Thursday, January 4, 2007

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The devil is in Max Baucus' details

I've received more than one query about what to make of Max Maucus' Wall Street Journal op-ed on trade policy(subscription only). Here's an excerpt:

Some think that the new Democratic congressional majority will be bad for trade policy. While it is true that some candidates criticized trade in their campaigns, I believe that the new Congress will have both the desire and opportunity to renew U.S. trade policy, with a unifying purpose that Americans can understand and support. Through trade, we must bolster the nation's innovative economy in an increasingly global marketplace. At the same time, we must tackle with equal vigor the negative domestic consequences of globalization, from trade deficits to job losses.

Congress should begin by renewing the administration's fast-track negotiating authority for trade agreements. The current grant expires in June, and trading partners will not negotiate trade agreements with us unless Congress gives the president the ability to bring these agreements to fruition....

Fast-track authority should be improved as it is renewed, with better trade enforcement capability and better environmental and labor provisions. By making those changes, we can protect American interests, project America's values, and help to create consumer classes capable of purchasing more U.S.-made goods. And as we address expiring fast-track authority, we must take on -- head-on -- globalization's downsides, especially worker displacement and the unsustainable trade deficit.

The trade deficit requires action on several fronts, which include beefing up U.S. export promotion programs and dedicating more time and resources to trade enforcement. We must also recognize that the trade deficit has causes closer to home, especially Americans' negative savings rate.

When it comes to helping workers, we must make the Trade Adjustment Assistance (TAA) program, which expires in September, more reflective of today's innovative economy.

TAA is our commitment that America will provide wage and health benefits while trade-displaced workers retool, retrain, and find better jobs. And a renewed TAA must do what today's program does not. TAA must be available to the eight out of 10 American workers who make their money in services professions; and it must apply to all workers displaced by trade, not just those affected by free-trade agreements. In fact, we should seriously examine the idea of expanding TAA into "GAA" -- Globalization Adjustment Assistance that would offer benefits not only to workers displaced by trade, but to those displaced by all aspects of globalization.

In addition to these new priorities, we must refocus current trade efforts. The Doha round is of obvious importance, but the world's economies do not appear ready to make the hard choices necessary to bring the round to an ambitious conclusion. Doha may yet progress in time, as the Uruguay round did after 1990. But until then, America should move forward on commercially significant initiatives with our largest trading partners. We should lay the foundations for a future free-trade agreement with the European Union and Japan by concluding a first ever free-trade agreement in services. We should stitch our current patchwork quilt of free-trade agreements into a seamless, coherent network that we can later open to other countries. Even more immediately, we must enforce China's trade and investment commitments. Doing that will help to boost the U.S. gross domestic product by $86.5 billion over the next three years.

There are three ways to interpret this essay:
1) Baucus, representing pro-trade Democrats, is laying down a marker against protectionist Democrats. For Sherrod Brown, Byron Dorgan, James Webb, etc., he's saying, "It's great that you won your elections with economic populism, but now you have to actually try and craft policy that does not trigger trade wars, runs on the dollar, global recessions, economic development, etc. We agree that cushioning the losers is important, and we're with you on bolstering labor and environmental standards, but let's play like grown ups, shall we?"

2) Baucus, representing the Democratic caucus, is trying to get the Bush administration to sign off on Democratic policy proposals with a veneer of soothing rhetoric. When you boil down the policy proposals, what Baucus is saying doesn't differ all that much from Sherrod Brown and Byron Dorgan: inserting stringent labor and environmental standards into FTAs, "trade enforcement," etc. He's just doing it minus the crackpot economic theories and idiotic rhetoric. Because Dorgan and Brown are so far out there, however, Baucus suddenly looks reasonable proposing something as amorphous as "Globalization Adjustment Assistance."

3) Baucus isn't entirely sure what he's saying. Again, see the GAA. And the lack of suggestions for increasing U.S. savings. Then again, it's only an op-ed, so specificity is tough.

I'll be charitable and say that the op-ed is 40% of (1), 25% of (2), and 35% of (3).

One last point -- Baucus embrace of a service pact with the EU, coming so soon after Angela Merkel's quasi-TAFTA proposal, makes me wonder if the Bush administration will become more enthusiastic about the proposal -- or run away, scared it's an EU-Blue State conspiracy.

posted by Dan on 01.04.07 at 03:58 PM


For sure, Baucus wants less in the way of free trade than we have now. And less than we would have with a Republican congress. I guess Prof. Drezner isn't going to mention these rather obvious points.

posted by: y81 on 01.04.07 at 03:58 PM [permalink]

Three factories within 40 miles of my house announced major permanent layoffs or closings so far this week.

The TAA is the biggest farce on the planet. The Bush-ites have interpretted it in uselessness.

"We agree that cushioning the losers is important..."

That is a hoax, there is nothing but lip service from either party - so far.

People are going to vote their pocketbooks, and that's why Sherrod Brown is a Senator and Mike DeWine is a retiree.

posted by: save_the_rustbelt on 01.04.07 at 03:58 PM [permalink]

For sure, Baucus wants less in the way of free trade than we have now. And less than we would have with a Republican congress.

Are you talking about the GOP Congress that voted to raise farm subsidies, and that didn't oppose Bush raising of steel tariffs?

posted by: Jon Kay on 01.04.07 at 03:58 PM [permalink]

Are you talking about the GOP Congress that voted to raise farm subsidies, and that didn't oppose Bush raising of steel tariffs?

I think heís thinking of the Democrats who wrote the Senate version of the 2002 Farm Bill and this time wonít have to compromise with a GOP controlled House that favored less in the way of subsidies. As far as steel tariffs go, since Bush sent VP Cheney to cast the tie-breaking vote in the Senate killing attempt to reauthorize the Byrd Amendment which gave the president statutory authorization for said tariffs, it isnít even an issue unless the Democratic-controlled Congress follows Baucusí suggestion and tries to restore the law.

posted by: Thorley Winston on 01.04.07 at 03:58 PM [permalink]

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