Obama’s trade policy opportunity

Contrary to the clamor from the U.S. Chamber of Commerce and newspaper editorials, the Obama trade agenda is not stalled — it is in formation.

This week, negotiations started on President Barack Obama’s first potential trade agreement — the Trans-Pacific Partnership. Will the administration transform the TPP process that Bush initiated in 2008, so as to translate Obama’s campaign trade reform commitments into a new approach that that works for more people and thus rebuild bipartisan consensus for trade expansion? Or, will the administration revert to the Bush-Clinton-Bush trade pact model, and intensify the associated economic and political damage?

Creating a new policy is necessary in this era of globalization, if Americans are to enjoy the economic security of good jobs and an end of the crisis-inducing financial casino, a clean environment, and safe food and products.

Indeed, creating a new trade policy will determine the success of much of the Obama administration’s domestic agenda given that today’s agreements extend far beyond tariffs and quotas to set parameters for numerous non-trade polices. Trade-pact investment and procurement rules will affect whether the billions being invested in the Green Economy will translate into American jobs. Trade-pact service sector rules define the policy space available to re-regulate finance and reform health insurance. Trade-pact rules implicate efforts to combat climate chaos.

The large agribusiness firms and job-offshoring multinationals who claim Obama’s trade agenda is stuck were the few beneficiaries of the 1990s pacts like the North American Free Trade Agreement and World Trade Organization. They oppose establishment of an Obama trade policy. They seek continuation of the status quo, starting with adoption of Bush’s leftover NAFTA-style pacts with Colombia, Korea and Panama. To revive this failed model — most recently rebuffed when a majority of House Democrats opposed Bush’s Peru agreement that mirrors the remaining three — would be a grievous policy and political mistake.

The goods news is that a diverse bloc in Congress has built consensus around a new approach designed to achieve trade expansion that can deliver U.S. job creation, consumer safety and environmental protection. A majority of House Democrats, including 12 full committee and 56 subcommittee chairs, have sponsored the Trade Reform, Accountability, Development and Employment (TRADE) Act, as have 23 Blue Dogs, 19 New Democrats and 30 Congressional Black Caucus members. The bipartisan legislation sponsored by Rep. Mike Michaud (D-Maine) and Sen. Sherrod Brown (D-Ohio) translates Obama’s trade reform commitments into a new trade-pact model — building on the initial reforms Democratic trade committee leaders extracted from Bush in 2007.

The TRADE Act’s provisions on what future pacts should and should not include provide a roadmap for trade expansion at a time when the damage wrought by the NAFTA-WTO model has transformed trade politics. In the past two elections, 72 congressional candidates that campaigned against the trade status quo and for a new approach replaced those who voted for NAFTA, CAFTA, and China’s WTO entry. GOP and Democratic 2008 candidates ran over 140 campaign ads on trade, as did the Democratic House and Senate national campaign committees. This reflects the strong public demand for a new American trade policy.

Not surprisingly, polling shows bipartisan opposition to the old trade regime across diverse demographics. Since NAFTA and WTO went into effect, the U.S. lost net 5 million manufacturing jobs (one out of four in that sector) while American median wages remained stagnant despite productivity gains as corporations used the pacts’ investor protections to relocate and arbitrage their labor costs absent a floor of labor standards. Various environmental and health laws were attacked before trade tribunals. Unsafe food and product imports swelled. The trade deficit exploded from $102 billion to a height of $807 billion, with dire consequences for global economic stability. Quite simply, the old model has not worked for most Americans — nor for most in other nations, as is highlighted by the Doha Round WTO expansion deadlock.

For the Obama administration to succeed, it must not only update the trade-pact model, but also remedy our China trade disaster and update the 2001 Doha Round agenda. Treasury’s April 15 decision on China’s currency manipulation will be critical in determining the success of Obama’s goal of creating 2 million net new jobs from expanded exports. We would suffer net job losses and an enormous trade deficit were imports — to which China is the largest single contributor — to follow their current trend.

Time is overdue to dispense with the claim that critics of the past model are anti-trade. The question is trade under what terms. The bipartisan consensus that marked decades of U.S. trade votes was shattered with the 1990s advent of the NAFTA trade agreement model. Replacing the failed 1990s trade-pact experiments with the new American trade policy Obama promised and Americans expect is the way forward.

Wallach is director of Public Citizen’s Global Trade Watch.