Canada Dominates while Washington Fiddles (or "Even More Proof that Canada Makes the US Look Like a Hoser")

It's looking more and more like my feared "bizarro competitive liberalization" is becoming reality in the United States.  First, it was the EU-South Korea FTA potentially pushing the US to ratify its FTA with Korea, and now the Canada-Colombia FTA might do the same for the US-Colombia agreement.  This is just great...  because, you know, nothing says "we support free trade" like being forced to ratify economically beneficial trade agreements with major diplomatic allies by threat of losing export market share.  Awful.

Here's Boomberg with the embarrassing details (with a nice little addendum at the end by the US Chamber of Commerce's John Murphy):

Colombian Trade Minister Luis Guillermo Plata said Canadian exporters may gain as U.S. lawmakers delay approval of a free-trade agreement with the Latin American country.

Plata was in Ottawa to court lawmakers from Canada’s main opposition Liberal Party in a bid to cement their support for a trade accord and assure its passage in Parliament. He testified at a committee hearing yesterday, met with Liberal leader Michael Ignatieff and dined twice with other Liberal lawmakers during his two-day visit.

“Many of the things that we buy from the U.S. we could buy from Canada and we could buy tariff-free,” Plata, 42, said, pointing to purchases of wheat, barley, corn, machinery and mining equipment.

“The U.S. has to think about it,” he said in an interview at the Colombian embassy in Ottawa. “If they come late to the party, and Canada has been able to move forward and been able to displace them from the market, it will be very hard to reclaim that market.”...

President Barack Obama has said he would press for passage of free-trade agreements with South Korea, Panama and Colombia, though he cautioned that “different glitches” must first be negotiated with each country.
The administration wants to balance its goal of doubling U.S. exports with concerns from Democratic lawmakers and labor unions that the trade agreements fail to align labor, tax and environmental policies.

Plata, who met with U.S. Trade Representative Ron Kirk last week in Washington, said U.S. officials initially signaled to him that lawmakers would make progress on trade accords after the U.S. Congress passed new health care legislation.

“To my surprise I find a very big disconnect between the speech and the reality,” he said. “The reality is that I don’t see the U.S. moving.”

Colombia was the U.S.’s eighth-largest market for corn last year, down from sixth place a year earlier, according to data from the U.S. Department of Agriculture. Its ranking for wheat fell to 10th place from seventh place in 2008....

If Canada seals a trade deal with Colombia, it may spur U.S. lawmakers to expedite the delayed accord, said Walter Bastian, the U.S. Commerce Department’s top official on Latin America.

U.S. trade talks with Chile were expedited in similar fashion after Canada cemented a deal with the South American country, he added.

“When people started to realize the lost business opportunities, it spurred negotiators to get it done,” Bastian said in an interview in Nicaragua today. “The rest of the world isn’t standing still. We don’t want to be left out of the game.”...

Prime Minister Stephen Harper’s governing Conservatives have made strengthening ties with Latin America a priority in an effort to broaden markets for Canadian commodities and reduce the country’s dependence on the U.S. economy.

Harper’s Conservatives lack a majority of seats in Parliament and need the support of opposition lawmakers to pass legislation. The Liberals have said they will back an amended version of the agreement that includes yearly assessments of human rights conditions....

The Chamber's Murphy adds via email: "In Washington last week, Minister Plata observed that the U.S. share of Colombia’s market for soybean meal, yellow corn, and wheat dropped by 67%, 53%, and 37%, respectively, in 2008-2009, following implementation of a new trade accord between Colombia and Mercosur.  That accord eliminated tariffs on those imports from Brazil and Argentina."

Me: I guess we're all mercantilists now.

Bizarro Competitive Liberalization, ctd.

According to Reuters, there's a twitch of life coming from the comatose US-Korea FTA:

U.S. Trade Representative Ron Kirk will outline the Obama administration's review of a long-delayed free trade agreement with South Korea in a speech next week, a U.S. business group said on Friday....

