GOP Control of Congress Likely To Push Free Trade Deals Along by Larry Luxner From Singapore to South Africa, business executives and diplomats across five continents are hopeful that the Republican victory in last monthís mid-term elections will lead to U.S. free trade agreements (FTA) with their governments. Yet the United States has signed FTAs with only four countries: Canada, Mexico, Israel and Jordan. Under an FTA, protectionist tariffs on imported goods are gradually lowered and eventually eliminated, thereby resulting in increased exports and, in theory, more jobs. With passage earlier this year of Presidential Trade Promotion Authority (TPA)ósomething the Bush administration fought long and hard foróthe president may now negotiate trade deals that Congress can accept or reject, but not amend. ìThe administration already has TPA, so basically thereís nothing legislative-wise that would change,î said David Lewis, vice president of Manchester Trade Ltd. ìWhat the election results do, at least from the domestic political point of view, is give the White House and the Bush administration a vote of confidence in its policies.î Lewis said that with TPA came the establishment of a Congressi onal Oversight Group headed by the chairman of the Senate Finance Committee. Incoming Sen. Charles Grassley (R-Iowa), who will head that oversight group, said he expects to continue his close cooperation with the current chairman, Max Baucus (D-Mont.), on most issues. And that could make it easier for Bush to win passage of FTAs between the United States and a number of countries, including Chile, Singapore, Morocco and Australia. The Bush administration is also pursuing FTAs with two regional blocs: the Central American Common Market and the Southern African Customs Union. ìIf you look at some of the Republican members who were targeted by the protectionists, they did fine. And some of the Democrats who took courageous positions to try to support us in the House, they did fine,î said U.S. Trade Representative Robert B. Zoellick. He added that the Bush administration ìrelied heavily on Republican votes to get TPA done in both the House and the Senate, as did President Clinton,î and that ìweíre better off with a Republican Congress.î RenÈ LeÛn, El Salvadorís envoy in Washington, said a proposed Central American Free Trade Agreement, or CAFTA, would link the U.S. economy to the economies of five nations: Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. Talks regarding CAFTA will begin Jan. 8 in Washington, and the first substantive round of negotiations is to be held Jan. 27 in San JosÈ, Costa Rica. ìThe fact that the 108th Congress will be controlled by Republicans in both houses is a very positive element which could expedite the process,î LeÛn told The Washington Diplomat. ìBut you always need bipartisan support.î LeÛn said he expects to see resistance from special interests, such as farmers and textile producers, who would object to Central Americaís relatively cheap labor costs. But he stressed that CAFTA is quite different from NAFTA, which has united the economies of the United States, Canada and Mexico since 1994. ìWe are a group of very small countries negotiating with the U.S., not like Mexico or Canada,î he pointed out. ìSecondly, we donít share a 3,000-mile border with the U.S., and third, our economic and social realities are different.î Mohammed Ariad, economic counselor at the Embassy of Morocco, said U.S. Trade Representative Zoellick formally notified Congress on Oct. 1 that it would pursue an FTA with Morocco. ìAn FTA would open tremendous opportunities for both countries because tariff barriers will be lowered,î said Ariad, estimating current bilateral trade at around $1 billion a year. ìMorocco has always been a true friend and ally of the United States, and we were the first country in the world to recognize U.S. independence in 1777. We have the longest unbroken international foreign relations treaty between the U.S. and any foreign country.î Ariad said that 57 members of Congress have already sent a letter to Zoellick supporting the idea of an FTA with Morocco. He said formal negotiations should begin in January. ìJordan is the only Arab country to sign an FTA with the United States, and Morocco will be the first country to negotiate an FTA under the new trade promotion authority, and under the Bush administration. Probably others will follow,î Ariad said. Lewis, whose Washington-based consulting firm has clients in Latin America, Africa and the Middle East, said, ìNational elections are never won or lost on international trade issues, so I really donít think trade policy provided votesî either for the Republicans or against the Democrats. ìThat being said, obviously a majority in the Senate does facilitate things for the administration on its trade policy,î he added. ìBefore the elections, they had to convince more Democrats in order to get a majority. Now they have that majority, so it gives them a cushion. But the agenda remains the same.î Mary A. Irace of the National Foreign Trade Council (NFTC) agrees. ìClearly, having the same party in charge as the presidentís party is always helpful in getting his agenda through,î said Irace, the NFTCís vice president for trade and export finance. ìHowever, the Senate margins are very narrow, and Congress itself always has a lot to say about any trade agreements. So there will be some give and take.