By ELIZABETH WILLIAMSON
WASHINGTON—The centerpiece of the American trade agenda—a trio of international trade pacts worth $13 billion in new U.S. exports—is in peril as Democrats and Republicans battle over a program that provides aid to U.S. workers.
The dispute over the future of the 50-year-old Trade Adjustment Assistance program, which provides benefits to American workers displaced by foreign competition, is putting pending free-trade pacts with South Korea, Colombia and Panama in jeopardy by pulling them into the contentious debate over federal spending.
The Obama administration and Democrats in Congress want the TAA program renewed. Some Republicans question its value and say it should be scaled back to narrow the deficit.
The delay caused by the congressional sparring means it is now virtually impossible to pass the South Korea agreement before a trade pact between Korea and the European Union takes effect July 1. That will put a wide range of U.S. industries at a competitive disadvantage.
Just a few weeks ago, the administration saw the TAA battle as surmountable. Now, unless lawmakers reach consensus soon, the trade pacts won't pass before the August recess, congressional aides say. After that, chances of passage grow slimmer as the 2012 election nears and lawmakers avoid controversial votes.
"We're fighting like hell because if the vote doesn't happen by the recess, we risk it not happening in the fall," said Christopher Wenk, senior director for international policy at the U.S. Chamber of Commerce. On Thursday, scores of business leaders visited all 100 senators to lobby for the agreements, and they plan to call on each House member in coming days.
Republicans say the administration should move forward on the trade deals and set the TAA dispute aside for later. "Why hold up three agreements that are going to create all kinds of jobs?'' said Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee.
"We have a duty to help American workers meet the challenge of global competition," said the panel's chairman, Sen. Max Baucus (D. Mont.), during a Thursday hearing on the U.S.-Korea Free Trade Agreement.
The standoff comes as other nations race to forge trade pacts with nations that are the U.S.'s chief commercial rivals.
In addition to the EU's impending pact with Korea, a Colombia-Canada pact will enter force before the U.S.'s agreement with Bogota.In Senate testimony last week, Deputy U.S. Trade Representative Demetrios Marantis told the Finance Committee that delays in passing the agreements meant U.S. exporters would lose market share to rival nations.
The three pending trade pacts are the backbone of President Barack Obama's plan to help businesses double U.S. exports by the end of 2015. Demand from markets abroad has helped support the U.S. economy—and employment—as consumers remain cautious. Exports contributed 1.16 percentage points to growth in the first quarter, when the economy expanded at a 1.8% annual rate.
The Korea deal, worth $11 billion in new U.S. exports, would immediately eliminate Korean tariffs on nearly two-thirds of U.S. farm products, from corn to wheat. U.S. beef exports to Korea would more than double, from to $1.8 billion from $600 million. It would eliminate a 15% Korean tariff on U.S. wine and afford U.S. financial services firms the same legal status as Korean firms.
The TAA program has been backed by both parties since the Kennedy administration, justified as a necessary price to induce lawmakers from industrial regions to support trade-opening legislation.
It provides training, extended unemployment benefits and health-care subsidies for workers idled when trade pacts shift jobs overseas.
But this year, TAA came up for renewal in the teeth of a polarized budget fight. It expired in February after a proposal to renew it failed in the House.
Two weeks ago, White House trade officials took a tough line, saying the president will not submit the finalized trade agreements to a vote until Republicans strike a deal on renewing TAA.
Republicans say the TAA is a sop to organized labor, and its merits don't justify its inclusion in an already-bloated budget. GOP lawmakers say the program's budget was swollen by the stimulus and point to past Government Accountability Office studies that question its implementation.
The program, they say, should be scaled back, although as an entitlement, by law it can't be eliminated altogether.
"Politicians used to use TAA to buy votes for trade agreements, and now they're holding the trade agreements hostage so they can get the expanded welfare program," said Sallie James, trade policy analyst at the conservative Cato Institute.
Democrats say the program has grown increasingly important as more companies move jobs overseas, and point to Labor Department figures showing that the program's size hasn't changed substantially since before the 2009 stimulus.
In 2002, the program was expanded to include workers whose jobs were lost due to outsourcing in addition to those affected by increased imports. In that year, TAA went to 50,000 people at a cost of $500 million. In 2008, the year before the stimulus, the program cost $916 million. Last year, TAA cost $975 million and 234,000 workers participated.
Leaders of both parties say they're confident they'll reach a compromise, but a deal has yet to take shape.
Sarah Thorn, senior director of government relations for Wal-Mart Stores, Inc., said business leaders' efforts to push the two parties together have so far led to frustration.
"Trade agreements have always moved in tandem with TAA—it's part of the bargain on trade," she said.
The Korea, Colombia and Panama agreements have been stalled for four years. The repeated delays underscore the difficulty experienced by every administration in overcoming the public skepticism and political roadblocks that have made the U.S. a global laggard on trade. Of the 202 regional trade agreements ever registered with the World Trade Organization, the U.S. accounts for only 11.
Meanwhile, rival nations are moving faster to forge global partnerships that open fast-growing markets for their exporters, and offer subsidies and rules that give their national champions an edge.
Write to Elizabeth Williamson at elizabeth.williamson@wsj.com
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