Kirk will give his speech on Thursday evening at the U.S. Chamber of Commerce, a leading business group that has criticized Obama for failing to move forward on the agreement with South Korea and others with Colombia and Panama.

The speech will come just weeks before Obama visits South Korea at the end of an Asian tour that will also take him to Singapore for the annual summit of the Asia Pacific Economic Cooperation forum and to Shanghai and Beijing.

Obama and South Korean President Lee Myung-bak issued a joint statement when they last met in June saying they "were committed to working together to chart a way forward" for the free trade agreement, which was signed in June 2007.

South Korea's ambassador to the United States, Han Duk-soo, said this month that Seoul hopes the upcoming summit will be a catalyst for action on the long-stalled agreement.

Just two weeks ago, the European Union signed its own free trade agreement with South Korea that is expected to take force by the middle of 2010.

White House deputy national security adviser Michael Froman said this week the Obama administration viewed the EU-South Korea deal with interest but declined to say whether it made it more urgent for the United States to approve its own pact.

Although most mainstream U.S. business and farm groups support the agreement, it faces strong opposition from labor groups and two of the big three U.S. automakers.

The United Auto Workers, Ford and Chrysler say the agreement fails to tear down non-tariff barriers that keep out American cars while eliminating the few remaining tariffs the United States still has on South Korean cars.

On September 15, 2009, USTR received about 300 solicited comments on the KORUS FTA, and about two weeks later, Assistant USTR Wendy Cutler stated in no uncertain terms that there was absolutely no timeframe for US consideration and passage of KORUS: ""All our efforts are really to understand concerns and figure out how the concerns can be timely addressed. There is no timeline assigned to this, but I can assure you that we are working intensively."  Now, about 6 weeks after those 300 comments were dumped on USTR's doorstep, and about a month after Cutler called "no timeline," USTR Kirk is prepared to announce the results of the administration's review of multi-billion dollar trade agreement.

So what's going on here?  Has the White House been pressured into accelerating KORUS due to increased pressure from business groups (and some public embarrassment) now that the EU-Korea is complete, or are they just buying time with another lukewarm and empty statement of support?  At this point, no one really knows for sure, but if Kirk announces next week that the administration will soon try to move KORUS through Congress - despite the vocal opposition of Ford, Chrysler and the UAW - it will certainly appear that "bizarro competitive liberalization" has indeed become a reality, and that America's trading partners will have dragged it, kicking and screaming, back into the free trade game.  The tables will have officially turned.

As I said yesterday, I highly doubt that this will be the case, and instead expect more stalling by the White House.  But if I'm wrong, it's good and bad news.  The good: any free trade movement in the US is a good thing these days.  The bad: it's a depressing state of affairs that said movement will have arisen out of fear (of losing overseas market share) and embarrassment, rather than an earnest and public desire to liberalize trade and better the lives of a vast majority of American citizens.

Stay tuned.

Moving On

The world is moving on without the United States.  Our trading partners have decided that they can no longer wait for the White House to emerge from its self-induced ObamaCare coma.  They are moving on, and both the United States and the global economy are worse off for it.

It's no longer a secret that, after charting an aggressive trade liberalization plan last spring, the Obama administration has since eliminated all tangible support for free trade in a wrongheaded attempt to ensure support for health care "reform" and climate change legislation.  Indeed, administration officials have openly admitted that they've shelved the Mexican trucking dispute and pending FTAs until these domestic priorities are achieved.  Other issues, such as a Doha negotiating mandate, Buy American and Section 421, have been similarly sacrificed on the mantle of domestic politics.

The effects of the White House's political strategy are being felt on both the multilateral and bilateral levels.  On the multilateral front, I've already documented the blowback: first, the EU and Brazil have openly fretted about the United States' failure to establish firm negotiating positions in the WTO's Doha Round, and they implored us to get in the game or else they'd be forced to move the process along without American input; second, our trading partners essentially blew off very public US demands on "sectoral" tariff elimination agreements and services liberalization.  As I said the other day, we're quickly becoming a "WTO backbencher."

