Author Archives: Greg Rushford

Obama’s “21st Century” Trade Policies

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The main themes of President Barack Obama’s international-trade strategy for the November 6 presidential election are now fully established. It’s all about the 21st Century, where the buzzwords are American jobs, U.S. exports, and more American jobs. He doesn’t want America known for “buying stuff from other nations,” Obama told representatives from a dozen-plus corporate luminaries including Ford Motor Co. and Intel Corp. who assembled in the East Room of the White House on Jan. 11. “I want us to be known for making and selling products all over the world stamped with three proud words: ‘Made in America.'”

If economists would immediately retort that the president’s language was the stuff of 17th and 18th century mercantilism, practicing politicians could shoot back that hey, campaigns are not academic seminars. In that vein, the nation’s Politician in Chief furthered his plea for economic nationalism in his Jan. 24 State of the Union address, where he asked Congress to help him give tax breaks aiming at bringing back lost manufacturing jobs to US shores. More broadly, Obama will be vigorously asserting that on his watch, he has succeeded in restoring America’s traditional claims to international economic leadership. Toward that end, he will ignore his lack of focus on what should have been top priority — the truly big-money stakes involved with the World Trade Organization’s Doha Round of multilateral trade liberalization talks, which the White House has helped kill. Instead, Obama will keep touting how he managed to obtain congressional passage of three small-by-comparison trade pacts last year— with South Korea, Colombia, and Panama — that had been negotiated by predecessor George W. Bush, but had become trapped in Washington’s gridlock. Obama has also positioned himself as an an advocate of government efficiency: a reformer who is fighting for lean-and-efficient bureaucracies, pitted against an entrenched Congress and corporate lobbyists. And looking to a second term in office, Obama will advertise his focus on forging deeper ties with dynamic, forward-looking Asian-Pacific economies in a region which he asserts Bush had neglected (and which conveniently encircles China, a trading partner that the president misses no opportunity to say doesn’t “play by the rules”).

The forward-looking Asia-Pacific part of the Obama campaign strategy was clearly on display before a high-powered audience of Washington insiders who packed a conference room on K Street the morning of Jan. 4 at an event organized by the respected bipartisan Center for Strategic and International Studies. Keynote speaker Michael Froman, the deputy national security adviser for international and economic affairs, smoothly spoke of US leadership in the so-called Trans-Pacific Partnership negotiations. The TPP negotiations are designed to liberalize trade with promising Asia-Pacific countries including Singapore, New Zealand, Australia, Malaysia and Vietnam, Froman said. After the Obama administration came into office in 2009, the White House had studied the gridlock and “determined that we needed a new, 21st century approach to trade,” Froman said. “When we launched TPP,” the White House top international economic aide added, “we developed entirely new texts that reflected US interests and the competitive realities of the region…we pushed our limits and forced ourselves to try to think a bit outside the box about traditional issues.” US Trade Representative Ron Kirk and his team of trade negotiators, Froman related, “have now led 10 rounds” of TPP negotiations, boasting how in 2010 “we welcomed” emerging tiger-cub economies Malaysia and Vietnam into the trade pact.

But a close examination of what has really happened on the Obama watch strongly suggests that the White House claims to economic leadership in the TPP negotiations should not necessarily be taken at face value. For openers, the United States isn’t even a member of the trade pact. Moreover, the issues that are at the core of the White House negotiating strategy are straight out of an 18th century fascination with the mercantile world of high tariffs. It’s the same old story: sugar, steel, cotton, clothes, shoes, and a few other coddled farm lobbies. Moreover, even a cursory look at Obama’s proposals to “streamline” what he says are inefficient federal trade agencies reveals an absence of policy prescriptions truly aimed at bringing official US trade policies into line with 21st century economic realities.

Here’s the story, beginning with the White House assertions of enlightened 21st century “leadership” in the Asia-Pacific negotiations. Continue reading →

Troubles along the U.S-Canada Border

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It was all smiles on Feb. 4, 2011, when President Barack Obama and Canada’s prime minister, Stephen Harper, met at the White House. We have a “shared vision” to ensure that important border-security and trade issues receive top-level attention at the highest levels in both Washington, D.C. and Ottawa, the two leaders announced in a joint statement. The United States and Canada are “woven together like perhaps no other two countries in the world,” Obama enthused to reporters.

What a contrast with the rampant narcotics- and people smuggling along the the southern U.S.-Mexican border, which has become an open sore. More than $1 billion in goods crosses the 4,000-plus mile border every day. Canada is America’s number one export market. The United States exported more than $204 billion in U.S. goods were exported to Canada in 2009 (compared to $69 billion in U.S. goods exported to China that year), according to the most recent figures released by the Office of the U.S. Trade Representative. And the U.S. is Canada’s top destination, with 2009 exports of manufactured goods to the United States reaching $225 billion. That amounted to nearly three-quarters of all Canadian goods’ exports. As Harper stressed at the Feb. White House press conference, “We are true friends.”

