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From: Strategic Forecasting, Inc. [mailto:[EMAIL PROTECTED] Sent: Thu 12/7/2006 7:28 PM To: Subject: Stratfor Public Policy Intelligence Report Strategic Forecasting Stratfor.com <http://www.stratfor.com> Services <http://www.stratfor.com/services/> Subscriptions <http://www.stratfor.com/subscriptions/> Reports <http://www.stratfor.com/reports/> Partners <http://www.stratfor.com/partners/> Press Room <http://www.stratfor.com/press-room/> Contact Us <http://www.stratfor.com/contact/> PUBLIC POLICY INTELLIGENCE REPORT 12.07.2006 <http://www.stratfor.com/offers/061127-extra/?ref=061207%20-%20PPI%20-%20PRE&camp=061127-extra&format=HTML#crisis> READ MORE... Analyses <http://www.stratfor.com/products/premium/more.php> Country Profiles - Archive <http://www.stratfor.com/products/premium/coprofiles.php?showCountry=1&countryId=1&cName=Afghanistan®ionId=1> Forecasts <http://www.stratfor.com/products/premium/forecast.php> Geopolitical Diary <http://www.stratfor.com/products/premium/geopoldairy.php> Global Market Brief - Archive <http://www.stratfor.com/products/premium/globalbrief.php> Intelligence Guidance <http://www.stratfor.com/products/premium/intelguide.php> Net Assessment <http://www.stratfor.com/products/premium/netassess.php> Situation Reports <http://www.stratfor.com/products/premium/showsitreps.php> Special Reports <http://www.stratfor.com/products/premium/splreports.php> Strategic Markets - Archive <http://www.stratfor.com/products/premium/smarkets.php> Stratfor Weekly <http://www.stratfor.com/products/premium/weekly.php> Terrorism Brief <http://www.stratfor.com/products/premium/terrorbrief.php> Terrorism Intelligence Report <http://www.stratfor.com/products/premium/terrorintelreport.php> Travel Security - Archive <http://www.stratfor.com/products/premium/travelalerts/> US - IRAQ War Coverage <http://www.stratfor.com/products/premium/iraqcommap.php> <https://www.stratfor.com/reports/podcasts.php?ref=061207%20-%20PPI%20-%20PRE&camp=060714-letter&format=HTML> Free Trade and the Democratic Party By Bart Mongoven The U.S. Congress reached an agreement Dec. 7 on granting permanent normal trade relations (PNTR) status to Vietnam. Barring a surprise procedural or scheduling change, the agreement sets the stage for a final vote Dec. 8 that would signal congressional acceptance of the Bush administration's support for Vietnam's accession to the World Trade Organization (WTO), and paves the way for U.S. businesses to begin to take advantage of that entry. However, the agreement also highlights fractures within the Democratic Party over trade issues: Most Democrats in Congress opposed the Vietnam deal, but the party's congressional leaders are mostly free-traders who support it. Compounding the confusion, there no longer is a clear gauge as to where the party's traditional constituencies -- labor unions and environmentalists -- stand on trade issues. Traditionally, they could be counted as staunch opponents of free trade agreements (FTAs), but many within those camps have begun to reconsider their positions. Nevertheless, the Democratic Party holds an advantageous position on trade issues -- for now. The fact that the party is at a loss as to how to reconcile deeply entrenched, opposing viewpoints into a unified strategy will not constitute much of a political weakness during the final two years of the Bush presidency. Because trade is managed mostly by the executive branch, the party can de-emphasize the need for a unified policy during that time and instead run a highly politicized opposition to whatever the administration wants or does on trade issues. As with the war issue <http://www.stratfor.com/products/premium/read_article.php?id=279762> during the election campaign, the Democrats are likely to find strength not in offering constructive alternatives but in arguing that they would have struck a "better" deal than the Bush administration on specific trade issues. The lesson of the November elections, for the Democrats, was that failure does not always stem from an inability to promote a positive message. Instead, they have learned to weigh the benefits of a positive, substantive message against its potential costs -- the widening of ideological rifts within the party's base. Thus, on trade, the party has chosen not to stake out a clear position. Trade Issues and Democratic Factions Trade issues occupy an interesting place in American politics -- which is exemplified by the fact that the most easily identifiable opponents to FTAs are right-wing journalist Pat Buchanan and consumer activist Ralph Nader. In truth, neither Republicans nor Democrats own the issue. Republicans generally are more supportive of free trade, but it is by no means a Republican issue: Bill Clinton, a Democrat, worked tirelessly for free trade laws in the face of alternating Republican and Democratic opposition. Incoming House Ways and Means Committee Chairman Charlie Rangel, D-N.Y., is an ardent supporter of free trade, as are most of the emerging presidential hopefuls from the Democratic Party. Opposition to free trade, meanwhile, encompasses populist, right-wing Republicans and the so-called "Seattle Coalition" -- a combination of radicals, environmentalists and organized labor that emerged in demonstrations outside the 1999 WTO Ministerial Conference in Seattle. But even among the subgroups of the Seattle Coalition, fissures are becoming evident. Ideological radicals aside, reflexive opposition to free trade laws is giving way to a more nuanced view among both labor activists and environmentalists. For instance, large segments of organized labor in the United States no longer have a vested interest in outsourcing or the competitiveness of manufacturing. And much of the environmental movement realizes that more damage is being done to the earth in places where Western protection standards are not imposed than there would be otherwise. More than any other subgroup in American politics, organized labor is considered to be the clearest opponent of free trade agreements. Still, even within labor, the issue is complex, as many union leaders devise strategies to bolster membership <http://www.stratfor.com/products/premium/read_article.php?id=252642> -- strategies that either do not rely on opposition to free trade or perhaps allow them to favor a modified version of it. Of course, textile workers, autoworkers and dozens of other manufacturing unions have a clear self-interest in stopping foreign competitors from siphoning off market share, and manufacturing jobs with it, from U.S. companies. But for a significant (and growing) segment of labor union members -- government workers and service industries -- foreign