still "unified in our belief that the first order of business, before we should consider any FTA, is securing a long-term TAA extension."

The TAA provides support for US workers that lose jobs as a result of foreign competition. The programme underwent a series of reforms in 2009, but they expired in February of this year. The reforms expanded the programme to cover both services workers and those workers displaced by import competition from non-FTA countries, among other changes. The 2009 reform and reauthorisation was part of the American Recovery and Reinvestment Act of 2009, more commonly referred to as the US economic stimulus package.

The Senate Finance Committee recently concluded a three-week series of hearings on these pacts, with the goal of approving them by the August recess; however, this deadline is looking increasingly infeasible. The hearings, which began on 11 May and finished last Thursday, were part of the ongoing review process that is necessary before US Congress votes on the FTAs (see Bridges Weekly, 11 May 2011).

Unexpected TAA link complicates August deadline

The demand that the TAA be used as a condition of the FTAs' ratification was met with strong opposition from several Republicans, including Orrin Hatch, the party's top member on the Senate Finance Committee. In his opening statement at the Korea hearing, Hatch insisted that "failure to submit the agreements [to a vote] sends a chilling signal around the world that the United States is not a trusted ally on trade."

The new linkage to the TAA programme has left some in Washington doubting whether these FTAs will be ratified before the August deadline. At the Korea hearing, Hatch told his colleagues that "[w]e don't have the votes to pass TAA through this Congress, so why hold up three trade agreements to do this."

The chairman of the Senate Finance Committee - Max Baucus, a Democrat - while supporting the FTAs at each of the Senate Finance Hearings, insisted in his own opening statement at the Korea hearing that Congress has "a duty to help American workers meet the challenge of global competition" - i.e. by reauthorising the 2009 TAA reforms.

"What we are reasonably assured of is that the FTAs have the votes in the House and the Senate to pass as clean bills, all three of them," Scott Lincicome, a Washington-based international trade lawyer, told Bridges. "The question becomes whether those votes remain when TAA is attached."

However, Lincicome added that, overall, opposing the TAA reforms would be a "difficult political position for Congressional Republicans," despite the TAA's high cost and its association with the controversial stimulus programme in the States.

He noted that, while Congressional Republicans object because of cost, policy, and politics, it would be difficult to do so for long, as it would require going "on record saying, according to their political opponents, they don't support worker retraining based on import competition, and they're willing to hold off votes on these great FTAs in order to spite the American worker. [...] Right or wrong, that's the kind of messaging that they'll inevitably face."

While the TAA announcement dominated headlines on the US FTA subject, there were some positive developments from the Senate Finance hearings. With market access issues for automobiles and beef resolved in the case of the Korea FTA, and recognition that both Colombia and Panama have made substantial progress on labour rights, the ratification of these FTAs looks increasingly likely in the coming months.

However, the possibility of delaying these FTAs further as a result of the TAA linkage has created concern about Colombia, Korea, and Panama turning to other trade partners that they do have pacts with. For instance, Gordon Stoner, who testified on the behalf of various national wheat and barley associations, stated that more delays could cause Colombia to focus more on its relationships with existing FTA partners, such as South American trade group Mercosur and, as of this summer, Canada - while leaving the US behind.

Similar concerns were voiced at the Korea and Panama hearings. Hatch reminded colleagues that, Canada and Europe had both "moved ahead to craft their own agreements [with Panama] to benefit their workers." Democratic Senator John Kerry noted that delaying the approval of the Korea FTA would also benefit Europe, at a detriment to the US.

ICTSD reporting; "Trade Votes Needed in U.S. Congress by August, Hatch Says," BLOOMBERG, 26 May 2011; "Senate Democrats support White House on trade deals delay," THE HILL, 23 May 2011; "Republican senator presses Obama on trade deal delay," REUTERS, 26 May 2011.

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