The Obama Administration Wants to Sell You a Used Trade Policy
The Office of the U.S. Trade Representative (USTR) just released the 2012 annual trade report and 2013 trade agenda of the President. It reads a bit like a used car salesman trying to do his best with a lemon. The report/car’s well-polished sheen looks pretty… until you take a peek under the hood.
Take the first sentence: “Trade is helping to drive the success of President Obama’s strategy to grow the U.S. economy and support jobs for more Americans.” Almost makes you forget that last year’s non-oil trade deficit rose to a five-year high, implying the loss of millions of jobs, doesn’t it? How about the second sentence: “The Obama Administration’s trade policy helps U.S. exporters gain access to billions of customers beyond our borders to support economic growth in the United States and in markets worldwide.” That’s an interesting way to frame a year whose sluggish two percent export growth rate put us 18 years behind schedule in achieving Obama’s export-doubling goal. The report continues on with its pitch, trying its darndest to pretty up what amounts to a year of ugly trade policy impacts for workers and consumers, and what appears to be more of the same planned for the 2013 trade agenda.
Before you buy this “certified pre-owned” trade policy, let us help interpret some of the report's glossy claims:
The report’s first page features these two sentences: “To facilitate the conclusion, approval, and implementation of market-opening negotiating efforts, we will also work with Congress on Trade Promotion Authority. Such authority will guide current and future negotiations, and will thus support a jobs-focused trade agenda moving forward.” Those lines have prompted a frenzy of press speculation that the Obama administration could ask Congress for Fast Track, the controversial tool that presidents from Nixon to Bush II have used to seize Congress' constitutional prerogative to set trade policy. Fast Track has been newly euphemized as "Trade Promotion Authority." (It's not a "clunker," it's a "mechanic's dream.") Much of the press hubbub has been over whether or not Congress would or should revive the "politically contentious" Fast Track authority for Obama. But that's not the right question. We should be asking: what kind of trade negotiating system should replace Fast Track? It's time for a modern, democratic trade negotiating process to replace an autocratic Fast Track system that predates disco.
It's interesting that the administration decided to devote two lone sentences to Fast Track in a 382-page report. Why not be more forthright in heralding a new push for Fast Track? Because when asking for something unpopular, it makes sense to whisper. And Fast Track is vastly unpopular. Before being allowed to die in 2007, Fast Track was a Nixon-conceived attempt to sidestep checks, balances and other pesky features of a democratic republic by taking from Congress its Constitution-granted prerogative to determine trade policy. In one fell swoop, Fast Track 1) delegated away Congress’ authority to choose trade partners and set the substantive rules for “trade” pacts that have deep ramifications for broad swaths of non-trade domestic policy, 2) permitted the executive branch to sign and enter into FTAs before Congress voted on them, 3) forced a congressional vote on FTAs, and 4) suspended amendments and truncated debate when that vote occurred. It was under this legislative luge run that we got NAFTA, CAFTA, the Korea FTA, etc. Fast Track's extreme approach has created many an opponent (right, left, and center), spurring politically costly battles for past presidents that have attempted to wrest the unpopular authority from Congress.
If Fast Track carries such political liability, why is the Obama administration pursuing it? Well, according to today's report, it's to “facilitate” the passage of FTAs like the TPP (see below). But if the TPP is such a “high-standard” agreement, what’s the harm in letting Congress get a good look at it, rather than handcuffing their involvement with Fast Track? Doing so would save Obama the political grief of a Fast Track fight. Or maybe there’s something even more objectionable about the TPP itself that requires Fast Track’s unparalleled sequestration of congressional power to get the deal enacted?
Again, the choice is not Fast Track or no Fast Track. It's Fast Track or a sensible model of trade policymaking for a modern democracy. A new model of delegated authority would respect Congress' responsibility to play the lead role in determining the outcome of “trade” deals that intend to rewrite policies regarding financial regulation, immigration, climate and energy policy, healthcare, food safety, etc.
