First 100 Days: Obama and trade
– Sean West is a Comparative Analytics analyst at the political risk consulting firm Eurasia Group. The views expressed are his own. —
Fear that President Barack Obama will backslide on America’s free trade commitments is misplaced—in fact, he may eventually expand America’s commitment to liberalization. His pledge to revisit the North American Free Trade Agreement (NAFTA) amidst an economic slump was one of his most widely discussed policy positions of the campaign season.
The economy—and, notably, unemployment—has gotten far worse since Obama derived political benefit from making the rhetorical connection between trade and job loss. Obama could use the magic policy window of his first 100 days to push through controversial but politically plausible anti-free trade measures. He will not do so—and if he does not do it now, he is unlikely to revisit it later.
If Obama is ever going to pound away at NAFTA it would in coming weeks. He is pushing this month for a comprehensive approach to saving or creating up to 4 million jobs in two years. If there was any real desire to rework NAFTA because it was thought responsible for job loss, it would make sense to address it now.
But Obama is unlikely to seek substantive change to NAFTA now or in the future because he recognizes the benefits of the agreement and knows that the U.S. has little room to maneuver in terms of renegotiation.
In fact, trying to “fix” NAFTA will more likely set off a firestorm with America’s neighbors than actually accomplish anything of substance. Obama may be politically shrewd to have raised the issue, but he’s more pragmatic than protectionist.
The term “protectionist” is often thrown around incorrectly—and has inappropriately been attached to Obama. He is not a protectionist. Fears that he is should have been quashed with his selections of pro-market internationalists Timothy Geither, Larry Summers, and Ron Kirk for his economic and trade teams. But any one still left unconvinced should have taken solace in his recognition of the market’s “power to generate wealth and expand freedom” in his inaugural address. So rather than focus on misplaced pledges, what can be expected from Obama’s trade policy?
New messenger, same mandate
– Kevin P. Gallagher is professor of international relations at Boston University and co-author of “The Enclave Economy: Foreign Investment and Sustainable Development in Mexico’s Silicon Valley” and “Putting Development First: The Importance of Policy Space at the WTO.” The opinions expressed are his own. –
On the campaign trail, President-elect Barack Obama pledged to rethink U.S. trade policy. The initial nomination of Xavier Becerra as United States Trade Representative was a signal that Obama will work to fulfill that promise. Congressman Becerra declined the offer and former Dallas Mayor Ron Kirk has been chosen to head the office instead. Given Kirk’s enthusiastic support for NAFTA, he will receive close scrutiny as he takes over a USTR that has the mandate of rethinking U.S. trade policy.
Regardless of the messenger, Obama has pledged to fundamentally change U.S. trade policy. To this end, there are four early priorities for Kirk and Obama: honor existing commitments under the WTO, press for an equitable completion of the Doha Round, conduct a thorough evaluation of major U.S. trade agreements, and enact comprehensive trade adjustment assistance legislation.
The immediate first step is to honor the WTO ruling that deemed that the $3.2 billion in annual cotton subsidies and $1.6 billion in export credits violate trade rules. The Institute for Agriculture and Trade Policy estimates that U.S. cotton subsidies caused damages of $400 million between 2001 and 2003 alone for poor African cotton-producing countries, where more than 10 million people depend directly on the crop.
Returning to multilateralism by honoring the cotton ruling would not only aid poor farmers but would also allow the U.S. to regain legitimacy at the WTO by sending signal to developing countries that the U.S. no longer preaches a global trade policy of “do as we say, not as we do”.
Second, Obama and Kirk should move to complete the Doha Round on terms that benefit both the U.S. and its trading partners. A core principle of a reconfigured Doha Round should be the recognition that developing countries need the policy space to deploy the kinds of government measures that have been proven to work for development in the west. According to separate studies by the World Bank and the Carnegie Endowment for International Peace, the deal debated while Bush was in office would have yielded only $6.7 billion to 21.4 billion (or less than a penny per person per day) for the poor. Rich countries were projected to see per capita income gains 25 times those in developing countries. (Read the full report here.)
Third, Obama’s first year in office should also honor his pledge to evaluate impacts of the North American Free Trade Agreement (NAFTA) and other major trade agreements. It is essential that the assessment analyzes the economic, environmental, social and regulatory impacts of past agreements on the U.S. economy– and on our trading partners.
Great analysis, Mr. West. I guess the first two commentors hadn’t seen Timothy Geitner’s discussing China as a currency manipulator during his confirmation hearings. Hopefully Obama can improve our trade relationships without sacrificing the value of free trade.