The economic agenda of President Barack Obama’s second term is being eagerly awaited. Few expect Obama to focus on much else except the immediate problems of fiscal management and the unacceptably high rate of unemployment that his administration was saddled with during most of his first term. On the jobs front, the unemployment rate is stabilizing at just below 8%, but the fiscal problems seem to be getting worse. There is a widespread view that the US is fast approaching the “fiscal cliff” and that unless urgent steps are taken to get government finances in order through a compromise on taxes between the Democrats and the Republicans, the economy could be headed towards another recession.
As Obama grapples with his domestic woes, the world will impatiently watch how the new administration of the world’s biggest economy will respond to critical global challenges, including those in the realm of climate change and trade. Multilateral processes in both these areas are paralysed—a US administration that is overtly obsessed with myriad domestic problems will not be particularly helpful in ending this logjam.
On the issue of climate change, the first signals Obama is giving out do not bode well for multilateral processes. The signal from his statements is quite clear. First, his views are that taking on climate change in a serious way will require “tough political choices”. But he hastened to clarify that at a time when Americans are focused on economic and unemployment challenges, he will not ignore jobs and growth “simply to address climate change”. The second message is that, in his second term, Obama will focus on a national “conversation” on climate change. Some observers see this as a positive signal. In his first term, Obama was personally far less involved in this area than he should have been. But the proposed national “conversation” could draw the president further into the fights of factious lobbies that are vying to put the domestic agenda above what is necessary for global good. Further, with various manufacturers’ organizations lobbying with the government to provide an environment that could ensure industrial revival in the US, possibilities of adjustment by the largest emitter of carbon dioxide in per capita terms and the second largest emitter in absolute terms, do not seem to be particularly bright.
The trade agenda adopted by Obama in his second term will be critical for the future of the global economy. Undoubtedly, the most important dimension in this regard will be the way the new administration engages with its partner countries to provide momentum to the multilateral trading system. Many observers are of the view that the negotiations in the Doha Round of trade liberalization are not going anywhere because of the US’s intransigence. Driving this position was the fact that the Obama administration, in its first term, did not have the mandate it needed from the US Congress to engage in trade negotiations. But the reality was that the previous administration never approached the Congress with the trade promotion authority (better-known as the “fast-track negotiating authority”), the legislation that enables the administration to do trade deals. It thus earned the dubious distinction of being the only one to have not approached the US Congress to obtain a “fast-track negotiating authority”, since this mechanism was introduced in the US Trade Act of 1974.
Over the past four years, the Obama administration was clearly in favour of the Trans-Pacific Partnership Agreement (TPPA), an agreement that involves eight countries from the Asia-Pacific region. TPPA appears to be an attempt the US is making to further its geo-political ambitions in a region that is witnessing China’s increasing presence and the importance it is getting is, therefore, quite understandable. That TPPA has become a handmaiden of the US trade administration was evident from a report of the United States Trade Representative that describes this as “a key initiative through which the administration seeks to advance the US’s multi-faceted trade and investment interests in the Asia-Pacific region by negotiating an ambitious 21st century regional trade agreement”. TPPA negotiations have also received tacit bipartisan support in the Congress, and this despite the fact that the administration does not have “fast-track negotiating authority”. After all, Congressmen can hardly object if the administration is engaged in a process that will ultimately advance the country’s economic interests.
The global trading regime can hardly be a safe bet if the largest trading nation pursues an agenda that is narrowly focused only on its own self interests. Such a tendency may well trigger similar trends in other major economies leading to inevitable trade conflicts. This is a situation that the global economy can ill-afford at the present juncture. Clearly, the way forward for the Obama administration is to vote for strengthening the multilateral trading system which offers a framework that enables all the countries to participate equally to put in place institutions and instruments needed to keep the global trade free from discriminatory trade practices.
Biswajit Dhar is director general at Research and Information System for Developing Countries, New Delhi.