Industry groups to President Obama: Leave federal trade agency alone

Business groups are expressing opposition to President Obama’s proposal to merge the Office of the U.S. Trade Representative (USTR) with other federal agencies. 

The plan, part of a broad restructuring of the government that Obama introduced last week, would combine six different trade-focused entities — including the Export-Import Bank, the Overseas Private Investment Corporation and USTR — into a single federal entity.

Businesses have hailed Obama’s call for the Small Business Administration (SBA) to be elevated to a Cabinet-level agency, but industry reaction overall has been mixed.

K Street’s final reviews likely hinge on Obama’s plans for the USTR, an independent agency that negotiates trade agreements and works to promote U.S. exports. 

Under the plan, USTR would merge with the Department of Commerce, prompting fears that the trade office, which business sees as an effective advocate, could lose its independence. 

The concern is magnified by the differences between USTR and Commerce.

USTR negotiates trade agreements for the United States and generally works to lower barriers in other countries. Commerce’s functions include determining whether to impose higher duties on imports to the United States, a practice that restricts trade and is designed to punish foreign exporters while protecting U.S. producers and workers.

In a series of meetings on the reorganization plans between trade groups and the Obama administration more than a year ago, the U.S. Chamber of Commerce advised against fiddling with the USTR. 

 “We emphasized that the Office of the U.S. Trade Representative has a unique and distinctive role negotiating and enforcing U.S. trade agreements,” John Murphy, the Chamber of Commerce’s vice president of international affairs, wrote in a blog post Friday. “The business community would oppose its merger with the Commerce Department, whose functions are quite different.”

Legislation passed by Congress and an executive order signed by President Carter made USTR the primary office on U.S. trade. Some in the business community fear putting USTR in Commerce could shift things back to the ’70s.

“The consensus view in the business community is that USTR has played its role and has played it exceptionally well,” said Calman Cohen, president of the Emergency Committee for American Trade (ECAT). “As more business leaders become aware of the implications for USTR, there will be an increasingly strong criticism of a return to its structure in the 1970s.”

USTR’s prestige also is enhanced by the presence of the lead negotiator — the U.S. Trade Representative, now Ron Kirk — in the president’s Cabinet. Obama’s plan would keep the trade rep in that vaunted inner circle, but business groups remain worried.

“Further, as the nation’s chief trade negotiator and trade enforcer, the U.S. Trade Representative must remain a member of the president’s Cabinet to underscore his stature in talks with other countries’ trade ministers,” Murphy wrote in his blog post.

The Chamber executive did write that the business group understands there is some overlap between the various agencies and would support efforts to improve the government’s trade-related functions.

Advocates for specific industry sectors are also fretting about USTR.

“International negotiations and trade disputes don’t wait for us to decide who gets to handle the issue. Any changes that are made to the USTR must not dilute its mission or hamper our ability to respond in real time,” Dan Varroney, acting president and CEO of TechAmerica, said in a statement Friday.

The future of Obama’s plan rests with Congress, which would have to pass legislation giving him the authority to reorganize the agencies. Obama said he needs that authority, last used by President Reagan, so he can improve the services that the government provides to businesses.

“Sometimes more is better; this is not one of those cases, because it produces redundancy and inefficiency,” Obama said Friday. “With the authority that I’m requesting today, we could consolidate them all into one department, with one website, one phone number, one mission: helping American businesses succeed. That’s a big idea.”

But business groups say folding the USTR into other agencies would hinder, not help.

Cohen of ECAT, who worked on the last reorganization of trade-related agencies during the Carter administration as an aide to the Senate Democratic Policy Committee, said USTR’s role was arrived at deliberately and should not be changed. 

“It was recognized that it was critical that the Office of the U.S. Trade Representative be the coordinator of trade policy, to coordinate different departments’ views of trade rather than just have one departmental view,” Cohen said. “It was important to have USTR in the Executive Office of the President in order to maintain pre-eminence and increase its clout in international trade negotiations.”

Business groups are happy with Obama’s move to return the SBA to the Cabinet — a position it last enjoyed during the Clinton administration. Under Obama’s proposal, SBA would eventually be folded into one entity, along with USTR and other agencies.

“Anything that elevates the SBA, given the credit access issue and its correlation to jobs, is critically important,” said Steve Caldeira, president and CEO of the International Franchise Association. “[SBA] Administrator [Karen] Mills has been an outstanding champion for the small business community. … It’s well-deserved.”

But Caldeira said more review of the reorganization proposal is needed, noting that it’s critical that SBA loan programs remain intact and stay at their current funding levels.

“The devil is in the details,” Caldeira said.