Obama should now work on his trade agenda

Business Times - 05 May 2009

Obama should now work on his trade agenda

The fact that he's avoided to push his protectionist agenda can be considered good news


IN most of the commentaries marking US President Barack Obama's first 100 days in office there has been almost no mention of the new president's global trade agenda.

That was not very surprising since Mr Obama has said very little on the issue since entering office; and he certainly has not made any important decision that affected US trade policy. And that is the good news - and the bad news.

Indeed, through his presidential election campaign candidate Obama pledged to renegotiate the North American Free Trade Agreement (Nafta), hinted that he would discard the Colombian Free Trade Agreement (FTA) and threatened to punish China for manipulating its currency to increase exports.

Hence the fact that Mr Obama has refrained from coming through on his campaign's protectionist trade rhetoric can certainly be considered good news.

Moreover, in the few instances that Mr Obama did state his position on global trade policy after taking office - warning of the threat of protectionism during the recent Group of 20 summit - or did take some action - pressing the US Congress to soften down some of the 'Buy American' clauses in the US$787 billion economic stimulus package - the new president sounded and acted like most of his predecessors who were committed to traditional principles of liberalising global trade.

In fact, supporters of free trade in Washington were somewhat cheery after Mr Obama's new trade representative, Ron Kirk, said last week that the new administration would push aggressively to revive the stalled Doha global trade negotiations and conclude three bilateral trade agreements that were negotiated by the Bush administration.

'Now is not the time to turn inward. Now is not the time to be timid,' Mr Kirk stressed during an address at Georgetown University in Washington. 'Now is the time to revive global trade.'

Mr Kirk, who was regarded as a proponent of Nafta and free trade generally when he had served as mayor of Dallas, also said that the White House was drawing the outlines of 'a new paradigm' on global trade and rejected the calls that have come from leading members in the Democratic Party to soften the support for free trade. He explained that there was bipartisan support on Capitol Hill for the negotiated FTA accord with Panama.

Mr Kirk may have angered members of the protectionist wing of his party - while easing the concerns of American exporters and US trade partners - by insisting that Mr Obama would promote the more controversial FTAs with South Korea and Colombia that candidate Obama had criticised during the campaign.

Mr Obama and his aides have also toned down their anti-China rhetoric after coming to office. In fact, Mr Obama's Treasury Secretary Timothy Geithner issued a report last month that, contrary to the hopes of China critics on Capital Hill including leading Democratic senators, did not declare China to be a currency manipulator.

There are several reasons why Mr Obama has avoided advancing the protectionist agenda he raised during the campaign as part of an effort to win the support of trade unions and the left wing of his party.

First, Mr Obama, like his top economic aides, including Mr Geithner and director of the National Economic Council Lawrence Summers, recognises that any signs of growing protectionist pressures in the United States and worldwide were bound to aggravate the current economic crisis and create major obstacles for economic recovery at home and abroad, turning a global recession into a global depression.

While trade unions and the progressives in the Democratic Party may be disappointed, they are certainly pleased with the new administration's efforts to expand the federal government's social and health programmes while trying to narrow the social-economic gap in the country.

Moreover, at a time when foreign exporters, including Mexico, are finding it more and more difficult to sell their products in the US, the sense that competition from the emerging markets is threatening American manufacturing has clearly diminished. Stimulating the economy has turned to be more important than bashing Mexico and China.

Most observers are optimistic about the prospects of the administration and Congress getting the FTA with Panama approved in the coming months but are less hopeful about the fate of the FTAs with Colombia (whose government's treatment of the country's trade unions has been criticised by many Democrats) and South Korea (especially at a time when the US car industry is crumbling).

And they are certainly dismissing the idea that Mr Obama will be willing to invest his political capital in leading an effort to revive the Doha Round.

But the real bad news is that Mr Obama has yet to integrate the issue of the liberalisation global trade in his activist neo-internationalist agenda that is aimed at US re-engagement with the rest of the world, like improving relationship with Europe and the Muslim world, opening a diplomatic dialogue with Iran and Syria, closing Guantanamo and ending the practice of torturing suspected terrorists, and reviving negotiations to end the nuclear arms race.

The fact is that liberalising global trade by concluding bilateral, regional and multilateral trade accords should be regarded as an essential component of a US-led policy that promotes global peace and prosperity.

President Obama probably knows this. He, therefore, needs not only to resist pressure from protectionists in his party and Congress but also try to take advantage of his personal and political popularity in order to win support from the American people for free trade and ensure that the administration and Congress will be able to re-energise global trade negotiations when the American economy finally begins to recover.

Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.


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