Business Times - 22 Jul 2011
Time for Obama to exert trade leadership
By LEON HADAR
IF YOU are getting depressed following the never-ending bickering in Washington over extending the debt ceiling and cutting the budget deficits, the continuing legislative deadlock over global trade policy is not going to cheer you up.
US President Barack Obama is sending the proposed free trade agreements (FTAs) with South Korea, Colombia and Panama to Congress for approval. But officials in the White House are not very optimistic that the lawmakers will approve the trade pacts before they leave for the summer recess next month.
The Obama Administration has integrated the promotion of global trade into its overall economic strategy, arguing that trade agreements with emerging markets like Korea help accelerate the fragile economic recovery while creating new well-paying jobs for American workers.
Many pro-free-trade Republican lawmakers share President Obama's sentiments but are unwilling to support the extension of a programme aimed at helping workers adversely affected by global trade, known as the Trade Adjustment Assistance (TAA). The White House and the Democrats have conditioned their support for the three FTAs on a Republican agreement to extend the TAA. But Republicans argue that the TAA needs to be eliminated as part of an effort to reduce government spending and cut the deficit.
It is not clear that the White House and the Republicans will be able to bridge their differences in the next two weeks, leading White House Chief of Staff, Bill Daley, to conclude that it might not be possible to win enough Congressional votes for the pacts before the August recess.
The possible setback for the White House over the trade pacts comes only a few days after World Bank president Robert Zoellick called on President Obama to assert more leadership on global trade issues and stop what he described as 'dumbing down' terms under debate in the stalled Doha Round of world trade talks. The Doha Round to reduce global trade barriers has been deadlocked, mostly because of opposition by the US and the EU to demands by emerging economies led by China, India and Brazil to cut farm subsidies.
'The whole discussion has become very defeatist,' Mr Zoellick said during a discussion in Geneva, according to The Washington Post. 'I draw out the US because the US should still be the world leader,' stressed Mr Zoellick, a former trade official under Republican administrations. He helped launch the Doha Round under President George W Bush. 'It's a missed opportunity for a pro-growth strategy at a time when the US - and the world - could use one,' he added.
He is expected to retire soon from his position at the World Bank, which perhaps explains why he had no qualms about pointing the finger at US policies.
Indeed, the failure on the part of the White House and Congress to provide leadership during the global trade negotiations and its inability to reach a bipartisan agreement on reducing the soaring budget deficit, are two sides of what is afflicting the legislative and policy process in Washington these days. As Mr Zoellick said, the opposition in Washington to cutting farm and ethanol subsidies makes almost no sense as a time when President Obama and Republican lawmakers are stressing their commitment to cut public spending.
One could empathise to some extent with the insistence on the part of the White House and the Democrats on the need to extend the TAA as part of an effort to help American workers losing their jobs as a result of the passage of new trade pacts. Even so, many experts have raised questions about the cost-effectiveness of the programme. And after all, the new trade agreements are supposed to create many more new jobs. The protection of the interests of the members of relatively prosperous - and politically powerful - American (and European) agricultural industries runs contrary to long-term US economic interests, including balancing the federal budget.
To be fair to the Americans and the Europeans, China, India and Brazil have not been very forthcoming during the trade negotiations either when it comes to protecting their own agricultural and industrial sectors from foreign competition. They seem intent on blaming Washington and Brussels for the current deadlock which threatens the collapse of the Doha Round.
What President Obama should provide now is a sense of leadership over the global trade talks, the same kind that he had exhibited in his efforts to mobilise a global response to the financial meltdown and the ensuing Great Recession in 2009. Now is the time to use his political acumen and rhetorical skills, and try to make some sort of a deal with the emerging economies over trade that would involve concessions on both sides, including a willingness to cut US farm subsidies. That is the wise thing to do.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.