USTR reiterates throughout the report its standard definition of the Trans-Pacific Partnership (TPP) as “a high-standard regional trade agreement that will link the United States to dynamic economies throughout the rapidly growing Asia-Pacific region.” (italics added) The primary problem with this pitch is that we’re already quite linked with these economies -- as in, 90 percent linked. The United States already has trade deals with six of the seven largest TPP negotiating economies, which constitute 90 percent of the combined GDP of the negotiating bloc. The TPP “dynamic economies” with which we don’t already have liberalized trade include Vietnam, where annual income per person is $1,374, and Brunei, which has a population smaller than Huntsville, Alabama. As we’ve said time and again, this deal is not primarily about trade.
What is it about? It's about banning Buy American policies that support U.S. jobs; discreetly enacting provisions of the congressionally-defeated, Internet-freedom-threatening Stop Online Piracy Act; restricting safety standards for imported food; empowering foreign investors to directly challenge governments’ public health and environmental policies while demanding taxpayer compensation for “expected future profits;” counteracting efforts to reregulate Wall Street; giving pharmaceutical corporations better tools to undermine drug cost containment policies; and more. USTR appears to have omitted such details in today's report.
Under a section entitled “Inclusion of stakeholders at Trans-Pacific Partnership negotiations,” USTR boasts that “Stakeholder engagements and briefings provided an opportunity for the public to interact with negotiators from all of the participating countries and provide presentations on various trade issues, including public health, textiles, investment, labor and the environment.” We have indeed given such presentations…while TPP negotiators were simultaneously scheduled to be on the other side of the negotiating venue. It’s hard to engage trade negotiators who are supposed to be in two places at once. We do appreciate the attempt at engagement, but would appreciate a more concerted effort.
After patting its back for being “open” and having “unprecedented direct engagement with stakeholders,” USTR includes this: “At the same time, the Administration will vigorously defend and work to preserve the integrity of confidential negotiations, because they present the greatest opportunity to achieve agreements that fulfill U.S. trade negotiation objectives.” Here USTR is trying to explain the equivalent of a used car's missing motor: an unbending commitment to not release the TPP negotiating text. While claiming “unprecedented” engagement with stakeholders, USTR’s decision to keep the TPP negotiating text secret from the public, the press, and even congressional offices is “unprecedented” among 21st-Century trade deals of this scope. The World Trade Organization (WTO), hardly a paragon of transparency, posts key texts online for public review. In addition, when the last major regional “trade” agreement (the Free Trade Area of the Americas) was at the same stage as the TPP is now, the text was formally released by the U.S. and other negotiating governments (in 2001). It’s hard to claim genuine engagement with stakeholders when those stakeholders cannot see the thing in which they hold such a stake.
The report reiterates President Obama’s State of the Union surprise: that the United States intends to not just negotiate a NAFTA-style pact spanning the Pacific (the TPP), but also one spanning the Atlantic. In brief discussion of the Trans-Atlantic FTA (TAFTA), the report says, “Such a partnership would include ambitious reciprocal market opening in goods, services, and investment, and would offer additional opportunities for modernizing trade rules and identifying new means of reducing the non-tariff barriers that now constitute the most significant obstacle to increased transatlantic trade.” But this deal, even more than most, is not about trade. Says who? USTR itself. U.S. Trade Representative Ron Kirk, in a briefing on the deal said that the administration has resisted including the word “trade” in the name of the deal “because it is so much broader than trade.”
With tariff levels already quite low between Europe and the United States, this FTA appears to be primarily about those “non-tariff barriers” standing in the way of “regulatory coherence.” What might such opaque terms mean? In the past, they have been code for a lowest-common-denominator approach to reducing all those safety, environmental, health, financial stability and other domestic regulations that corporations have not been able to roll back via domestic pressure. “Trade” deals provide a handy forum in which to write binding rules that contravene such regulations. What regulations in particular might be on the hoped-for chopping block? European firms have already taken aim at U.S. financial regulations, while U.S. corporations have long been annoyed by Europe’s tougher policies against unsafe food, GMOs, and carbon emissions. Big agribusiness, oil and gas, chemical, and financial firms on both sides of the Atlantic may be hoping to undermine such policies in a new TAFTA, to the detriment of, well, just about everyone else.