job competition is not a realistic fear. Janitors, for example, cannot be off-shored. For these workers, free trade is an ideological question, rather than one of clear self-interest. Politically active union members from all industries still retain the longstanding view that FTAs benefit management and shareholders, but not workers. The heat of that argument is dissipating, however, as the downside of FTAs (erosion of U.S. manufacturing jobs) is mitigated by the upsides (a still-robust economy with low inflation and low unemployment). The shift within the labor movement is eloquently expressed by labor's silence over Vietnam's PNTR status. The issue does not figure prominently on the Web sites or in the press statements of any of the major unions. For the most part, it does not appear at all. Certainly, labor's leadership cares about the issue and it is actively trying to ensure as much protection for American union jobs as possible, but it is no longer serving as a rallying point for labor. Further, the lack of public attention to the issue indicates that leadership does not believe the issue helps in boosting union membership or in organizing new companies or industries. A similar shift has occurred among environmentalists. Large numbers of environmentalists in the United States view FTAs as facilitating the manufacture of consumer goods in developing countries under inadequate environmental standards, and therefore traditionally have fought FTAs, saying they are damaging to the environment. If the status quo were to be maintained -- which is to say that countries such as China, India and Vietnam would remain poor and barred from free trade deals with large consumer economies -- that opposition would easily hold. But the status quo is not being maintained: With the economic growth of developing countries, industrialization became inevitable. Now, environmentalists are starting to realize that there is a great deal of power to be developed in the rules attached to trade agreements -- rules that can create a relatively strong regulatory environment in countries where oversight has been weak. Furthermore, even where rules are not applied in trade agreements or enforced by governments, increased trade flows between industrialized countries and poorer ones results in pressure -- transmitted particularly through the supply chains of well-known Western companies -- on manufacturers in poor countries to meet certain standards. The Democrats' Approach For the Democrats, then, a clear policy is becoming more and more difficult to develop. The party's two solid anti-free trade constituencies are increasingly ambivalent, and the party leadership is equally split or trending toward an endorsement of FTAs. Clearly, the Democrats will not constitute a rubber-stamp veto on FTAs under the new Congress. But the real difficulties for the party's leadership will come when the president's "fast-track" negotiating authority runs out June 30. Fast track allows the U.S. trade representative (USTR) to negotiate trade agreements, with the knowledge that Congress will have to give an up or down vote on the entire agreement in the end. By giving the president fast-track authority, Congress denies itself the ability to add riders or amendments to the trade agreement. Until now, fast track has been deemed almost a necessity: Foreign governments are not eager to negotiate and come to an agreement with the executive branch only to have more demands thrust on them by Congress. Not only does this make trade deals a more time-consuming process, but it places the foreign country at a severe disadvantage as the country tries to negotiate with or anticipate the demands of the legislative and executive branches simultaneously. Without fast track, no new trade agreements are likely during the president's remaining time in office. This is just fine from the point of view of most Democrats, and fast track will almost certainly run out in June 2007. But at that point, the Democratic leaders in Congress must determine how much authority they are willing to give the president -- whether it is Bush or his successor. And that is when the fissures now emerging within the party over trade issues could become a serious detriment. The chief issue is this: The Democrats' main strategic objective for the next two years is to build a unified national party. To do this, the party is seeking to define a values set upon which Americans agree, and which can clearly define the Democratic Party in the future. At the center of this strategy is a push for policies on health care, minimum wage, a Clintonian foreign policy characterized by reflexive internationalism and market-based environmental protection -- or, in other words, building unity through an emphasis on issues that all Democratic constituencies can support. Free trade, like the war in Iraq, presents a number of complications in this strategy. The traditional Democratic response -- opposition to the war and opposition to free trade -- does not fit with the new strategy. Because the issue does not serve the party's larger unification strategy <http://www.stratfor.com/products/premium/read_article.php?id=272174> , the response to trade issues appears likely to mimic the Democrats' war position: "We aren't necessarily against free trade, but we would definitely do it better than the Bush administration has." The rhetoric will emerge as a call for "fair trade," meaning that many of the liberal values of the industrialized economies -- environmental protection, the right to organize, prohibitions of child labor and so forth -- are embedded in all trade agreements. Through this approach, the party can promote something positive (protections) without staking out a clear stance in opposition to free trade. As attractive as this idea may be in theory, the ugliness will appear in practice. The battle to define what is acceptable and what is not will inevitably tilt the Democrats in one direction or the other. For instance, if the "fair trade" demands are realistic, the party will have chosen to accept FTAs and tacitly endorsed free trade. If the demands are onerous and ultimately prevent the USTR from being able to successfully negotiate a treaty, the party will have chosen protectionism. Either way, in crafting a law, the party will have to choose -- and, as with the war, it is highly unlikely to want to do that. Send questions or comments on this article to [EMAIL PROTECTED] Was this forwarded to you? Sign up <https://www.stratfor.com/subscriptions/free-weekly-intelligence-reports.php> to start receiving your own copy - it's always thought-provoking, insightful and free. 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