Small Ball

posted by
on March 6, 2009

Since the collapse last July of the World Trade Organization’s Doha Round, the object of which is to enable the expansion of international trade flows by persuading the WTO’s 153 member countries to slash tariffs and trade-distorting subsidies, WTO Director-General Pascal Lamy has refused to accept defeat. Lamy pressed as hard as he could to put a deal together by the end of 2008, so it would be in President Barack Obama’s in-box, come January 20, 2009, ready for him to put on the final touches. (Of course, the diminished support in the U.S. for trade wasn’t the only major worry for the WTO negotiators, but it was a major concern, given the importance of obtaining American support.) The idea was that despite the many protectionist IOUs that he had accumulated on the campaign trail, once in the White House, President Obama would not abdicate America’s international economic leadership by walking away from a deal that was all-but-done.) But the talks failed again in December, and the Doha process went back into intensive care. And now, President Obama seems content to put multilateral trade liberalization on indefinite hold.

But Pascal Lamy, a well-known marathon runner, doesn’t give up easily. He has been issuing a steady stream of warnings in recent months of the dangers associated with rising protectionism measures that are being taken by some WTO member countries. This is especially dangerous, Lamy has explained — repeatedly — as the current global wave of economic nationalism comes as the international economy is in a deep global recession, and trade flows are shrinking. In late January, Lamy issued a confidential 14-page report to the WTO’s 153 member countries, in which he singled out some recent protectionist developments in the European Union, India, South Korea, Indonesia and the United States as reason for particular concerns. Later this month, Lamy is expected to follow up with a second, even more detailed, report. Lamy’s basic argument is based on clear economic reasoning: if political leaders could now find the will to bring the Doha Round to a successful conclusion, that would constitute an economic stimulus package that would help expand international trade flows and help jump-start the global economy. In short, Pascal Lamy has been thinking strategically.

The chief executive officers of America’s major corporations are also supposed to be strategic thinkers, always looking over the horizon for looming economic troubles. So what has the premier corporate lobby in Washington, D.C. done by way of advocating what America’s top international trade priorities should be? The Business Roundtable — whose members include such sophisticated global operators as Caterpillar Inc., General Electric, FedEx, IBM, Cummins Engines, Deere, Procter & Gamble, and dozens more — has dropped its previous support for the Doha Round as a top priority. Nearing the end of last year, just when Lamy’s attempts to rescue Doha were at their vital make-it-or-fail point, the BRT’s corporate leaders decided to drop from the BRT website all mention of the Doha Round as any sort of a priority. BRT President John Castellani has declined repeated entreaties to comment on the Doha negotiations.

You could call it: small ball.

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Instead of stressing the importance of expanding global trade, the BRT’s corporate leadership has decided to pursue four lesser trade priorities: support for the U.S.-China trade relationship, lobbying for congressional passage of two preferential-trade deals with junior U.S. trading partners (Korea and Colombia); and lobbying the Obama White House on behalf of various corporate international tax breaks. The importance of the Doha negotiations isn’t mentioned. The BRT has instead decided to play in the minor leagues.

For the U.S. corporate leaders, the lesser game is easier to play. CEOs make widgets, and often seem uncomfortable when diplomats like the WTO’s Lamy try to explain the serious policy issues that the WTO’s multilateral trade negotiations have to deal with. Perhaps they know that when the subject of their own business practices comes up, that can be, well, awkward..

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Not all of the BRT’s members seem to be well-positioned to complain about the rising international protectionism — as they are part of the problem. .

Consider Pascal Lamy’s Jan. 26 confidential report to WTO members that warned of the example being set by the world’s (still) largest economy in various “Buy American” provisions in President Obama’s $787 billion economic stimulus package.

The Lamy report noted that the so-called Tarp bailout — officially, the Troubled Asset Relief Program — for Wall Street defines a “financial institution” eligible for the taxpayer-financed billions as any financial institution “established and regulated under the laws of the United States or any State, territory, or possession of the United States…but excluding any central bank of, or institution owned by, a foreign government.” The obvious protectionism appears to be perfectly legal under current WTO trade rules, but that’s not the main point — which is that the measure is bad economics.

In their own financial-bailout plans, other members of the WTO such as Germany and France have refrained from discriminating against foreign-owned financial institutions. But are prominent (increasingly state-owned) BRT members like Citi and General Motors really in a position to complain to their Uncle Sam?

