Turning the Wheels of Trade

U.S. Trade Representative Rob Portman expects progress in the stalled WTO talks as many nations realize their future is tied to free markets

Rob Portman joined the Bush Cabinet in May as U.S. Trade Representative and immediately had to tackle a series of high-profile battles: A bruising fight over the controversial Central American Free Trade Agreement (CAFTA), which squeaked through the House in July by just two votes; an attempt by Congress to punish China for manipulating its currency; and efforts to block Beijing's bid, through state-controlled energy company, CNOOC, to purchase California energy concern Unocal (UCL ). Add to that a nasty continuing dispute between the U.S. and Europe over subsidies to aircraft makers Airbus and Boeing (BA ).

Portman's upcoming challenges are every bit as tough: Finish a global round of trade talks, already a year behind schedule, by the new December deadline; keep negotiating new trade deals with individual countries such as Thailand and Bahrain; and ramp up enforcement of existing agreements that many countries, principally China, have been flouting.

Portman, a former trade lawyer and Republican Congressman from Ohio, spoke with Paul Magnusson, BusinessWeek's Washington correspondent. Here are edited excerpts from the conversation.

Q: CAFTA was a very narrow victory. Does this reflect a change in the way Congress views globalization and trade? Or just more partisan bickering?


I think it reflects the increasing partisanship we see on almost all issues, but even more so, labor's opposition to CAFTA specifically. We've passed other trade agreements easily, but on this one, the unions and Democratic leadership decided to draw the line. That's why this victory was all the more important and impressive.

[On the other hand] we didn't communicate early enough and clearly enough the benefits of CAFTA, and we could have done a better job in having people feel a stake in the agreement and in consultation [with the Democrats].

Q: Did the congressional reaction over CNOOC and Unocal send a signal to China that the U.S. considers itself exempt from the rules that are supposed to govern others?


No one raised it with me [during two trips to Beijing,] and they had plenty of opportunities. I thought it would come up, but it didn't. I don't know how they would have dealt with a U.S. government entity purchasing a private entity in China.

Q: Had you been in Congress at the time, how would you have reacted?


My free-trade instincts would have been challenged. My instincts are to encourage open trade because it works. That's why I took this job -- I think that we have lost track of the benefits of free trade, both imports and exports. On the other hand, given the trade deficit and the Chinese government involvement, I'm not sure what I would have done.

Q: Mexico and India say the U.S. should move to a free-trade system for labor. That if there are jobs here, the U.S. government should allow foreign workers to apply freely for them with no restrictions. Is that something to eventually move toward?


I think that's a nonstarter right now. I have spent the last few months lowering expectations overseas because I don't think that's likely to pass congressional muster. Immigration is such a hot topic, we have to be very careful. I hear it mainly from India and from some private-sector folks in the U.S. -- the services sector. We'll be dealing with this in the Doha negotiations.

Q: The WTO's three-year-old Doha Round is stalled once again, with a new deadline coming up in December. Are you going to be done by the final meeting in Hong Kong?


We won't be done. I think we will be able to make progress, though. There's a sense by most of the 148 countries that this is a good idea. There is the political will in the WTO to reduce agriculture subsidies and tariffs because that's the key to reaching a deal. Also, [former European Trade Minister] Pascal Lamy, the new director general of the WTO, will bring a new aggressiveness to the job.

Q: Will India and China continue on their path of economic liberalization or draw back under the pressures of increased unemployment or other local disruptions?


I think it's almost inevitable that they will continue to liberalize because their leadership has chosen that path. Each is now developing the largest middle class that mankind has ever known. That requires freer markets, more open trading, and internal market reforms, all to meet the needs of their people. They're beginning to see the benefits of trade, even imports of agricultural products. India has 600 million farmers, and they're concerned, but they also acknowledge their future is in trade.

Q: A new GAO report is critical of the Administration's efforts in enforcing current trade agreements. Some in Congress say we need a time-out, a breather, so enforcement can catch up. Meanwhile, the number of enforcement cases brought to the WTO court by the Bush Administration is way down from the number brought by the Clinton Administration.


I thought it was a pretty good report. It did point out that the new workload is going to pose a challenge for us.

I don't disagree. We could do a better job. But I totally reject using the number of enforcement cases as a measurement. When we started the WTO [in 1995] there was a lot of low-hanging fruit. But I don't favor litigation when we can reach a solution with negotiation. I reluctantly took the Airbus case to the WTO because the negotiation was not productive.

Q: India, China, and Brazil historically have led the unaligned, undeveloped nations in opposing the U.S. in the WTO and also the UN. Do you see them continuing?


I see that changing. It's not in their interest. The G-20 [developing nations] recently came out with a very constructive proposal on agriculture, where we have been stuck in the WTO talks for a year. A large group of developing countries realize their future is tied to free markets. India and China are very eager to see investment continue. That's part of what ties them into the global trading system.