America Votes: What next for the WTO? edit

Nov. 13, 2006

The Doha Round of trade negotiations was suspended in July 2006. Soon thereafter leading trade negotiators hoped that talks could resume -even be completed- in early 2007. This timetable allowed for a short "cooling off" period but, more importantly, envisaged the resumption of negotiations after the U.S. Congressional elections. These elections were thought to be one factor stopping American negotiators from making further concessions on agricultural trade subsidies during 2006. Well, the elections have now come and gone but will we see the resumption and conclusion of the WTO's Doha Round negotiations?

-->Last week's election results saw the Democratic party capture control of both chambers of the U.S. Congress and, as a result, the chairmanships of key Congressional committees that deal with trade policy-related legislation. Given the tiny majorities in each house in favour of recent controversial trade measures, such as the Central American Free Trade Agreement (CAFTA), any newcomers to Congress may well have a disproportionate effect on future votes. We analysed the attitudes towards trade policy of the 62 new elected members of Congress and compared them to the incumbents that they will soon replace. Given some election counts took far longer than others, our analysis considered those elections that were declared by midday last Thursday. The results were revealing. Of the 62 new members of Congress, 48 are Democrats. Half of these Democrats made critical remarks about the CAFTA agreement during the election campaign. Free trade agreements in general were heavily criticised. Only five Democrats mentioned the WTO during their campaigns, suggesting that U.S. elected officials can distinguish between bilateral trade agreements and wider-ranging WTO reforms. This is bad news for Korea, Malaysia, Thailand and the other countries that are negotiating free trade agreements with the USA, or have already concluded such agreements (like Peru.) Serious doubts now arise as to whether those agreements will be ratified by the next Congress, or at least be ratified on terms that satisfies the trading partner in question. In contrast, little ire was directed towards the WTO.

America's trading partners may be disturbed, however, by the fact that over 20 of the newly elected U.S. officials campaigned on promises to include labour and environmental rules in trade agreements. These rules have long been opposed by developing countries and readers may recall that the Seattle meeting of WTO ministers in 1999 collapsed in acrimony over them.

On the basis of their election campaigns, we calculate that in the U.S. Senate six trade-friendly officials will be replaced by five trade-sceptics and one person sympathetic to trade reform; a substantial shift. Likewise, in the U.S. House of Representatives of the 22 departing Congressmen who were friendly to trade reforms, 16 are being replaced by trade-sceptics or outright opponents to trade reform. This does not bode well for any proposals to liberalise trade put before Congress in 2008 and 2009.

And, that, is unfortunately where the real problem arises. In addition to deciding whether to approve any Doha Round agreement, Congress may have to decide whether to extend President Bush's authority to negotiate trade agreements. Worse still, there are other pieces of trade legislation that must be considered this year or in 2007 and 2008, including normalising trade relations with Vietnam, the renewal of special access to the U.S. market given to developing countries in general and to the Caribbean and to Sub-Saharan Africa in particular, and free trade agreements with (at least) Peru and Colombia. Few people realise just how heavy the U.S. legislative calendar will be on trade policy matters in the last two years of the Bush Administration.

Votes on trade matters became increasingly partisan under Republican leadership of the U.S. Congress. The number of Democrats prepared to support a Republican President's trade legislation dwindled. Moreover, these trade-supporting Democrats faced growing criticism from their own party, trade unions, and some NGOs. Some of these Democrats are on record as saying that the last thing they want to do is to have to vote frequently in favour of trade reforms, and this is precisely the prospect that faces them.

Optimists argue that two strong Democratic chairman of Congress' trade committees, with relatively good pro-trade credentials, will help get trade legislation enacted. Thirty years ago, when such powerful chairman dominated the U.S. Congress, this argument would have greatly reassured U.S. trading partners. Since then, however, there has been a progressive weakening of these chairmen's power and, furthermore, the number of Congressional committees that oversee trade policy matters has increased. A few men, however well placed, might not be able to stave off defeat this time.

Now that they control both chambers of Congress, other optimists argue, the Democrats may feel under pressure from the U.S. public to cooperate with President Bush. Here Democrats will have to weigh up the unpopularity associated with partisanship with the electoral benefits from staking out different positions ahead of the U.S. presidential election in 2008. Plus, Democrats haven't forgotten that Republicans barely cooperated with President Clinton on his trade policy agenda in the 1990s and might return the favour. Revenge, electoral positioning, and ambition may well dominate the political benefits from cooperation.

One important countervailing force could be the support of US business for a new WTO agreement. To date, this support has been meagre because businesspeople don't understand what the WTO's "development mandate" means for them and because few, if any, new market opportunities are likely to be created by the deal on the negotiating table in July 2006. Worse, many believe that if there is a WTO deal in 2007, then it will be watered-down version of what is already proposed. This means that U.S. business has even more reason to be ambivalent about the Doha Round, unless they perceive a threat to the entire WTO system from outright negotiating failure.

Last week's U.S. elections are likely to have significant implications for U.S. trade policy and for negotiations on the Doha Round. Free trade agreements with the U.S. are likely to be subject to more stringent standards which U.S. trading partners won't like. Plus, greater doubts about whether Congress will ratify any trade accord concluded by President Bush's trade negotiators could be destabilising, doubts that will rise with any partisanship in Washington over the next two years. If anything Democratic control of Congress will further tighten the political constraints on U.S. trade negotiators, making the depressing prospects of a Doha Round failure all the more likely.