The trade agenda of US President Barack Obama, released on 2 March, appears to include more obstacles to free trade than incentives. His team brands the troubled Doha Round of talks “imbalanced”, while new trade agreements must satisfy tough standards on workers’ rights and the environment. Obama’s agenda praises the benefits of free trade, but in practice his policies could prove protectionist.
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Obama’s trade policy agenda promises to “correct the imbalance in the current Doha Round negotiations in which the value of what the US would be expected to give is well known and easily calculable, whereas the broad flexibilities available to others leaves unclear the value of new opportunities for our workers, farmers, ranchers and businesses.”
The administration wants trade policy to meet “strong standards of social accountability and political transparency”. Workers’ rights provisions will be part of future trade agreements to ensure that “competitiveness is not based on the exploitation of workers”. The framework for trade agreements and the framework for global climate change will also need to complement each other, the Obama administration said.
For one thing, the administration appears to regard free trade as unpleasant medicine to be taken only when necessary. Obama’s attitude to Doha, objecting to the US “giving” obvious benefits away while its “opportunities” are unclear, is a case in point. The main concession from the US in Doha is the reduction of farm subsidies, a major economic distortion and a waste of taxpayer money. The idea that free trade deals can result in huge economic benefits to everybody whether or not “gifts” are entirely balanced has been lost.
And while Obama reiterates the US commitment to the World Trade Organization, his agenda promises to “aggressively defend our rights and benefits under the rule-based trading system”. Again, that seems to label trading partners as antagonists.
Free traders will also worry about the fate of past and future free trade agreements. Only the tiny Panama free trade agreement (FTA) will be allowed through quickly, while Colombia and South Korea, both substantial FTAs with important US allies, are now subject to a process of “establishing benchmarks for progress”—a delaying mechanism for agreements signed two years ago. Renegotiation of the North American FTA is on the cards too, albeit only through “working together” with Canada and Mexico.
The US unions’ desire to impose American labour practices on emerging markets appears sacrosanct, despite the failure to recognize drastic differences in economic conditions. Obama’s environmental agenda too risks becoming an obstacle to free trade deals.
That’s particularly worrying in a severe economic downturn. The infamous Smoot-Hawley trade tariffs of 1929 grew out of the Great Depression. Under Obama’s agenda, trade deals will instead be complicated by debates about labour rules and climate change. Despite Obama’s trade-friendly rhetoric, the danger is that—whether he likes it or not—this will provide easy justifications for protectionism.