The Political Economy of U.S.

Trade Policy

Craig VanGrasstek
 Current Issues in U.S. Trade Policy
• A new grant of negotiating authority for the
president (known as “fast track” or “trade
promotion authority”)
• Approval of the pending free trade agreements
with Colombia, Panama, and Korea
• Conclusion of the Doha Round in the WTO
• Renewal and reform of the Generalized System
of Preferences and the special programs for the
Andean and Caribbean Basin regions
• The linkages between trade policy and a
climate-change agreement
 The Broader Trends that Will Affect
How these Issues Are Handled

• The division of labor in U.S. trade policymaking

(i.e., the struggle between the branches)

• The supply and demand for U.S. trade policy
(i.e., the diminishing attention to this field)
• The competition for U.S. trade policy
(i.e., the importance of trade-related policy)
 Issue 1:
The Division of Labor in U.S. Trade
Policymaking
 Issue 1:
The Division of Labor in U.S. Trade
Policymaking

Thesis: The executive branch can only do

what the legislative branch allows it to do in
this field, a fact that does not change simply
because we have restored unified (one-party)
government.
The History of U.S. Trade Policy Centers on a
Clash between Two Constitutional Principles

The Commerce Clause:

The Congress shall have Power … To regulate
Commerce with foreign Nations, and among the
several States, and with the Indian Tribes
Article I, Section 8, Clause 3

The Treaty Clause:

[The President] shall have Power, by and with
the Advice and Consent of the Senate to make
Treaties, provided two thirds of the Senators
present concur
Article II, Section 2, Clause 2
 The Ways that Congress Retains
Control over Trade Policy
• Grants of negotiating authority are limited;
the last such grant ran out in mid-2007
• The terms of those grants are set by Congress
before a negotiation and can be revised at
any time
• Congress can use almost any initiative to
enact trade-related measures (e.g., Buy-
American provisions in the stimulus package)
• Even the threat of action can be intended to
influence other countries (e.g., the sanctions
in the climate-change bill)
 Options for Approving Trade Agreements

Can Be Can Be
Requires for Can Be Blocked in Filibustered
Approval Amended Committee in Senate
2/3 vote in
Treaties Senate Yes Yes Yes
Majority in
Bills both houses Yes Yes Yes
Reciprocal
Presidential
Agreements No No No
proclamation
(1934-1967)
Fast Track/ TPA Majority in
(1974-?) both houses No No No
 Status of U.S. Preferential Trade
Agreements and Programs

Program or Latin American and Caribbean

Agreement Countries Affected Status

Free Trade Colombia and Panama Pending

Agreements approval in
Congress
Andean Trade Colombia and Ecuador Expires 31
Preferences Act December 2009

Generalized Argentina, Bolivia, Brazil, Paraguay, Expires 31

System of Suriname, Uruguay, Venezuela December 2009
Preferences (potentially Colombia and Ecuador)

Caribbean Anglo-Caribbean and Haiti Parts expire 30

Basin Initiative Sept. 2010
 The Division of Party Power over the Past Forty Years
Presidency House Senate
247 64
1967 Johnson
243 57
Nixon
255 54
Nixon
242 56
Nixon/Ford
291 60
Ford
292 61
1977 Carter
277 58
Carter
242 53
Reagan
269 54
Reagan
253 53
Reagan
258 55
1987 Reagan
260 55
Bush
267 56
Bush
258 57
Clinton
230 52
Clinton
228 55
1997 Clinton
223 55
Clinton
221 50
Bush
229 51
Bush
232 55
Bush
2007 Bush
 The Division of Party Power over the Past Forty Years
Presidency House Senate
247 64
1967 Johnson
243 57
Nixon
255 54
Nixon
242 56
Nixon/Ford
291 60
Ford
292 61
1977 Carter
Carter We have had unified government
277 58

