Obama Warms to Global Trade

For much of his campaign for President, Barack Obama sought to differentiate himself from predecessors who, he said, did not adequately protect American companies or foreign laborers and environments. He would be different, he said.

Yet, 100 days into his first term, Obama has appeared much more pro-trade than business feared—or some of his supporters hoped. U.S Trade Representative Ron Kirk has embarked on negotiations to complete bilateral trade agreements left over from the Bush Administration with Colombia and Panama. Both could be submitted to Congress this year, Panama as early as June, Administration officials say. In addition, both Kirk and Obama say that, contrary to what the President vowed in the heat of the campaign, they will not seek to amend the North American Free Trade Agreement with Canada and Mexico—at least not soon.

What has changed? The economy, for one. Obama has said repeatedly in recent weeks that he does not want to risk the rise of global protectionism that could make the financial crisis much worse.

But the President's actions have also validated a suspicion during the campaign that he was never as radical on trade as was suggested. "If you just listened carefully to what he said, that wasn't where he was. The nuances were in the opposite direction," says Mickey Kantor, who was U.S. Trade Representative under President Bill Clinton.

Answering to the Unions

Enforcement will hardly disappear from the agenda in any event. On Apr. 28, Kirk wrote an op-ed article in the San Francisco Chronicle arguing for the need for strong and effective protection of America's intellectual property. On Apr. 30, he sent a required report to Congress on the efficacy of intellectual-property protection and enforcement around the globe. For the first time, the U.S. placed Canada on a watch list, in part because of concern about "weak border enforcement" of intellectual property.

The Administration still must answer to politically powerful labor unions and their backers in Congress, which partly blame existing trade agreements for the nation's job losses. If Obama doesn't convince them he's doing all he can to assure a level trading field for U.S. companies and workers, Democrats in Congress may scuttle the Colombia and Panama agreements as they did during the Bush Administration.

"In this time of economic uncertainty, we need to redouble our efforts to work with all of our trading partners—even our closest allies and neighbors such as Canada—to enhance protection and enforcement of intellectual-property rights in the context of a rules-based trading system," Kirk said in a statement.

In moving away from its harshest campaign rhetoric, the Administration is winning a cautious vote of approval from the business community. "I think President Obama and his key economic advisers, people like Larry Summers and Tim Geithner, understand that trade is very important to our country and that the international economy is very important," said Caterpillar (CAT) Chairman and CEO James W. Owens in an Apr. 24 briefing, just hours after he and other members of the Business Roundtable met with Kirk for the first time since he took office. "As Nixon went to China and President Clinton reached across party lines to pursue trade liberalization. I think President Obama may be positioned to do the same. There are still some issues to work through, but I thought [Kirk] spoke quite positively about developing a trade agenda that we can move forward with this morning."

Frank Vargo, vice-president for international economics at the National Association of Manufacturers, said: "A lot of people prognosticated that nothing would happen on trade. That has turned out not to be true. We feel we can work with this Administration."

Honoring Trade Treaties

Elsewhere, though, Obama's stance is getting mixed reviews.

Lori Wallach, head of Public Citizen's Global Trade Watch, a Washington (D.C.) lobbying group critical of trade, said that Kirk seems prepared "to implement the Bush trade agenda. That seems to contradict what President Obama has said himself." Obama, she said, promised "to create a new trade model."

David Spooner, a lawyer at Squire, Sanders & Dempsey who was Assistant Commerce Secretary for import administration in the Bush Administration, concedes that Obama is more pro-trade than he expected. But he is not all that impressed. "It amazes me that the [U.S. Trade Representative] generates positive [media] coverage simply because he says he supports trade," Spooner said in an e-mail exchange. "Has there ever been an anti-trade USTR? At some point, the new trade team will actually have to do something."

With his relatively pro-trade agenda, Obama is falling in line with a global trend that contradicts the conventional wisdom. While international trade officials have raised alarms over what they call a worrying rise of tariffs around the world, in fact there have been very few cases of any country actually violating trade treaties during the financial crisis, officials say. One of the few countries that appears to have broken an agreement is the U.S., which in March blocked Mexican long-haul trucks from U.S. roads. Mexico responded by slapping tariffs on 90 U.S. products.

Scott Miller, chief Washington lobbyist for Procter & Gamble (PG), said it is notable that countries are by and large honoring actual legal thresholds. "People do feel obligated to hold on to their binding [World Trade Organization] commitments. That's a signal that the trading system is working," Miller said.

Kirk's Game Plan?

The broad outlines of how the Administration will try to get the Colombia and Panama treaties through Congress are beginning to appear, analysts say.

On Panama, Kirk will try to get the country to tighten tax laws affecting foreign companies to satisfy critics who describe the country as one of the world's most egregious tax havens, experts say. The Administration hopes to finish the talks in time to present a finished agreement to Congress by June.

On Colombia, Kirk will address concerns over the murder of labor leaders by showing that the country is arresting, convicting, and imprisoning those responsible, said Bill Reinsch, president of the National Foreign Trade Council. In an interview in Washington, Colombian Trade Minister Luis Guillermo Plata said he is meeting Kirk, in addition to members of the Administration and Congress, in order to set out a framework for negotiations. He said it's possible that an agreement can be reached by yearend, but he will know more after the meetings. Colombia is seeking the agreement because a trade agreement "brings certainty" for local investors considering starting or expanding businesses, Plata said.

A third languishing Bush-era agreement is with South Korea. But experts say it will be by far the most difficult of the three to complete. Labor critics say that the Koreans have unfair barriers to U.S. automobiles and beef. The easiest area to reach a pact on will be beef, experts say. South Korea is already buying more U.S. beef, which Kirk could present to Congress as evidence that the country is playing fairer on trade. "Meanwhile, with all of the [U.S.] government involvement in the auto industry, Obama certainly has leverage to tell industry execs to shut up about Korea," said Spooner.

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