In early April, amid the sound and fury on trade surrounding the US presidential campaign, the US Congress fired a very significant legislative shot at the Bush administration’s trade agenda. That move, derailing a special legislative procedure for the US-Colombia Free Trade Agreement (FTA), directly affects Colombia of course. But it also has immediate impact on both the US FTA with South Korea, and the global effort to conclude the Doha Round of trade negotiations.

Under the parliamentary system used by most Asian countries, trade agreements negotiated by the government’s executive branch are almost always later accepted and ratified by the legislature, as the executive commands a legislative majority. However, under the US system, the executive and legislative branches often are not controlled by the same party, and even if they are, the different priorities of the branches mean that they do not share the same objectives.

This disconnect between the negotiator (executive) and the implementer (legislative) means that countries negotiating with the US cannot be certain whether international agreements negotiated with the US administration will be accepted, or even re-written, by the US Congress. Trading partners thus have been reluctant to conclude trade agreements with a US administration that might later be revised beyond recognition. The resulting stalemate led to little or no progress in trade negotiations during the 1970’s.

At that time, the US Administration devised a compromise with Congress. Congress would agree in legislation to limit its authority, for a stipulated period of time, to revise trade agreements negotiated by the US administration. Congress would instead apply an expedited legislative schedule and vote on each agreement as a whole in an up-or-down vote. In return, the US administration would grant greater involvement to Congress in the trade negotiation process.

The resulting compromise, then known as “fast-track” and now known as “Trade Promotion Authority” (TPA), gave US trading partners more certainty. Trade agreements would either be accepted in their entirety or not, without the threat of being rewritten. Under TPA and its predecessor, the General Agreement on Tariffs and Trade (GATT) Tokyo Round and Uruguay Round agreements were concluded and implemented, as were several FTAs, including the US-Singapore FTA.

The TPA authority expired last year for the Bush administration, but FTAs with Colombia, South Korea, Peru and Panama were concluded before it expired.  Thus, those US trading partners thought their FTAs were guaranteed.

The difficulty is that all legislatures retain the fundamental authority to set their own rules for the consideration and passage of legislation. The US constitution specifies this. Hence each house of Congress could, at any time, decide to revise its legislative rules – even rules which had been established in previous legislation such as TPA.

This happened on April 8. Upset that the Bush administration had initiated the expedited legislative process under TPA for the Colombia FTA, the House of Representatives voted along party lines to suspend TPA rules for that FTA. The Colombia FTA is now subject to normal legislative rules, meaning that the FTA may never reach a vote during the Bush administration, or perhaps ever.

The immediate impact on other US trading partners, including South Korea, is quite significant. Not only does it indicate that their FTAs may not be considered this year or even afterwards, but also means that the Congress may decide to suspend other aspects of TPA, including the restriction on legislative amendments. Various negotiated compromises in those FTAs could be undone, causing great difficulties for their other governments at home. 

Malaysia and Thailand, which have held FTA talks with the US but not under TPA, have similar cause for concern. Even if new TPA legislation is passed to cover their FTAs, their agreements may face insurmountable obstacles to final passage.

More ominous is the impact on the WTO Doha Round. Multilateral trade negotiations involve even more compromises and bargains. A lack of confidence in the US administration’s ability to implement a WTO Doha Round agreement could be the final nail in the coffin.

The most distressing aspect of the April 8 vote is that it confirms the breakdown of the bipartisan consensus on trade. The previous GATT agreements and FTAs were passed with support from both Democrats and Republicans, even when the executive and legislative branches were controlled by different parties. Now it appears that the Democratic party is quite skeptical of any trade agreement.

The bipartisan consensus will take time to restore, perhaps after the Bush administration has left office. Although the furious debate on trade between the Barack Obama and Hillary Clinton campaigns may seem discouraging, Asian trading partners should not despair. The intensity of the debate is related to the Democratic party presidential primary process; either candidate, if elected, will seek to improve US global prestige, and FTAs and other trade agreements will be necessary tools to achieve that goal.

Furthermore, the Republican candidate John McCain is a firm believer in free trade.  The general election later this year thus could serve as a catharsis for America, as it will be presented with clear choices on how to tackle trade issues in the new government. 

The April 8 vote may have signaled a low tide for free trade in the US. What it really signals, however, is that a new bipartisan consensus on trade needs to be established, and that will take time. In the meantime, Asian trading partners will need to sit back, keep their fingers crossed, and let the process play itself out. If we are lucky, cooler heads in the US government will again coalesce around free trade. Time may be well be on the side of free trade.