April 14, 2008 | Commentary on Foreign Aid and Development

America Loses by Changing the Rules on Trade

House Speaker Nancy Pelosi's sudden desire to change the rules on trade agreements carelessly throws into doubt a process that has brought unprecedented economic prosperity to millions of Americans -- and billions more worldwide.

At issue: the proposed free-trade agreement with Colombia. President Bush, concerned that Congress would adjourn this year without acting on the agreement, formally sent the pact to the lawmakers April 8. This, in turn, started a 90-day clock for an up-or-down vote.

The next day, Pelosi announced that the House of Representatives would void that timetable, likely delaying a vote on the Colombia deal until after the presidential election in November. The California Democrat vowed to set aside the "fast track" guarantee of the Trade Promotion Authority, under which the U.S.-Colombia agreement was concluded. Regrettably, the House on April 10 agreed 224-195, mostly along party lines.

Before that vote, AFL-CIO President John Sweeney had quickly praised Pelosi's move, saying, "We applaud her for taking decisive action to reassert congressional authority over trade."

But changing the rules in the middle of the game strikes at the integrity of the process, which includes elaborate international negotiations and much hard bargaining with foreign governments.

If this maneuver stands, U.S. trade negotiators will have a far harder time persuading counterparts in other nations that they can deliver congressional approval of negotiated terms -- even if Congress awards a future president renewed fast-track authority.

Americans should expect far less favorable trade deals, as foreign negotiators lose faith that the United States will uphold our end and thus make fewer concessions of their own.

The beauty of the fast-track procedures -- and the up-or-down vote within 90 says was a key provision -- is that they provide an incentive for both sides to get to their bottom lines.

Congress already had dealt another blow to the process last year, when it insisted on renegotiating trade agreements with Peru, Colombia, Panama and South Korea to insert or "improve" provisions on labor and the environment. The Bush administration complied, raising eyebrows among trade negotiators around the world as they sensed core principles crumbling beneath their feet.

Pelosi's rules change could signal the end for the World Trade Organization. Its demise undoubtedly would be met with glee by the AFL-CIO, where Sweeney and other leaders seized on international trade as a convenient, if false, explanation for the union's declining membership and influence. The AFL-CIO's remaining grip on the Democratic Party apparently remains strong enough to insist that the rest of the economy share in the decline of Big Labor.

All the evidence points to free trade as propelling prosperity, not only for Americans at all income levels but for people around the world -- especially the poor in developing countries. They have seen their prospects bloom as their nations were integrated into the world economy.

Trade liberalization over the past five decades secured an extra $9,000 a year for the typical American household. It promises even more, if policymakers can break down remaining trade barriers.

Shifting from today's global trade regime to one characterized by perfectly free trade and investment would boost U.S. income by $500 billion per year, studies indicate.

Developing countries would win, too. The World Bank estimates that even modestly freer trade -- lowering tariffs on agricultural and manufactured goods as well as elimiĀ­nating subsidies and other non-tariff barriers -- would allow developing counĀ­tries to gain nearly $350 billion in income by 2015.

Overall, opening markets stimulates economic growth, creates economic opportunity, encourages innovation and raises living standards.

Congress, whose approval rating is mired at 13 percent among likely voters, according to a new Rasmussen poll, should rethink Pelosi's latest effort to rewrite the rules that her party previously endorsed.

Trade is one issue that successive administrations got right, Democrat or Republican, under policies that lifted ordinary Americans and enhanced our prestige abroad.

Failure to deliver on our international promises, especially when the transparent reason is short-term political gain at home, tells the world that we cannot be trusted. That perception would only put Americans at greater risk, economically and strategically.

Terry Miller is director of the Center for International Trade & Economics at The Heritage Foundation, where Daniella Markheim is senior analyst in trade policy.

About the Author

Daniella Markheim Jay Van Andel Senior Analyst in Trade Policy
Center for Trade and Economics (CTE)

Ambassador Terry Miller Director, Center for Data Analysis and the Center for Trade and Economics and Mark A. Kolokotrones Fellow in Economic Freedom
Center for Trade and Economics (CTE)

Related Issues: Foreign Aid and Development

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