[Note to readers: This is the first of a four-part series this week on where President Barack Obama’s presently stalled international agenda is headed, looking to identify key decisions that the White House will have to make by the end of this year. These decisions, one way or the other, will either help expand presently shrinking trade flows, and thus promote enhanced global prosperity and job growth — or they will start throwing American workers out of their jobs.]
Half way through his first year in the Oval Office, Barack Obama’s (slowly emerging) international trade agenda remains stuck in the familiar Washington, D.C. political gridlock that the president inherited. The White House, preoccupied with other priorities like health insurance reform, has refused to go to the mat to obtain congressional passage of preferential trade deals with Panama, Colombia and South Korea that remain stalled on Capitol Hill. The Office of the U.S. Trade Representative is not presently conducting serious negotiations to bring the World Trade Organization’s Doha Round of multilateral tariff- and subsidy slashing to a successful conclusion. Rather, Ron Kirk, the president’s top trade negotiator, is first trying to see if he can build a domestic constituency that would support trade expansion. On June 23, Kirk — advancing a case that had been first developed by his predecessor in the George W. Bush administration, Susan Schwab — took China to the WTO’s dispute-resolution process, complaining that the Chinese have been restricting exports of key raw materials like coke and magnesium that US steel mills need to import. And on July 16, Kirk spoke to an audience of cheering steelworkers at a mill some 12 miles southeast of Pittsburgh, in which he offered rhetorical appeals aimed at bridging the gap between advocates and skeptics of free trade. But the wide gap remains. After Kirk spoke, one angry partisan free trader quickly fired off a mass e-mail that said that the Obama administration’s developing trade regime is “pathetic.”
Perhaps the critics ought to consider a little history before they jump to conclusions.
In late July, 1993, half way through his first year as president, Bill Clinton still didn’t really have a clear international trade agenda either. During his successful 1992 presidential campaign, Clinton had expressed ambivalence on trade (much like Barack Obama would do, although using decidedly sharper political rhetoric, in his own winning presidential race 16 years later). Finally, in August, Clinton decided to press for congressional approval of the North American Free Trade Agreement with Canada and Mexico, despite the vehement opposition of the AFL-CIO and the protectionist wing of the Democratic Party, including then-House majority leader Rep. Richard Gephardt and the number two House Democrat, Rep. David Bonior. Unimpressed with Clinton’s display of political courage, in October, 1993, then-minority leader Rep. Newt Gingrich pronounced that Clinton’s efforts to win Nafta approval were “pathetic.”
The abrasive Gingrich — hardly for the first time in his checkered career — was flat-out wrong. Clinton sure didn’t look so pathetic by Dec. 8, 1993, the day that Congress would approve Nafta, which went into force the next month. Now, the question that cannot presently be answered is whether, by the end of this year, Obama will have also shown his mettle to prove the critics wrong.
To understand why the Obama White House is currently in a very weak political position on trade, it’s necessary to look at a little history — to better understand where the last young Democratic occupant of the Oval Office succeeded, and where Bill Clinton failed.
Clinton had not only proven his partisan critics wrong by pushing through Nafta by the end of his first year in office, but he would continue doing so throughout his second year.
In 1994, Clinton successfully concluded multilateral trade-liberalizing negotiations of the General Agreement on Tariffs and Trade that were known as the Uruguay Round. And in December, 1994 Clinton won congressional ratification of the legislation that would implement the US legal obligations that had been negotiated in the round. The GATT then morphed into World Trade organization the following month.
Later in his presidency, Clinton would go on to lay the groundwork for China’s accession to the WTO, over the bitter objections of important Democrats like Rep. Nancy Pelosi. Clinton also moved to heal the wounds caused by the Vietnam War, and launched the negotiations aimed at bringing Vietnam into the world’s trading system. By choosing to embrace globalization, despite the political price within his own Democratic party, Clinton defined some of the major accomplishments of his two terms in office. On his watch, international trade flows expanded, as did jobs, both in the US and around the world.
But Clinton never succeeded in reaching a consensus on trade between the Democrats’ dominant, union-backed nativist wing, and the party’s so-called New Democrats, whose main base is in the Democratic Leadership Council and its internationally enlightened think tank, the Progressive Policy Institute.
The root of the problems stems from Clinton’s dishonest decision (and the Business Roundtable’s) to sell Nafta as a domestic jobs program. This planted the seeds that have now germinated in today’s bitter resentment on trade. While expanding trade flows with Mexico and Canada predictably contributed to job growth in the overall US economy, the inevitable losers in places like Ohio and Michigan who saw their jobs shift south of the border (rightly) felt deceived. While it made good economic sense for the likes of General Motors to shift production to Mexico, nobody in Washington, D.C. seemed much interested in doing anything for the losers who were left behind in, say, the declining US automobile industry — declining, and still in denial to this day.
