The US Election & Trade

What will Democratic control of the US Congress mean for trade policy? Opinions vary. In short, I don’t think the legislative shift implies much for the WTO negotiations, which were going to be quiet for a while regardless.

Even prior to Tuesday, the majority of analysts expected the Doha Round to lay dormant for some time. The most notable dissident is Jagdish Bhagwati, who wrote last week:

But Doha is far from dead. Pascal Lamy, World Trade Organisation director-general, has only “suspended” the talks… George W. Bush is deeply committed to the success of Doha: it would be a rare multilateral triumph for a US president who never wavered in his support for free trade, even as John Kerry, his opponent in the last presidential election, was condemning US companies that outsource as traitors. With the elections to the US Congress pending, and with Democrats out to exploit every opportunity, he simply could not make the necessary concessions in agriculture and risk losing his own “farm belt” support. But with the elections behind him, he can return to act forcefully on his convictions.

In contrast, Brad DeLong says that “free trade does not appear to be a priority for the types of Republicans who get elected president–and definitely not for their staffs.” Nonetheless, so that we can focus on the legislative branch, let’s assume that Bush would like to renew trade promotion authority (TPA) and use it to achieve a meaningful Doha round outcome. What do the mid-terms spell for the US in the WTO negotiations?

Pat Buchanan welcomes the election results as hailing a “new era of economic nationalism”:

Among the more dramatic events of this election year was one that has been little debated: The return of the trade-and-jobs issue, front and center, to American politics. Note: Almost no embattled Republican could be found taking the Bush line that NAFTA, or CAFTA with Central America, or MFN for China, or globalization was good for America and a reason he or she should be re-elected. But in Ohio, Pennsylvania and Michigan, attacks on free trade were central elements of Democratic strategy…

With the 2006 election, America appears to have reached the tipping point on free trade, as it has on immigration and military intervention to promote democracy. Anxiety, and fear of jobs lost to India and China, seems a more powerful emotion than gratitude for the inexpensive goods at Wal-Mart.

While I dissent from Buchanan’s enthusiasm, it’s true that free trade was not a platform plank likely to attract many swing voters on Tuesday. But if public opinion of trade liberalization is so low, would Republican victories have made a difference? Sen. Charles Grassley recently noted that “even if the Republicans continue to control the Congress we’ve already moved into a more protectionist atmosphere.”

President Bush imposed steel tariffs a few months before the 2002 mid-terms in order to win TPA and the election, and free traders were told that a bit of protectionism up-front would buy them much greater liberalization in the future. It didn’t pan out. Then, in 2004, we were told that the Doha round needed to wait until after the presidential election so that Republicans wouldn’t lose critical farm state votes. But the administration didn’t make any serious push at the WTO in 2005, and by the Hong Kong ministerial in December, you could look ahead to Tuesday’s mid-terms. Moreover, the July 2005 pork-laden passage of CAFTA exposed the President’s limited ability to pressure Congress on even the most watered-down trade deals and made me pessimistic about the future of trade liberalization long before a Democratic takeover of Congress seemed likely.

That’s why I disagree with Bronwen Maddox, who wrote that “if the Democrats win back the House of Representatives today, that is the end of the enthusiasm in the US for free-trade deals.” There never was any enthusiasm. Congressional staffers tell me that no one in Washington has considered TPA renewal to be feasible for a couple of years, and Chuck Grassley told Pascal Lamy that it had no chance back in February. While the Democratic Congress will “probably be marginally more protectionist than the current one,” I don’t think that means much difference in terms of further liberalization. The WTO talks were dormant already, Bhagwati’s “far from dead” optimism notwithstanding, and no one expects them to go anywhere without TPA after it expires on July 1.

When might the Doha round resume? Richard Baldwin previously commented that EU CAP reform in 2008/2009 may revive the round. Last Friday, Alan Beattie described the negotiations as in a “deep freeze.” He said they wouldn’t have a chance until after the next US presidential election, and some analysts have even said 2012. I haven’t seen anyone predicting substantive action prior to 2008.

So don’t blame Democrats for hurting Doha, which had already collapsed and wasn’t going anywhere soon even if Republicans kept control of Congress. The interesting question: do the election results increase the risk of protectionist backsliding that we’ve managed to avoid thus far?

4 thoughts on “The US Election & Trade

  1. ivan

    I think i would be more interested in building a coalition that would lower trade barriers unilaterally, whatever the Doha-outcome. Are there any Republicans or Democrats who are such real free traders?

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