Opinion

The Great Debate

Obama: Building trade to build growth

The Obama administration has quietly embraced the most ambitious agenda on trade and investment liberalization in the past two decades.

The United States is currently juggling no fewer than five high-level trade negotiations: free trade talks with the European Union; the Trans-Pacific Partnership (TPP) talks with a dozen Asia-Pacific countries; a new Information Technology Agreement covering trade in high-tech goods; negotiations on liberalizing services trade though the World Trade Organization, and a last-ditch effort this week to agree on new trade facilitation measures at the WTO ministerial meeting in Bali.

This about-face on trade from President Barack Obama’s first term is remarkable.

In 2008, candidate Obama promised to renegotiate the North American Free Trade Agreement (NAFTA) with Canada and Mexico to add tougher provisions for protecting worker rights and the environment. Once in the Oval Office, he stalled for several years before even sending to Congress three free trade agreements — with South Korea, Panama and Colombia — that had been completed by the Bush administration. Today, however, the administration’s trade agenda is the most far-reaching since the late 1980s and early 1990s, when the United States was negotiating NAFTA and the Uruguay Round of world trade talks.

The new direction is as much accidental as deliberate. Except for the new talks with Europe, the various trade initiatives have been slowly advancing for many years and are now coming to fruition. But it also reflects the administration’s belated recognition that opening new global markets is vital for generating stronger U.S. growth.

from Nicholas Wapshott:

No, austerity did not work

There have been a lot of sighs of relief in Europe lately, where countries like Britain and Spain, long in recession, have finally started to grow. Not by much, nor for long. But such is the political imperative to suggest that all the misery of fiscally tight economic policies was worth the pain that there are tentative claims the worst is now over and, ipso facto, austerity worked.

Hold on a minute. Growth is good. Growth is what allows countries to pay down their national debt by increasing economic activity, putting the unemployed to work and making people prosperous enough to pay taxes. But gross domestic product growth alone is not enough to provide adequate sustained prosperity if it does not also lead to significant job growth.

Take Spain, which has just emerged from two years of recession by posting a third quarter growth rate of 0.1 percent. Technically the Spanish slump is over. But a glance at their job figures shows the country has a long way to go before it can genuinely say it has escaped the diminishing effects of austerity -- in the form of tight fiscal policies, public spending cuts and labor and entitlement reforms -- imposed indirectly by Germany through the European Union.

In Syria, try banks before bombs

As President Barack Obama weighs the U.S. response to chemical weapons attacks against Syrian civilians, one soft power option should still be at top of his to-do list: cutting off access to the U.S. financial system to those doing business with Syria’s Bashar al-Assad.

Russian banks and others are reported to be helping the Assad regime circumvent U.S. and EU sanctions by holding Syrian money while continuing to do business, legally, in the Europe Union and the United States. With a more aggressive and coordinated approach to financial sanctions, Obama could inflict serious capital damage on Assad’s enablers — without collateral damage in the form of slain or injured civilians.

Aggressive sanctions could be more effective than bombing in hastening the end of the Syrian civil war by imposing substantial financial costs on those who are propping up Assad — without enraging the Arab street.

Greek bailout sham

Driven by its bailout loan terms, the Greek Parliament recently voted to lay off 25,000 more public employees. The public has responded with demonstrations while striking public sector workers try to disrupt air and rail travel, law enforcement and medical care.

How did Greece get to this point, where creditors dictate what jobs the government should cut as a condition for continued bailout loans, and where its outraged citizens take to the streets? What are the chances that Conservative Prime Minister Antonis Samaras’ newest plans to fire or cut salaries of thousands of government employees will work?

The fact is that Greece’s fortunes have been deteriorating since its entry into the Economic and Monetary Union and the ascension of corrupt politicians, who don’t care about the country’s future. Essentially, they have sold much of Greece’s wealth at bargain-basement prices and used the nation as collateral.

What Hollande can learn from Queen of Hearts

French President Francois Hollande’s predicament is, oddly enough, akin to one Alice faced in Lewis Carroll’s 19th century classic.

A year after taking power, Hollande is buffeted by the lowest popularity of any modern Gallic leader, a record number of jobless, a recession and shriveled business investment – while still needing to cut his budget deficit to hit European targets.

The protagonist of Alice in Wonderland, meanwhile, confused by her strange encounters down a rabbit hole, meets the Queen of Hearts, who tells her: “My dear, here we must run as fast as we can, just to stay in place. And if you wish to go anywhere, you must run twice as fast as that.”

