SO it does indeed end with a whimper rather than a bang. Free trade, I mean. Thanks to a president too weak politically to withstand the protectionist surge of a Democratic Congress, the era of ever-freer trade has come to an end. It expired quietly, with few mourners, and with some of those who have done it in claiming that the corpse is alive and well.

Susan Schwab, US trade representative, found it politically necessary to claim that the deal cut with Congress by a weakened President George Bush and a reluctant Treasury secretary Hank Paulson “shows the US is not turning protectionist”.

The deal, still subject to congressional approval, is this. The Democrats will agree to approve two minor trade agreements, one with Peru and the other with Panama, in return for a Republican agreement to include in trade pacts a series of environmental and labour-market “reforms”.

Those reforms include the recognition of the right of trade unions to organise workers, the outlawing of most child labour and of workplace discrimination, and a requirement to allow patent protections of pharmaceuticals to lapse overseas when they expire in America. We can sue our trading partners if they violate the agreement, and they can sue us. For example, if some country such as Panama decides we are violating trade-union rights here at home, they can bring a suit to press Congress to change the law.

More important is what this deal signals about the shift in the balance of political forces that determine future trade policy. Until now, the administration’s supporters of free trade have been able to fight off Democrats’ attempts to incorporate these restrictions in trade agreements. No longer. For two reasons.

First, there is Iraq, which has sharply reduced the president’s ability to keep his congressional party in line. The presidential coat-tails are frayed beyond any ability to be useful to aspiring politicians. Indeed, the name of the game in Republican circles is to create as much distance as possible from the Oval Office.

Second, there has been a shift in attitudes towards trade. There are increasing charges by Wal-Mart’s political critics that its prices, so attractive to consumers, come at the expense of exploited children in Asia and an underpaid workforce in America. Asian child labourers might be working themselves out of poverty, and Wal-Mart might be providing jobs for thousands unable to find work elsewhere, but that doesn’t matter to critics of free trade and the company.

In one sense, the free-trade advocates in the administration have nobody to blame but themselves. They have been unable to craft and to explain programmes to transfer some of the gains of free trade to those who suffer from it – displaced workers. Yes, there is a host of programmes aimed at doing just that, but most workers can’t cope with the bureaucratic shoals that must be navigated to be eligible for benefits. And yes, unemployment is virtually nonexistent, but until very recently workers’ wages have not kept pace with the growth of profits and executive compensation. That created an opportunity for critics to claim that globalisation and free trade raise corporate profits and executive pay, while exposing ordinary workers to competition from dollar-a-day labourers in Asia and Latin America.

Then there is China, increasing its wealth and, equally important, its political power on the back of an export boom sustained in part by an undervalued currency. This provides it with a huge and growing surplus in its trade with America: $63.3 billion (£32 billion) in the first four months of this year, up 88% on the same period in 2006. That won’t be changed much by this week’s semi-annual economic dialogue between an American delegation headed by Paulson and a Chinese delegation led by vice-premier Wu Yi. Its ineffectiveness might stir congressional critics to consider legislation on those issues.

So the state of play now is roughly as follows: the administration has agreed to accept Democratic restrictions in return for support of two minor trade agreements. The more important agreement with Colombia has been put on hold. This is a blow to the Bush administration, which had been counting on President Alvaro Uribe to be an ally to counter the influence of Venezuela’s rabidly antiAmerican Hugo Chavez.

Also, the important agreement with South Korea has been sent back to the drawing board by a Congress seeking more concessions.

Two important questions remain. The first is whether the Bush administration can persuade important elements in the business community to support the deal, and whether Democratic leaders can overcome opposition from those of their colleagues who believe that the best trade deal is no trade deal. Neither is certain.

The second question is whether the deal can become a template for others, and also presages congressional renewal of the president’s fast-track authority, which empowers him to put any trade agreement to Congress for an up or down vote, no amendments allowed.

The dealmakers, most notably Schwab and Paulson on the Republican side, and Congressman Charlie Rangel, the suave chairman of the powerful House Ways and Means committee, for the Democrats, say it will. Trade-union leaders disagree: no trade deals so long as Bush is president or, better still, never. John Sweeney, president of the AFL-CIO, America’s largest trade-union confederation, has promised to oppose any trade agreement with South Korea or Colombia, as well as any extension of Bush’s fast-track authority. With elections pending, that matters.

All of this is a pity. Just when the falling dollar is boosting American exports, a tit-for-tat trade war, closing markets to US goods, is the last thing a slowing American economy needs.

Irwin Stelzer is a business adviser and director of economic policy studies at the Hudson Institute

stelzer@aol.com

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