Free Trade Agreements (FTAs) with South Korea, Panama and Colombia moved forward on Tuesday with the announcement that a deal had been struck between Democrats and Republicans. Later in the day, doubts – centered on an extension of the Trade Adjustment Assistance (TAA) program -- emerged about the solidity of the announced compromise but it is expected the Senate Finance Committee will take up the FTAs on Thursday.
The Obama administration, eager to boost trade in a slow-moving economy, has long seen the proposed FTAs as a quick shot in the arm. At the same time, to the irritation of Republicans, Democrats have insisted on an extension of the TAA program, which would assist U.S. workers who lose their jobs in the wake of the trade deals.
Commodity groups were largely positive with Tuesday’s news. In the Mid-South, the lack of U.S. access to Korea’s rice market has tamped down some enthusiasm for the FTA. On the flipside, the American Soybean Association (ASA) said the three trade pacts represent the potential of some $3 billion of additional agriculture exports.
"This is a critical step in the right direction," said ASA President Alan Kemper, a soybean farmer from Lafayette, Ind., in a statement. "Now that an agreement on Trade Adjustment Assistance has been reached, we call on Congress and the (Obama) administration to quickly advance these trade agreements in order to boost our economy."
Bart Schott, farmer and National Corn Growers Association president, said the “NCGA is greatly encouraged by the movement on the pending FTAs. The United States is the largest corn producer and exporter in the world and developing new markets for our country’s agricultural products will help our sector lead the nation in economic growth and international competitiveness.”
The TAA hurdle
Despite such backing, it is unlikely to be smooth sailing for the trade deals. Key Republican leaders are already kicking against coupling the FTAs and TAA while the White House is on record saying the TAA component is imperative. If the preliminary FTA/TAA deal with House Ways and Means chairman Rep. Dave Camp holds, the TAA, set to expire early in 2012, is now expected to be viable through 2013.
During a Tuesday afternoon hearing of the Senate Agriculture Committee, Montana Sen. Max Baucus – who chairs the Senate Finance Committee – told a panel of livestock producers what was at stake with the FTAs.
“My goal (with the Korea FTA) has been to put more pressure on other Asian countries, especially China and Japan,” said Baucus. “That way … they’ll very soon take all ages (of U.S. cattle) and all cuts. That’s a huge opportunity for the American producer.”
The FTAs, Baucus warned the cattlemen, “will pass only if Trade Adjustment Assistance is also passed. They’re all together … it’s all or nothing.
“My judgment is it’s a package worth pursuing. So, I urge all of you when talking to your colleagues, your friends … (to) advise them ‘heck, we’re going to get these FTAs. But part of the deal is TAA as part of it.’
“Then, we can start putting pressure on these other countries. Let me tell you, it was hard getting the extra beef provisions in the Korean (FTA) bill. I ran into a lot of resistance in certain quarters. But we got it.”
Late Tuesday afternoon, White House officials – pushed by President Obama’s National Export Initiative calls for doubling exports by 2014 – tiptoed around just how much ground they’d cede on the labor front if pro-trade Republicans balked at the FTA/TAA coupling.
The White House claimed the compromise deal struck with Camp would:
- More than double TAA resources for job training while reducing separate programs and increasing the flexibility.
- Cause the “Health Coverage Tax Credit” to see a drop to 72.5 percent. At the end of 2013, the credit would sunset as the Affordable Care Act comes into effect.
The Obama administration also agreed the plan would be paid for with spending cuts through Unemployment Insurance “program integrity” along with “very small administrative savings” on the Medicare side and a proposal that “seeks to penalize preparers who have bad records on the Earned Income Tax Credit.”
While insisting a commitment to America’s workers through renewal of the TAA in the South Korea trade bill was “a great way to move forward” the officials were unable, or unwilling, to predict how Republicans would react.
In fact, the White House officials said the deal with Camp – described as an “honorable compromise following a tough but constructive negotiation” - was only “on the underlying substance of the agreement.” Camp, it was claimed, “didn’t reach any agreement with us, in any form, on what the process (will be) going forward.”
The officials dodged repeated questions that attempted to draw them out on whether they would move forward with the FTAs without the TAA program extension.
Labor concerns have continuously dogged the trade deals. During the lengthy debate over the FTAs, Democrats have pointed out Colombia has, at best, a spotty record with labor rights.
During a May House hearing, U.S. Trade Ambassador Ron Kirk claimed various controversies and human rights concerns associated with the Colombia FTA had been properly addressed through intensive work resulting in an “action plan.” The plan focuses on Colombian labor rights and outlines a number of steps the government of Colombia has agreed it will undertake.
The action plan, said Kirk, “significantly expands the protection for labor leaders and union organizers. It bolsters efforts to hold accountable and punish those who have perpetrated violence against union members. And it makes a number of important steps to strengthen labor laws and enforcement.”
At the time, Kirk also made it clear if the deals aren’t passed an already unpopular Congress will be at fault and the Obama administration will not shoulder the blame. “We think it’s important that we make a covenant to American workers. We’re concerned … that the American public has lost faith with Congress with regard to trade policy. They know we get excited about passing FTAs but they don’t believe we’ll enforce them – we think we have a good record on that. But they’re really concerned that we’ll stand up for the rights of workers and the environment and take care of American workers.”
Kirk also admitted a skeptical U.S. public must have “confidence we’re not doing ‘trade and away’” with the FTAs. “A lot of people believe (that). They know we get great consumptive benefits: cheaper food, fresher products, cheaper computers. But, right now, Americans are concerned about jobs and want to make sure we’re not doing a trade agreement with another country that doesn’t respect (labor) … and we encourage (U.S.) businesses to move production elsewhere.”
More than an hour into the May hearing, Massachusetts Rep. Jim McGovern spoke at length about what passing the Colombia FTA could mean for that nation’s poorest. “Most of the violence and conflict happens in the countryside. It primarily affects rural communities and small farmers. In the United States, we take great pride in supporting our small farmers. We should also be concerned for Colombia’s small producers and how the Colombia FTA might affect them.
“The most definitive study on this matter estimates that small-scale producers of Colombia would lose around 16 percent of their net income from agriculture under the Colombia FTA. For those who produce products that will directly compete with U.S. agriculture imports, they’ll likely experience a fall of between 48 percent and 70 percent in their net agricultural income.”
Those unconcerned with such predictions “should care because it means these people are likely to lose their land and join the ranks of the displaced in the growing urban poor. Colombia is only second to Sudan in terms of the number of internally displaced people.”
On Tuesday, the Obama administration said the current Colombian government has demonstrated “a remarkable commitment to human rights reform.” Further “the standard has never been a complete absence of violence. We think any death is one too many. But what we sought was a balance that would allow the United States to reap the economic benefits of Colombia through this FTA, which are almost 100 percent in our favor. ... We struck a good balance.”
Still, why make a deal in such an environment? Numbers tell the tale: in 2010, U.S. exports in goods to Colombia amounted to $12 billion. Under an FTA, the International Trade Commission predicted that would expand by another $1 billion. The White House claims that under the FTA, over 80 percent of U.S. exports of consumer and industrial products would become duty-free immediately. The remaining tariffs will be phased out over 10 years.
For more, see FTAs.