| Bush Trade Plan Will Probably Prevent Calderon Trade Plan
The Bush Administration this week proposed making the entire Western Hemisphere -- with the exception of Cuba -- an almost entirely free trade zone by 2015.
Under the plan, the Free Trade Area of the Americas (FTAA) would be established by 2005. At that point, tariffs would be eliminated on 65 percent of goods traded in the region.
Tariffs on remaining goods would be phased out between 2005 and 2010. For example, tariffs on clothing and textiles would be eliminated by 2010.
The goal of a hemispheric free trade zone was set during the Clinton Administration in 1994. It followed the establishment of the North American Free Trade Area (NAFTA), which has eliminated trade barriers between the U.S., Mexico, and Canada.
Puerto Rico’s Resident Commissioner in Washington, Anibal Acevedo Vila acknowledged that the plan could create a problem for one of Governor Sila Calderon’s two major "commonwealth" goals: the territory obtaining authority to negotiate trade agreements with foreign countries. (The other is the territory obtaining the power to determine the application of federal laws.)
Federal officials object to the "commonwealth" trade agreement’s goal on constitutional and policy grounds. Under the U.S. Constitution, only the federal government can make binding commitments internationally.
The major policy problem relates to the major reason for the separate Puerto Rico trade agreement’s goal --limiting imports into the islands to ‘protect’ local industries from foreign competition. Such protection would be a precedent that would encourage foreign countries to also seek separate trade agreements. This would undermine U.S. free trade objectives. It would also be an embarrassment for the U.S. to have one of its territories pursue a different trade policy than the nation as a whole.
Puerto Rico seeking to lower trade barriers faster than the U.S. as a whole would also be problematic for the federal government. Since the territory is part of the U.S. for trade purposes, that would create the potential of goods that could not enter the U.S. market directly entering through the territory, so-called ‘pass-throughs.’
Supporters of Puerto Rico’s current territorial status have long proclaimed that "common market" is one of the "pillars" of the status. Federal officials confirm that Puerto Rico would have to be taken out of the "customs territory" of the U.S. if the territory has different trade policies than the nation as a whole. This would be needed to prevent pass-through entries into the U.S. market from foreign countries.
Currently the U.S.’ four other territories -- American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands — are outside the U.S.’ customs territory. Goods -- and individuals -- are inspected by federal officials when they enter the U.S. Quotas and duties are applied to some goods.
Calderon’s "commonwealth" trade agreements goal is a major element of the "commonwealth" party’s vision for the territory’s future status. This plan was established in 1998 as an alternative to the status options for the territory that were discussed by federal officials and put on a referendum ballot in Puerto Rico by the territorial government.
The "commonwealth" party established a similar -- but much less ambitious -- trade goal for a 1994 referendum. That proposal only called for the federal government to levy tariffs that would protect Puerto Rican products in the territory.
The idea was not accepted by the Clinton Administration -- because of its free trade goals -- or by leaders of the U.S. House of Representatives.
By contrast, a very different stance on trade issues by Calderon’s predecessor, Pedro Rossello (statehood party/D), helped develop a close working relationship between then President Clinton and Rossello. The Puerto Rico governor at the time became an early backer of the Clinton NAFTA proposal.
Rossello also approached the global movement to free trade issues by seeking to expand exports of Puerto Rican products rather than by blocking foreign competition.
That was also the goal this week of a private sector Puerto Rican delegation in Washington that included former resident Commissioner Antonio Colorado ("commonwealth" party/D), Manufacturers Association president Manuel Cidre and Export Council President Salvador Vasallo.
San Juan Metro Rail System Gets $40 Million
Bush Administration officials and congressional negotiators completed talks this week on a $397 billion bill to fund most federal programs through September 30 -- the rest of fiscal year 2003. The bill encompasses 11 of the federal government’s 13 regular annual spending bills.
The bills were due to be enacted into law by the start of the fiscal year -- last October 1 -- but were held up by differences between congressional Republican leaders and the Bush Administration as well as differences between Democrats and Republicans. To break deadlocks on issues this week, Vice President Cheney had to personally negotiate provisions with House Republican staff.
The bill will provide $40 million for the construction of the commuter rail system in San Juan, Bayamon, and Guaynabo, Puerto Rico that is to begin services later this year. The amount is the funding that President Bush proposed a year ago.
The House of Representatives increased the Bush proposal to almost $60 million due to the efforts of Representative Jose Serrano (D-NY). The Senate decreased it to $30 million last month before the compromise was reached.
The funding is part of a $307 million commitment to the project made by President Clinton at the request of then Puerto Rico Governor Rossello.
Republicans Expected to Keep Congress in 2004 Election
Republicans are well-poised to retain their majorities in both houses of the Congress in the November 2004 elections. Key factors will make it difficult for Democrats to regain the majority in the Senate that they lost last November or take back the control of the House of Representatives that they lost in 1994.
Senate:
Only 35,000 votes across the country resulted in the current Republican majority in the Senate -- a bare 51 to 49 margin -- but Democrats face serious problems looking forward to 2004.
A major one is retirement by incumbents. Three Democrats have said that they will not run for re-election -- John Breaux of Louisiana, Ernest Hollings of South Carolina, and Zell Miller of Georgia.
Two others may run for President rather than re-election -- John Edwards of North Carolina and Bob Graham of Florida.
All five of these senators are from southern States that President Bush carried in 2000 and where other Republican candidates are also competitive. Republican candidates to replace the five may well be helped by Bush being at the top of their tickets in 2004.
Of the five seats, the most likely to remain in the Democratic column is that held by Graham . . . if the Floridian decides to run for re-election.
Republicans, by contrast, expect no retirements by senators from States in which Democrats are strong.
Democrats are also concerned about the re-election of their top two leaders in the Senate. Minority Leader Tom Daschle of South Dakota may be challenged by former Representative John Thune, the Republican who almost unseated Senator Tim Johnson (D) last November.
Minority Whip Harry Reid of Nevada was barely re-elected in 1998. There are Republicans who may be able to give him a run for his money in 2004.
House:
Democrats would need to add 12 seats to their numbers to win control of the House. This is a daunting task since 2002 reapportionments of House districts in States left only 40 of the 435 House districts competitive between Democrats and Republicans and most are basically districts that Bush won in 2000.
The Democrats’ House disadvantage could be further exacerbated by another reapportionment in Texas. It reportedly could give Republicans a leg up on six more seats.
Money and Time:
Money is another major problem for the Democrats. The new campaign finance law named for Senators John McCain (R-AZ) and Russ Feingold (D-WI) bans "soft money" contributions -- unlimited donations from businesses and unions as well as individuals. Democrats and Republicans were competitive in raising soft money in the 2002 election cycle. The Democrats took in $246 million -- almost as much as the Republicans’ $250 million.
But Democrats lagged far behind Republicans in raising the "hard money" that can still be contributed and used in campaigns. These are contributions up to $2,000 — twice the previous limit. Republicans raised $402 million in hard money in the 2002 campaign in comparison to the Democrats’ $220 million.
Time is the factor providing the greatest hope for Democrats right now. It is 21 months until the 2004 elections. President Bush’s popularity could wane. There is still time to recruit good candidates. Republican retirements and other developments could still alter the 2004 outlook.
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