Portman departure seen as lessening priority of trade for administration

The departure by U.S. Trade Representative Rob Portman to become director of the Office of Management and Budget and the nomination of Deputy USTR Susan Schwab as the next USTR signals that trade has become a diminishing priority for the Bush Administration, according to several sources. As the Bush Administration struggles to improve its domestic standing, the moves suggest trade has taken a backseat to domestic political issues, they said.

The personnel change is likely to slow down the Doha round negotiations as well as the congressional consideration of bilateral trade agreements, these sources said.

The practical implication of the Schwab appointment is that the Peru and Colombia FTAs likely will not come up for congressional consideration until next year, according to Gary Hufbauer of the Institute for International Economics. He also said the personnel change signals a 'downgrading' of trade as a priority for the Bush Administration, and will be seen as such by trading partners, who he said already questioned how much of a priority trade was for the administration.

Hufbauer and others described Schwab as an expert on trade who would not need a learning curve to represent the U.S. in negotiations in Geneva. But they also predicted it would be difficult for Schwab to deliver a Doha round deal by the end of the year, sources said, in part because unlike Portman she does not have the confidence and trust of members of Congress to get their support for any additional concessions the U.S. would have to make to get a Doha deal.

However, one business source downplayed these fears by saying in the end, the quality of the WTO deal will sell itself, and that even a former member of Congress would be unable to sell a bad deal to members. Hufbauer pointed out that the Doha round is already languishing and that Portman faced an uphill fight in trying to deliver a result. Still he said the personnel change likely signals a 'big deflation' in efforts to reach agreements by the end of July on general formulas for reducing farm subsidies and farm and industrial tariffs.

July 30 has been seen for some time as the real deadline for this work in order to conclude a Doha deal by the end of this year, although officially WTO members have an April 30 deadline for concluding this work. One trade source described the timing of the moves as 'terrible' given the April 30 deadline.

'I am concerned that this major shift at USTR will create uncertainty on U.S. trade policy for American exporters, for our trading partners and for Congress,' said Senate Finance Committee Ranking Member Max Baucus (D-MT). 'It's a critical moment for international trade, and the world needs to see a strong, consistent commitment to U.S. leadership.'

Baucus said Schwab had vast experience in trade policy and would make a good USTR, but said she had 'oversized shoes to fill and a full plate to tackle.' Similarly, Rep. Benjamin Cardin (D-MD) welcomed Schwab's nomination in a statement, and praised her experience. He said she would need it in order to deal with the many trade challenges facing the U.S.

USTR also emphasized Schwab's broad experience in an e-mail sent to reporters. A USTR spokeswoman argued Schwab's appointment would ensure a seamless transition and that she was the 'logical candidate for the position' because she is briefed on the issues and has served as Portman's deputy during a critical period for the president's trade agenda. The spokeswoman also noted that Schwab attended the Hong Kong WTO ministerial and helped drive the conclusion of trade agreements with Peru and Colombia.

Sources predicted Schwab's confirmation hearing would not be controversial since the Senate confirmed her as the deputy USTR last November. Some sources also praised the nomination and said it would ensure continuity in U.S. trade policy.

One way of trying to strengthen the link between USTR and Congress under a Schwab tenure would be to appoint a deputy for Schwab who would be focused on congressional outreach, sources said. The most obvious kind of candidate for such a slot would be a former or current member of Congress, but it is unlikely this would happen because the position is not the top slot at USTR, they said.

With respect to the Doha round, other sources pointed out that Schwab has not yet established a rapport with ministers of other key members of the World Trade Organization that would be critical to get them to move off their established positions that have caused the deadlock in the negotiations. At a minimum, Schwab would find it difficult to create such a rapport in the timeframe of concluding a Doha deal by the end of the year, they said.

These sources acknowledged Portman was not known to his international counterparts when he became USTR, but that he was perceived to have domestic stature as a seven-term member of the House of Representatives. In addition, it was clear to these foreign officials that he had a personal connection to Bush, they said.

Schwab does not have the same strong connection to President Bush, and neither do the other deputies at USTR, sources said. But others emphasized that she does have a connection to newly appointed White House Chief of Staff Josh Bolten, whom Portman will replace at OMB. Bolten was the Senate Finance Committee trade counsel from 1985 to 1989, during which Schwab was the legislative assistant to then Sen. John Danforth (R-MO).

One business source noted Schwab would have a second potential ally in the Bush Administration with Portman's OMB appointment. This could help ensure that trade remains a priority within the administration, this source said.

However, regarding congressional action on such bilateral FTAs as Peru, Schwab would need to convince the political advisors in the White House to go forward this year, which would be difficult to do given their 'general tendency' of not wanting to take on trade deals in an election year, a former USTR political appointee said.

Both Baucus and Cardin praised the nomination of Portman to lead OMB. 'Rob has a deep knowledge of the many serious budgetary challenges facing our nation,' Cardin said. 'He also understands the importance of bipartisanship.' According to Cardin, Portman would be an enormous asset as OMB director and Baucus said he is a strong choice for the OMB slot.

Several sources pointed out that a position at OMB would be more helpful to Portman than his tenure at USTR if he has higher political ambitions such as running for governor of Ohio. In his statement announcing the change, Portman said his new job would allow him to spend more time with his family, which has remained in Ohio.

European Union Trade Commissioner Peter Mandelson said he looked forward to working with Schwab, who he said he knew well in an April 18 statement. But he also appeared to criticize the timing of the move when he said that at this stage of the Doha round it would have been easier to manage with Portman than without him.

WTO Director General Pascal Lamy signaled in an April 18 statement that further concessions from the U.S. and other key players will be necessary to come to a deal. 'I look forward to working with Susan as we enter a decisive phase in the negotiations, when key players will be asked to take bold moves, in order to secure a successful conclusion of the Round by the end of the year,' the statement said.

The U.S. is particularly under pressure to agree to further cuts to its farm subsidies, something it has signaled it is unwilling to do unless other players, including the EU, Brazil and India, making deeper cuts to their farm tariffs.The U.S. has also criticized Brazil and India for not offering enough on industrial market access and services.

In a statement that praised the nominations of both Portman and Schwab, Agriculture Committee Chairman Saxby Chambliss (R-GA) said the future profitability of U.S. agriculture hinges on securing an ambitious WTO agreement that achieves significant market access around the world. 'The United States' offer on domestic support remains conditional on what other nations contribute to the market access discussions,' Chambliss warned.