US Trade Representative Susan Schwab on 12 February called on the new Democrat-controlled Congress to renew the presidential administration's trade promotion authority (TPA), warning that a failure to do so would "signal to the world that the United States has lost faith" in the Doha Round negotiations. "We must not let that happen," she said.

The administration's trade policy came under fire from senior Democratic lawmakers this week, as new data revealed that the US' trade deficit had reached an all-time high.

President George W. Bush's TPA will expire at the end of June. Without a renewal, the administration will lose its ability to negotiate trade agreements and submit them to Congress for a yes-or-no vote without the possibility of making changes. In the absence of this mandate, other countries are reluctant to finalise trade deals with Washington, since they might subsequently get picked apart by Congress.

Speaking in Washington at an event sponsored by business groups that want to see the mandate extended, Schwab indicated that the administration would work closely with members of the House and the Senate to flesh out the details of TPA legislation.

Most Democrats voted against the current trade promotion mandate in 2002, and seven senators have vowed to "aggressively oppose" extending it this year. However, the senior lawmakers who now chair the powerful Congressional committees responsible for trade policy have suggested that they would be willing to approve new TPA legislation - if the administration takes heed of their concerns, principally on labour rights, the environment, and support for affected workers (see BRIDGES Weekly, 15 November 2006, http://www.ictsd.org/weekly/06-11-15/story3.htm).

Indeed, Schwab said that she had been "encouraged" about the prospects for TPA renewal by her conversations with House Ways and Means Committee Chair Charles Rangel (Democrat-New York) and Senate Finance Committee Chair Max Baucus (Democrat-Montana).

"Personally, I think every president should have the comprehensive authority to negotiate and to implement state-of-the-art trade deals," the US trade chief added. "The broader the better, the longer the better," she subsequently clarified, reports Reuters. Some observers have suggested that the Democrats might be more amenable to granting the Bush administration a short-term extension limited to the multilateral Doha Round talks.

Setting out her case for TPA renewal, Schwab said "the equation is simple... trade agreements mean more exports, and more exports mean better jobs." She noted that the US' exports to countries with which it had implemented bilateral free trade agreements between 2001 and 2006 had grown twice as fast as those to the rest of the world. She also linked trade and investment agreements, specifically the North American Free Trade Agreement (NAFTA), to increased employment, industrial production, and wages.

In a letter to Congress the same day, President Bush reiterated the case for extending his negotiating mandate, saying it was "the only way we can complete the Doha Round and make headway on other trade agreements."

Data on deficit sparks row over trade policy

The tone of the debate on trade became much sharper on 13 February, after the US Census Bureau announced that the country's trade deficit had risen to a record high for the fifth straight year, amounting to USD 763.3 billion in 2006, a 6.5 percent rise over the year before.

The data sparked a new row between Congressional Democrats and the Bush administration about the wisdom of its trade policy. US Commerce Department officials pointed out that 2006 marked the first time in a decade that exports grew faster than imports, and argued for maintaining the existing course.

House Speaker Nancy Pelosi and several other senior Democrats, including Rangel and Trade Subcommittee Chair Sander Levin (Michigan), responded with a call for a "new direction in US trade policy." In a letter to Bush dated 13 February, they blamed the administration's policies for the cavernous trade deficits as well as job losses, and argued that the wage stagnation experienced by most Americans was at least partially caused by "globalisation and trade."

Nevertheless, they stopped well short of demanding a halt to negotiating trade agreements. In fact, while they implicitly criticised the administration for having focused on signing FTAs with countries that accounted for "less than 5 percent" of US trade, they specifically urged it to pursue commercially "meaningful trade liberalisation opportunities," especially at the multilateral level.

"Congress is prepared to approve a strong and ambitious WTO agreement that achieves core US objectives, including in the areas of agricultural, manufacturing - including the dismantling of non-tariff barriers - [and] services," the letter said.

The 19 representatives targeted the 'Big 3' economies of China, the EU, and Japan and gave the administration 90 days to develop and present Congress with a plan to "eliminate" the trade deficits that the US runs with each "by tearing down market access barriers and eliminating unfair trading practices." They said that the US should not hesitate to take these countries to WTO dispute settlement to pursue its objectives, and must pressure China and Japan to let their currencies appreciate, accusing them of "currency manipulation."

Notably, when calling for the US to use "vigorously" anti-dumping duties when necessary, they specifically called for them to be calculated with a controversial methodology that the WTO has ruled against several times (see BRIDGES Weekly, 17 January 2007, http://www.ictsd.org/weekly/07-01-17/story4.htm ). According to the letter, 'zeroing' is "provided for under the WTO rules as written" -- but presumably not as interpreted by WTO dispute panels.

The lawmakers also called for expanded investment in education, research, and innovation in the US to help Americans adapt to open markets.

Several labour and environmental groups, for their part, were harshly critical of the Bush administration's call for TPA renewal. The Washington Times quoted the Sierra Club's executive director as saying that TPA stands for "trust the president always." The United Steelworkers and AFL-CIO also urged Congress not to delegate its authority over trade issues to the president.

ICTSD reporting; "For 5th Year, Trade Gap Hits Record," NEW YORK TIMES, 14 February 2007; "Labor, greens denounce trade policy," WASHINGTON TIMES, 14 February 2007; "US trade bill renewal vital for Doha: Schwab," REUTERS, 12 February 2007.