Politics should not deter FTA talks

Although a China-US Free Trade Agreement may be timely, is it wise?

Bilateral trade talks are typically launched in the spirit of lofty goals and mutual enthusiasm, but the reality is often something else, especially if the trade partner is the United States.

With the US, the process can be frustrating and even ugly, because Congress has the final word on all trade agreements. A US Trade Representative may put in a star performance as chief negotiator, but he can only initial the final document before turning it over to Congress.

Over the past 20 years, the US has entered into 20 FTAs, including four this year, and several multilateral agreements, but they have had a minimal impact on US' overall trade position as they are mainly with small countries. Yet each agreement was subject to intense scrutiny and inexcusable delays which left both sides wondering whether it was worth the time and effort.

President Barack Obama finds himself in a dilemma on the issue of trade. He values the importance of trade and sees exports as vital to boosting the US economy. Yet, he cannot ignore the protectionist forces within the Democratic Party, especially organized labor, which strongly opposes most trade agreements.

The Obama administration's single trade initiative is the Trans-Pacific Partnership, which includes nine Asian countries. The US already has FTAs with four of the partner nations, so why is it necessary to do an additional trade agreement? If the economic future is with Asia, why exclude China and Japan, the region's two largest economies?

Robert Zoellick, who launched a series of FTAs when he was the US Trade Representative for the George W. Bush administration, hit the nail on the head when he said, "trade agreements are more about politics than economics".

Obviously the Obama administration sees the Trans-Pacific Partnership as a geopolitical strategy that will serve to enhance America's position in Asia and provide something of a protective shield for Asian countries who may feel threatened by China's growing influence in the region.

Bilateral trade agreements aim to open markets, lower tariffs and remove trade barriers, but China is already opening its markets. Last year, US exports to China totaled more than $100 billion.

Wei Jianguo, former deputy minister of commerce and now head of the China Center for International Economic Exchanges, rightly points to the complimentary benefits that FTAs bring to participating countries and asks, "Why shouldn't we consider establishing a FTA between the world's two largest economies?" But he too recognizes the "political considerations" that would come into play.

Today the challenge is more about contentious trade disputes than market access. The US' trade laws, such as the anti-dumping and countervailing duties, are directed at non-market economies, which make China a primary target. Such actions are well suited for US domestic industries which rely on Congressional support of petitions to the Department of Commerce and the International Trade Commission that call for imposing import duties to protect US producers.

And that is how the game is played in Washington, where anxiety about China's economic strength is the breeding ground for political mischief and controversy that will likely doom any chance of gaining Congressional approval for a China-US FTA.

However, despite this, going through the process is worth the effort, as it will demonstrate China's willingness to participate in establishing and playing by the rules that govern international trade, countering US worries that China's giant State-owned enterprises have an unfair advantage in the global economy. The mere announcement of bilateral trade negotiations demonstrates a mutual commitment to taking the higher ground in improving trade relations that is certain to deliver political benefits to both countries.

The author is a former US congressman and an expert on international trade and investment. He is an executive vice-president at APCO Worldwide.

(China Daily 04/12/2012 page8)