Holding American Exports Hostage

Normally, I try to present non-partisan and unbiased views, as I comment on issues of exports, international business development and risk mitigation. Yet, in certain rare cases it is impossible for me to contain my emotion and even outrage at certain actions, which threaten to undermine our national interests for the benefit of relatively few politically connected constituents.

As the article below discusses, certain political interests are holding hostage three Free Trade Agreements worth at least $13 billion dollars of U.S. exports annually, in order to extend a welfare type Trade Adjustment Assistance (TAA) Amendment that is used as a crutch to help a relatively small group of workers, whose jobs were displaced by outsourcing or imports, to hopefully transition to new positions in the new economy.  I am not here to debate the merits or shortcomings of the TAA’s longer unemployment benefits, extended healthcare and retraining. I am sure that in its core it is probably a good, well-intentioned program.  What I strongly disagree with, is using this program, which results in spending of about $1 billion of our stretched budget funds to help 235,000 workers, as a loaded gun to hold entire nation of 300 million people hostage.  If these trade agreements are not passed in the next several weeks, not only will U.S. forgo billions in critically needed exports, but it will also lose its competitive position, as other nations move in to strike their own Free Trade Agreements, pick up the slack and crowd out U.S. company thus reducing our national export capacity.

The TAA issue must be immediately uncoupled from the Trade Agreement legislation and Congress should pass Columbian, South Korean and Panamanian FTAs before this summer’s Congressional recess.

Dispute Threatens Key Deals on Trade

By ELIZABETH WILLIAMSON  The Wall Street Journal.   May 28th, 2011

WASHINGTON—The centerpiece of the American trade agenda—a trio of international trade pacts worth $13 billion in new U.S. exports—is in peril as Democrats and Republicans battle over a program that provides aid to U.S. workers.

The dispute over the future of the 50-year-old Trade Adjustment Assistance program, which provides benefits to American workers displaced by foreign competition, is putting pending free-trade pacts with South Korea, Colombia and Panama in jeopardy by pulling them into the contentious debate over federal spending.

The Obama administration and Democrats in Congress want the TAA program renewed. Some Republicans question its value and say it should be scaled back to narrow the deficit.

The delay caused by the congressional sparring means it is now virtually impossible to pass the South Korea agreement before a trade pact between Korea and the European Union takes effect July 1. That will put a wide range of U.S. industries at a competitive disadvantage.

Just a few weeks ago, the administration saw the TAA battle as surmountable. Now, unless lawmakers reach consensus soon, the trade pacts won’t pass before the August recess, congressional aides say. After that, chances of passage grow slimmer as the 2012 election nears and lawmakers avoid controversial votes.

“We’re fighting like hell because if the vote doesn’t happen by the recess, we risk it not happening in the fall,” said Christopher Wenk, senior director for international policy at the U.S. Chamber of Commerce. On Thursday, scores of business leaders visited all 100 senators to lobby for the agreements, and they plan to call on each House member in coming days.

Republicans say the administration should move forward on the trade deals and set the TAA dispute aside for later. “Why hold up three agreements that are going to create all kinds of jobs?” said Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee.

“We have a duty to help American workers meet the challenge of global competition,” said the panel’s chairman, Sen. Max Baucus (D. Mont.), during a Thursday hearing on the U.S.-Korea Free Trade Agreement.

The standoff comes as other nations race to forge trade pacts with nations that are the U.S.’s chief commercial rivals.

In addition to the EU’s impending pact with Korea, a Colombia-Canada pact will enter force before the U.S.’s agreement with Bogota.In Senate testimony last week, Deputy U.S. Trade Representative Demetrios Marantis told the Finance Committee that delays in passing the agreements meant U.S. exporters would lose market share to rival nations.

The three pending trade pacts are the backbone of President Barack Obama’s plan to help businesses double U.S. exports by the end of 2015. Demand from markets abroad has helped support the U.S. economy—and employment—as consumers remain cautious. Exports contributed 1.16 percentage points to growth in the first quarter, when the economy expanded at a 1.8% annual rate.