For Russia, Syria is not in the Middle East

Russian President Vladimir Putin meets with (clockwise, starting in top left.) U.S. Secretary of State John Kerry, British Prime Minister David Cameron, next Israeli Prime Minister Benjamin Netanyahu and U.N. Secretary-General Ban Ki-moon. REUTERS/FILES

A string of leaders and senior emissaries, seeking to prevent further escalation of the Syria crisis, has headed to Moscow recently to meet with Russian President Vladimir Putin. First, U.S. Secretary of State John Kerry, then British Prime Minister David Cameron, next Israeli Prime Minister Benjamin Netanyahu and now, most recently, U.N. Secretary-General Ban Ki-moon These leaders see Russia as the key to resolving the Syria quandary.

But to get Russia to cooperate on any stabilization plan, the United States and its allies will have to take into account Russia’s significant interests in the Mediterranean region.

from Nicholas Wapshott:

Austerity is a moral issue

Security worker opens the door of a government job center as people wait to enter in Marbella, Spain, December 2, 2011. REUTERS/Jon Nazca

In the nearly five years since the worst financial crash since the Great Depression, the remedy for the world’s economic doldrums has swung from full-on Keynesianism to unforgiving austerity and back.

The initial Keynesian response halted the collapse in economic activity. But it was soon met by borrowers’ remorse in the shape of paying down debt and raising taxes without delay. In the last year, full-throttle austerity has fallen out of favor with those charged with monitoring the world economy.

from John Lloyd:

No Union, please, we’re English

The opinions expressed are his own.

In France, it is les Anglais. In Germany, die Engländer. In Italy, gli Inglesi. In Russia, Anglichane.

The peoples of the United Kingdom, for most other peoples, are habitually “English.”

Not unnaturally. The English part of the UK accounts for close to 90 per cent of the country’s population; the language is English; the capital is London, long the English capital; the accents heard are overwhelmingly English; the long-held stereotype of the country is an upper-class English gent, snobbish, prudish and insular.

from Ian Bremmer:

Romney’s foreign policy: Reagan redux

By Ian Bremmer
The views expressed are his own.

After yet another GOP debate where foreign policy took a near-total backseat to economic and domestic policy, Mitt Romney is in the catbird seat for the nomination. He even locked up the endorsement of Tea Party AND Republican machine favorite, New Jersey Governor Chris Christie. Romney’s only problem: it’s October 2011. Not one primary has yet taken place. Romney will have to return to his foreign policy platform to expand it, should he be fortunate enough to make it to the general election. And based on the speech he gave at The Citadel, we can already see that Mitt Romney intends to return to the American exceptionalism of the Ronald Reagan and George W. Bush eras.

For Romney, as for many politicians of both parties in decades past, the United States is not just a big and powerful country. Rather, it is the only country in the world that deserves superpower status. What’s unfortunate for Mitt and his all-star, Bush-heavy foreign policy team is that, these days, that line of thinking is more nostalgic than realistic. (By the way, though Romney was almost bombastic at times, calling Iran’s leaders “suicidal fanatics,” his actual policies are unlikely to reflect or adopt that tone -- at least not with his foreign policy team as constituted now.) The idea of the U.S. as the leader of the free world is at a post-WWII nadir. However, that’s not because some other country, like China, has risen to fill the vacuum. No, the fault is wholly our own.

In fact, right now there’s a global debate about whether the U.S. really deserves its superpower mantle, given the political and economic issues of recent years that have unquestionably eroded its leadership position. It’s helpful to compare the two camps:

from Ian Bremmer:

The fiscal fix Europe can’t bear to embrace

By Ian Bremmer
The opinions expressed are his own.

The European Union now faces a sovereign debt crisis that threatens the viability of the entire experiment, one that looms over the economies of even the sturdiest EU countries. Fair or not, debt crises in Greece and Portugal, and the spectre of them in Spain and Italy, have markets questioning whether the eurozone remains viable.

There is some good news. Everyone in Europe, from Germany’s state-level officials to Members of the EU Parliament, takes this issue seriously. The time for kicking the can down the road has passed. The bad news is that the only long-term solution to the crisis is the one that may be a bridge too far for most of the major players: a fiscal union that controls spending across all of the EU’s economies. Fiscal union might sound like a politically impossible concept, but market leaders, like Pimco's Mohammed El-Erian, are urging Europe to at least consider, "a unified European balance sheet," as a logical and badly needed extension of the currency union. To join the euro, governments surrendered control of their monetary policy. Surrendering control of fiscal policy amounts to an enormous psychological step.

A little background: EU member states still control their own spending -- and their indebtedness. The EU specifies spending and debt limits for its member nations, but can’t really enforce its guidelines. That’s why Greece was able to hide the problem that too many of its citizens have evaded income taxes for decades, despite the government providing them substantial social benefits. This problem created the country’s debt crisis. Local control of fiscal policy also allowed Portugal to base its budgets on wildly optimistic economic growth projections for years. That’s why the debt crisis spread out of control -- every country kept its own books, but few of the strong countries realized that to protect the euro, they would have to bail out weaker countries that rode the economic boom for years—including up to and during the global financial crisis and its aftermath.

  •