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To their credit, a few BRT members — most notably, Caterpillar Inc. and FedEx — have been vocal about their opposition to other “Buy American” provisions in the economic stimulus package that steer federal contracts for the highway trust fund and other major infrastructure spending to domestic steel manufacturers. The BRT has even joined other pro-business lobby organizations in signing a letter to President Obama that strongly protested the signal that this measure was sending to the rest of the world.

That the BRT would even consider signing such a letter itself deserves some explanation, as the Business Roundtable has a history of looking the other way when the Stand Up For Steel crowd is concerned. (Current top BRT staffer John Castellani succeeded a former U.S. steel lobbyist, Sam Maury, who was a strong advocate of the U.S. anti-dumping regime.) Two of the corporate luminaries at the American Iron and Steel Institute that lobbied the hardest for including Buy American provisions in the economic stimulus package, AK Steel and Nucor, are also BRT members. While BRT insiders aren’t talking, it is a safe guess that the two protectionist steel companies were not happy when BRT signed the letter that criticized their handiwork.

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Of course, signing an occasional letter in support of trade is no real substitute for sustained efforts at the grassroots level to explain the benefits of international to the American public. This, the BRT has never done really well (claims that BRT has a grassroots trade education program were also recently dropped from the BRT’s website, some months after BRT spokesman Kirk Monroe acknowledged to me that there was no such program).

It used to be that shortly before an important congressional vote on trade, the Business Roundtable would fly a bunch of CEOs into Washington to work Capitol Hill. The business lobby would also take out a flurry of (expensive) “issue ads” in newspapers to tout whatever issue was then hot. This worked for many years, although by increasingly narrower margins each time.

The strategy was finally upended last April, when Speaker Nancy Pelosi’s House effectively killed action on a U.S. trade deal with Colombia. The BRT’s late-hour advertising blitz failed, and only a handful of CEOs (Caterpillar’s Jim Owens was one of the few who bothered) buttonholed lawmakers personally. The Business Roundtable’s traditional strategy has now (predictably) failed because at the grassroots level, the American public’s support for trade has waned. And the BRT, it’s intellectual capital spent, has no real plan to turn the situation around. (The conservative business lobby resembles the Republican Party it tends to support in that regard.)

The business of effective grassroots political communication is really quite simple. Cable television demagogue Lou Dobbs gets it. Organized labor understands how to reach out to ordinary Americans in terms they can grasp. By and large, most corporate CEOs and their spinmeisters in the public relations offices, don’t.

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The Stand up for Steel lobby — the usual suspects: the steelworkers’ union, U.S. Steel, and so forth — has a well-funded lobby operation called the American Alliance for Manufacturing. The AAM is effective at getting its message out to ordinary Americans, and holds town hall meetings all across the nation to gather political support for its Buy American cause. During the 2008 presidential campaign, the AAM even sponsored an event featuring Hillary Clinton and Barack Obama. This is how political IOUs are collected. Throughout the campaign, the steel guys — hardly for the first time — out-maneuvered the corporate types.

While some American corporations spend some efforts with their own workers to promote increased understanding of trade, the BRT does not provide financial support for town hall meetings. There are pro-trade outfits like Consumers for World Trade and the Consuming Industries Trade Action Coalition that know how to do such things, if they had the resources. But they do not receive serious corporate support, and limp along with minimal budgets, year after year. And inside the Washington, D.C. beltway, the Global Business Dialogue regularly holds events where well-informed Washington insiders discuss various trade topics in thoughtful depth — why not take this show on the road, where ordinary Americans could also become educated?

One would think leading corporate CEOs would immediately jump at such opportunities.

But while the protectionist steel lobby understands how to spend money effectively to get its message out at the grassroots level, the business community largely doesn’t.

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In his “restricted” Jan. 26 report that documented the dangers of rising protectionism around the world, WTO Director-General Lamy cited a recent study that ought to be sobering to any CEO who thought about the implications. The International Food Policy Research Institute, in Washington, D.C., Lamy noted, had crunched the numbers to see what would happen if all WTO member countries increased their applied tariffs to their maximum-permitted bound rates. “The average global rate of duty would double and the value of global trade would be cut by about 8 percent,” Lamy’s report pointed out.

That’s how important the WTO’s Doha negotiations — which would cut both current applied and bound tariffs even further — are for future hopes to get world trade expanding again.

But however compelling the WTO leader’s warnings may be, America’s corporate chiefs are not listening.