No End of Free Trade

Early in 2008, Democratic congressional leaders put a hold on trade deals the Bush administration had negotiated with Colombia, Panama, and South Korea. In the presidential campaign that played out the rest of the year, leading Democratic candidates and the party's ultimate winner, President-elect Barack Obama, pledged to renegotiate the North American Free Trade Agreement (NAFTA) as part of an overall bid to restore "fair trade" principles to such deals, including greater labor and environmental protections. In the electoral season's final months, the country plunged into a financial crisis, by some indications further deepening the misgivings Americans were expressing about globalization and free trade. The mood has aroused concerns among some economists about a shift toward protectionism at a time when most economists say open markets are vital for economic revival. Some analysts, however, see an opportunity for trade advances in the new administration. They note the Democratic Party's support for the Doha multilateral trade round and say the new team of political leaders might be better positioned to reform trade policy and promote free trade.

There is a long history of U.S. bipartisan cooperation on trade liberalization. U.S. policymakers forged a bipartisan consensus on expanding global trade at the end of World War II, building on the momentum of the Bretton Woods conference to form the General Agreement on Tariffs and Trade (GATT) in 1947. The GATT was inspired by a shared belief that lowering tariffs and expanding free trade worldwide would contribute to lifting millions of people out of poverty, and to instilling confidence in a free-market system based on fairness, transparency, and the rule of law. With the onset of the Cold War soon after the creation of the GATT, trade expansion's geostrategic dimension grew in importance. President John F. Kennedy linked the advancement of freedom and trade, inspiring the Kennedy Round of world trade talks, which led to significant tariff cuts and trade expansion. "A vital expanding economy in the free world is a strong counter to the threat of the world Communist movement," said Kennedy after signing the 1962 Trade Expansion Act. Two decades later, Republican President Ronald Reagan similarly connected trade to the "tides of human progress" and launched the Uruguay Round in 1986, which a later Democratic president, Bill Clinton, helped complete in 1994. The Uruguay Round established the World Trade Organization.

Trade liberalization has been embraced by many economists and policymakers through the years because it is seen as generating greater productivity and wealth through shifting labor and capital from less to more productive economic activities. It also greatly expands the amount of goods and services available to consumers. Gary Clyde Hufbauer, a senior fellow with the Washington-based Peterson Institute for International Economics, says postwar globalization has made the U.S. economy $1 trillion richer each year. But there has been growing resentment in some quarters about a failure to adequately address free trade's losers--those working in U.S. sectors, particularly in manufacturing, that have lost out to cheaper, more efficient producers abroad.

This resentment has been directed in part at the expanding number of free trade agreements (FTAs), both regional and bilateral, negotiated by the Bush administration. Some say they aided special interests at the expense of other U.S. job sectors, while others object to them in principle as distracting from the more broadly beneficial Doha trade round still under negotiation. Clinton helped shepherd NAFTA to completion and President George W. Bush has completed eleven FTAs-but the stalled action on the Colombia, Panama, and South Korea deals reflects concern among some Americans that globalization has eroded jobs and wages in the United States. Democrats, in particular, seized on this unease in the run-up to the 2008 elections. A backlash against NAFTA and other free-trade agreements featured prominently in the Democratic primary contest, especially in manufacturing states like Ohio and Pennsylvania, which have shed hundreds of thousands of jobs.

In the 2008 elections, dozens of Democrats and a handful of Republicans critical of the Bush administration's free trade policy were elected to Congress. Public Citizen's Global Trade Watch, a Washington-based organization that tracks such issues and opposes the Bush administration's trade policy, says thirty-three new "fair trade" advocates (PDF) were elected to Congress in 2008. It identifies such politicians as "committed to changing the North American Free Trade Agreement/World Trade Organization model." One of the newly elected Democratic congressmen, Larry Kissell of North Carolina, was quoted by Reuters as saying there should be a moratorium on trade deals until "we see good jobs coming back."

Some experts say the pending agreement with Colombia will mark an important litmus test for Obama. Business groups, along with editorial pages ranging from the Cleveland Plain Dealer to the Detroit News to the New York Times, have called for passage of the deal. Most have noted that the United States is already open to Colombian goods. The deal would provide an important market for U.S. manufacturers currently facing high tariffs in Colombia, at a time when competitors are poised to make their own deals with the country. Labor groups, which heavily supported Obama and other Democratic candidates, oppose the deal on the grounds that violence against labor organizers remains at an unacceptably high level. Obama cited this in his last presidential debate with Sen. John McCain (R-AZ). By contrast, Obama referred to the recent FTA with Peru as a "well-structured agreement."