Can this woman save free trade?

Susan Schwab, the U.S. trade representative, has channeled a personal tragedy into a nonstop crusade to keep globalization alive, writes Fortune's Nina Easton. Will she succeed?

By Nina Easton, Fortune Washington bureau chief

(Fortune Magazine) -- Susan Schwab is sitting inside a VIP lounge at Dulles airport near Washington, waiting for a call from The Chairman. Jet fumes hang on the tarmac outside, but what Schwab smells is a deal.

That's why she's grounded for the moment on her way to Tampa, where she's scheduled to give a speech to 1,000 people the next morning. In this twilight March moment, waiting for word from The Chairman, there was no better encapsulation of the power shift that had taken place in Washington: President Bush's trade ambassador, yellow legal pad on lap, faux quill pen in hand, surrounded by a handful of aides, hoping for Charlie Rangel to call.

Susan Schwab, near her home in Annapolis, is an academic with real-world savvy.
Schwab talking with U.S. Agriculture Secretary Mike Johanns on a train to Brussels.
Schwab meets with ET trade chief Peter Mandelson.
Schwab leading her team in Paris

That is the kind of humbling moment that makes up Sue Schwab's lonely crusade to fight the rising tide of protectionism. It was her fate to take this job just months before the Democrats gained control of Congress, bringing with them an end to the unfettered, free-trade era of Bush's first six years.

During that time Bush and the GOP leadership in Congress rammed through global agreements to open trade in the U.S. and abroad - ignoring a shifting political zeitgeist in which Democrats were jumping off the free-trade bandwagon to complain that American workers were being harmed.

Now Schwab finds herself in the delicate position of pleading for support from the same Democrats who had been bulldozed by her White House boss for six years.

"Hello! Mr. Chairman!" Schwab coos after an aide announces the caller and delivers her cellphone. Even at age 52, draped in a St. John knit and an Hermès scarf, Schwab has a pixie quality; she's the classroom good girl whose razor intellect lies just below the surface.

By contrast, Rangel, at 76, is a natural showman who describes himself as having a "gift for living by my wits and hiding my inadequacies behind bravado." The call goes well. "We'll send those papers over - you got it," Schwab promises before hanging up to dial Treasury Secretary Hank Paulson with a status report: Progress made. No deal yet.

By May, Schwab will close this deal, and the press will label it "historic." In return for Democratic support, the administration will - for the first time ever - agree to global standards for protecting workers and the environment. Paulson and House Speaker Nancy Pelosi will stand side by side at a late-night Capitol Hill press conference to celebrate their bipartisan good will. Schwab and her staff will pop bottles of champagne.

At last, after months of roller-coaster negotiations - and after the most painful year ever in her personal life - Schwab will be able to take credit for saving America from protectionism.

Or will she? The Schwab story is not over - and this fall comes her biggest test yet. Powerful Democrats, under pressure from organized labor, have suggested they had crossed their fingers behind their backs last summer when signing off on the deal she and Rangel negotiated.

Now the stage is set for a titanic fight on Capitol Hill. The main targets of dispute are agreements with four countries - South Korea, Peru, Panama, and Colombia - that promise to open new markets for agriculture, machinery, financial services, and other industries.

More important, the outcome will signal to the world the direction America plans to take in writing the rules for a globalizing economy that promises riches for U.S. companies but uncertainty for U.S. workers.

Schwab understands the stakes. But can one woman, working for a lame-duck administration, make a difference?

So far she has exceeded all expectations. Part of the explanation is that Sue Schwab is getting the chance to campaign for a cause in which she passionately believes. But close friends know that her crusade to change the world is driven in part by something else: She's also getting a chance to open a new chapter in her life, moving past the troubles of a marriage she couldn't save and a husband's descent she couldn't prevent.

Everyone has his own way of dealing with pain, but for Sue Schwab it has meant 250,000 miles of global shuttling to rescue trade talks, reassure anxious trading partners, and woo wary Democrats as she finds her footing in life again.

I first saw Sue Schwab in action inside Beijing's cavernous Great Hall of the People, where she had just emerged from delivering a lecture to China's vice premier, arguing that China's brand of government intervention in markets historically has led to "less stability, not more; less development, not more."

Schwab's history lesson might seem at face value like the musings of a scholar whose real-world experience ends at the Campus Drive stop sign. After all, the woman has academia written all over her: Williams College, master's from Stanford, Ph.D. from George Washington University.

