Barack Obama made a lot of promises during his campaign. Two of the most important ones were to get the economy moving again and to improve relations with critical international partners. But a counterproductive trade agenda has already led key trading partners to put new restrictions on U.S. imports. And rather than attempt to repair damaged relations and to open markets, Obama’s trade team appears to be drifting with the protectionist tide. If the White House does not wake up and correct some obvious mistakes, both short-term and long-term economic growth will suffer from loss of sales in critical markets.
On at least one important trade question - the North American Free Trade Agreement (NAFTA) - candidate Obama’s position implicitly promised friction with a key partner. Obama had called for renegotiating NAFTA, with a goal of establishing enforceable labor and environmental standards. Obama’s calls for changes to the agreement caused consternation in Canada, and particularly in Mexico, which regarded itself as the likely ‘target’ of new standards. Obama initially assuaged the concerns of both Mexican president Calderon and Canadian prime minister Harper. He met with Calderon before his inauguration, and with Harper in February. In both cases, Obama offered reassurances that he would not seek any changes that would restrict trade unnecessarily.
But while Obama made peace with Calderon, he was quick to sign into law legislation to bar Mexican commercial trucks from U.S. roads. It was the same position Obama had held while in the Senate, but Mexican officials had hoped that Obama might reconsider his stance when he became President. Instead he put the United States in violation of NAFTA without a second thought, and Mexico quickly imposed $2.4 billion in tariffs on a whole range of US exports. The Mexican commercial trucker association now says it will file suit against the U.S. government, seeking to recover $6 billion in damages due to the broken commitment.
The ban on Mexican commercial trucks was included in the so-called ‘stimulus’ legislation. That spending package also required that all public works projects paid for with stimulus money use domestically-produced steel, except when it was far more expensive than imported metal. In an effort to comply with this law, many states and municipalities have stopped buying imported Canadian steel, leading to hard feelings in Ottawa. In the last week, the Canadian Trade Minister has called for the repeal of the ‘Buy American’ rule, and threatened retaliation if the United States does not comply. One Canadian city has barred the purchase of imports from countries that refuse to buy Canadian goods, and Canada’s Federation of Municipalities is preparing to debate a similar resolution next month.
Furthermore, at least 29 members of the World Trade Organization have accused the Obama administration of instituting a new form of dairy protectionism, through the introduction of export subsidies for U.S. dairy products. The Australian government is particularly angry about the move, and has labeled it "a serious backward step toward protectionism." Leaders of Australia’s dairy industry support the filing of a complaint under the provisions of the US-Australia Free Trade Agreement. If the United States loses the case, American exports to Australia would face higher tariffs.
When you turn your view away from bilateral questions and toward multilateral negotiations, the picture is no better. The secretary general of the World Trade Organization is now putting the onus for success of the Doha Round of trade talks squarely on the United States. According to Pascal Lamy, the key impediment to a Doha deal was the refusal of the United States and India to make concessions on agricultural trade before their elections. Now that both have held their national elections, Lamy is calling for them to step up to the table and make a deal. In the case of the United States, there is pressure to curtail the system of agricultural subsidies that has been politically untouchable for decades. So far there’s no sign of movement from Obama.
The failure to move on the Doha negotiations is mirrored by the lack of commitment to trade agreements that have already been negotiated. Congress has refused to take a vote on the U.S.-Korea Free Trade Agreement for months. Now, the European Union has concluded its own deal with Korea, which will give European exporters an edge over their U.S. rivals. Congress has also refused to approve the U.S.-Colombia FTA. Canadian exporters will gain an edge in that market once Canada approves the deal it just negotiated. The Obama administration had signaled that it would push for a vote on the already-negotiated U.S.-Panama deal this summer; now that appears unlikely. So not only is the United States failing to put out bilateral trade brush fires, it’s losing ground against a broad range of competitors, and hampering the competitiveness of its own companies.
By themselves, none of these disputes is a serious problem – at least right now. Any one might be addressed relatively quickly by the Obama administration making concessions that are opposed by some portion of their political base. However, this White House has shown no inclination to take such actions – at least not yet. And none of these problems is going to go away – or even become any simpler – if ignored. The government of Mexico is considering adding tariffs to a new set of American exports; Canada might ultimately do the same (or see its municipalities cut off the purchase of U.S. exports). And the overall picture is of an administration content to see American companies lose out to companies operating in countries with leaders who lead.
Brian Faughnan's Bio
Brian Faughnan is a contributor to RedState.com and the Weekly Standard blog. He has written columns for the D.C. Examiner, and has provided political commentary on National Public Radio, XM, SkyNews, and other media outlets. Mr. Faughnan is a 10-year veteran of Capitol Hill, and has worked as a lobbyist and a consultant. He resides in Virginia.
Posted
06-05-2009 12:05 AM
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