Commentary

Obama’s First Trade Move: No Big Deal

After almost a year of waiting for a signal of President Obama’s intentions on trade policy, Dec. 14 saw a letter from his trade representative, Ron Kirk, stating the administration’s intent to enter negotiations on a trade agreement — called the Trans-Pacific Partnership, or TPP — with seven Asian nations in March 2010.

While this is the first positive move on trade since Obama’s inauguration, those hopeful that it represents a broader shift away from his protectionist missteps earlier this year will likely be disappointed.

First, the TPP deal might not be worth the effort. Four of the seven current parties (Australia, Singapore, Peru and Chile) already have preferential trade agreements with the U.S., and the other three (New Zealand, Brunei and Vietnam) are not particularly economically significant, Vietnam possibly excepted.

Moreover, the real economic benefits TPP does offer are by no means guaranteed.

Free trade with New Zealand, for example, could bring real benefits to U.S. dairy consumers, who currently pay well above the world market price for dairy products in a sop to American dairy farmers.

However, the U.S. dairy lobby will likely follow the sugar lobby’s precedent with the U.S.-Australia FTA by insisting on an industrywide carve-out before any talks even began.

Obama’s record on standing up to powerful special interests that benefit from protection — witness his capitulation to organized labor on the Chinese tire decision in September — is not good.

Second, if the administration were as committed to “enhancing U.S. competitiveness and our share of job-creating economic opportunities” as it says it is, it would be working harder to clear the trade decks by pushing the trade deals with Colombia, Panama and South Korea that the previous administration has already negotiated.

The fact that the Obama administration would seek to start new negotiations with fewer economic benefits on the table instead of expending any political capital on controversial agreements already signed is not encouraging.

Ambassador Kirk insists that the administration is taking a long-term view of the potential for the TPP to become a trans-Asian agreement, with the eventual participation of Japan, China and others.

It is true that a broader Asian agreement would indeed be more worthwhile than the deals already pending. But that’s the sort of pipe dream that the administration can ponder in the comfortable knowledge that such an outcome would happen on someone else’s watch and after the exhibition of someone else’s political courage.

Third, although Kirk’s announcement of talks and his call for public comment adheres to “fast-track” procedure, in fact that formal authority expired in July 2007. The ability of the administration to submit a trade deal to Congress for an expedited up-or-down vote without the possibility of amendments, also called “trade promotion authority,” or TPA, is a valuable — if not necessary — tool for U.S. negotiators.

Some powerful members of Congress dismiss the value of TPA, suggesting that so long as the administration stays in close consultation with Congress, then all should be well. But those procedural considerations ignore the external value of TPA. Without it, trade partners fear that their American counterparts do not have the credibility to make concrete offers.

Why would mercantilist-to-their-bones trade negotiators offer market openings that alienate powerful interest groups at home if they feared such offers could all come to naught when Congress gets involved? TPA may not be a sufficient condition for shepherding a trade deal though Congress, but it does appear to be necessary.

Finally, Ambassador Kirk’s letter also contained words comforting to the neo-protectionists in Congress: This agreement will be one for the 21st century, he assures us, one that will “update … the U.S. approach to traditional trade issues, address … new issues, incorporate… new elements that reflect our current values and priorities.”

That includes an intention to “work with Congress to enhance the agreement’s focus on environmental protection and conservation… (and) workers’ rights and protections.”

Those latter “updates” have been consistently and firmly opposed by developing country members in the past, who rightly see labor and environmental standards as protectionism in blue and green drag.

While this new approach might go some way to appeasing the most vocally anti-trade Democrats, it might also scupper any chance the talks would have had in succeeding and undermine the economic development that is the ultimate end of freer trade.

Being seen to be open to trade agreements that are of little economic benefit to Americans or the global trading system gives trade skeptics some immunity from charges of being anti-trade, even as they seek to bog down those agreements with anti-competitive standards and leave more valuable agreements on the shelf.

The American public should not let them get away with it.

Sallie James is a policy analyst at the Cato Institute’s Center for Trade Policy Studies.