Perhaps the lowest moment of Congress 2008 occurred when the Speaker of the House decided to prevent consideration of the U.S.-Colombia Free Trade Act, blowing up the long-established congressional process for reviewing FTAs under Trade Promotion Authority. The Speaker abandoned accepted protocols for hearings and floor action, simply setting the trade agreement aside with the approval of her Democratic caucus. The Colombia agreement, as with the pacts with Panama and Korea, has never even had committee hearings, much less an up-and-down vote on the House floor.

The inescapable message to the rest of the world was that even if you negotiate in good faith with the government of the United States, the U.S. legislative branch feels no responsibility to act on the results. Make concessions on issues close to the heart of national sovereignty — environmental and labor standards — and you will receive nothing in return save an appearance of weakness at home.

So as uncertainty roils global finances, the U.S. is now perceived as an unreliable negotiating partner, a country where political interests come first. The clear benefits of expanded trade — and exports have kept the U.S. economy afloat this year — are sacrificed even as the U.S. and global economy slide toward recession.

Any reason for hope?

President Bush is keeping the faith, in his speech this morning calling for Congressional enactment of the Colombia trade agreement (presumably in a lameduck session).

Senator McCain made a good pitch for the benefits of the U.S.-Colombia FTA during Wednesday’s presidential debate at Hofstra (transcript). Unfortunately, Senator Obama stuck to organized labor’s anti-Colombia talking points, for which the Wall Street Journal today took him to task in an editorial, “Obama Makes it Up.”

If Colombia hopes to keep spending on judicial improvements and better law enforcement, it needs an expanding economy. In addition to misrepresenting the country’s progress on reducing violence, Mr. Obama has never explained how denying Colombians the FTA will help the country reduce violence. Maybe this is because he knows he’s merely repeating union distortions.

Consistent advocates of free trade like the Washington Post are reduced to optimistic speculation that Senator Obama’s trade criticisms are election-oriented rhetoric. In its editorial endorsement of Obama for president today, the Post wrote:

We also can only hope that the alarming anti-trade rhetoric we have heard from Mr. Obama during the campaign would give way to the understanding of the benefits of trade reflected in his writings. A silver lining of the financial crisis may be the flexibility it gives Mr. Obama to override some of the interest groups and members of Congress in his own party who oppose open trade, as well as to pursue the entitlement reform that he surely understands is needed.

Yes, we can only hope.

Missed this from earlier in the week, a new survey released during a Consumer Electronics Association event at the Republican National Convention in Minnesota. From CEA:

Fifty-eight percent of those polled said they consider trade a good thing because it has reduced the costs of goods such as electronics and clothing while at the same time helping Americans to become more competitive with workers overseas. The survey released by the Consumer Electronics Association (CEA)^® was conducted by Zogby International.

A vast majority, 69 percent, report that they personally benefit from trade. Support for trade has particularly been drawn from the technology and consumer electronics fields. Sixty-nine percent of Americans called said they support overseas trade in those sectors. In addition, 74 percent said that it was a “good thing” that overseas trade and global manufacturing had reduced the costs of consumer electronics goods in the United States. Fifty-seven percent said that America would not be the economic leader it is today without overseas trade. Only 25 percent disagreed with this statement.

“The verdict is in and the people have spoken. Now it’s time for Congress to grasp what the American people firmly understand – that trade benefits our country,” said CEA President and CEO Gary Shapiro. “It’s time for Congress to listen to the American people and not the protectionists in the media and do what’s right for our economy, which is passage of trade agreements with Colombia, Panama and South Korea.”

The event in Minnesota, which featured Commerce Secretary Gutierrez, was part of the CEA’s month-long “America Wins with Trade” bus tour. Washington Times story here.

From AFP, “Singapore says free trade talks with China concluded“:

SINGAPORE (AFP) — Singapore and China have successfully concluded negotiations on a bilateral free trade agreement, the city-state said in a statement Thursday.

