1st March 2012

Bridges Weekly | White House Trade Momentum Builds as Election Heats Up


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With the US election year well underway, the White House appears to be making a concerted push to advance the trade agenda outlined in January’s State of the Union address, with President Barack Obama signing an executive order yesterday for the creation of a new agency that would target “unfair” practices in US trading partners.

The Interagency Trade Enforcement Center (ITEC) “will bring the full resources of the federal government to bear to investigate and counter unfair trade practices around the world, including by countries like China,” Obama said at a United Auto Workers convention yesterday after signing the order.

The agency will “help American workers and businesses compete and win on a fair global playing field,” US Trade Representative (USTR) Ron Kirk said in a statement.

Kirk told reporters that the agency would help the White House “double down” on its trade enforcement efforts, focusing on the most commercially significant trade barriers.

The new agency’s director will be chosen by USTR Kirk, with a deputy selected by Commerce Secretary John Bryson, according to the White House.

The new agency will also receive the support of other US agencies, including the Departments of Agriculture, Homeland Security, Justice, State, and the Treasury. Obama has asked Congress for US$26 million in new funding for the agency.

Focus on China

The US President had first announced that he would be creating this agency during his 24 January State of the Union address, telling a joint session of Congress that he would “not stand by when our competitors don’t play by the rules.” (See Bridges Weekly, 25 January 2012)

China’s trade practices have regularly found themselves in the spotlight over the past year, with the two sides sparring over China’s valuation of its currency, both sides’ renewable energy support policies, and a host of other subjects.

This month’s visit by Chinese Vice-President Xi Jinping brought the trade tensions front and centre. While the two countries resolved a long-standing conflict over Beijing’s restrictions on the importation and distribution of foreign films during the weeklong visit, discussions between Xi and top US officials - including Obama and US Vice President Joe Biden - also touched repeatedly on Beijing’s currency policies and other “areas of concern.” (See Bridges Weekly, 22 February 2012)

The US trade deficit with China reached US$295.5 billion in 2011, according to data released earlier this month by the US government. On the campaign trail, Republican presidential candidates have repeatedly targeted Obama’s trade record, particularly regarding Beijing.

Mitt Romney - the former governor of Massachusetts, who is one of four candidates currently vying for the Republican party nomination - has promised to take a stronger stance against Beijing should he win office, and has accused Obama of having been “walked all over” by China.

“[China's] been able to put American businesses out of business and kill American jobs,” Romney told an audience on Wednesday at a campaign stop in the US state of Ohio. “They also steal our designs and our patents and our brand names and our know-how… This president has sat idly by and watched that happen.”

“If I’m president of the United States, that’s gonna end.”

Romney’s election rhetoric on China has already prompted Chinese officials to call for a more “responsible” approach.

“Speaking words responsibly and doing things responsibly is how a responsible politician behaves,” Chinese Foreign Ministry spokesman Hong Lei told reporters this week in Beijing.

Trans-Pacific pact on the move

The past two years have seen increased action in Washington on trade matters, following a lull during the early days of the Obama administration. In early 2010, the US President announced a goal of doubling US exports from their 2009 levels of US$1.57 trillion to US$3.14 trillion by 2015; since then, Obama has touted trade as a tool for job creation, against the backdrop of the ongoing economic crisis.

The long-awaited ratification of three FTAs with Colombia, Panama, and South Korea last fall followed years of political wrangling in Congress. Now that the three trade pacts have been enacted into law, the focus has shifted to the broader Trans-Pacific Partnership (TPP) Agreement, a proposed nine-country pact that has been billed as a “21st century” deal.

House Ways and Means Committee Chairman Dave Camp - a Republican from the US state of Michigan - said earlier this week that “the three free trade agreements with Colombia, Panama, and South Korea that Congress passed last year in a bipartisan manner sent a strong message that the United States has returned to the trade negotiating table.”

“We are now at an important juncture to move forward aggressively on the Trans-Pacific Partnership negotiations and other initiatives to make sure that last year’s momentum is not lost,” Camp added.

The countries negotiating the proposed trans-Pacific deal are hoping to conclude talks by year’s end, after announcing a broad outline for the accord at last November’s gathering of leaders from the Asia-Pacific Economic Cooperation (APEC) economies.

The proposed deal will slash tariffs and other barriers to goods and services trade and investment; the goods covered will represent some 11,000 tariff lines. Negotiators also plan to incorporate in the pact issues involving regulatory coherence; competitiveness and business facilitation; small- and medium-sized enterprises; and economic development and governance, according to the November framework.

USTR Kirk, at a hearing on Wednesday, announced that Obama plans to seek the restoration of legislation that would allow him to negotiate trade agreements and submit them to Congress for a straight up-or-down vote.

“We’ve got to have it,” Kirk told the House Ways and Means Committee, adding that the White House would like the legislation - known as Trade Promotion Authority, or “fast track” - by the end of the year in order to fulfil the goal of concluding the TPP in 2012. The legislation expired in 2007.

Some trade observers have suggested that the proposed nine-country pact is a way for the US to respond to China’s growing influence, though Obama has said in the past that “the notion that we are looking to exclude China is mistaken.”

“What we have said is the future of this region depends on robust trade and commerce, and the only way we’re going to grow that trade is if we have a high-standards trade agreement where everybody is playing by the same rules,” Obama said in a November press conference, adding that, while China is welcome to join the pact, it would need to “rethink some of its approaches to trade.”

The past few weeks have seen US officials meeting with prospective TPP members Canada, Japan, and Mexico, which all announced in November their wish to join the nine-country negotiations.

The proposed deal currently counts Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the US, and Vietnam as members. The next round of TPP negotiations is set to begin in Australia on 1 March.

ICTSD reporting; “Obama to Sign Executive Order Creating Trade Enforcement Panel,” BLOOMBERG, 28 February 2012; “China urges US politicians to be responsible,” CHINA DAILY, 27 February 2012; “Obama to sign order creating trade enforcement unit,” REUTERS, 28 February 2012; “US wants more talks on Japan bid to join Pacific trade group,” REUTERS, 22 February 2012; “White House wants trade promotion authority: Kirk,” REUTERS, 29 February 2012; “Mexico Pushes to Join Pacific Talks,” WALL STREET JOURNAL, 20 February 2012; “Mitt Romney talks tough on China during Ohio visit,” WASHINGTON POST, 29 February 2012.

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