But Schwab is a deceptively astute politician, learning to play the game first on Capitol Hill as a Senate trade expert, and later in China, dealmaking for Motorola (Charts, Fortune 500).

As trade ambassador, Schwab understands that at any given moment, she is speaking to multiple audiences. In the case of her Beijing remarks, she was keenly aware that the Democrats - who had swept into power a month earlier and viewed China as the chief villain in America's mushrooming trade deficit - were watching closely. It was no time to get squishy toward her hosts.

Schwab has been looking over her shoulder at the Democrats ever since they declared victory last November. "I thought trade was in desperate straits," says Louisiana's Jim McCrery, ranking Republican on the House Ways and Means Committee and a key player in trade talks. "The Democrats had pretty much marched in lockstep with labor, opposing anything of great significance."

But it wasn't just politicians. A handful of prominent free-trade economists had flipped and were now suggesting that what's good for multinational corporations isn't necessarily good for American workers.

That meant a whole flotilla of free-trade initiatives was suddenly in jeopardy this year: newly minted agreements with Peru, Panama, and Colombia that would open business for such companies as Wal-Mart (Charts, Fortune 500), Caterpillar (Charts, Fortune 500), and Procter & Gamble (Charts, Fortune 500). American financial services companies, among others, stood ready to tap into South Korea's middle class.

Despite the sea change, Schwab understood that top Democrats didn't want to be branded the "party of protectionism." Rangel, in particular, was open to finding a way forward. With 36 years in the House behind him, the Harlem Democrat had finally achieved his lifelong dream of running the House Ways and Means Committee and was eager to leave his imprint.

So Schwab marched up to Capitol Hill after the election and offered one word for virtually all of Rangel's conditions: yes. Yes to international labor standards, yes to environmental standards, and, later, yes even to softening drug company patents to let more generic drugs flow abroad.

"We're prepared to concede - just give it to them," she told me a couple of months later in March, after her airport tête-à-tête with Rangel was complete and our plane to Tampa was lifting off the runway. "It's a huge victory for Charlie Rangel and the Democrats, if they choose to take it. The question is, Does Nancy Pelosi want the Democrats to be the party that killed trade?"

At this point Schwab still hadn't met with Pelosi. They did cross tracks at the Four Seasons salon in Georgetown - Schwab in hair foils, Pelosi getting a manicure - but beyond congratulating the new House Speaker, Schwab didn't do her trade pitch.

"You don't want to take advantage of someone when their nails are still wet," she said with a laugh.

For months Schwab had been a fixture in Rangel's office, negotiating the bipartisan deal. The night before the flight to Tampa, she and Congressman McCrery spent two hours with the chairman and top staffers, quietly working out the details.

The night in Rangel's office might have been a happier moment, except that it was also the tenth anniversary of her wedding to Curtis Carroll, who had died four months earlier. His passing had been announced in a terse AP news item that raised more questions than it answered. "Curtis Carroll, a professional magician, died Monday of kidney and liver failure, Schwab spokesman Sean Spicer said."

The news surprised those who didn't know her well: Susan Schwab, Washington policy wonk, academic dean, was married to a professional magician, uneducated past high school and, it turned out, alcoholic.

She met Carroll in 1995, during Christmas vacation with relatives aboard a cruise from Hong Kong to Singapore. Far-flung travel was familiar to Schwab: Her family bounced around Africa on account of her father's job with the State Department. Schwab learned how to ride horses with the Tunisian calvary. In Sierra Leone she returned from an outing to a village market with her father, reached into her gingham pocket, and pulled out a mongoose as a present to her little sister Teresa. They named it Sputnik.

Wherever she went, Schwab seemed to know where she was heading. "Every now and then you get a child who is born knowing what they want, who is very self-motivated and very self-directed," says her sister Teresa Marshall. "That was not me. That was Susan."

By age 40, when Sue met Carroll, she was accomplished and single - and not especially in the market for a husband, especially a cruise-ship magician with an erratic income. By all accounts, Carroll was a talented entertainer and "hysterically funny," as Schwab notes. "Curtis was the funny and warm and creative side of me."

At the time they married in 1997, she was dean of the University of Maryland's School of Public Policy and busy building it into a nationally recognized institution. Schwab's husband, meanwhile, pursued a magician's life, traveling to corporate events, often with Schwab.