Exports and Jobs
The report informs the reader that “Data from 2012 showed that every $1 billion in U.S. goods exports supported an estimated nearly 5,400 American jobs...” Good to know. What about an additional $1 billion in imports? As per usual, USTR trumpets the gains of exports without looking at the other side of the trade equation. In the same way that exports are associated with job opportunities, imports are associated with lost job opportunities when they outstrip exports, as dramatically occurred last year. The non-oil U.S. deficit in goods rose six percent in 2012 to $628 billion, the largest non-oil U.S. trade deficit in the last five years. According to the Obama administration’s own math, that degree of negative net exports implies the loss of 3.4 million jobs. That data from 2012 didn’t make it into the report.
Readers of Eyes on Trade know that U.S. exports to Korea under the Korea FTA have been faring particularly poorly: they fell 10 percent in 2012 after the deal took effect (compared to the same months for 2011). How did USTR deal with this inconvenient truth in its annual report? It didn’t. With respect to the three FTAs implemented in 2012, the report states “…in 2013 we will work with Korea, Colombia, and Panama to ensure that the bilateral trade agreements that went into effect last year continue to operate smoothly…” A ten percent fall in exports for a deal that was sold under the unrelenting promise of “More Exports. More Jobs?” Real smooth. It seems that these are not the things one mentions in an annual report when one’s accompanying agenda for the next year includes more of the same FTAs (e.g. TPP), sold under the same “More exports. More jobs” pitch.
Buy American and Green Procurement Policies
Wonder why our exports and job growth has been so sub-par recently? USTR thinks it has found the answer—that scourge of our economic woes called “localization.” Here’s what the report has to say on the topic: “We are also actively combating “localization barriers to trade” – i.e., measures designed to protect, favor, or stimulate domestic industries, service providers, and/or intellectual property (IP) at the expense of goods, services, or IP from other countries…Localization barriers to trade that present significant market access obstacles and block or inhibit U.S. exports in many key markets and industries include: requiring goods to be produced locally; providing preferences for the purchase of domestically manufactured or produced goods and services; and requiring firms to transfer technology in order to trade in a foreign market…Building on progress made in 2012, the localization taskforce will coordinate an Administration-wide, all-hands-on-deck approach to tackle this growing challenge in bilateral, regional, and multilateral forums…”
Before the USTR dedicates the few hands it has on deck to scour the globe for pernicious localization policies, it might want to check out a few of our own. Namely, Buy American. This program, widely-supported among Republicans, Democrats and independents, provides a textbook example of USTR’s definition of a “localization barrier.” Buy American explicitly “provides preferences for the purchase of domestically manufactured or produced goods,” by requiring that U.S. tax dollars be spent on domestic firms when the U.S. government purchases construction equipment, vehicles, office supplies, etc. Did USTR have in mind the elimination of this job-supporting program? Their trade agenda would certainly indicate so –- the TPP and other FTAs ban the Buy American treatment for any foreign firms operating in new FTA partner countries.
“Localization” also implicates Buy Local and other green procurement policies that governments are increasingly using to transition to a greener economy. Ontario, for example, has employed a renewable energy program that requires energy generators to source solar cells and wind turbines from local businesses so as to cultivate a robust supply of green goods, services, and jobs. The program has earned acclaim for its early success in generating 4,600 megawatts of renewable energy and 20,000 green jobs. But one group hasn’t had much acclaim to offer: the WTO. In a ruling at the end of last year, the WTO decided that the successful program’s local requirements violate WTO rules. Today's report confirms indications that USTR now also intends to take on such climate-stabilizing “barriers to trade." Last month, the United States initiated a WTO case against India, attacking buy-local components of its solar energy policy. A refurbished trade agenda that undermines an urgently-needed clean-energy agenda? Sounds like a lemon.