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U.S. Trade Policy in Transition

Introduction

Early in 2008, Democratic congressional leaders put a hold on trade deals the Bush administration had negotiated with Colombia, Panama, and South Korea. In the presidential campaign that played out the rest of the year, leading Democratic candidates and the party's ultimate winner, President-elect Barack Obama, pledged to renegotiate the North American Free Trade Agreement (NAFTA) as part of an overall bid to restore "fair trade" principles to such deals, including greater labor and environmental protections. In the electoral season's final months, the country plunged into a financial crisis, by some indications further deepening the misgivings Americans were expressing about globalization and free trade. The mood has aroused concerns among some economists about a shift toward protectionism at a time when most economists say open markets are vital for economic revival. Some analysts, however, see an opportunity for trade advances in the new administration. They note the Democratic Party's support for the Doha multilateral trade round and say the new team of political leaders might be better positioned to reform trade policy and promote free trade.

A Fraying Consensus on Trade

There is a long history of U.S. bipartisan cooperation on trade liberalization. U.S. policymakers forged a bipartisan consensus on expanding global trade at the end of World War II, building on the momentum of the Bretton Woods conference to form the General Agreement on Tariffs and Trade (GATT) in 1947. The GATT was inspired by a shared belief that lowering tariffs and expanding free trade worldwide would contribute to lifting millions of people out of poverty, and to instilling confidence in a free-market system based on fairness, transparency, and the rule of law. With the onset of the Cold War soon after the creation of the GATT, trade expansion's geostrategic dimension grew in importance. President John...

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