In late 1999, Clinton went to Seattle for the WTO’s ministerial meetings that were to have launched a “Seattle Round” of multilateral trade liberalizing negotiations. But when Clinton tried to throw a domestic political bone to the disaffected members of the AFL-CIO by publicly implying that the US might link labor sanctions to such a round, angry Third World WTO members sank the negotiations (assisted by the hordes of anti-globalist protectors in the streets of Seattle). There would be no Seattle Round. [After Sept. 11, George W. Bush’s first trade negotiator, Robert Zoellick, managed to launch the WTO’s new round when ministers met in Doha, Qatar, which would be called the Doha Round. But the bitter domestic divide over trade has only worsened since then — fueled by a politically lethal combination of consistent agitation at the grassroots levels by organized labor, and a largely indolent business lobby, which has out-spent, out-worked, and out-hustled. (At least, the labor side deserves credit for standing up for its own perceived best interests, even if mistakenly. Why America’s otherwise ambitious CEOs lack the vision to fund the kind of grassroots campaign that would turn the situation around continues to amaze and astound, the worse the situation becomes.)
Now, Obama has inherited the bitterness and the gridlock at precisely the worst time, considering the global financial crisis. Last week, at an important meeting of Asia-Pacific trade ministers in Singapore that Ron Kirk attended, WTO Director General Pascal Lamy released a sobering report that estimated that international trade flows will fall by some ten percent this year.
To be sure, nobody in the Obama administration wants to preside over a shrinking international system that fosters both more unemployment, which in turn fuels increasing tit-for-tat international protectionist measures. In his July 16 speech at U.S. Steel’s Mon Valley Works, Kirk declared that the administration’s top trade priority is “to save American jobs and make trade work better for America’s families.” But the days when the new administration can buy time simply by talking about trade policy are far from infinite. President Obama was reported in May to be working on a speech that will attempt to heal the divisions that have been preventing America from participating in trade expansion — but waiting skeptics on both sides are looking for presidential actions, not words. Indeed, several politically contentious decisions will have to be made by the Obama White House before the year ends — decisions that, one way or the other, that will either keep more Americans working, or throw more of them out of their jobs.
Tomorrow, I’ll file a report that shows how trade negotiator Ron Kirk went to an important meeting of Asia-Pacific trade ministers held in Singapore last week, where he was saddled with a very weak negotiating hand (which Kirk nevertheless seems to have played rather skillfully). On Wednesday, we’ll look to the consequences in terms of job losses if the Obama administration doesn’t succeed in reviving the WTO’s long-troubled Doha negotiations by the end of this year, and also moving the trade deals with Korea, Panama, and Colombia through Congress. That report will also highlight the difficult political situation in his home state of Texas that USTR Kirk could land in, if he doesn’t deliver on legislation to help Texans who work in so-called Foreign Trade Zones on an equal footing with their competitors in Mexico. And on Thursday, I’ll file a report that looks at one very important idea that Kirk planted in his recent Pittsburgh speech, an idea that to date has gone unreported. Thursday’s report will also highlight some sensible advice that the administration has received from the progressive Democratic Leadership Council on steps the president could take by way of restoring the luster to America’s international economic reputation.
To put the subsequent reports in perspective, first briefly consider what’s going on in the Obama White House. Or not going on.
The White House website lists 23 issues, from “civil rights” to “women” that are the president’s top priorities. Stimulating the US economy is one of them, but the “economy” priority has no mention of international trade, that engine that — at least when it’s working on all cylinders — importantly drives global prosperity.
The White House website also lists seven “additional issues” that the president is concerned about, like “faith,” the “arts,” and “child advocacy.” Even Americans who hunt and fish are listed as presidential priorities. But while the president of the United States wants to help “sportsmen” prosper, there is no mention of Americans whose livelihoods depend upon international trade.
In his first term, President Clinton (much to the annoyance of then-First Lady Hillary Clinton) decided that he had to take care of trade issues first before fighting for health care reform. With Obama, it’s the other way around.
White House top international economic advisor Larry Summers — one of the nation’s most brilliant economists, and a man who was in the Clinton White House when the president first began to move on his trade agenda in 1993 — has told visitors privately that he and the president understand the importance of advancing freer trade. Be patient with us, we’ve got serious political constraints, Summers added, referring both to Obama’s close ties to organized labor and labor’s powerful friends in Congress who presently like the US trade-liberalizing agenda precisely where it remains: stalled.
[Coming tomorrow: Ron Kirk’s Singapore fling.]