Then another side emerged. "Curtis became an alcoholic, or maybe he was and I didn't know it," she recalls. "It got worse and worse, and the last couple of years it was pretty strained because I was doing what all spouses and loved ones of alcoholics do beg, plead, threaten, try to rescue. And then at some point you figure out there isn't a damn thing you can do. No matter how much you love the guy, no matter how much he loves you."

The rescue extended to pouring their savings into a magician's theater in Florida to boost his career. But the theater failed financially, and friends say Curtis never recovered. "He'd go to rehab," Schwab recalls. "He was in and out. I didn't realize how sick he was, quite frankly."

Emotionally drained, she took an apartment in downtown Washington while Carroll lived in their Annapolis home. She said yes to an offer to become deputy U.S. trade representative in 2005, then was promoted in 2006 to trade ambassador, on the eve of the breakdown of the latest round of World Trade Organization talks in Geneva.

Determined to salvage the talks, Schwab traveled 87,000 miles in three months to try to piece the negotiations back together. "I'm enough of an economist that I really felt I was creating wealth, helping people, creating U.S. exports - all the things I believe in," she says. Whether negotiating over trade in autos or dark-meat chicken parts, Schwab played well in the nuances of trade disputes. "These specific line items mean someone does or does not make a sale," she says.

Back in Annapolis, her husband's promised detox never materialized. By November he had developed jaundice and cirrhosis of the liver. Then his organs shut down. "He was 58, much too young to die that way," Schwab recalls through tears.

A week later she was scheduled to give a speech unveiling her new bipartisan trade approach. She kept the commitment. "Not giving the speech wouldn't have brought Curtis back," she says. She has been on airplanes ever since. Longtime friend and former Senator Bill Brock, a Tennessee Republican who was President Reagan's trade ambassador, calls her restless diplomacy a "real tour de force."

Her performance seemed to pay off on the night of May 10, when Paulson and Pelosi convened the joint press conference to announce the bipartisan breakthrough. Then it all came apart again.

Union leaders, never fully onboard, publicly denounced it as a "sellout." They turned up the heat on Democrats, especially over the Colombia deal, citing continued violence against labor organizers in that country, and the Korea accord, pointing to U.S. trade imbalances with that country.

On June 29, as Congress was breaking for the Independence Day recess, Pelosi issued a press release saying the House wouldn't consider the Peru and Panama deals unless those countries first changed their labor laws.

Inside her office next door to the White House, a stunned and angry Schwab began crafting a three-page letter to Pelosi, objecting to the "unprecedented new preconditions on our trading partners" Peru and Panama. The letter ended with a passionate defense of free trade.

"American workers, farmers, consumers, and businesses cannot afford for Congress to hang up a CLOSED FOR BUSINESS sign," she wrote. The letter, Schwab told me a month later, was cathartic. It also forced her to examine the Democrats' press release, which appeared carefully nuanced to keep labor satisfied while moving free trade forward.

"They appear to be moving the goal posts," she says. "But they are saying the right things [privately]. Let's see if they deliver."

It is early August, and we are talking over coffee at the Hay-Adams Hotel, across the street from the White House. A relentlessly upbeat Schwab insists on blending realism with optimism on the WTO talks, too, which have had their own set of twists and turns.

This fall could be "the end of the road," she says of the six-year WTO session to lower trade barriers. "If it doesn't work this time around, we're probably done for now."

And then there's the most controversial trade issue of all - "fast-track" authority for the President, which gives foreign nations the reassurance that their trade deals with the President won't be picked apart by Congress and special interests. (Under fast-track, which expired in June, Congress can only vote up or down, not amend.) Labor leaders and their Democratic allies are reluctant to renew fast-track authority for Bush, though Rangel appears willing to reconsider if there's a WTO deal.

I ask her which is more difficult - negotiating with foreign nations or Democrats. She laughs, because it's something she has thought a lot about. "Whether it's the Indians trying to protect their agriculture or the Brazilians trying to protect their manufacturers or the Democrats trying to protect organized labor," Schwab says, "everyone has their political imperative."

What's generally agreed is that if anyone has the persistence and patience to bring the parties together, it's Sue Schwab. "She hasn't gotten discouraged," observes McCrery. "She's always bounced back from a disappointment to plow ahead." Maybe that's because for Sue Schwab, this crusade isn't just business, it's personal.

Reporter associates Doris Burke and Joan L. Levinstein contributed to this report. Top of page