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Obama to Be Tough on Trade

Key adviser says candidate would enforce rules.

Daniel Tarullo

WASHINGTON — Don’t expect Barack Obama, if elected, to be soft on countries that deliberately violate global trade rules.

With just seven weeks to go until the Nov. 4 election, Daniel Tarullo, a senior economic adviser for the Obama campaign, in an interview lifted the curtain on the candidate’s trade agenda, giving insight into how the Illinois senator might navigate the complex arena of global commerce.

“What you will see in an Obama administration first are more resources to monitoring, consultations and, where necessary, enforcement,” said Tarullo, a law professor at Georgetown University Law Center. “Second, you will see more attention at the top reaches of the administration to enforcement of rights that we have under existing agreements.”

The fashion sector is closely monitoring whether Obama or Republican presidential nominee John McCain will address protection of U.S. industry in the form of higher tariff or quotas on imports. One of the defining issues for apparel importers and domestic textile producers is how the next president will deal with a bilateral apparel quota agreement with China that restricts 34 import categories and is set to expire at the end of the year.

Neither presidential candidate has taken a clear position on the issue. Tarullo said Obama will use all the trade enforcement tools in his toolbox, including a general China safeguard that does not expire until 2012. The safeguard calls for punitive action by the White House if a country is found to have injured a domestic industry through illegal trade practices.

U.S. textile firms hope Obama will be more aggressive in utilizing the general safeguard and also are pushing for a new monitoring program to investigate whether Chinese imports are being dumped below cost in the U.S. Industry groups have been disappointed with the Bush administration, which has declined to impose sanctions in five cases under the special safeguard where the International Trade Commission found injury.

“It is very important to use the enforcement and safeguard tools that are available under trade agreements in order to maintain credibility broadly among the industry and the public,” said Tarullo, who was assistant to the president for international economic policy under Bill Clinton, and served on the National Economic Council and National Security Council.

Democrats on Capitol Hill repeatedly have accused the Bush administration of failing to enforce the rules of existing trade agreements, as well as commitments countries make when joining the World Trade Organization.

The administration filed 26 WTO cases in the past eight years, targeting everything from Chinese export subsidies to auto parts, but critics charge that the record pales in comparison to the 67 cases filed by the Clinton administration.

While U.S. apparel importers and retailers say they support vigilance and strict enforcement when countries violate the rules, many are concerned that a new president will be overzealous and take punitive action that affects the $94.7 billion in global apparel and textile import trade.

But beleaguered domestic textile producers and several labor groups, including the AFL-CIO and UNITE HERE, the apparel industry’s main union, are pushing for a crackdown on illegal and unfair trade practices by many U.S. trading partners.

“I suspect you will see more [WTO] cases [under Obama] than [the Bush administration] filed,” said Tarullo.

One surprise in the Democratic party platform, from the textile industry’s perspective, was a commitment to complete the Doha Round, which has been faltering over the past seven years. Obama endorses a completion of the global trade round aimed at reducing tariffs and subsidies worldwide.

“While we agreed with the current administration that the deal that was evolving in Geneva last July was not a good one for the U.S., that is certainly no reason to abandon the effort,” said Tarullo. “We would contemplate renewing the effort next year. We might be able to get a deal that is good for American industry and workers, and also good for the poorest countries.”

On another hot-button topic for the industry — how the next president will approach China’s currency policies that have caused a groundswell of concern in Congress — Tarullo said, “As president he would bring a resolute and persistent approach to China’s currency practices.”

Tarullo stressed that Obama “would like to see changes in those practices to provide more reciprocal benefits in U.S.-China trade relations.”

Obama has signed onto two separate currency bills in the Senate, one of which would make currency manipulation a subsidy and actionable under U.S. countervailing duty laws.

Apparel importers are concerned about legislation that could lead to higher tariffs on billions of dollars worth of apparel imports they ship to the U.S. from China. However, textile producers see the legislation as another tool to help level the playing field against Chinese imports that critics contend are undervalued by as much as 40 percent, putting U.S. companies at a competitive disadvantage.

Passage and enactment of pending trade agreements with Colombia and South Korea also top the wish list of apparel importers next year. The two free trade deals stalled in Congress this year because of opposition over the assassinations of trade unionists in Colombia and high barriers to U.S. auto imports in South Korea.

“What he’s said is that he cannot support voting through an agreement with Colombia when the agreement itself provides the right to organize, and yet people in Colombia are being murdered because they are exercising that right,” said Tarullo. “So, this is something that would need to change before we could support moving forward with that relationship.”

An Obama administration also would have much closer and more thorough consultations with Congress on free trade deals that are negotiated, Tarullo said.

“He certainly doesn’t think the way the Bush administration has proceeded on fast-track policy is either wise or defensible in terms of the freezing out of Democrats, certainly during the first six years of the administration,” he said. “One of the hallmarks of an Obama administration on trade is that consultations with Congress will be real and substantive.”