"Free Trade Agreements - Green Shoots in California"

Sydney M. Williams

Thought of the Day

“Free Trade Agreements – Green Shoots in Colombia?”

June 14, 2010

It is commonly assumed that the Great Depression was made worse because of three decisions: the Fed’s decision to lift interest rates, the decision to increases taxes and the unintended consequences of the Smoot-Hartley Tariff Act of 1930. (There is a fourth factor, in my opinion as important as the first three, but about which there is less consensual agreement, and that is the decision by the Roosevelt administration to intrude in an unprecedented manner into the private sector.) We are, in my opinion, fortunate in that our current Fed Chairman, Ben Bernanke is a student of the Great Depression, so is more likely to guide us safely through these uncertain times, at least in the area in which he exerts some control – interest rates. Unfortunately, unless dramatic steps are taken, taxes will go up next year, as the Bush cuts expire; so it is of the trade situation I want to write. Last week green shoots may have appeared in Colombia.

This has been an Administration that, despite the multicultural image it has cultivated, has been singularly xenophobic when it comes to global trade. In a report dated March 2009, Craig VanGrasstek of Harvard’s Kennedy School of Government stated that President Obama’s approach to trade “might be best characterized as passive free trade.” In fairness, most of the opposition to global trade emanates from Congressional Democrats who have long, deep and dependent (financial) ties to labor unions, the scourge of free trade advocates.

As a candidate, in a March 2008 speech in Ohio, Mr. Obama proclaimed that NAFTA had cost the United States one million jobs. He later vowed to withdraw if terms weren’t renegotiated. However, it is generally conceded that NAFTA, encompassing 450 million people producing $16.5 trillion in goods and services annually, is the world’s largest free trade area and, according to estimates, adds 0.5% (about $70 billion) to our GDP every year. But, bending to union lobbyists, no matter the benefits of NAFTA to the Country, President Obama signed a bill denying a Bush-era provision allowing transborder trucking between the U.S. and Mexico.

President Obama has neither actively encouraged nor discouraged Free Trade Agreements. When House Democrats inserted the provision “Buy America” into the stimulus package, the Administration waffled. Claude Barfield and Philip Levy wrote in August 2009, “The European Union, Canada, Mexico, Australia and Japan threatened to launch World Trade Organization (WTO) cases against the United States,” not an auspicious start for a man who vowed to rebuild international bridges allegedly blown up by his predecessor. But, rather than remove the language altogether, as John McCain urged, the agreed-to-amendment stated that the “Buy America” provision should not violate existing U.S. trade commitments.

Free trade agreements between the U.S. and South Korea, Panama and Colombia were negotiated by the Bush administration, but have been bogged down in a Democratic-led House. Mindful of his financial backers, the Obama administration has made little attempt to push them through a union-sponsored Democratic Congress.

Last week, however, the log jam may have been released, or, at least, eased. On the third stop of her Latin America tour, Secretary of State, Hillary Clinton, assured the Colombians of her and President Obama’s commitment to the Free Trade Agreement. On RCN Television she said, “We are going to continue to work to obtain the votes in Congress to be able to pass it.” Perhaps more importantly, she demonstrated that the streets of Bogotá have become safe. She met her peripatetic husband, ex-President Clinton, for cappuccinos and a steak dinner in a restaurant across the street from their hotel, a move that delighted President Alvaro Uribe, as a manifestation of the safety of the city. As President, not only was Mr. Clinton the author of NAFTA, but shortly before the end of his second term, in 2000, he launched Plan Colombia, the policy that has allowed Colombia to ascend from a drug -infested terrorist state to one of the few examples of a foreign aid success story.

As an editorial in the weekend edition of Investor’s Business Daily puts it, who better than Mr. Clinton, fresh from a successful endorsement of Blanche Lincoln in Arkansas’ Democratic primary – a victory she won despite $10 million being spent for her opponent by big labor – to shepherd the Colombian Free Trade Agreement through Congress? Unions have been the problem, in terms of getting Democratic support, so the former President would seem an ideal choice.

Unions have become an albatross around the neck of progressive Democrats. The world continues to evolve, becoming increasingly global, yet many unions are mired in the past. Their influence exceeds their numbers and is based almost solely on the dollars they provide to fund campaigns – virtually exclusively Democratic ones. Unions, especially the public ones, are the largest dollar contributors to any national campaigns, Democratic or Republican. Despite waning numbers, private sector unions’ influence remains ubiquitous.

While unions in the private sector have declined in terms of numbers, those in the public sector continue to expand, creating problems for states like California, New York, Illinois and New Jersey. Nevertheless, President Obama has shown courage in his willingness to take on teacher’s unions, in his support for charter schools. If he will now take on the AFL-CIO, in urging Congress to pass the three remaining Free Trade Agreements, the economies of the countries involved – the United States, South Korea, Panama and Colombia – will benefit. The way forward was shown last week when Mr. and Mrs. Clinton dined on steak in Bogotá. It is now up to Mr. Obama.