Same Old Protectionism

Friday, July 6, 2007

TRYING TO salvage an American trade policy, the Bush administration took the unusual step of embracing bipartisanship. Unfortunately, the overture hasn't been reciprocated.

In May, the administration accepted Democratic demands for tougher labor and environmental standards in return for Democratic approval of free-trade agreements with Peru and Panama -- and the possibility of more. "Today marks a new day in trade policy," House Speaker Nancy Pelosi (D-Calif.) said. But last week, the speaker, along with House Majority Leader Steny H. Hoyer (D-Md.), Ways and Means Committee Chairman Charles B. Rangel (D-N.Y.) and Ways and Means trade subcommittee Chairman Sander M. Levin (D-Mich.), dashed those hopes. There will be no more "fast-track" authority for the administration to negotiate trade deals, they declared, until that glorious day when we "expand the benefits of globalization to all Americans." The Panama and Peru deals may still sneak through, although Mr. Rangel will be going to Lima and Panama City soon to discuss how those sovereign nations can change their laws to suit the U.S. Congress. Much bigger proposed agreements with Colombia and South Korea are dead, the Democrats say.

The Democrats insist their stand is a principled one. On Colombia, the ostensible issue is human rights: America's staunchest Latin American ally must show unspecified "concrete evidence of sustained results," though its record has already improved. As for the U.S.-South Korea Free Trade Agreement, the biggest such proposed pact since the 1993 North American Free Trade Agreement, Democratic objections center on access to Korea's market for U.S. autos.

Do they have a point? South Korea is the world's ninth-largest car market, with 1 million vehicles purchased in 2006 -- but only 40,000 from abroad, 5,000 of those from the United States. Legitimate U.S. concerns include not only an 8 percent tariff but also a sales tax and environmental regulations that apply disproportionately to U.S. autos.

The trade agreement goes a long way toward resolving these problems. It would eliminate the Korean tariff, as well as the 2.5 percent U.S. tariff on Korean cars sold here. It commits Korea to halving its sales taxes, rewriting its regulations and joining a dispute resolution panel that could restore U.S. tariffs to punish proven violations by South Korea. General Motors, which owns 51 percent of Korea's Daewoo, has declared that the deal "addressed the auto industry's concerns" (though GM is officially neutral on ratification). Only the United Auto Workers, Ford and Chrysler oppose the deal, insisting on linkage between future U.S. tariff reductions and increased sales of U.S. cars in Korea. Of course, scuttling the trade agreement is the one outcome that would guarantee no improved access to Korea. But perhaps that's all right with the critics, since the protective U.S. tariff on Korean cars would then remain.

It would be nice if South Korea and other trading partners accepted every item on every U.S. industry's wish list. But that is not the nature of trade negotiations. In the real world, officials must weigh the costs and benefits to the country as a whole -- not to mention the legitimate interests of the other side. One union and the two smaller U.S. automakers should not be allowed to sink a deal that would improve relations with a strategic ally in Northeast Asia and deliver real gains to U.S. agriculture and industry -- not to mention American consumers. The Democrats' partisan embrace of rationalizations served up by labor and (part of) the auto lobby is not "a new day in trade policy." It's protectionism as usual.

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