By Doug Palmer
WASHINGTON, Jan 13 (Reuters) - The outgoing top U.S. trade negotiator said on Tuesday she was concerned about threats to free trade in the United States and abroad, but defended U.S. bailout actions as legal under world trade rules.
"I worry about protectionist trends not just in the United States, (but) in China as well and in other countries," U.S. Trade Representative Susan Schwab said in a final news conference before leaving office next week.
"It isn't just the risk of nasty little protectionist riders and measures going through Congress or major pieces of protectionist legislation ... it's also the damage that inaction and policy paralysis can have," Schwab said.
President George W. Bush told reporters on Monday that failure to win congressional approval of free trade agreements with Colombia, Panama and South Korea was one of the biggest disappointments of his second term.
Many Democrats oppose almost all trade deals in the belief they cost more jobs than they create. But other party members have joined with Republicans to approve trade pacts.
Schwab blamed the failure to approve the Colombia, Panama and South Korea accords on the refusal of Democrats, who have controlled Congress since January 2007, to move legislation that "would generate a split in the Democratic caucus."
Now, with Democratic President-elect Barack Obama replacing Republican Bush next week in the White House, the United States will "have a Democratic party-dominated trade policy by any definition," Schwab said.
She argued it was important for Congress to approve legislation giving Obama the authority to negotiate new trade agreements because other countries will be moving ahead on that front even if the United States is not.
NO REGRETS
Schwab said she had no regrets about Bush's decision to try to force a vote on the Colombia agreement, even though that backfired when House Speaker Nancy Pelosi pushed through a measure to indefinitely delay action on the pact.
"The status quo was untenable and it was important to show where the problem was," Schwab said, insisting that Colombia has already done much to address worker rights and violence concerns that have been raised by Democrats.
The financial crisis that has crippled economic growth across the world has given rise to fears that countries could erect tariff barriers to keep out imports.
Schwab said that would be a mistake, and added the Bush administration has been scrupulous in ensuring that U.S. bailout packages for banks and automakers stay within the bounds of World Trade Organization rules.
"We have not at this point seen evidence that we are doing something that would be inconsistent with the WTO," she said.
Obama has nominated former Dallas Mayor Ron Kirk to take over Schwab's job, although he has yet to be confirmed by the Senate. Congressional sources said they had not yet received Kirk's nomination paperwork.
Schwab declined to offer any public advice for Kirk, but said she had met with him to discuss the outstanding free trade agreements and where things stand in the seven-year-old Doha round of world trade talks.
She expressed concern about Obama's plan to "fix" the North American Free Trade Agreement by adding stronger labor and environmental provisions.
"There are always dangers in reopening existing agreements and the next administration is going to have to weigh the pros and cons of that," Schwab said.
Obama also wants to renegotiate the South Korea agreement because of concerns that Democrats have raised about the pact's auto provisions.
The South Korean government has been pushing toward a vote on the agreement in its legislature in the hope that would force Washington to follow suit.
Schwab said there were pros and cons to that strategy and it was up to Seoul to decide the best course. (Reporting by Doug Palmer; Editing by Eric Walsh)