According to the Commerce Department, the U.S. trade deficit rose by more than 8 percent in 2006 to a record $856 billion. While 4th quarter numbers showed improvement largely due to lower foreign oil prices, the annual trade gap ballooned to record proportions for the fifth consecutive year. Critics point to the cavernous deficit as evidence that President Bush's trade policies are failing to protect American workers.
This week, the administration announced it had agreed in principal to a bilateral deal with South Korea.
U.S. officials called the accord the most significant trade agreement since NAFTA, and said it will help South Korea, the world's tenth largest economy, transform itself into a 21st century economic power by lifting trade barriers to U.S. goods.
According to United States Trade Representative Susan Schwab, the deal announced with South Korea this week would give U.S. agriculture access to $1 billion worth of duty-free trade. This would be followed by the elimination of most tariffs and quotas over a ten-year period. The only major commodity kept out of the trade deal was rice. Fearing their market would be a dumping ground for U.S. rice, Korean farmers insisted tariffs remain in place for the Korean staple.
The success or failure of the agreement hinges on a thumbs-up vote from Congress via Trade Promotion Authority. Commonly known as "Fast Track", the provision limits Congress to either a "yes" or "no" vote on trade deals negotiated by the President.
President Bush: "In other words, our trade partners have got to say, 'if that's the deal we negotiate, that's the one that somebody is going to have to vote up or down on. You can't negotiate a deal in fairness with the United States if you think it's going to be changed on the floor of Congress. So the up or down vote is important..."
President Bush's Trade Promotion Authority will expire on July 1st unless it is reauthorized by Congress. Many key democrats have already said they will not vote in favor of reauthorization. The deal with South Korea announced this week faces other obstacles as well.
Senator Max Baucus of Montana, has vowed to stop the accord unless South Korea lifts a ban on U.S. beef imports imposed after mad cow disease was confirmed in a single Washington state animal more than three years ago.
Baucus called the agreement "unacceptable," and said South Korea must lift its beef ban if it ever wants free trade with the U.S.
Restrictions on U.S. beef continue in several Asian countries including Japan. Though beef from cattle younger than 20 months is exempt from the ban, the Kyodo News is reporting USTR officials are pushing the Japanese Agriculture Ministry to open the border to animals older than 30 months of age. Japanese officials responded by demanding yet another round of inspections for U.S. packers. The USTR's office may be upping the ante in anticipation of receiving a World Organization for Animal Health "beef-safety status" rating. If the internationally recognized clean bill of health is granted, countries like South Korea and Japan would no longer have a reason to block U.S. beef from cattle of any age.