Obama’s Economic Policies Unpopular Abroad, Too

November 17, 2010 • Commentary
This article appeared in The Washington Times on November 17, 2010.

November has been a tough month so far for President Obama and his economic policies. After suffering a “shellacking” by voters on Election Day, the president encountered push‐​back against his mercantilist trade policies at the Group of 20 summit in Seoul last week.

On the two trade issues he pressed at the G-20 meeting — getting tough with China over its currency and driving a hard bargain with Korea to wrap up a trade agreement — his approach was flatly rejected in both cases. As the normally sympathetic New York Times trumpeted on its front page on Friday, “Obama’s Economic View Is Rejected on World Stage: China, Britain and Germany Challenge U.S. — Trade Talks with Seoul Fail, Too.”

Most observers agree that China should continue to move toward a more flexible currency, and that likely would mean a stronger yuan. But the administration is isolated in its insistence that China’s currency is the major stumbling block to a global recovery.

Global leaders rightly rejected the administration’s idea of setting a 4 percent cap on current account surpluses and deficits. German Economics Minister Rainer Bruederle branded the proposal “old‐​style central planning,” a stinging rebuke from Continental Europe.

The low point of the week, however, was Mr. Obama’s failure to reach agreement with his Korean hosts over his administration’s remaining objections to the U.S.-Korea trade agreement.

Negotiated under the George W. Bush administration and signed in 2007, the agreement would eliminate almost all trade barriers between our two nations upon full implementation. The agreement has been stalled for more than three years by objections in Congress over its automobile provisions.

Representatives sensitive to the “Detroit Three” automakers claim it would not do enough to eliminate non‐​tariff barriers to U.S. auto exports to Korea. They blame Korean trade barriers for the fact that Americans buy a lot more cars imported from Korea than vice versa. It quickly became clear last week, as the president and U.S. negotiators pressed the Koreans, that their objective was not only or primarily to further open the Korean market, but to delay the further opening of the U.S. market.

At the behest of the United Autoworkers Union (UAW), Ford and Chrysler, the president pushed the Koreans to accept the delay of the phaseout of the 2.5 percent U.S. tariff on imported autos and the 25 percent tariff on trucks. The UAW is even demanding an automobile‐​specific safeguard provision that would allow special duties to be imposed if Korean imports grew too rapidly for the comfort of U.S. producers. The Koreans rightly refused to backtrack on the agreement’s market‐​opening provisions.

The talks also foundered on the Obama administration’s demand that Korea relax emission and mileage standards so U.S. automakers can more easily modify their cars for the Korean market. This is the same administration that insists that all trade agreements must strengthen the environmental and labor standards of our trading partners. Yet U.S. negotiators were strong‐​arming the Korean government to weaken its own standards while the Obama administration seeks to impose higher mileage and emission standards on cars sold in the United States. Again, the Koreans understandably balked.

Instead of muddying the waters with its unreasonable demands, the Obama administration should accept the U.S.-Korea free‐​trade agreement as 95 percent of a very good loaf. The U.S. International Trade Commission estimates that the agreement as written would boost U.S. exports by $10 billion a year when it took full effect. That would make a major contribution to the president’s stated goal of boosting U.S. exports and creating better‐​paying jobs for American workers.

Beyond the lost economic opportunities, Mr. Obama’s mishandling of the Korea trade negotiations is a major diplomatic setback. At the G-20 meeting in Toronto in June, the president pledged to work with Korean President Lee Myung‐​bak to resolve differences by the meeting and to present the agreement to the U.S. Congress early in 2011. The fact that Mr. Obama failed to deliver will weaken the credibility of the United States in other trade negotiations, including the ongoing Doha, Qatar, round of talks with the 150 members of the World Trade Organization.

There is still time to save the U.S.-Korea agreement and present it to the potentially more trade‐​friendly Congress that will convene in January. But for now, Mr. Obama has chosen to serve the narrow interests of two domestic automakers and their union rather than the overall economic and strategic interests of the American people.

About the Author
Daniel Griswold
Former Director, Herbert A. Stiefel Center for Trade Policy Studies