during only seven of the past

242 53
Reagan
269 54
Reagan
Reagan
twenty-one congressional terms
253 53

1987 Reagan (i.e., one-third of the time).

258 55

260 55
Bush
Bush
Trade policy nevertheless has to be
267 56

Clinton made all the time. 258 57

230 52
Clinton
228 55
1997 Clinton
223 55
Clinton
221 50
Bush
229 51
Bush
232 55
Bush
2007 Bush
 The Mixed Record of Success and Failures
Presidency House Senate
247 64
1967 Johnson Failure: Two GATT codes rejected by Senate
243 57
Nixon
Repeated failures to get fast-track grant.
255 54
Nixon
242 56
Nixon/Ford
291 60
Ford Success on fast-track grant.
292 61
1977 Carter
Success on Tokyo Round.
277 58
Carter
242 53
Reagan
Success on Israel FTA and new fast-track grant.
269 54
Reagan
253 53
Reagan (Congress almost rejected FTA talks with Canada.)
258 55
1987 Reagan Successes on Canada FTA and new fast-track grant.
260 55
Bush
Success on launching of NAFTA negotiations.
267 56
Bush
258 57
Clinton Successes on NAFTA and Uruguay Round.
230 52
Clinton
Repeated failures to get new fast-track grant.
228 55
1997 Clinton
223 55
Clinton
221 50
Bush
String of successes on TPA & numerous FTAs.
229 51
Bush
232 55
Bush
2007 Bush Success on Peru, failure on Colombia.
 The Mixed Record of Success and Failures
Presidency House Senate
247 64
1967 Johnson Failure: Two GATT codes rejected by Senate
243 57
Nixon
Repeated failures to get fast-track grant.
255 54
Nixon
242 56
Nixon/Ford
291 60
Ford Success on fast-track grant.
292 61
1977 Carter
Success on Tokyo Round.
277 58
Carter
ReaganUnified government is neither a necessary
242 53

Success on Israel FTA and new fast-track grant.

269 54
Reagannor a sufficient condition for successful trade
253 53
Reagan (Congress almost rejected FTA talks with Canada.)
1987 Reagan
policymaking,Successes
but it does make it much
258
on Canada FTA and new fast-track grant.
55

Bush easier to manage the relationship.

260 55

Success on launching of NAFTA negotiations.

267 56
Bush
258 57
Clinton Successes on NAFTA and Uruguay Round.
230 52
Clinton
Repeated failures to get new fast-track grant.
228 55
1997 Clinton
223 55
Clinton
221 50
Bush
String of successes on TPA & numerous FTAs.
229 51
Bush
232 55
Bush
2007 Bush Success on Peru, failure on Colombia.
 Issue 2:
The Supply and Demand for U.S. Trade Policy
 Issue 2:
The Supply and Demand for U.S. Trade Policy

Thesis: Both the private sector’s demand for

trade policymaking and policymakers’
willingness to supply trade policy have been
on the decline for decades, and that decline is
especially notable in Washington today.
 U.S. Measures Adopted Since the G-20
Standstill (and Election) in November, 2008

Trade- Buy-
Remedy American Fees on
Cases Provisions Imports All Other

Green Measures 0 1 0 2

Amber Measures 17 5 4 4

Red Measures 1 1 0 6

Total Measures 18 7 4 13

Source: Global Trade Alert.

 U.S. Measures Adopted Since the G-20
Standstill (and Election) in November, 2008

Trade- Buy-
Remedy American Fees on
TheseCases Provisions
numbers Imports
seem prima facie All
to Other
be troubling, but how do they
Green Measures compare0to the past? 1 Do the recent
0 2

Amber Measures trade-restricting

17 actions
5 in the4 4
United States represent an increase
Red Measures or a decrease
1 compared
1 to prior
0 6
periods (recessionary or otherwise)?
Total Measures 18 7 0 13

Source: Global Trade Alert.

 U.S. Measures Adopted Since the G-20
Standstill (and Election) in November, 2008

Trade- Buy-
Remedy American Fees on
Cases Trade-remedy
Provisions Imports cases
All Other
account for 42.9% of
Green Measures 0 the1 action during
0 2
this period, and also
Amber Measures 17 5 4 4
have the virtue of
Red Measures 1 being
1 susceptible
0 to 6
time-series analysis
Total Measures 18 7 4 13

Source: Global Trade Alert.

