Susan Schwab: The politics of trade and the economics of trade have diverged to the point where it's really been evident to the Bush Administration, and frankly to a lot of Democrats and Republicans on the Hill, that we can no longer take for granted that the conventional wisdom is that trade is good for the United States.

So any chance we get to get out of town, to get out of D.C., and to interact directly with business people and workers and service providers and agricultural groups, and so on, both to make the case and to get their input, the better off we are. Hank Paulson was out here not long ago, Carlos Gutierrez was out here. Mike Johanns when he was Secretary of Agriculture... I wanted to make sure I got a chance to make it out.

Persuading the protectionists

Susan Schwab: The politics of trade agreements is that you're fighting anecdotes with data, and date doesn't always win out. Our principle message is first and foremost the benefits of free trade agreements to the U.S. economy. That's true whether it's the Colombia free trade agreement, the Panama free trade agreement or the Peru free trade agreement. We try to remind people that 95% of the world's consumers are outside this country, and if you want to grow your business, if you want to grow your market, the best way to do it is to be operating internationally. In the case of the four free trade agreements — Peru, Colombia, Panama, Korea — you're talking about a combined population of over 120 million people. In the Latin free trade agreements alone, you have 20,000 U.S. companies already doing business there. You talk about the Korea free trade agreement, the International Trade Commission has estimated a ten-plus-billion-dollar boost to U.S. GDP. Over $10 billion in U.S. exports...

And so the job implications, even before you get to the geopolitical implications, of supporting allies and supporting governments that are pro-market and pro-democracy and pro-U.S. is a compelling message. And it needs to get out there. It is a message that is best articulated by those of us who are not in Washington, when members of Congress are hearing it from their own constituents.

Reforming sinners

Dan Turner: What you hear from Congress, and from all the Democratic candidates and probably some Republican candidates is that we're not against free trade pacts. What we want to do is add more labor and environmental provisions and enforce them more. How is that a problem in trying to negotiate these things?

Susan Schwab: I think it's a good question, and I think we have responded to the question: The question of enforceable labor and environmental provisions has been hotly debated in Washington for more than a decade, really going all the way back to NAFTA. We had labor unions and a lot of Democrats saying they could not see their way clear to supporting free trade agreements. Last May the Bush Administration reached a historic agreement with the congressional leadership on labor and the environment. And for the first time the four free trade agreements — Korea, Peru, Panama, Colombia — would include enforceable labor and environmental protections. Exactly what the labor unions have been asking for, exactly what the Democratic leaders have been calling for. More than what they've been calling for in some cases. But not so much as to negate or jeopardize the trade agreements. I mean, you don't want your labor and environmental agreements to become an excuse for preventing free trade. In this case, part of the mechanism in the agreements can be used to enforce those protections...

Jim Newton: Are the countries with whom you're negotiating asking for reforms from us as part of a trade agreement?

Susan Schwab: They are. In some cases they can be accommodated; in some cases they can't. In the case of the Korea free trade agreement, the Koreans were very interested in having us change our anti-dumping and countervailing duty laws, on unfair trade practices. We were unable to do that because those affect every country in the world, and imports from all sources. So that negotiation sort of shifts over to the WTO and the Doha round. There are countries that would love to see us discipline or eliminate our agricultural subsidies. Those are sort of generic, across-the-board items. So that's an issue that migrates over to the multilateral negotiations.

But yes, there are provisions associated with access to certain elements of the U.S. market that could constitute reforms. Usually our trading partner is willing to exchange much higher barriers and accept significant reforms domestically in exchange for access to the largest market in the world.

So there's a nasty not-so-secret characteristic of a good trade agreement: Both parties are able to use trade agreements to enact reforms and self-disciplines that we know are good for ourselves. You know, that if you could do it unilaterally you probably would do unilaterally, but you can only do it in the context of leveraging new access. Then it really is a win-win. In the case of the Korea free trade agreement, you have an incoming and an outgoing government that both recognize these reforms are in the country's best interest. Korea's market traditionally is heavily protected. These are reforms that they would like to undertake. The Korean market is a very large market; it's our seventh-biggest trading partner, the eleventh-largest economy in the world. Per capita income is approaching $20,000 a year. The U.S. economy is significantly bigger and we have much lower barriers. But they're willing to exchange much higher barriers for access to this market.

Who has responsibility now?

Jon Healey: Does the persistent support in Congress for trade-distorting subsidies strengthen your hand in talks at Doha or does it undermine them? I mean if I were one of the trading partners there I'd be inclined to say, "You're asking us to give up this in exchange for something you're going to give up, but look at your own lawmakers. They're not ready to give up anything."

Susan Schwab: I certainly hear that. My response is that this is not our Doha round offer. My second response is look at the position the administration's taking on the farm bill, which is a very responsible position. Let me put it this way: If a trading partner is looking for an excuse to blame the United States for the Doha round not coming together, this is as good an excuse as any. But it is an excuse.

Jon Healey: And they certainly have been looking for excuses.

Susan Schwab: They have been looking for excuses, but I'd say it's an excuse drawn because they are not prepared to do the things they need to do to open their markets. Talk about stuff related to the Doha round: First, once you get to the eighth level of a multilateral negotiation there's not much easy stuff left to do. You're left with only the tough stuff.

Second, what is unusual about this multilateral trade round is the role, and I would argue the fundamental responsibilities, of the advanced developing countries: of Brazil, of India, of China, of Mexico, Argentina, Indonesia. If this is to be, as it was meant to be, a development round, if we're going to be helping the developing countries in the alleviation of poverty, you have to generate new trade flows. And the way you generate new trade flows is by cutting into applied tariffs. Who has the highest applied tariffs that are blocking potential trade flows? In many cases it's the advanced developing countries. So what kind of obligations are Brazil or China or India willing to undertake, commensurate with their responsibilities? You know, 70% of tariffs paid by developing countries are paid to other developing countries; they're not paid to us.

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