Chicago: President-elect Barack Obama has signaled a major shift in US trade policy with a new emphasis on enforceable environmental and labor standards to prevent a “race to the bottom.”
But while these progressive policies may satisfy some critics, they could further complicate stalled WTO negotiations and serve as an excuse for greater protectionism as the United States slips deeper into its worst financial crisis since the Great Depression.
“The incoming president will face more political pressure for protectionism than any other US chief executive since 1930,” said outgoing US Under Secretary of Commerce Christopher Padilla.
“How president-elect Obama responds to this pressure will define the course of the global economy - and America’s economic identity - for a generation,” he said.
Obama’s free trade credentials remain questioned ahead of his White House entry on 20 January despite having tapped free trade advocates Bill Richardson for commerce secretary and Ron Kirk as US trade representative.
The Democrat is strongly backed by trade unions and opposes free trade pacts with Colombia and South Korea that were signed under President George W Bush’s administration.
Together with another free trade deal signed with Panama, the pacts are gathering dust in Congress due to opposition from largely Democratic lawmakers.
In tapping Kirk on Friday, Obama said that while the success of American business depends on “strong, robust trade, and open doors for American products,” any agreement he signs “must be written not just with the interest of big corporations in mind, but with the interests of our whole nation and our workers at heart.”
Kirk has “seen the promise of trade, but also its pitfalls, and he knows there is nothing inconsistent about standing up for free trade and standing up for American workers,” Obama said at a press conference in Chicago.
That reciprocity will extend beyond just trade in goods, Obama said, but also means that “on both sides of the border, we end up having labor and environmental agreements that are enforceable so we don’t have a race to the bottom, but instead the standards of living of all workers are raised.”
Kirk, who as mayor of Dallas, Texas championed a “NAFTA freeway” to speed cross-boarder shipments with Mexico as a “true river of trade between our communities,” faces a tough task balancing varying national, trade union and business interests.
Kirk faces the challenge of pushing for greater market access with China and working on the sensitive issue of adherence to intellectual property rights.
Obama has also vowed to get tough on China’s currency policy which US lawmakers charge is a key cause for the ballooning US trade deficit with the world’s most populous nation.
Kirk may also have to tinker with the key North American Free Trade Agreement (NAFTA), which Obama wants renegotiated in order to protect US jobs.
Obama also wants to rewrite the South Korean deal, the biggest to be forged since NAFTA 15 years ago, to give US carmakers greater access to the Korean market.
Outgoing trade representative Susan Schwab welcomed Kirk as an “excellent choice” who “understands the importance of trade” and said she hopes he will build upon the Bush administration’s record of opening markets and enforcing trade agreements.
While Bush expanded the number of bilateral free trade agreements from three countries to 14 in his eight years, his administration has shouldered much of the blame for the failure of the Doha Round of the World Trade Organization talks to forge a new global trade deal.
Obama’s advisors say he wants to give emphasis to both regional and multilateral trade negotiations, but any deal he forges will have to get past a Democratic-controlled Congress.