But my, how the closest of friends can sometimes treat each other. Behind the smiles, there are awkward tensions over trade, and also very troublesome security issues along the U.S.-Canada border that Obama and Harper prefer to gloss over. This article focuses on three otherwise unrelated controversies that go beyond the normal tit-for-tat spats that inevitably crop up between even between the closest friendly nations. First, even though the U.S. enjoys its own preferential trade agreement with Canada (the North American Free Trade Agreement), the Obama White House has worked behind the scenes in the ongoing Trans-Pacific Partnership negotiations to exclude the Canadians from preferential access to other lucrative markets in Asia — a game that Ottawa also knows how play. Second, since 9/11 there have been increasing complaints from American importers and Canadian exporters over overly-stringent U.S. border controls that threaten jobs on both sides of the border. While the complaints began when George W. Bush sat in the Oval Office, they are intensifying in this third year of the Obama presidency.

But by far the most serious concerns involve organized criminal activities along one particular 12-mile stretch of the U.S.-Canada border that runs through 28,000 acres of the sovereign Akwesasne Mohawk Indian Territory. On the New York side, the Mohawks are in the United States; the northern part of the reservation is in parts of Ontario and Quebec. To evade high Canadian taxes on cigarettes, contraband cancer sticks are smuggled into Canada through this 12-mile hole in the border. Some come up from U.S. tobacco states like the Carolinas, but mostly the illegal smokes seem to come from factories right on the reservation itself. Beyond cigarettes, much of the ecstasy that floods the streets of New York and other East Coast cities also flows through the same smuggling routes. So much, that Canada has become the number one U.S. supplier of ecstasy, according to official reports. In return, American gangs such as Hell’s Angels have become Canada’s top supplier of cocaine, along with assault weapons. Asian triads and Eastern European mafias also look to this border hole to smuggle in drugs, prostitutes and other illegal aliens. While this is bad enough, it gets even worse. Terrorist organizations like Al-Qaeda and Hezbollah are also known to be familiar with the Akwesasne smuggling routes. The risk of terrorist activities is “high,” as a recent investigation by the Government Accountability Office noted.

To be sure, U.S.-and Canadian law enforcement and intelligence officials are trying as best they can to manage the mess. But evidence of strong leadership at the highest political levels is scanty at best. Despite their glowing assurances to the contrary that were uttered at the White House two months ago, it does not appear that either Obama or Harper is really focused on what it would take to plug the 12-mile hole in the border. Their biggest mutual failure: Neither leader has thought to reach out to help empower the sovereign Indian communities themselves to come up with a realistic plan to shut down the illegal activities, and replace them with viable economic alternatives.

Here’s what’s going on — and not going on.

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Barack Obama and the Ironies of “Economic Patriotism”

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One way to better understand what’s really going on with U.S. trade politics — as opposed to what politicians and their backers say is happening at any given moment — is to appreciate the many ironies. Especially the ironies of Buy American trade policies that have failed to deliver as promised by President Barack Obama and two top union leaders who worked overtime in 2008 to put their man in the Oval Office, AFL-CIO President Rich Trumka and Leo Gerard, the president of the United Steelworkers. These are perhaps the three most ardent advocates of economic nationalism in America. Aiming to please the pro-tariff labor wing of his Democratic Party, Obama has put the AFL-CIO’s trade agenda front-and-center. This is the first irony. A president who promised to change lobby-driven business as usual in Washington has basically turned over his international trade policies (and much else) to the labor lobby.

“I don’t want to buy stuff from someplace else,” Obama declared in a Sept. 6, 2010 Labor Day appearance in Milwaukee that set the tone as the Democrats prepared for the Nov. 2 midterm elections. “I want to grow our exports so that we’re selling to someplace else — products that say ‘Made in the U.S.A.'” Sharing the stage, the AFL-CIO’s Trumka agreed, railing against unpatriotic corporations that ship jobs overseas, offering that the elections would be about “economic patriotism.” Elsewhere on Labor Day, USW President Gerard — a man who last year accused Washington international trade lawyers whose clients import tires from China of being “traitors” to their country — called for “punishing predator countries” like China that “subvert fair trade.”

The unions pulled out all the usual stops to influence the Nov. 2 voting. “USW activists distributed 1.6 million leaflets at work sites, while making 745,240 phone calls in union halls across America to active and retired members,” Gerard boasted in a statement on election day. “In addition, local union volunteers knocked on more than 350,000 doors in the final weeks of the campaign where our members live.”(Here is another irony. Gerard is a Canadian citizen, a native of Ontario. Last year the USW chief told reporter Ann Belser of the Pittsburgh Post-Gazette that he refuses to become an American, for fear of losing his Canadian health care. Gerard declines further comment for this article.) Continue reading →