Optimism and Skepticism on Trade Policy in Obama’s Second Term

Over at Foreign Policy, trade experts Phil Levy are Dan Drezner have been debating the prospects for trade and investment initiatives during Obama’s second term. Levy is skeptical that much will be accomplished. Drezner is more optimistic, and he makes some bold predictions:

I’m willing to bet that at least two out of the following four things will happen during Obama’s second term:

1)  A Trans-Pacific Partnership that is ratified by Congress;

2)  Bilateral investment treaties with India and China;

3) A transatlantic integration agreement;

4)  A new services deal within the auspices of the WTO.

I get nervous about making predictions. I’ve been wrong many times before! But I think I’m closer to Levy on these issues. I have serious doubts that any of the items Drezner mentions will be achieved in the next four years. To get specific (and risk being wrong again), I would rate the chances of seeing completed China/India investment treaties or a US-EU FTA at close to zero; a ratified TPP at around 10%; and a WTO services agreement at around 25%.

But just to be clear, I don’t blame the Obama administration for this. I think that if Romney had been elected, the same things would have been pursued, with about the same results.

Why am I so pessimistic? One big reason is this. In recent years, the trade and investment agreements noted above have become much less about free trade and investment. The U.S. is pushing a lot of issues that are not about free trade at all (e.g., intellectual property protection). As a result, there is a great deal of opposition to these agreements from people who do not instinctively oppose free trade. Protectionists and certain interest groups have always opposed free trade, of course, but adding in a whole new set of opponents has made things more difficult. The current trade negotiating template can support agreements with small countries, which often fly under the radar, but can’t make much progress beyond that.

Having offered that gloomy view of things, let me just note that I’m happy to be proved wrong about the prospects for free trade in the near future!