The Economy

Trade: Pressures Dampening Outlook

Sept. 26, 2005

CAFTA's close vote might be a sign of tougher times for other pacts.

The extremely narrow 217-215 margin by which the U.S. House of Representatives in late July approved a free-trade agreement among the U.S., the Dominican Republic and five Central American countries could signal serious trouble ahead for approval of other trade-liberalizing measures.

In addition to a yet-to-be-reached global trade agreement being pursued by the 148 members of the World Trade Organization (WTO), pending pacts include the Free Trade Agreement of the Americas (FTAA) and free-trade agreements between the U.S. and the Andean countries, the Southern Africa Customs Union, Thailand and Panama.

The Business Roundtable, a Washington, D.C.-based association of 160 influential CEOs, tacitly recognizes tough times could lie ahead for these agreements. While praising this summer's passage of the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA) -- which will lower trade barriers with the Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua -- the CEOs emphasized a "U.S. commitment to a global leadership role on trade" would be "vital" to successfully concluding the Doha Round of WTO negotiations. Launched in Doha, Qatar, in November 2001, those ambitious trade talks have been marked by dissension and delays. Bargaining is not likely to be finished before the end of 2006, nearly two years behind schedule. And results could be far less than the marked lowering of tariff and non-tariff trade barriers achieved in the Kennedy and Uruguay Rounds, arguably the most productive of the nine post-World War II global trade negotiations.

The FTAA, the Americas free-trade pact, is "pretty much bogged down," believes Ernest H. Preeg, senior fellow in trade and productivity at the Manufacturers Alliance/MAPI, an Arlington, Va.-based business research and public policy group.

And Preeg predicts getting approval for the other pending trade pacts will be "difficult and complicated," not so much because of their content as what he calls "the broader concerns about trade policy." In the U.S. Congress, chief among those concerns is China -- specifically the huge U.S. trade deficit with China, $90.1 billion for the first six months of 2005, and an undervalued Chinese currency.

"A lot depends on what happens over these next few months," most importantly with China but also at the December WTO meeting in Hong Kong on the Doha Round, judges Preeg. "By early next year might be the time that one would have to look at where [the bilateral free-trade agreements] are going with a view to concluding them," he says. "They are being negotiated now, and that will continue. The real question is when they have agreements is the President in a position to sign them with a reasonably sure expectation that he would get them through Congress."

Meanwhile, procedural steps must be taken before CAFTA takes effect. But when the agreement does take effect, probably in early 2006, for U.S. makers of wood products, tariffs on their exports to the six CAFTA countries will fall from 10% to zero; for U.S. auto and auto parts producers, tariffs will from 11.1% to zero; for U.S. processed foods producers, tariffs will fall from 12.8% to zero; and for U.S. ferrous metals producers, tariffs will fall from 6.3% to zero.

About the Author

John McClenahen | Former Senior Editor, IndustryWeek

John S. McClenahen, is an occasional essayist on the Web site of IndustryWeek, the executive management publication from which he retired in 2006. He began his journalism career as a broadcast journalist at Westinghouse Broadcasting’s KYW in Cleveland, Ohio. In May 1967, he joined Penton Media Inc. in Cleveland and in September 1967 was transferred to Washington, DC, the base from which for nearly 40 years he wrote primarily about national and international economics and politics, and corporate social responsibility.

      McClenahen, a native of Ohio now residing in Maryland, is an award-winning writer and photographer. He is the author of three books of poetry, most recently An Unexpected Poet (2013), and several books of photographs, including Black, White, and Shades of Grey (2014). He also is the author of a children’s book, Henry at His Beach (2014).

      His photograph “Provincetown: Fog Rising 2004” was selected for the Smithsonian Institution’s 2011 juried exhibition Artists at Work and displayed in the S. Dillon Ripley Center at the Smithsonian Institution in Washington, D.C., from June until October 2011. Five of his photographs are in the collection of St. Lawrence University and displayed on campus in Canton, New York.

      John McClenahen’s essay “Incorporating America: Whitman in Context” was designated one of the five best works published in The Journal of Graduate Liberal Studies during the twelve-year editorship of R. Barry Leavis of Rollins College. John McClenahen’s several journalism prizes include the coveted Jesse H. Neal Award. He also is the author of the commemorative poem “Upon 50 Years,” celebrating the fiftieth anniversary of the founding of Wolfson College Cambridge, and appearing in “The Wolfson Review.”

      John McClenahen received a B.A. (English with a minor in government) from St. Lawrence University, an M.A., (English) from Western Reserve University, and a Master of Arts in Liberal Studies from Georgetown University, where he also pursued doctoral studies. At St. Lawrence University, he was elected to academic honor societies in English and government and to Omicron Delta Kappa, the University’s highest undergraduate honor. John McClenahen was a participant in the 32nd Annual Wharton Seminars for Journalists at the Wharton School at the University of Pennsylvania in Philadelphia. During the Easter Term of the 1986 academic year, John McClenahen was the first American to hold a prestigious Press Fellowship at Wolfson College, Cambridge, in the United Kingdom.

      John McClenahen has served on the Editorial Board of Confluence: The Journal of Graduate Liberal Studies and was co-founder and first editor of Liberal Studies at Georgetown. He has been a volunteer researcher on the William Steinway Diary Project at the Smithsonian Institution, Washington, D.C., and has been an assistant professorial lecturer at The George Washington University in Washington, D.C.