Bridges Weekly Trade News Digest • Volume 12 • Number 38 • 12th November 2008

Free Trade a Hot Topic in US Election Season

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Candidates for the US Congress in 2008 campaigned on trade more than they ever have in the past, a new study suggests, drawing on growing sentiment within the US electorate that lowering barriers to cross-border commerce is bad for the American economy.

But the extent to which campaign messaging translates into policy changes remains to be seen, especially given that other issues – namely, helping the US economy recover from the financial crisis – will most likely top the government’s agenda in 2009.

But the 4 November vote resulted in some changes that could affect trade in the long run. Indeed, the elections resulted in a net increase of 30 members of Congress – 26 in the House and 4 in the Senate – who support greater restrictions on free trade, according to a report by Public Citizen’s Global Trade Watch, a consumer advocacy group.

The Senate Finance Committee, which handles trade issues, will say good-bye to Senator John Sununu, Republican of New Hampshire, who lost a re-election bid to Democrat Jean Shaheen. Republican Gordon Smith of Oregon will also be leaving the committee after his loss to Democrat Jeff Merkley, who won the backing of union groups and campaigned hard for greater restrictions on trade.

On the House side, the Ways and Means Committee, which deals with trade issues, will lose two Republicans, Phil English of Pennsylvania and Jon Porter of Nevada. English, a supporter of free trade, lost his re-election bid to Democrat Kathy Dahlkemper, who has called for a renegotiation of some existing trade agreements.

Prominence of trade in the campaigns

While the ultimate impact of the new players on Capitol Hill remains to be seen, trade clearly played a larger role in many Congressional campaigns than it has in the past.

“The demand for a new trade and globalisation model went mainstream with the 2008 elections,” Lori Wallach, director of Public Citizen’s Global Trade Watch, said in a conference call with reporters. “This political shift follows on where the American public has been moving for years,” she said.

According to the Public Citizen report, more than 130 paid ads were run on trade-related issues in the 2008 Congressional elections, up from 25 in 2006.

Although Democrats – the party of labour unions and environmental activists – have traditionally been more likely to oppose free trade deals than Republicans, this year’s election season saw members of both parties campaigning against free trade in some districts. In a dozen races, the candidates engaged in “anti-NAFTA-offs” – competing to see who could take a harder line on trade, according to the Public Citizen report.

In the North Carolina Senate race, Democrat Kay Hagan used seven trade-related TV ads in her successful campaign to oust Republican incumbent Elizabeth Dole, the study says. And in Oregon, Democrat Jeff Merkley took over Republican Gordon Smith’s Senate seat after running seven TV ads calling for greater restrictions on world trade.

US citizens going cold on free trade

Politicians campaigned on trade because they knew it would resonate with the US public. Indeed, recent polls have shown that Americans have cooled toward free trade.

In June, a nation-wide Rasmussen poll of US voters found that 56 percent of respondents believed that the North American Free Trade Agreement (NAFTA) — a 14-year-old deal that keeps trade barriers low between Canada, Mexico and the US — should be revised. And 28 percent of respondents said that free trade agreements have had a direct negative impact on their families.

According to an April poll by the Pew Research Center, nearly half of US citizens (48 percent) believe that free trade agreements are “a bad thing” for the country, compared with 35 percent who say that they are beneficial. That represents a significant shift from a decade ago, when 47 percent of Americans said trade deals were a good thing, and only 30 percent said they were harmful to the country’s economy.

More recently, some have pointed to the ongoing economic turmoil as proof that the current approach to trade cannot be sustained. Leo Gerard, president of the United Steelworkers of America, said in a conference call with reporters that the current financial meltdown was “the final nail in the coffin” of the notion that de-regulation and market-opening is the way forward for the US economy.

But not everyone agrees that trade policy is the culprit.

Ed Gresser, trade policy director at the DC-based Progressive Policy Institute, says that trade has actually softened the blow of the current economic crisis. Indeed, recent data from the US government’s Bureau of Economic Analysis show that US exports boosted GDP by 1.1 percent in the third quarter of 2008, a period when GDP shrank by 0.3 percent.

“At the moment, trade is doing what it ought to do,” Gresser said.

The loss of US jobs is more a function of “structural trends” – including declining costs of transport and communication and growing labour forces worldwide – than of trade policy per se, Gresser said.

But many in Congress argue that trade policy has played a role, and that it is up to the government to secure the jobs of American workers.

Among that crowd, Senator Sherrod Brown, a Democrat of Ohio, introduced a bill in the spring that would require the government to review - and potentially renegotiate - all existing US trade pacts, including both the North American Free Trade Agreement and the Marrakech Agreement, the 1994 deal that created the WTO. Though the bill has not moved out of the Senate Finance Committee since it was introduced, it has garnered the support of six co-sponsors – five Democrats and one Independent.

The House version of the bill, introduced by Congressman Mike Michaud, a Democrat from Maine, has won the support of 74 co-sponsors, more than one-sixth of the 435-member legislative body. The bill has been referred to the House Subcommittee on Trade, but, like its Senate counterpart, has not moved since it was introduced.

“Fair trade has become a national priority in this country,” Senator Brown said in a conference call with reporters last week.

But for some, the term ‘fair trade’ is code for protectionism, a border-closing approach to trade that many economists have blamed for turning recessions into full-fledged depressions.

“The notion that what is being called for is protectionism is a red herring,” Lori Wallach said on the same call. “At issue is not whether or not there will be trade, the question is will the rules of trade and globalisation be designed to broadly suit the public interest, or just a set of narrow special interests like the current status quo policies,” she said.“That’s not protectionism.”

But trade is not going to figure high on the government’s list of priorities, at least not in the short-term, some say. The financial crisis, energy policy, and climate change are expected to take centre stage.

And even when trade makes it on the agenda, many observers say that President-elect Barack Obama, who has said he supports trade opening if it is accompanied by specific protections, will be more accountable to labour and environmental groups than was President Bush (see Bridges Weekly, 5 November 2008, http://ictsd.net/i/news/bridgesweekly/32652/).

Exactly how such politics will play out after newly elected officials take office in January has caught the attention of leaders around the world.

UK Prime Minister Gordon Brown issued a warning to the Obama administration on Monday night, calling for “an urgent agreement on a [world] trade deal and a rejection of beggar-thy-neighbour protectionism that has been a feature in transforming past crises into deep recessions.”

But if the new Congress adopts a hard line on new trade deals, the incoming president’s hands will be tied.

ICTSD reporting.