ROB PORTMAN has a tough job. As United States trade representative he has the rank of ambassador and a staff of more than 200 (considered tiny by the standards of Washington’s bloated agencies). That, and the fact that he is siding with the angels by fighting for freer trade, must be a comfort on a cold night after wearying negotiations with developing countries whose grievances he knows to be legitimate, and with his European Union counterpart, Peter Mandelson, ever-ready to, er, reinterpret the meaning of his most recent concessions.
Portman, mild-mannered and not given to hyperbole, characterises the current trade environment as “a challenging time”. He knows that the global Doha round is in serious trouble. If a deal cannot be struck by July 1, 2007, the president’s authority to put it to Congress on a take-it-or-leave-it basis will expire, and with it the chance for congressional approval.
The stumbling blocks are agriculture and services. President George Bush has offered to eliminate all trade-distorting agricultural subsidies if America’s trading partners will do the same. That has been greeted by the EU, with France in the lead, with as much enthusiasm as French students have for private- sector jobs that don’t promise lifetime employment.
Worse still, Mandelson has presented that position as non-negotiable. That leads Congressman Bill Thomas, a staunch free trader, to conclude that the US-EU differences are irreconcilable, “and when you have irreconcilable differences the best thing you can do is call it (the Doha round) off”.
Services, which include everything from finance to law and insurance, are America’s strongest export sector. In documents released last week Portman points out that America runs a $56 billion surplus in trade in services despite barriers erected by developing countries, and that liberalisation of such trade “could account for fully 72% of the economic gain from the Doha round”. But the developing countries are about as ready to open their insurance and other markets as the French are to abandon agricultural protection.
Although he still hopes to salvage the global Doha round, Portman knows that his best hope is to concentrate on bilateral rather than multinational agreements. So he has turned to individual deals with countries that account for 54% of American exports. With good results: exports to those countries have grown at twice the rate of exports to the rest of the world. More such deals are in the works, with countries ranging from Peru and Malaysia to Panama and South Korea and — surprise — with the United Arab Emirates, home of Dubai World Ports.
That Portman can make such progress is testimony to his negotiating skills, and not only with America’s trading partners. Nipping at his heels are environmentalists, who worry more about fish and forests than about the economic growth that freer trading brings, and trade unions, which disguise their protectionism by professing concern for working conditions in Asia and Central America. The unions would have us stop trading with countries that fail to adopt the high-cost American standards that would make most developing countries uncompetitive in world markets.
Then there is the US Congress, some of whose members, their sights set on the November elections, don’t want to antagonise constituents that might be hurt by imports. Others profess to be worried about the national security implications of increased reliance on imports, and acquisitions of American firms by foreigners.
Finally, there is China. On April 20, China’s president will visit Washington. The date is significant because some time this month the Treasury must issue its bi-annual list of currency manipulators. It is doubtful that the 3% rise in value of the yuan against the dollar, allowed by the Chinese since they relaxed the yuan-dollar peg, will satisfy congressional critics who want China included on the list, with retaliatory measures to follow.
Bush is concerned not only with the damage such retaliation would have on the American economy — prices would rise, forcing interest rates higher, creating pain for a softening housing market. He also fears that such targeted protectionism would dash his already slim hopes of converting China from a geopolitical rival into a partner in maintaining a stable world order.
So the administration is trying to play down the significance of America’s $202 billion trade deficit with China. Commerce secretary Carlos Gutierrez told a business forum in Tokyo that America’s economy has nothing to fear from China’s low-cost products. Administration spokesmen also point out that many made-in-China products are produced in factories owned by American companies, and that products imported from China are often manufactured elsewhere in Asia, and merely assembled in China.
The Chinese helped by inviting to Beijing two of their severest critics — Senators Chuck Schumer and Lindsey Graham — and persuading them that they would indeed revalue gradually. So the senators have agreed to delay their bill to levy a 27.5% tariff on Chinese imports.
But all is not sweetness and light. America and Europe have followed the imposition of quotas on several Chinese products (bras, panties, shoes, trousers) with an appeal to the World Trade Organisation to declare China’s tariffs on imported car parts a violation of the organisation’s rules.
More important, China’s theft of American intellectual property has the influential software and entertainment industries up in arms. They want the president to tell the visiting Chinese to respect their intellectual-property rights or face a closing of the American market that is so crucial to China’s ability to grow its economy, create jobs, and avoid a social upheaval that might create the sort of unemployment that the Chinese most fear — the turfing out of office of the current regime.
Irwin Stelzer is a business adviser and director of economic policy studies at the Hudson Institute
