Unfortunately, by the time the Department of the Treasury changed its dollar policy in 2003, opposition to fresh trade liberalization was ingrained into the US political system—largely the consequence of a decade of rising dollar rates and widening trade deficits.

Worker and Farmer Adjustment

Advocates of free trade are too fond of “win-win” rhetoric. Juxtaposed against “the great sucking sound,” win-win is the shining truth, but it ignores the losses from trade liberalization and it closes the official mind to remedial measures. Among Organization of Economic Cooperation and Development (OECD) nations, the United States offers the least generous public safety net for workers ground down by creative destruction. Of the 1.3 million US workers displaced annually, no more than 15 percent are the victims of import competition. But that statistic does not enlist advocates for freer trade.

This problem has been a gnawing feature of US trade policy since the Kennedy Round of trade negotiations, which occurred under the aegis of the General Agreement of Tariffs and Trade from 1963 to 1967. The situation worsened during the Bush administration, as 2.8 million manufacturing workers lost their jobs—mainly on account of recession and productivity gains. Offshore outsourcing was the last straw. While the number of jobs outsourced abroad is still small—probably under 400,000 in a work force of 140 million—the variety of white collar positions moving overseas (from US$20,000 per year call center employees to US$80,000 per year software programmers) creates anxiety among millions of workers.

“Displaced land” attracts less notice than displaced workers but equally obstructs trade liberalization. Durable trade barriers and agricultural subsidies have added several hundred billions of dollars to US farm land values. Since the federal government has no program to pay landowners for converting Florida sugar fields into everglades, Colorado cattle pastures into native grasses, or Virginia cornfields into hardwood forests, agricultural lobbies fiercely resist initiatives that would dismantle tariffs and subsidies and slash their land values.

The Bush administration flubbed two chances to address worker and farmer concerns. When TPA was debated in fall 2002, rather than cooperating with Democratic Senator Max Baucus to design a broad and generous trade adjustment program, the administration demanded tight limits. When the Farm Act was debated in the summer of 2002, rather than insisting on “green” subsidies, with money dedicated to farmland conversion, the administration went along with the usual subsidy mix that distorts production and prices.

From Incomplete to an A

US trade policy quickly blends into US worries about globalization. One lesson learned from Bush’s successes and failures is that trade policy must be formulated in a context that addresses interlocking concerns: exchange rates and trade deficits, worker and farmer adjustment, immigration, and partner country labor and environmental standards. Another legacy is the partisan quality of Congressional support. Trade legislation has become a Republican project, especially in the US House of Representatives. Bipartisanship needs to be reestablished if the United States is going to provide global leadership.

In a few months, voters will grade George W. Bush. If they grant him a second term, he might yet earn an A in trade policy. That would reverse the sequence of grades in President Clinton’s two terms—the first term a landmark for trade initiatives—NAFTA, the Uruguay Round, the launch of the FTAA, the Bogor Declaration—and the second term distinguished only by admitting China to the WTO.

But the trade road for a second Bush administration will be much steeper than it was for the first Clinton administration. Bush will have to depart from traditional Republican ideology and sponsor meaningful adjustment programs for workers and farmers who land on the losing side of the trade equation. He will have to ensure a competitive value of the dollar and reduce the trade deficit.

Even with appropriate macroeconomic and adjustment policies, a second-term Bush will need to face powerful industry, labor, and legal lobbies at home in order to close meaningful Doha and FTAA bargains. He will need to persuade Brazil, China, and India that reciprocal market access is essential not only to make a deal with the United States, but also for their own prosperity. He will need to persuade Europe, Japan, and Korea to reduce high farm barriers. He will have to work closely with Canada and Mexico to make the North American market an economic reality.

To do these things, Bush must put trade near the top of his second-term agenda. That seems improbable, but it is not impossible.