It said the bilateral deal builds on a free trade agreement already reached between China and the 10-member Association of Southeast Asian Nations (ASEAN), to which Singapore belongs.

Granted, regional trade agreements complicate the global trading systems, introducing protections and complications even as they lower other trade barriers. The Economist comments in “A second best choice“:

On August 28th India agreed a free-trade agreement with the ten fast-growing countries in the Association of South-East Asian Nations. ASEAN also announced a second big regional deal, with Australia and New Zealand. Coming so soon after Doha’s collapse, the two agreements sent a powerful message. The global trade talks may have stumbled, but regional pacts are pushing ahead, particularly in the fastest-growing part of the world economy. According to the World Trade Organisation (WTO), over 200 regional and bilateral agreements are in place with many more under negotiation. More than 100 came into force during Doha’s seven exasperating years.

That is disturbing. Every trade deal should be measured on its own merits. But, for all their political appeal, bilateral and regional deals are never a substitute for progress at the WTO. Multilateral trade rounds are the foundation of the trading system because they are based on the “most favoured nation” principle—that any tariff cuts offered to one country must be offered to them all. Regional and bilateral deals are based on discrimination.

And here’s the third best choice, which equals the BAD choice: Do nothing, as so many in Congress — especially the House leadership — have decided is the best course of action on FTAs with Colombia, Panama and Korea.

UPDATE (4:15 p.m.): From today’s Asian WSJ, “Bilateral Trade-Off,” a column by trade thinker Bernard K. Gordon that takes the criticisms pretty darn far:

The latest sign that the postwar era of “multilateral” trade liberalization has ended came last week in Singapore. The event was an Association of Southeast Asian Nations ministerial meeting, where the 10-member grouping and India formally agreed to a “free trade” deal to take effect in January. At the same meeting, Asean leaders also agreed to establish yet another so-called “free trade agreement,” this one with Australia and New Zealand.

That brings to roughly 400 the number of regional and bilateral trade agreements that have been notified to the World Trade Organization. Meanwhile, another try to keep the Doha Round of world trade talks alive will be made in Geneva later this month. But the prospects are not bright, and all of this has been very predictable. Scores of observers — not only academics — have regularly warned that bilateral and regional trade pacts, which are in fact preferential rather than free trade agreements, are both a cause and a consequence of a breakdown of the WTO system.

 

That’s the headline on a new Investor’s Business Daily editorial, and we feel compelled to ask: Why the “dropped g”?

Other than that, the editorial makes the clear case for expanded trade as an economic essential, chiding the charlatans who make free trade the scapegoat for U.S. economic troubles. Trade helps keep us afloat, the IBD argues, daring to cite facts:

Exports have been rising at a remarkable 11.1% annual pace since 2000 (see chart), nearly doubling average nominal GDP growth of 5.8%. It’s no exaggeration to say trade has become a key underpinning of our economy’s growth.

Recently, the National Association of Manufacturers noted that we now sell more manufactured goods than we buy from all those countries we have free-trade agreements with. The first-quarter surplus with our free-trade partners was a half-billion dollars — compared with a deficit of $176 billion with the rest of the world.

In short, free trade has become a major boon to American makers of everything from jetliners and earth-moving equipment to movies and financial services.

The IBD editorial  also notes that economists Gary Hufbauer and Matthew Adler of the Peterson Institute say eliminating remaining trade barriers would lift household incomes as much as $12,000 more.

All in all, a punchy editorial arguing clearly for the benefits of trade. We suggest readin’ the whole thing.

P.S. For more on trade from the Peterson Institute:

Peterson Perspectives: Interviews on Current Issues
The decision by the House of Representatives to change the rules for Congressional action on trade agreements drives a gaping hole in US trade policy and poses the gravest threat to the global trading system in decades, says C. Fred Bergsten in a website interview. See also Policy Brief 08-5.

Greetings from Panama, the other country that has a trade agreement pending with the United States. I will leave hand-wringing over trade to those in Geneva this week - because here it’s awfully hard to find anyone who doesn’t support the idea of free trade and, more specifically, the U.S.-Panama Free Trade Agreement.