On the bilateral front, our failure to ratify pending FTAs with Colombia, South Korea and Panama is producing equally distressing results.  I freely admit that I'm not a huge fan of bilateral FTAs and strongly prefer unilateral or multilateral liberalization, but I also understand that politics and a comatose Doha round often make bilateral FTAs the only option for significant market opening.  So the fact that our trading partners are completing such deals right and left while we sit on agreements that were signed years ago is a problem.  Consider just a few examples: 

• On October 15, South Korea completed a massive (~$28 billion) FTA with the EU that should enter into force in late 2010.  The agreement, which will seriously disadvantage US businesses in the Korean and European markets vis a vis their European/Korean competitors, actually used the Korea-US FTA (KORUS) as a template to speed completion of the complex negotiations.   Moreover, the EU showed real backbone by completing the agreement despite significant resistance from its domestic automakers - the exact same type of resistance that has stopped feckless American politicians from considering and passing KORUS.  Indeed, KORUS is actually stronger on autos than the EU agreement, because it contains a "snapback" provision that would re-establish US tariffs on Korean automobiles in the case of a dispute over the agreement. The EU agreement has no such provision.  So even though the United States completed KORUS more than two years (June 30, 2007) before the EU-Korea deal, it is very likely that the latter will enter into force long before the former.  And American exporters will pay the price.  Embarrassing.
  

• South Korea is also negotiating bilateral FTAs with Canada, Mexico, India, New Zealand, China, Colombia, Peru, the Gulf Cooperation Council, and Japan; and Seoul is exploring deals with Mercosur, Malaysia, Turkey, and possibly Israel.  All the while, the completed KORUS agreement collects dust.
  

• Panama and Colombia are following in the Koreans' footsteps, albeit on a smaller scale.  On August 11, 2009, Panama and Canada completed FTA negotiations, and Panama announced recently that it has begun bilateral negotiations with the EU and several Caribbean nations.  (A Chile-Panama FTA is already in force.)  Since the US-Colombia FTA was signed in November 2006, the Colombians have completed bilateral trade agreements with Canada, the European Free Trade Association (EFTA), and the "Northern Triangle countries" (El Salvador, Guatemala and Honduras).
  

These bilateral examples closely parallel the aforementioned multilateral problems and make clear that US trading partners are not sitting on their hands while the White House plays political footsie with their economic futures.  Optimistic free traders like AEI's Claude Barfield hope that other nations' bilateral moves will push the United States to get its free trade act together in order to avoid harming our ability to compete in key markets.  One can only hope, although I'm not so sure that anything will change until the domestic political dynamic shifts significantly - whether that's through the passage or failure of ObamaCare and cap-and-trade or a GOP rout in the 2010 elections.

However, if Barfield and others are right and the extracurricular activities of Korea, Colombia and Panama (most notably implementation of EU-Korea FTA) force the White House to advance the pending FTAs regardless of domestic politics, the irony will be as thick as it is depressing. The United States initiated these (and other) trade agreements pursuant to "competitive liberalization," under which we entered into bilateral/regional FTA negotiations with several countries in order to get them to compete for access to the US market and thus offer greater concessions at a faster pace.  Supporters (like former USTR Robert Zoellick) also claimed that competitive liberalization would motivate WTO Members to complete the Doha Round, as the US FTAs would provide preferential access to only a select few nations.  If the United States is forced to pass FTAs with Colombia, Korea and Panama in order to keep pace in their markets, America will have become the target of competitive liberalization, rather than its champion.  Should this "bizarro competitive liberalization" come to pass, I think it would be safe at that point to officially conclude that that the United States no longer leads on free trade but instead is forced to pursue it as a last resort. 

And that would be a shame.