Free-trade backers on shaky ground

U.S. POLLS IMPACT ON TRADE

FTA talks with KL, Bangkok and Seoul, and trade ties with Beijing, face scrutiny.

SEVERAL free-trade pacts being negotiated with Asian nations could land in choppy waters with the Democrats taking control in the US Congress.

Populist rhetoric on China will also mount, given that the Democrats are likely to link human rights and labour concerns with trade.

One of the first legislative casualties could be President George W. Bush’s power to negotiate free-trade agreements (FTAs) without congressional review, said sources.

Known as the trade promotion authority, it was granted in 2002 and ends next July.

Dr Larry Niksch, a veteran Asia hand in the research arm of Congress, said: “Trade is the major issue to watch. Democrats are wary and suspicious of free-trade agreements … It is very unlikely that they will renew his fast-track authority. And even if they do, it will come with severe limitations.”

Dr Niksch, who made clear that his views did not reflect that of the Congressional Research Service, noted that even if Washington secured one of the FTAs under negotiation with Malaysia, Thailand or South Korea: Democrats might reject it and this will act as a dampener on future negotiations.”

Democrat support for FTAs has eroded dramatically since the early 90s. Nafta, negotiated by former president George H.W. Bush and pushed to a vote by his successor Bill Clinton, passed the House 234 to 200, with 102 Democratic votes.

When Mr Clinton pushed for permanent normalised trade relations with China in 2000, he secured the support of 73 Democrats. By 2002, the vote to grant President Bush the ability to negotiate “fast-track” trade deals that cannot be amended by Congress garnered just 25 Democrats.

A number of concerns are at play. Mr Edward Gresser, a trade expert at the Washington-based Progressive Policy Institute, said Democrats see bilateral FTAs as a small component – just 12 per cent – of overall trade.

There is also anxiety in dealing with developing nations because of the attendant problems that worry Democrats – labour rights, human rights and environmental policy as well as the impact of FTAs on US industries.

Mr Edmund Rice, who worked in Congress for 20 years as a trade specialist, said Malaysia, Thailand and South Korea “will have a more complicated task of meeting what will be a more stringent negotiation process that might not play out too well domestically in their own countries”.

A nettlesome issue in the Malaysia-US FTA is the way the government awards contracts to companies through direct negotiations. “The sticking point is the procurements part where the US wants us to open government contracts for
tender,” said economist Saifudin Morat at Mayban Securities, a leading Malaysian stockbroking company.

“This will continue to be an issue.”

In Thailand, where the FTA negotiations stalled partly because of the change of government, a senior official said: “The ball is actually in our court. If we were to show that we are politically ready, it would go ahead.”

But another official observed that Thais usually found it easier to deal with Republicans “because the party was not as ideologically driven as the Democrat Party.”

Seoul will find the ongoing FTA negotiations remarkably tougher. Congressman Charles Rangel, a Democrat who will head the House Committee on Ways and Means overseeing trade, is on record demanding a “high-standard” FTA with South Korea.

The sticking points in the FTA are cars, agriculture and textiles. Ahead of more talks over the next two months, South Korean President Roh Moo Hyun has said major concessions will not be made just for the sake of meeting the target date for an agreement.

With the baton passing on to the Democrats, China’s trade ties with the US will come under tighter scrutiny. Beijing’s growing trade surplus – US$140 billion (S$218 billion) – has been a sore point and it faces pressure to allow the value of yuan to rise.

Influential Democrat senator Charles Schumer has put on hold a protectionist Bill that threatens to slap a 27.5 per cent tariff on all Chinese goods entering the US.

Mr Schumer and his supporters in Congress had given Treasury Secretary Hank Paulson a chance to negotiate with Beijing.

Dr Michael Green, a former Bush strategist on Asia, said: “If that dialogue doesn’t yield results by early next year, then the heat will grow on China heading into the presidential primaries.”

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