Susan Schwab began
work this week as U.S. Trade Representative (USTR) at a difficult
time for free trade. Free traders have promised results for
decades, and an honest assessment says they were right.
Globalization is enhancing prosperity everywhere, and lowering
trade barriers promotes broad prosperity for the poor and rich
alike. But reality and perceptions are far apart in Washington,
making the free trade argument tougher than ever. After months of
delay, the Senate finally approved Schwab, just as souring
economies in Europe may offer yet another obstacle to further trade
liberalization.
President Bush made a smart pick in Schwab. She is a tough and
knowledgeable negotiator, having spent a lifetime working on trade
issues in government, academia, and private business. An Assistant
Secretary of Commerce in the first Bush presidency, Schwab most
recently managed European Union and World Trade Organization (WTO)
relations as Deputy USTR. She will certainly need that experience
to drive the Bush Administration's free trade agenda.
Schwab was confirmed as USTR in early June by a Senate that is in
one of its most protectionist moods of the last twenty years.
Support for lower trade barriers-a cornerstone of American freedom
and prosperity-has been eroding for the better part of a decade.
This is largely due to hysteria over outsourcing, concerns about
foreign investment in the United States, and the powerful influence
of agricultural and industrial interests.
The net impact hasn't slowed the USTR's ambitious agenda, but it
has quieted the bully pulpit and diminished America's ability to
push the current WTO round ahead. Farm subsidies remain high
globally, while major tariff increases are lurking in the Senate.
Two free trade agreements (FTAs) currently before Congress (and
another four in the works) will have to be passed by mid-March of
2007, at the absolute latest, if they are to be passed at all. The
elevation of Ms. Schwab may give America's foreign economic efforts
a much-needed shot in the arm.
As USTR, Susan Schwab must pursue four goals:
1. Don't let Doha become the walking undead. The
Doha round of WTO trade negotiations is the USTR's biggest
challenge and opportunity, and achieving global consensus will
undoubtedly be tougher than ever before. Some say, "Doha is dead,"
but that's wishful thinking. In fact, the global trade talks risk
becoming undead-going through the motions, with no genuine
progress. The best solution is to reach an agreement under the
auspices of the WTO. The second best solution is to reach agreement
with a broad group of nations that excludes those who favor delay
and inaction. A deal must be concluded by the end of 2006 so that
President Bush can present the bill to Congress before his legal
authority expires. The worst possible outcome would be, as Rep.
Bill Thomas (R-CA) of the Ways and Means Committee said, for
America to "just walk away." Schwab must focus on reducing EU and
U.S. farm subsidies to jumpstart G-20 interest in Doha. The
developing world will open its markets to American service-sector
and manufacturing firms, but the U.S. needs to take the first
step.
2. Emphasize the importance of global prosperity to the war
on terrorism. Winning the debate at home requires a
message that links free trade to the defeat of terrorism. The
instinct of terrorists is to resist openness, modernization, and
all aspects of globalization. Framing the debate in these terms
helps voters understand why a vote for trade protectionism is a
vote for homeland insecurity. With the argument presented that way,
very few politicians would be willing to take the moral low ground,
especially relating to bilateral trade opportunities in the Middle
East.
3. Push property rights, not exchange rates.
Schwab, along with her Treasury and Commerce colleagues, must
resist pressure to rattle sabers on foreign exchange rates,
particularly on China's currency. America can become more
competitive and out-produce its rivals without resorting to
legislative gimmicks. Artificially lowering the yuan exchange rate
will not necessarily improve American trade. What matters more for
fair trade is the enforcement of intellectual property rights in
China and elsewhere, which should be a diplomatic priority.
4. Advance bilateral FTAs-and get them passed.
FTAs with Oman and Peru, along with Vietnam's WTO accession, await
congressional approval. FTAs with South Korea, Panama, Columbia,
and Malaysia are still being negotiated. The dilemma now is how to
get them through Congress-put them all up at once or push a few at
a time? In an election year, it may be best to give Congress one
big push; going through every individual bill one at a time may tax
Members' time and attention.
The free trade road may be rockier than ever, but there are
actually many roads to freer trade. Multilateral, bilateral, and
unilateral trade action are all ways to improve America's
prosperity and security. Ms. Schwab has the experience, smarts, and
tenacity to make the passage, and she deserves the full, vocal
support of Congress, Wall Street, and the White House.
Tim Kane, Ph.D., is Director of the Center for International Trade and Economics at The Heritage Foundation.