The Korea deal, worth $11 billion in new U.S. exports, would immediately eliminate Korean tariffs on nearly two-thirds of U.S. farm products, from corn to wheat. U.S. beef exports to Korea would more than double, from to $1.8 billion from $600 million. It would eliminate a 15% Korean tariff on U.S. wine and afford U.S. financial services firms the same legal status as Korean firms.

The TAA program has been backed by both parties since the Kennedy administration, justified as a necessary price to induce lawmakers from industrial regions to support trade-opening legislation.

It provides training, extended unemployment benefits and health-care subsidies for workers idled when trade pacts shift jobs overseas.

But this year, TAA came up for renewal in the teeth of a polarized budget fight. It expired in February after a proposal to renew it failed in the House.

Two weeks ago, White House trade officials took a tough line, saying the president will not submit the finalized trade agreements to a vote until Republicans strike a deal on renewing TAA.

Republicans say the TAA is a sop to organized labor, and its merits don’t justify its inclusion in an already-bloated budget. GOP lawmakers say the program’s budget was swollen by the stimulus and point to past Government Accountability Office studies that question its implementation.

The program, they say, should be scaled back, although as an entitlement, by law it can’t be eliminated altogether.

“Politicians used to use TAA to buy votes for trade agreements, and now they’re holding the trade agreements hostage so they can get the expanded welfare program,” said Sallie James, trade policy analyst at the conservative Cato Institute.

Democrats say the program has grown increasingly important as more companies move jobs overseas, and point to Labor Department figures showing that the program’s size hasn’t changed substantially since before the 2009 stimulus.

In 2002, the program was expanded to include workers whose jobs were lost due to outsourcing in addition to those affected by increased imports. In that year, TAA went to 50,000 people at a cost of $500 million. In 2008, the year before the stimulus, the program cost $916 million. Last year, TAA cost $975 million and 234,000 workers participated.

Leaders of both parties say they’re confident they’ll reach a compromise, but a deal has yet to take shape.

Sarah Thorn, senior director of government relations for Wal-Mart Stores, Inc., said business leaders’ efforts to push the two parties together have so far led to frustration.

“Trade agreements have always moved in tandem with TAA—it’s part of the bargain on trade,” she said.

The Korea, Colombia and Panama agreements have been stalled for four years. The repeated delays underscore the difficulty experienced by every administration in overcoming the public skepticism and political roadblocks that have made the U.S. a global laggard on trade. Of the 202 regional trade agreements ever registered with the World Trade Organization, the U.S. accounts for only 11.

Meanwhile, rival nations are moving faster to forge global partnerships that open fast-growing markets for their exporters, and offer subsidies and rules that give their national champions an edge.


About Alexander Gordin
An international merchant banking professional with over twenty years of business operating and advisory experience in the areas of export finance, international project finance, risk mitigation and cross-border business development. Clients include foreign governments, municipalities and state enterprises as well as Fortune 500 and small/medium enterprises. Strong entrepreneurial instincts, combined with leadership and strategic skills. Transactional and negotiations experience in over thirty five countries. Author of the highly acclaimed "Fluent in Foreign Business" book and creator of the "Fluent in OPIC", "Fluent in EXIM","Fluent In Foreign Franchising", "Fluent in FCPA",and "Fluent in USTDA" seminar/webinar series. Currently developing "Fluent In ......" seminars and publications. Co-author of the Fi3 Country Business Appeal Indices. Extensive international business development and project finance transaction experience in healthcare, aerospace, ICT, conventional and alternative energy infrastructure, distribution and hospitality industries. Experience managing international public and private corporations. Co-Founded three companies abroad. Strong Emerging and Frontier Market expertise. Published and featured in numerous publications including: The Wall Street Journal, Knowledge@Wharton, NBC.com, The Chicago Tribune, Industry Week, Industry Today, Business Finance, Wharton Magazine Blog, NY Enterprise Report, Success magazine, Kyiv Post and on a number of radio and television programs including: Voice of America, CNBC, CNNfn, and Bloomberg. Frequent speaker on strategy, cross-border finance and international business development. Executive MBA from the Wharton School at the University of Pennsylvania. B.S. in Management of Information Systems from the Polytechnic Institute of NYU. Specialties Strategic Management Advisory, Export Finance, International Project Finance & Risk Management, Cross-border Negotiations, Structured Finance transactions, Senior Government and Corporate officials liason

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