U.S. in Tight Spot on Trade


The Wall Street Journal
By Bob Davis and Greg Hitt
July 16, 2009

WASHINGTON — In a bid to revive support for free trade within the U.S., the Obama administration plans to press foreign nations to increase imports of U.S. agriculture and manufacturing — but not to push so hard as to ignite a protectionist backlash.

"In order to save trade, we’ve got to deal more honestly with those who feel like [trade’s] benefits haven’t been manifested for them," U.S. Trade Representative Ron Kirk said in an interview Tuesday. "We’ve got to be serious about enforcement."

Thursday, Mr. Kirk plans to travel to Mon Valley Works, a steelmaking complex in Braddock, Pa., to tell steelworkers that the U.S. will begin regular reviews of countries whose regulations and other practices limit American exports of agriculture and manufactured goods. In agriculture, for instance, the U.S. would target health-based import restrictions that Washington considers bogus — such as bans of American pork products by Russia, China and other nations in reaction to the outbreak of H1N1 influenza.

The U.S. effort would rely largely on trying to embarrass countries into changing policies, rather than directly threatening tariffs or other commercial penalties. The U.S. could decide to refer some of the disputes to the World Trade Organization, but getting cases decided there can take years.

"One of the legitimate complaints levied against our trade policy is people feel like we just let our partners run roughshod over us," Mr. Kirk said, at the cost of U.S. jobs. "I don’t think it’s too much to ask of our trading partners that you live by the rules that you agreed to."

White House economic-policy makers argue they need to jump-start trade to fight the global recession, but they acknowledge that they have little political room at home to maneuver. President Barack Obama wants to win approval of three free-trade deals and finish negotiations on a global trade deal by the end of next year. The initiative Mr. Kirk plans to unveil Thursday could ease public skepticism, mollify union allies and raise prospects for those deals on Capitol Hill.

Globally, trade continues to contract. Wednesday, the Organization for Economic Cooperation and Development reported that the value of exports in 30 OECD countries during the first quarter fell 13.4% from the previous quarter, and imports declined 15.2%.

Boosting trade could help revive economic prospects in the U.S. and elsewhere. Mr. Kirk said the initiative would translate into jobs, as U.S. partners were forced to follow through on commitments to open markets. "It has real practical value in our overall economic strategy," he said.

The administration has had a tough time articulating a clear trade policy. As a presidential candidate, Mr. Obama ran as a trade hawk, urging the renegotiation of the North American Free Trade Agreement. As president, he has supported free-trade measures, including pledging at several G-20 summits not to take protectionist steps, and softening "Buy America" provisions in the stimulus package that would limit foreign companies from bidding on U.S. government contracts.

To win over a public skeptical about trade, he is now following a course plotted by earlier Republican and Democratic administrations: appear to get tough with trade partners and show that trade deals can boost exports and jobs, then use that credibility to push for new trade deals.

The administration is also working on a separate initiative to enforce labor rights in bilateral free-trade pacts. Generally, those agreements require U.S. trading partners to enforce their own domestic labor laws and work to raise them to international standards.

Mr. Kirk wants to expand on annual U.S. reviews of intellectual-property protection abroad, and produce similar reports on agricultural and manufacturing restrictions. By "naming and shaming" countries, the U.S. tries to build pressure for change. Many developing countries fear that being placed on watch lists can limit foreign investment.

The intellectual-property effort has had mixed success. Bootlegged software and movies are still available throughout China, for instance, despite years of U.S. pressure on Beijing to crack down. But Gary Hufbauer, a trade specialist at the Peterson Institute of International Economics, a free-trade think tank, credits U.S. pressure for the enactment of a formal WTO agreement in 1994 protecting patents and copyrights.

It’s far from clear that the new trade-enforcement efforts will mollify Congress, where skepticism about free trade runs high among rank-and-file Democrats. The biggest concerns are in the House, where more than 100 members — most of them Democrats — are backing legislation that would require a wide-ranging review of Nafta and other trade pacts, and boost the role of Congress in negotiations over future deals.

"That’s an awful lot of votes for the trade representative to come up against," said House Rules Chairman Louise Slaughter, a New York Democrat.

Write to Bob Davis at [email protected] and Greg Hitt at [email protected]

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