The New Shape of America's Trade Policy
After months of rumor and speculation, on May 10, Congress and
the Bush Administration finally announced that they have arrived at
a compromise deal redefining America's trade policy. The deal may
be worth celebrating, but only after the specific language of the
agreement is finalized and only if that final language preserves
trade freedom. Details regarding the more controversial aspects of
the accord have been revealed, giving some insight to the direction
U.S. trade policy may now take. It is a direction that may not
promote U.S. interests.
Congress and the President must ensure that U.S. trade policy
continues to advance the goals of freeing trade and promoting
American leadership in trade liberalization around the world. New
restrictions on free trade agreements (FTAs) that impose costs on
potential partner countries or on the U.S. will hinder the
achievement of these goals.
New labor, environment, and intellectual property provisions
have been announced as the core elements of the compromise.
Unfortunately, implementing language may result in these provisions
being contrary to free trade policy:
- The agreement contains a new, enforceable commitment to the
1998 International Labor Organization "Declaration on Fundamental
Principles and Rights at Work." This declarationcommits ILO members
to endorse policies advancing freedom of association, collective
bargaining, the elimination of forced or compulsory labor, the
abolition of child labor, and the elimination of employment and
occupational discrimination, whether or not they have ratified the
relevant ILO conventions.
According to the ILO "Global Report on Discrimination," the U.S.
has not ratified many of the associated conventions and is not
fully compliant with the Declaration. The report lists
examples--mostly provided by the AFL-CIO and the International
Confederation of Free Trade Unions--of inadequate U.S. policies
regarding each principle. Moreover, the Declaration is legally
non-binding--it does not require nations to change national laws in
accordance with the stated principles. However, the new FTA
provision could make these principles legally actionable through
FTA legislation and the dispute resolution process. Including this
provision in U.S. FTAs exposes America to legal challenges from
trade partners and non-governmental organizations (NGOs) trying to
influence U.S. labor laws through trade policy.
- The deal includes new restrictions on enforcement discretion.
U.S. FTA partners will no longer be allowed to defend their failure
to enforce labor laws due to inadequate resources. This provision
will affect developing countries that use U.S. FTAs to promote
development and reduce poverty. Historically, as prosperity
increases, the desire and ability to implement labor protections
and enforce them grow. This natural evolution towards protecting
workers has been demonstrated in the U.S., Britain, and other
developed countries. Forcing trade partners to shift scarce
resources toward enforcing a labor regime that they cannot afford
will neither promote development nor promote healthy labor
- The deal includes a new, enforceable commitment to adopt,
implement, and enforce seven multilateral environmental agreements
according to multilateral treaty guidelines. As with labor
regulation, a number of these treaties do not impose obligations
that supersede national laws. This new provision, however, dictates
that treaty obligations cannot be undermined by FTA obligations.
Consequently, this rule may make treaty obligations legally
actionable through FTA legislation and trade dispute resolution.
Moreover, no guidance is given as to the treatment of disputes that
arise between the U.S. and free trade partners that are not
signatories to a given treaty. While the U.S. is a signatory to all
of these treaties, many other countries remain uncommitted.
- The agreement would eliminate the requirement that a country's
drug regulatory agency withhold approval of a generic drug until it
can certify that no patent would be violated if the generic were
- In addition, it would alter the general rule by which U.S. FTAs
provide five years of data exclusivity for new drugs introduced
into a trade partner's market. Under this new provision, a country
that relies on the United States FDA for marketing approval and
that grants approval within six months of a U.S. firm's application
will have to maintain exclusivity for a five-year period beginning
when the drug was first approved in the United States, not the
These IP provisions are designed to speed the delivery of
medicines to developing countries. The new rules are coupled with
new provisions for improved patent protection, but many FTA partner
countries lack strong intellectual property rights protections
under existing FTA requirements, making it unlikely they will be
able to support the burden of new requirements. Drugs may get to
market sooner, but they will do so at the expense of drug makers.
This wouldseriously impact pharmaceutical companies' ability to
recoupresearch and testing costs, resulting in less investment in
future drug research.
Stand Strong for Free Trade
Until the agreement is fleshed out and the FTA language is
developed, it will be difficult to pass final judgment on the new
trade policy compromise. That said, while this compromise plan is
testament to the real willingness of both sides to develop good
policy, it falls short of providing the answer--good or bad--as to
what shape U.S. trade policy will take.
The Administration has agreed to significant concessions on
labor, environmental, and intellectual protection standards in U.S.
FTAs, but these concessions do not ensure that pending FTAs with
Peru, Colombia, Panama, and South Korea will win Congress's
approval. If this agreement does not go far enough to satisfy
concerns about the four pending FTAs, then it will probably not
address concerns over any future FTAs stemming from the renewal of
the President's Trade Promotion Authority (TPA). If the
Administration gives up the authority granted by current TPA
legislation, this "compromise" agreement could just lead Congress
to pick apart the four pending FTAs to incorporate more palatable
policy language, without advancing trade in any other way.
Until Congress reaches some consensus over the criteria needed
to enable the passage of trade agreements, no progress can be made
towards a meaningful compromise that will allow the free trade
agenda to move forward. If that criteria is too protectionist, then
no compromise would be acceptable. FTA provisions that are too
costly for the U.S. or result in new barriers to trade would not be
worth the fight. And a TPA hampered by overly restrictive
conditions also would be of little value in promoting a free trade
Defending free trade are central tasks for both Congress and the
Administration. Policymakers need to stand firm and reach a
compromise that is politically feasible and advances the cause of
Daniella Markheim is
Jay Van Andel Senior Trade Policy Analyst in the Center for
International Trade and Economics at The Heritage Foundation.
Convention on International Trade in Endangered
Species; the Montreal Protocol on Ozone Depleting Substances; the
Convention on Marine Pollution; the Inter-American Tropical Tuna
Convention; the Ramsar Convention on the Wetlands; the
International Convention for the Regulation of Whaling; and the
Convention on Conservation of Antarctic Marine Living