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CRS Reports on Congressional Options for Future U.S. Trade Policy

The Congressional Research Service has issued a report entitled, “The Future of U.S. Trade Policy: An Analysis of Issues and Options for the 111th Congress.”

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FTAs, Doha, Trade Preferences & Exports Among Top Issues

Among the trade issues facing the 111th Congress and the Administration are pending free trade agreements and negotiations on new FTAs; the stalled Doha multilateral trade negotiations; the possible renewal of trade promotion authority (TPA); the review and reauthorization of trade preference programs for developing countries; the enforcement of U.S. trade laws and rights under existing trade agreements; the role of export promotion in the U.S. economic recovery; and the growing link between foreign direct investment and trade and, with it, the increasing use of bilateral investment treaties (BITs) and investment provisions in trade agreements.

U.S. at Crossroads in Trade Policy, Consensus on Liberalization Frayed

According to CRS, Congress and the Obama Administration are at a crossroads on trade policy. Over the years, the general consensus on trade liberalization has frayed as evidenced by closer congressional votes on major trade legislation and ambiguous public views on the value of foreign trade. CRS states that the recession and high unemployment levels have worsened this splintering.

Three Different Approaches

CRS characterizes the debate on trade as being framed by the following three groups of views:

  • trade liberalizers - assert that on a net basis, the benefits to the U.S. of trade liberalization are greater than the costs and, therefore, should be encouraged through trade barrier reductions;
  • fair traders -- acknowledge the benefits of trade liberalization but assert that U.S. firms and workers are often forced to compete under unfair conditions. They support trade agreements, but only if the agreements provide for a “level playing field.”
  • trade skeptics - tend to argue that the costs of trade liberalization outweigh the benefits for the U.S., and therefore, reject unrestricted trade liberalization.

Where Policymakers Fit in Spectrum Will Determine Future Direction

Where policymakers fit on this continuum of views will have broad implications for the outstanding and emerging trade issues before Congress and whether the direction will be toward greater trade liberalization, conditional trade liberalization, or a restrained, if not retrenched, trade policy.

For example:

Greater Liberalization May Bring Growth & Efficiency, Expose the Vulnerable

Greater trade liberalization, whether unilateral or via trade negotiations and agreements, would promote further U.S. integration with the world economy and with it, according to many mainstream economists, a more efficient allocation of resources and economic growth. It would also encourage the development and adherence to internationally negotiated rules on trade to promote stability and to prevent the use of protectionist measures. At the same time, it would expose the already vulnerable firms and workers to increased competition, forcing them to make costly adjustments.

Fair Trade Policy May be More Acceptable to Public, but Irritate Trade Partners

A “fair trade” focused policy direction would address what some view as inequities in trade policy by proceeding with trade agreements that require U.S. trade partners to adhere to core labor standards, environmental protection measures, and other provisions to “level the playing field.” In so doing, such trade agreements could be acceptable to larger segments of the American public and rebuild a consensus on trade. However, some trading partners have resisted what they consider to be U.S. efforts to impose its own values on them through trade policy. Many economists argue that the “playing field” will always be uneven as labor will be cheaper in some countries than others, reflecting differing stages of development.

Skeptic Approach May Give Sovereignty, Undermine Credibility as Trade Partner

A “skeptical” policy direction would require U.S. policymakers to retrench and reevaluate trade policy as a whole to ascertain whether it has benefitted or harmed U.S. interests, for example, in employment, and would reserve the opportunity to renegotiate those trade agreements if they fail to meet the criteria. This approach would aim to protect U.S. national sovereignty over matters pertaining to the health and safety of its citizens, among other issues. Opponents of this path have argued that it is very difficult, if not impossible, to determine the impact of individual trade agreements on the level of employment and other economic trends, because so many other factors play a role. They also argue that revisiting and renegotiating trade agreements could undermine the credibility of the U.S. as a trading partner.

(CRS No. R41145, dated 03/24/10)