î Irace explained that ìprior to the election, there was a lot of emphasis by Baucus to be part of negotiating sessions. Iím not sure that the incoming chairman, Grassley, will have as strong a view on that. The TPA has been passed, so the major hurdle is behind us,î she said. ìFrankly, we are in a better environment overall. Nevertheless, there will remain strong views on all of these issues. I donít expect the Democrats in the House to be completely quiet about their views on any trade agreements. Itíll be an interesting year,î added Irace. What may prove even more interesting is if FTAs can be concluded with Chile and Singaporeówidely viewed as the two next likely candidates to enjoy unfettered access to the U.S. market in exchange for opening up their markets to U.S. goods. Singaporeís ambassador in Washington, Chan Heng Chee, said, ìThe representatives I speak to are in support of an FTA with Singapore because they see Singapore as a free trader, and because we play a major supportive role in security and the war on terrorism.î Chee said her countryódespite its small sizeóranks as Americaís 11th-largest trading partner. Most of the $40 billion in bilateral trade this year has been concentrated in high-tech exports, such as printed circuit boards, semiconductors and telecommunications equipment. ìNow that the Republicans control the Senate and the House, legislation will hopefully be introduced faster than before. But we still need a substantial number of Democratic votes in order to have the legislation pass in the House.î The FTA will eliminate tariffs on most of Singaporeís exportsóparticularly electronics and chemicals. The main benefit for U.S. firms is greater access to Singaporeís services sectors, especially the financial sector. In addition, Singapore has agreed to pass a competition law to proscribe unfair competition and encourage entrepreneurship. It will also strengthen intellectual property protection. Chee said there remain ìjust some small, little issues which have to be ironed out,î noting that Singapore already has FTAs in place with Australia, New Zealand, Japan and the European Free Trade Association, and is negotiating one with Canada in addition to the United States. One of those issues is U.S. access to Singaporeís financial services sector, where disagreement remains over the ceiling for foreign ownership and the ability of U.S. banks to market their services to all Singaporeans. The other matter involves restrictions on U.S. law firms in the country. ìOur terms should not be worse than Chile because both these two agreements are going up together,î Chee said. ìHow would we explain [that] to our people and certainly to our region?î Once Singapore and Chile are out of the way, Congress will also take up a proposed FTA with Australia, now that Zoellick has officially notified lawmakers of the U.S. Trade Representative Officeís intent to enter into negotiations. ìWe believe the United States has much to gain in pursuing a negotiation with Australia,î Zoellick wrote in a letter to congressional leaders. ìThe increased access to Australiaís market that an FTA would provide would further boost trade in both goods and services, enhancing employment opportuniti es in both countries. We plan to use our negotiation with Australia to strengthen these commercial ties and address barriers that U.S. exports face today.î He added, ìWe will work hard to facilitate the export of U.S. food and agricultural products to the Australian market and to address the full range of issues facing U.S. agricultural exports.î Australiaís ambassador in Washington, Michael Thawley, wasnít available for comment, but the countryís trade minister, Mark Vaile, noted in a prepared statement that he has ìno doubt that FTA negotiations with the U.S. will present us with major challenges, but the benefits to the Australian economy will be in the order of many billions of dollars over time,î said Vaile. ìI am also convinced that negotiating an FTA will enable Australia and the United States to provide momentum to the Doha Round of multilateral trade negotiations, which remains Australiaís highest trade policy priority.î In addition to Australia, retiring Sen. Phil Gramm (R-Texas) has introduced legislation authorizing Bush to negotiate FTAs with Turkey and Afghanistan. He said both countries deserve FTAs because of their roles as U.S. allies in the Middle East. Although the Republican victory might encourage trade with the rest of the world, it probably wonít do much for Cuba. The re-election of Florida Gov. Jeb Bushóthe presidentís brotherómakes it even more unlikely that Washingtonís 40-year-old trade embargo against Cuba will be lifted anytime soon, said Dennis K. Hays, executive vice president of the Cuban American National Foundation, which opposes the Castro regime. ìI think clearly the presidentís position has been strengthened by the election,î he said. ìOur opponents keep hoping against hope that they will see some verification of their belief that Castro can be modified through trade and investment. If you want to believe in fairy tales, you can believe that Cuba under Castro represents some kind of business opportunity for Americans. But if you look at it objectively, you see that it isnít.î On the other hand, LuÌs M. Fern·ndez, spokesman at the Cuban Interests Section in Washington, said the GOPís improved position in Congress isnít necessarily bad news. ìOne of the most vocal groups trying to relax the trade embargo against Cuba is precisely the Republicans. Of course, the administration is trying to reinforce its policies, but at the same time, the farm states are really interested in trying to open business with Cuba, and their representatives are basically conservative Republicans.î Fern·ndez added, ìFor us, whatís important isnít Jeb Bush, but to work with anyoneófarmers, universities, scholarsówho wants to improve U.S.-Cuban relations.î Larry Luxner is a contributing writer to The Washington Diplomat.