Is Obama Tempering His Protectionist Trade Talk?

The Administration's ambiguous views on NAFTA and other pacts will come up in Senate hearings on U.S. Trade Representative nominee Ron Kirk

President Barack Obama campaigned on a platform of a more restrictive trade policy than his White House predecessors embraced, but experts wonder whether he will temper his views now that the U.S. economy is in a tailspin.

For now, the impression is that trade probably is on the back burner until the Administration gets traction on fixing the financial system and the economy. Still, the question of how open the U.S. should be with its trade partners is certain to be a central issue in a Senate Finance Committee confirmation hearing on March 9 for former Dallas Mayor Ron Kirk, Obama's nominee to be U.S. Trade Representative. If confirmed, Kirk will represent the country in trade negotiations, and Senate Republicans appeared likely to question him closely on an apparent administration plan to seek amendments to the North American Free Trade Agreement with Canada and Mexico. Kirk's position on pending bilateral trade agreements with Colombia, Panama, and South Korea—all of which Obama questioned during the campaign—also appear to be likely flash points.

The hearing will be the first chance for the administration to respond to critics who have said that Obama has a hostile attitude toward foreign trade at a time when experts say any move toward protectionism could trigger a devastating eruption of trade barriers around the world.

An ambiguous U.S. trade posture

Obama's first choice for the trade post, Rep. Xavier Becerra (D-Calif.), declined the nomination because it seemed clear that trade would not be a priority of the Administration, according to people close to him. The 54-year-old Kirk has little trade experience. He was Dallas mayor from 1995 to 2001, then worked as a lawyer with the firm Vinson & Elkins after losing a 2002 U.S. Senate bid. In an interview with the Dallas Morning News in December, Kirk suggested he might run for the U.S. Senate again next year.

A starting point for questioning in the Senate hearing will be a seemingly ambiguous trade policy paper released by the administration on March 2.

Christopher Wenk, a trade lobbyist for the U.S. Chamber of Commerce, said the paper signaled that Obama would support the trade agreement with Panama as a way of demonstrating that his Administration is not anti-trade. Wenk said that indications were that "nothing is holding it back," and that the agreement could come up for Senate ratification as early as the summer. Wenk also read the trade paper as setting out a "road map" for how the Colombia and South Korea agreements could be approved, too.

Mixed signals persist

But David M. Spooner, an Assistant Secretary of Commerce in the George W. Bush Administration who is now a trade lawyer with Squire, Sanders & Dempsey, said the paper gave off mixed signals on Panama. He points out that it initially suggested the Administration would move on the agreement "relatively quickly," but later said it would review all three pacts to see "whether these agreements appropriately advance the interests of the United States and our trading partners."

"The most remarkable thing about the paper is how little it clarified Obama's trade policy," Spooner said.

Gary Hufbauer, a trade expert at the Peterson Institute for International Economics in Washington, said the policy paper is "pretty bland" and indicates that the economic crisis will continue to occupy most of the administration's attention. "I think the administration hopes to keep trade policy as a fairly low-profile matter for a few months," Hufbauer said. "They don't want to agitate their allies or adversaries" while they are focusing on economic policy.

Obama has appeared to give confusing signals on NAFTA. In his campaign, the candidate offered up much criticism of the agreement, which he said he would seek to renegotiate. But in a meeting in February with Canadian Prime Minister Stephen Harper, Obama suggested that the economic crisis necessitates a change of plans, saying that nations had to be "very careful about any signals of protectionism."

Grassley defends Iowa's grain exports

The trade paper, however, revisits NAFTA, saying that the administration would meet with Canada and Mexico to determine whether the agreement "could be improved without having an adverse impact on trade." The paper suggests that Obama will seek more protection for labor and the environment in Mexico—points he raised routinely during his Presidential campaign.

Senator Charles Grassley (R-Iowa) signaled in a letter to Obama last week that he will seek assurance from Kirk that agricultural exports from Iowa wouldn't be affected by any amendment to NAFTA. Canada and Mexico are Iowa's top export markets, accounting for a combined 47% of the state's $12.1 billion of shipments abroad last year. Corn and soybean products were Iowa's main exports to Mexico.

Another issue sure to come up is personal income taxes, which have dogged Obama's nominees. Last week, Senate Finance Committee staff revealed that Kirk failed to pay $9,975 in back taxes over the last three years, largely from improperly reported speaking fees and inadequate business documentation for spending on Dallas Mavericks basketball tickets. Kirk said he would pay the full amount. Committee Chairman Max Baucus (D-Mont.) said the problem was not significant and predicted fairly rapid confirmation. But other committee members, including opposition senators Orrin Hatch (R-Utah) and John Cornyn (R-Tex.), said they would quiz Kirk on his tax-paying record.

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