 Long-Term Decline in the Demand for
Protection via the Antidumping Law
Average Number of Antidumping
18
Petitions Filed Per Quarter, 1980-2009
16

14

12

10
Steel Petitions
8

4
All Other Petitions

0
1980- 1982- 1984- 1986- 1988- 1990- 1992- 1994- 1996- 1998- 2000- 2002- 2004- 2006- 2008-
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

Source: Calculated from Bown’s Global Antidumping Database and USITC data
 This Trend is a Twin Function of Recessions
and Changes in the Antidumping Law
Quarterly Average of Antidumping Petitions Filed by
Policy Period and Economic Phase, 1980-2009
19
18
17 Recession Recovery
16
15
14
13
12
11
10
9
8
7
6
(No Recession During
this Period)

5
4
3
2
1
0
Prior to Trade & Tariff Act Trade & Tariff Act of 1984 Post-Uruguay Round Byrd Amendment Post-Byrd Amendment
of 1984

Source: VanGrasstek (2009).

 Long-Term Decline in Demand for Either
Global or China-Specific Safeguards
Average Annual Filings of Safeguard Petitions
Per Presidential Term, 1975-2009
10

6
China
Global
5

Ford Carter Reagan Bush Clinton Bush Obama

Source: Calculated from U.S. International Trade Commission data.
The Long-Term Decline in Congressional
Interest in Trade Legislation
Shares of Bills Introduced in Congress that Deal with
the Trade Acts of 1930 and/or 1974, 1980-2009
2

0
1981- 1985- 1989- 1993- 1997- 2001- 2005- 2009-
82 86 90 94 98 02 06 10

Source: Calculated from data on [Link].

 Other Trends that Are Not
Easily Quantified
• The private sector places less emphasis on
trade now than during the Uruguay Round
• The pressure to negotiate new FTAs, or even
to approve the ones that have been concluded,
is quite low
• Trade is even a lower priority among the critics
of globalization, who now have positive
initiatives to attract their attention (e.g.,
climate change)
 Issue 3:
The Competition for U.S. Trade Policy
 Issue 3:
The Competition for U.S. Trade Policy

Thesis: While traditional trade policy (tariffs,

trade agreements, trade-remedy laws, etc.) is
increasingly neglected, many other issues in
current U.S. policy have important, indirect
effects on competition.
 What is a Trade-Related Issue?
Any topic that is not fundamentally about the cross-
border exchange of goods and services, but can
nonetheless get linked to trade issues:
• In foreign policy:
– Trade sanctions against adversaries
– Measures taken for reasons of national security
– Choice of FTA partners by the executive
– Closer scrutiny of these partners by Congress
• In domestic policy:
– Aid to domestic industry that is discriminatory
– Application of domestic standards to imports
– Exploitation of opportunities by protectionists
More than Most Other Countries, the
United States Can Afford to Treat Trade
as an Instrument Rather than an Objective
Netherlands

Trinidad & Tobago

Nigeria

Saudi Arabia

Canada

Germany

China

Mexico

South Africa

France
Exports of Goods and Services
United Kingdom as a Percentage of GDP
India

United States

0 10 20 30 40 50 60 70
The Activities of the “Trade” Committees in the
111th Congress: Topics of Hearings and Mark-
Ups Held January 20-September 29, 2009

Health Nomi- Energy & Social

Care nations Taxes Climate Trade Security Other
House 8 0 8 3 3 3 7
Ways &
Means
Senate 14 14 2 5 2 1 4
Finance
Total 22 14 10 8 5 4 11

Only 6.8% of these two committees’ time this year has been devoted to trade.
Two of the five trade hearings have been about trade and climate change. If we
discount those two hearings, the share of time devoted to traditional trade policy
has been just 4.1%.

Source: Calculated from data on the two committees’ websites.

Trade Has Taken Up a Small Fraction
of President Obama’s Time

As of September
29, 2009, he
dealt with 1068
topics in 934
events. Trade
policy was at
issue 12 times
(1.1% of the
1068).

Source: Calculated from the

Washington Post’s POTUS Tracker.
Presidents Tend to Be More Interested
in Trade Policy Later in Their Terms
Number of Times Presidents Use the Word “Trade” in State of
the Union Messages, in Two-Year Increments, 1980-2009
20

18

16

14

12

10

0
1981-82 1985-86 1989-90 1993-94 1997-98 2001-02 2005-06 2009-10

Reagan Bush Clinton G.W. Bush Obama