Trade Policy and the Obama Administration

Article excerpt

During his primary campaign, President Obama took an aggressive stance on trade, suggesting a protectionist drift in U.S. trade policy. However, it seems more likely that policy will focus more on enforcement of existing rights than on protectionist initiatives. The major influences on trade policy are likely to be multilateral approaches to trade problems, broad foreign policy concerns, the impact of trade policy on recovery from the current recession, and global climate change initiatives. Holdover initiatives on the World Trade Organization's Doha round and bilateral agreements will be joined by-global climate change as the principal policy issues for the next few years.

Business Economics (2009) 44, 150-153.

doi:10.1057/be.2009.15

Keywords: trade policy, protectionism, Obama administration, world trade organization, bilateral agreements, global climate change

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What a difference a year makes! Last year, Senators Obama and Clinton were vying for the Democratic nomination and threatening to withdraw from the North American Free Trade Agreement (NAFTA) if the pact was not renegotiated. Their campaign debate was regarded by our trading partners as signaling a protectionist drift in U.S. trade policy. Go abroad and you will find officials still worried about the direction of U.S. policy--even though President Obama long ago dispensed with the inflammatory rhetoric and emphasized the importance of U.S. compliance with its international trade obligations.

During the campaign, the President emphasized the need to better enforce U.S. rights under existing trade laws and agreements and to strengthen NAFTA rules on labor and the environment. His views resonated with the electorate, especially with core Democratic constituencies. Union opposition to NAFTA and other trade pacts is strong and will undoubtedly intensify as the U.S. unemployment rate spikes. Clearly, the President will try to "put paid" to his campaign promises on trade. Thus, we will see more antidumping cases and World Trade Organization (WTO) litigation filed by the U.S. Trade Representative (USTR)--that always happens during periods of economic distress. And U.S. officials will push Canada and Mexico to "upgrade" NAFTA--which they appear willing to accept as long as it doesn't involve renegotiating existing obligations.

Undoubtedly, President Obama will be forced by Congress to do more. The caucus of new members of Congress elected on an explicitly antitrade liberalization platform do not fully share the views of the centrist, international-minded Obama administration. Indeed, Obama's main trade policy challenge will be working with members of his own party in Congress.

That is why the Obama administration first has to address the anxieties about globalization and trade in the American public debate that are reflected in congressional trade policy critiques before he can garner a mandate for new trade negotiations. Doing so could well smooth the path for future trade initiatives, especially if the administration strengthens unemployment insurance and pension and health-care benefits. Unlike trade policy, those issues are high priority for the Obama administration.

President Obama entered office with an ambitious domestic reform agenda that included health care, energy, and the environment. The urgent task of managing the global economic crisis has so far superseded, but has not supplanted, those plans to bolster the social safety net. To that end, the $787 billion stimulus bill in February 2009 included an extensive expansion of the trade adjustment assistance program to help displaced workers. In light of the massive economic challenges confronting the new team, which is still under-staffed due to the unwieldy nomination and congressional confirmation process, and in light of declining output and rising unemployment, the Obama administration will be hard pressed to pursue new trade initiatives anytime soon--especially since fast track trade negotiation authority, which lapsed in 2007, is unlikely to be revived in the near term, except possibly for the Doha Development Round (the current round of WTO negotiations). …