WASHINGTON — The Obama administration is walking a fine line as it looks to strengthen its trade credentials.
The administration is balancing a goal of doubling exports in five years to $3.14 trillion and moving forward with free trade initiatives against stepped-up enforcement of existing trade agreements. It is also reviewing the U.S. relationship with trade partners.
It’s been 20 months since President Obama took office, following a long campaign leaning toward protectionism, and his trade agenda has evolved into a bifurcated strategy — emphasizing enforcement by bringing cases against illegal trade practices to the World Trade Organization, and moving slowly on free trade agreements negotiated by the Bush administration that it felt were not strong enough in areas such as labor rights on the one hand, and opening markets for U.S. exports on the other.
The centerpiece of the President’s trade agenda so far has been the National Export Initiative, which aims to double exports in five years.
In its first annual report to the President, his “export promotion cabinet” made several recommendations on how to achieve the goal, such as providing more access to export financing credit for small and medium-size businesses, removing trade barriers to U.S. exports and passing a free trade agreement with South Korea.
“One part of the National Export Initiative and overall strategy is to further liberalize trade and enforce our existing trade agreements and trade rights,” said Mike Froman, deputy national security adviser for International Economic Affairs at the White House. “With regard to the FTAs, the president has directed U.S. Trade Representative Ron Kirk to work with the Koreans with the objective of resolving outstanding issues for his trip to Seoul in November and then bring it to Congress as soon as possible thereafter, assuming we can resolve outstanding issues.”
He was less specific about the timing on trade deals with Panama and Colombia.
The President’s trade agenda also encompasses export promotion such as government-sponsored trade events and negotiations on a regional Asia-Pacific trade pact known as the Trans-Pacific Partnership with seven other nations.
“They’ve modestly ramped up the rhetoric without ramping up the substantive action that has to go along with the rhetoric to turn it into some sort of reality,” said Phillip Swagel, a visiting professor at the McDonough School of Business at Georgetown University, and director of the school’s Center for Financial Institutions, Policy and Governance. “To me, it is a little schizophrenic in trade with an administration that knows an open trade regime is part of a modern economy but has not done more and is not willing to really commit.”
Gary Hufbauer, senior fellow at the Peter G. Peterson Institute for International Economics, said the President has put trade liberalization aside to focus on working with international partners in various forums to get the world economy back on track after the global financial crisis.
“Most people would say he will get more optimistic and in a constructive mood about trade,” said Hufbauer. “The administration has pinned a lot on doubling exports, and the President and his economic team see [the strategy as being] led off with doubling exports and jobs and then we can explain the FTAs as a way of getting there.”
Analysts said it was no surprise that trade has taken a backseat in Obama’s first months in office. Strapped with a recession, deepening deficit and two wars, the President has spent his first term focused on domestic and foreign policy objectives. He has helped usher through Congress a $700 billion stimulus package, a massive overhaul of the health care system and financial regulatory reform.
“I just think trade is a third-tier issue for the Obama administration,” said David Spooner, an attorney with Squire Sanders, who represents importers. “Trade is seen as a political loser and there has been a greater willingness to tackle other issues than spending political capital on trade.”
Spooner, who also held key positions in the generally free-trade oriented Bush White House, said the Obama administration has put out positive signals on trade with the launch of negotiations on the TPP and support for the Doha Round of global trade talks, but there has been no concrete action.
“We don’t seem close to fixing Panama, Colombia and South Korea, and the TPP negotiations are moving along at a snail’s pace,” Spooner said. “Meanwhile, we are continuing to see protectionist announcements [such as a labor case filed against Guatemala], but we are seeing no trade liberalization.”
Importers and retailers are concerned Obama’s focus on exports will come at the expense of imports.
Stephanie Lester, vice president of international trade at the Retail Industry Leaders Association, agreed the administration will not be able to achieve its goal of doubling exports in five years without being more “proactive” on the import side of the equation.
“You can’t increase exports and try to get tougher on imports or fail to recognize that U.S. producers rely on imports to increase their exports,” Lester said.
Kevin Burke, president and chief executive officer of the American Apparel & Footwear Association, said he believes the Obama administration has not put forth a clear vision on trade and criticized its focus on exports over imports.
“Without solid trade initiatives from this administration, other countries are leapfrogging over the U.S.,” said Burke. “The president and his staff need to start looking beyond what the labor unions want to do to what is good for America in world trade. It’s about reciprocity.”
On the trade enforcement side, the administration recently unveiled a broad list of proposals to strengthen its trade remedy laws, including the way antidumping and countervailing duty rates for imports from nonmarket economies like China and Vietnam are calculated. It has also filed a number of WTO cases against countries for alleged unfair trade practices that put U.S. companies at a disadvantage. This includes recent ones against China, one for China’s imposition of antidumping and countervailing duties on U.S. exports of certain kinds of steel, and the second against the country’s alleged discrimination against U.S. suppliers of electronic payment services.
The Obama administration has repeatedly declined to go after China’s undervalued currency under U.S. trade remedy laws, and recently said it would not initiate investigations in two cases into whether China’s alleged currency manipulation constitutes an illegal subsidy. Separately, the Treasury Department has twice declined to name China a currency manipulator, but has said the yuan is undervalued.
However, Obama took a much tougher stance on China’s currency policies last week in the run-up to the United Nation’s General Assembly meeting, where White House aides said the President expressed his disappointment to Chinese Premier Wen Jiabao about the slow pace of China’s currency appreciation. Obama also told Wen that the U.S. expects to see more “significant movement” on revaluing its currency or it will consider taking action, and he cited the WTO as one venue to take action, according to aides.
Julia Hughes, president of the U.S. Association of Importers of Textiles and Apparel, said of U.S.-China dealing, “It is a geopolitical and national security relationship, and at the end of the day, the administration recognizes those are all elements they have to consider.”
Thea Lee, deputy chief of staff for the AFL-CIO, said Obama’s enforcement of trade is not “ambitious enough.”
“Obviously, there are people in the administration who understand that China currency is a problem, but I would say that is one area where we would be critical of their lack of action,” Lee said. “But he has been better than most presidents. He has talked about rejuvenating the manufacturing sector and what that would take and that is a huge step forward.”
Lester of RILA said: “We got 14 proposals on trade remedy rules and I think the administration is in the mind-set that they need to show tough enforcement before they can do something proactive on trade.”