Bridges Weekly Trade News Digest • Volume 14 • Number 4 • 3rd February 2010

Obama: US Must ‘Seek New Markets Aggressively’

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US President Barack Obama has spoken out forcefully in favour of opening up trade, in perhaps his highest-profile speech of the year.

“We have to seek new markets aggressively, just as our competitors are,” Obama said in his State of the Union address on Wednesday night last week, adding that “if America sits on the sidelines while other nations sign trade deals, we will lose the chance to create jobs on our shores.”

To that end, Obama vowed that his administration “will continue to shape a Doha trade agreement that opens global markets” while working to “strengthen our trade relations in Asia and with key partners like South Korea, Panama, and Colombia.”

Obama also announced the launch of a National Export Initiative to “help farmers and small businesses increase their exports, and reform export controls, consistent with national security.” His goal, he said, was for US exports to double over the next five years, “an increase that will support two million jobs in America.”

The president’s statements on trade were greeted with loud applause from both Democratic and Republican lawmakers on Capitol Hill. An ocean away, Obama’s remarks also drew a warm response from WTO Director-General Pascal Lamy, who told Reuters last week that the US president’s statement on trade “goes in the right direction.”

That’s a sentiment that US trade officials have not been hearing much recently. Since a few months after Obama took office a year ago, Washington has been widely accused of dragging its feet in the WTO’s Doha Round of trade talks and stalling on approving free trade deals with Colombia, Panama and South Korea. Obama’s apparent hesitations on trade are widely seen as a symptom of the lack of support for free trade initiatives among US citizens, especially among certain groups - namely unionists and environmental groups - that helped propel Obama into office.

The president acknowledged last week that, with regards to trade, there are “conflicts” and “fissures” within his own Democratic Party as well as among the Republicans. The problem, Obama has said, is that many people fail to see the benefits that a more liberal trade agenda can bring to the US economy.

But the White House appears to be tackling such public doubts head-on. The Office of the US Trade Representative has begun “an unprecedented 50-state domestic outreach strategy” to “remedy the deep scepticism on trade,” deputy USTR Demetrios Marantis said at an event in Washington last week. He added that they expect the upcoming consultations to “shape, guide and develop” the administration’s trade priorities.

“My hope is…that we can move forward with some of these trade agreements, having built some confidence, not just among particular constituency groups but among the American people, that trade is going to be reciprocal, that it’s not just going to be a one-way street,” Obama told a group of Republican lawmakers on Friday.

What’s in the trade pipeline

There are several items on Washington’s trade agenda that could see some action in the coming weeks. The White House announced in December that it will take part in negotiations toward a Trans-Pacific Partnership (TPP), a regional deal that is set to include seven other countries - Australia, Brunei, Chile, New Zealand, Peru, Singapore and Vietnam - but could soon be joined by others in the Pacific region. Those talks are set to pick up in March.

Congress is also being pressed to act on pending free trade agreements with Colombia, Panama and South Korea. The terms of each of the deals have been finalised, but they have yet to win lawmakers’ approval. Following Obama’s statements last week, however, several groups - including farm and livestock lobbyists as well as business groups - have spoken out to urge passage of the bills.

Meanwhile, senior trade officials the world over are looking to the United States to take a stronger negotiating stance in the WTO’s struggling Doha Round. Some trade ministers meeting in Davos, Switzerland over the weekend pointed to Obama’s State of the Union address as a signal that the US could be ready to more fully engage in the talks, which are already in their ninth year.

But free trade sceptics in the US are not backing down. Public Citizen’s Global Trade Watch, a Washington-based NGO, argues that even if Obama meets his goal of doubling exports, further trade opening will still trigger job losses in the US unless the administration is also able to slow down the rate at which foreign products enter the country. If imports continue to grow, the US trade deficit will persist, the group argues, which “means we are losing out on jobs in tradable sectors that we could have had in a situation where our trade was balanced.”

Trade lawyer and blogger Scott Lincicome disagrees. The US trade deficit - the gap between the amount the country imports and the amount it exports - “has almost nothing to do with trade policy,” he says; rather, it is a function of savings, consumption and investment.

“If you look at the last twenty years or so, there’s actually a very strong positive correlation between an expanding trade deficit and GDP growth,” Lincicome says. “All one needs to do is look at Japan’s decade-plus stretch of economic stagnation and constant trade surpluses to realise that a surplus should not be the goal of US trade policy.” Instead of hammering away about doubling exports - a “laudable” if “highly unrealistic” goal - the Obama administration should work on busting the “protectionist myths” that import competition is killing US manufacturing and that US trade deals are unfair and unbalanced, he argues.

ICTSD reporting; “WTO’s Lamy praises Obama’s trade comments,” REUTERS, 28 January 2010.