Landing yesterday, the plane made a sweep over the Pacific, where I counted 17 container ships lined up on approach to the Canal. Lots of commerce, on its way from Asia to the East Coast and points further east. There was a similar queue on the Atlantic end of the Canal too. This is trade at its most fundemental, and few nations are better positioned to benefit than Panama. The United States and China are the two largest users of the canal.

Having lunch al fresco along the Canal approach, it was hard not to notice the constant procession of PanaMax ships in both directions. You can propose a time-out on trade in Washington, but it’s not going to make a whit of difference here. They’re expanding the Canal in one of the largest public works projects in the world. U.S. Companies stand to benefit greatly from this project - so passing the trade agreement and getting those tariffs removed will be a great thing for lots of manufacturers. More on the Canal tomorrow after our tour.

From nearly any vantage point, Panama City reminds you of Hong Kong, with scores of 50 and 60 story residential towers crowded together. It is a bit surprising to find such a concentration of tall buildings in a small country, but Panama continues to be a big draw for U.S. and European retirees, and is a critical logistics and services center for Latin America. It is predominently on on services economy, including call centers, banking, insurance, and lots and lots of shipping-related business.

Three million people live in this country, about half in Panama City. This is still a developing country, with poverty levels still above 30%. But unemployment is low - below 5%, and GDP is growing. Inflation, particularly food prices, is running about 8-10% this year, I was told this morning. A trade agreement will certainly lower food prices, as agriculture and food tariffs tend to be high.

NAM President John Engler stopped by a reporters’ briefing today to talk about the NAM’s new analysis that shows U.S. trade in manufactured goods is now in a surplus with its Free Trade Partners (see news release in the extended entry):

At a time when there is so much worrisome about the U.S. economy, this is bright spot we ought to be reinforcing. When you’ve a Congress that’s been willing to vote preferences for regions of the world for them to send their goods to us, I would hope that they would treat the U.S. based manufacturers as well as we’ve treated other people all over the globe, and let us send our goods out.

In this audio clip, Engler also discusses the difficulty that faces any Congressional attempt to enact the pending free trade agreements this year. In addition, he looks at problems the lack of trade promotion authority will pose for a new President, addressing the question: Given the House leadership’s decision to circumvent the rules of consideration and shelve the Colombia FTA, how can you ever enact a new PTA that can be effective? 

Engler also talks about the prospects of the next Doha ministerial meeting in Geneva. The NAM’s Frank Vargo, vice president for international economic affairs, will be on hand.

Stories from today:

• VOA: WTO’s Lamy: Global Trade Deal Possible
• Reuters: WTO chief sees improved chance of trade deal
• SABC (South Africa:) Hope dims for Doha trade talks

Commerce Secretary Gutierrez released new trade statistics yesterday that calculate exports according to metropolitan areas, using a speech at the Detroit Economic Club to drive home the point for Michigan: For the first half of 2007, the Detroit metro area was the fifth largest export market in the U.S. with sales totaling $24.3 billion.

Consider these statistics:

• In 2007, Michigan’s merchandise exports to NAFTA were $13.0 billion above 1993—an increase of 72 percent.
• Between 1993 and 2007, real per capita personal income in Michigan increased by 24 percent.
• Export-supported jobs linked to manufacturing account for an estimated 6.4 percent of Michigan’s private-sector employment.
• Nearly one-quarter of all manufacturing workers in Michigan depend on exports for their jobs.

There are three FTAs pending—with Colombia, Panama and South Korea—that would give American companies and workers greater access to 100 million consumers.

Last year, Michigan merchandise exports to Korea totaled $627 million. That was an increase of 72 percent since 2003. An FTA with Korea would level the playing field and provide U.S. automotive exporters a competitive advantage in gaining access to the Korean market. Congress should pass each of the pending FTAs.

A Gutierrez op-ed in the Detroit News made similar points, a news release is here, and the website is www.trade.gov/metrodata