Free Market Carnivore's Blog

After five frustrating years of waiting and delays, the White House and Congressional leaders have reportedly worked out an agreement that would have the White House sending the three Free Trade Agreements (FTA) to Congress any day now.

A compromise deal on voting on the three FTAs and the Trade Adjustment Assistance (TAA) program one after the other has apparently been thrashed out.  The Wall Street Journal reported House Speaker John Boehner wanted to move the three FTAs and the TAA bill in tandem through the House (“Disputed Trade Pacts Advance,” 10/03/11.)  The Senate has already passed a compromise version of the TAA, with fewer weeks of unemployment compensation and a lower percentage of health care deductability.  Under the deal worked out, the House would vote separately on the three FTAs and the TAA and then send the FTAs to the Senate.

The Democrats want separate votes on each of the three FTAs so that more of them can vote against the deals with Panama and Colombia, as union opposition to those deals is stronger.  Union opposition, of course, is primarily what has stalled the FTAs since the Bush Administration negotiated them five years ago.  The Democratic Senate and House refused to consider the agreements then, and President Obama refused to sign them after his election.  In fact, he insisted on re-negotiating them with the three countries, adding things union backers wanted into the agreements.

The deputy chief of staff at the AFL-CIO Thea Lee called the FTAs even with these changes “bad agreements,” according to the Journal.

But as even President Obama publicly acknowledged that the agreements would generate economic revenue and jobs and his re-election chances dimmed under weak economic growth and high unemployment, movement on the pacts renewed.  In the meantime, new trade pacts between the EU and South Korea and between Canada and Colombia took effect over the summer, further putting American companies at competitive disadvantages.

Once the president actually sends the FTAs to Congress, it has 90 days to vote on them.  But with South Korea’s President Lee Myung-bak coming for a state visit Oct. 13, there is incentive to get a vote accomplished by then.  The House has agreed to hustle up hearings on the bills straight away in order to speed the process up.

The FTAs are estimated to be worth $13 billion in trade annually and generate hundreds of thousands of jobs.  With agricultural commodities, machinery and chemicals as well as financial services, legal and health care industries and the auto industry set to benefit from the FTAs, it is a measure of the labor unions sway in Washington that the Journal reports these deals as “controversial.”  We haven’t seen any projections as to how the voting will go but we hope that the crying need for growth and jobs obvious even to the most hardened Democratic Congressional members, will motivate them to vote for the long-awaited FTAs to increase the chances of saving their own skin.

Hopes for negotiating changes to the beef trading rules with Japan were dealt yet another setback Friday, as the Japanese prime minister indicated he will step down as party leader and, therefore, prime minister.  The U.S. beef industry had hoped that the 20-month rule could soon be negotiated to a near world-standard beef from 30-month-old animals, based on science regarding BSE.

 But political turmoil in Japan has now yielded six prime ministers in five years and even more agricultural ministers.  Even an aggressive effort by U.S. negotiators would have been hard pressed to deal with such constant change, much less an Obama administration that can’t even figure out who’s on first with the free trade agreements (FTA) already negotiated and ready for the President’s signature.  Last week two administration officials blamed the FTA’s delay on Congress, when the documents have languished on the president’s desk since inauguration.

 The Japanese Democratic Party of Japan (DPJ) will vote on a new party leader Monday and, most likely, a new prime minister will be confirmed Tuesday by the Japanese parliament, according to the Wall Street Journal (“Japan’s Kan Steps Down as Party Chief,” Sat./Sun 8/27-28/11).  Prime Minister Kan, who has held the office for 14 months, has been attacked on all sides for his handling of the triple disasters of earthquake, tsunami and nuclear disaster and confessed in his final speech that he knew his talents were unequal to the task of leadership during the nuclear crisis.  He got off to a rocky start to his term by proposing an increase in the consumption tax to pare down debt, a politically unpopular move.

 Five different men are expected to declare their candidacy for the prime minister’s post, so prognosticating on beef industry negotiating chances would be difficult now.  Paradoxically, one of the problems that beset Prime Minister Kan is being soft-pedaled by the candidates jockeying for position this weekend, the Journal said.  In a nation with few other means of generating electrical power, many Japanese citizens have turned against nuclear power since the disaster and a number of plants around the country have still not been restarted, starving industry for power.

 While U.S. beef exports to Japan have been steadily growing, they are still far below 2003 levels before the BSE scare and trade is hampered by the 20-month rule.  Packers can only ship beef from 20-month or younger cattle and, therefore, have to source and verify eligible animals for the Japanese trade.  That means many animals cannot be identified as eligible.

 Ironically, this writer thought eligibility for the lucrative Japanese market would be the incentive that would finally push many producers into the extra effort to individually identify and tag animals and keep the necessary records to qualify for Japan.  While some have made some extra money that way, many producers still view individual ID and traceability  — and the connected premiums  —  as something they are too busy to deal with.

 Meanwhile, the political revolving door whirls in Japan.