Free Trade Is Not Quite President Obama’s Neglected Stepchild, But…

In the first Obama term, trade was not quite a step-child, but neither was it a priority. Mostly, the Obama trade team concentrated on improving enforcement of trade laws. That is useful work, but it’s no fun for trade enthusiasts. They would rather play offense by opening markets instead of looking for ways to slow down trade.

The team did manage to complete 3 trade treaties handed to it by its predecessors. Only one of them, Korea, required significant renegotiation. The President’s most important trade action was the initiation of the Trans-Pacific Partnership (TPP) negotiations, effectively managed by U. S. Trade Representative Ron Kirk.

Political polarization makes everything difficult, but the Administration faced other daunting trade problems, too. One of its principal constituencies, big labor, opposes most trade treaties. That labor position has been a powerful deterrent to trade expansion policies.

Most important treaties passed by other administrations in the post-war period were handled under the “fast track” process, now called Trade Promotion Authority, which guarantees an up or down vote in both houses. President Obama and his trade people have never had that authority.

The 2013 State of the Union address was the first sign of change. In it, the President served notice that he has moved trade up the priority ladder in his second term. He cited two major negotiations: the TPP which he hopes to complete this year; and a new initiative, the Trans-Atlantic Trade and Investment Partnership (TTIP).

The Trans Pacific Partnership has been moving along through a dozen and a half negotiating sessions. Until a few months ago, it had a less than impressive list of participants. Then Canada decided to join. Japan followed shortly. Those new entrants, and others as yet unannounced, but known to be waiting in the wings, gave a dose of steroids to the TPP. It began to look more muscular, and therefore more attractive to American businesses.

Surprisingly, the push for TTIP originated in Europe. There, leaders tired of recession and austerity saw it as an economic booster shot. Apparently, President Obama thought so, too. He accepted the difficult challenge of negotiating a Trans-Atlantic agreement. This long-time dream of American and European trade expansionists will require extended and arduous negotiations with no assurance of completion in the next 3.5 years left in Obama’s term. But, it is a prize worth the effort. Europe amounts to about 20% of total US two-way trade.

Taken together, TPP and TTIP form an aggressive effort which, if successful, could be the needed substitute for the moribund WTO Doha Development Round. They could spark a growth spurt in world trade. They also might be the force which causes the WTO multinational Doha Round to arise from its sick-bed. This new Obama trade priority has escalated US trade policy from the minor leagues to the majors.

Last week came more good news on the trade front. Stories from the White House indicate that the President intends to nominate Michael Froman as his new US Trade Representative to replace Kirk, who returned to private life after 4 years on the job. Froman, is a White House insider who previously advised the President on international economic policy, and who is held in high regard by many business people.

The US has been fortunate to have a succession of great Trade Representatives over the 50 year history of the office. Some of the most effective have been those who enjoyed both the ear, and the confidence, of the President. Those who lacked ready access to the President found the job more difficult. If history is any guide, Froman would seem to possess a critical asset for his new trade job.

In the first Obama term, some trade observers were wont to say that the President was wasting the most pro-trade Congress in years. This term will test that assessment of both the President and Congress. Will Congress’ pro-trade proclivities allow it to overcome the polarization that has stalemated the legislative process? Or will the on-going fist-fight under the Capitol dome doom trade legislation that might otherwise claim majority votes?

Trade’s higher priority and increased visibility are assured, but its success is not. The Congress has the right inclinations. The President is showing leadership. The omens appear favorable. But, both branches of government have a long way to go before they can bring home the difficult treaty legislation needed to increase US and world trade.