Obama Asks Trade Nominees to Tackle Slumping U.S. Exports

President Barack Obama asked his nominees for Commerce secretary and trade ambassador to revive U.S. export growth as the administration’s goal of doubling overseas sales by the end of next year slips out of reach.

Obama yesterday nominated Chicago businesswoman Penny Pritzker to lead the Commerce Department and Michael Froman, deputy national security adviser for international economics, as trade representative. Both posts, which promote the U.S. overseas, require Senate approval.

“I urge the Senate to confirm Penny and Mike without delay, because they’ve got a lot of work to do,” Obama said in a White House Rose Garden ceremony before departing on a trip to Mexico and Costa Rica. “I intend to work them to the bone as soon as they’re official.”

While exports have climbed during Obama’s tenure, the pace has slowed each year since he took office. U.S. exports advanced 17 percent in 2010 from the previous year as the economy began to rebound from the global economic crisis. The rate fell to 14 percent the next year and was 4.3 percent last year as growth slowed in Europe, a major market for U.S. goods.

Global Economy

``The easy growth is over,'' Derek Scissors, a senior research fellow at the Heritage Foundation in Washington, said in a phone interview. The effects of short-term government economic stimulus programs are wearing off, and the global economy remains weak, he said. ``The recovery essentially ended.''

Scissors said he doesn't think the U.S. will be able to double exports by next year because the goal is founded on the world economy recovering quickly, which isn't probable.

World trade growth declined to 2 percent in 2012 from 5.2 percent the previous year, according to the World Trade Organization.

Amy Liu, co-director of the Metropolitan Policy Program at the Brookings Institution in Washington, said a key to improving U.S. exports will be to encourage small and medium-sized companies to enter the global trading system. "This is the nut that we need to crack," she said in a phone interview.

Export Pledge

Obama pledged to double exports, to $3.14 trillion in goods and services, by the end of 2014. Last year, they were a record $2.2 trillion, a 39 percent increase from 2009, when Obama took office, according to the Bureau of Economic Analysis.

Pritzker, 54, and Froman, 50, would join Obama’s Cabinet as the U.S. sets out to forge a trade deal with the European Union and embraces Japan’s participation in Pacific-region talks.

To curb what it calls unfair competition that hinders U.S. exports, the administration has started legal proceedings against nations including China and India at the World Trade Organization, and last year it established a unit that includes officials from the Commerce Department, which promotes U.S. goods overseas, and USTR, which leads negotiations on trade agreements, to police potential trade violations.

“It’s not simply a matter of filing a WTO case and then doubling your exports,” Scott Lincicome, a trade lawyer with White & Case LLP in Washington, said in a phone interview. The success of a nation’s exports depends on macroeconomic conditions, and to significantly boost sales abroad the U.S. will need to take steps including reducing its debt, he said. “Until you do those things, you’re kind of at the whims of the market gods.”

Pace Slows

Exports in March declined $1.7 billion from the month before, to $184.3 billion, the Commerce Department reported yesterday. Exports for three months through March reached a quarterly record $554.7 billion.

In picking Pritzker and Froman for his economic team, the president chose confidants with whom he has longstanding relationships.

Froman, a former Citigroup Inc. executive who worked in President Bill Clinton’s Treasury Department, was an Obama classmate at Harvard Law School. Pritzker, an heiress whose family helped build the Chicago-based Hyatt Hotels Corp. chain, has known Obama since the mid-1990s and served as finance chairman for his 2008 campaign. Her birthday was yesterday.

“They both can have an impact, but they play different roles,” Ira Shapiro, a trade lawyer with Greenberg Traurig LLP in Washington and a former USTR general counsel, said in a phone interview before the nominations were made. “Day-to-day export promotion is likely to fall more” to Pritzker, he said.

Commerce Advocacy

The Obama administration’s 2014 budget proposes $520 million, about 6 percent of the Commerce Department spending, to help reach the export goal. The request is 14 percent higher than spending to promote U.S. products in 2012.

The secretary of Commerce leads a department with about 43,000 employees in 12 units including the National Oceanic and Atmospheric Administration, the Census Bureau and the Patent and Trademark Office. The department’s International Trade Administration has 4 percent of the agency’s total employees.

The National Association of Manufacturers, a Washington-based industry group, welcomed Pritzker’s nomination. “We are looking forward to working closely with Penny on policies to increase trade promotion, reduce tariffs, reform our export control system and improve enforcement of our trade rules,” Jay Timmons, the group’s president, said in a statement.

Unwieldy Bureaucracy

Lincicome said the bureaucracy is too unwieldy for any leader to have much of an effect on exports. Deputy Commerce Secretary Rebecca Blank has led the agency after John Bryson resigned last June for health reasons.

If confirmed at USTR, Froman will succeed Ron Kirk, who left the post in March. Demetrios Marantis has been acting U.S. Trade Representative.

“Michael Froman has the vision and experience to deliver new trade opportunities for American workers and companies at the negotiating table,” U.S. Chamber of Commerce President Tom Donohue, who leads the nation’s biggest business lobby, said yesterday in an e-mailed statement.

Democrats led by Senator Max Baucus, chairman of the Senate Finance Committee, and Representative Sander Levin of Michigan expressed support.

‘Nimble Agency’

Baucus is working toward bipartisan legislation by June that would renew the president’s authority to negotiate accords without amendments from Congress. Advocates of such a measure say it would speed completion of trade negotiations.

“USTR is an effective, nimble agency, and by choosing Mr. Froman to lead it, the administration is sending a clear signal that trade is a top priority,” Baucus said in a statement.

Republicans such as Senator Orrin Hatch of Utah were muted in their reaction.

“I want to know whether this nominee shares my commitment to innovation and strong intellectual property rights,” Hatch, the top Republican on the Senate Finance Committee, said in a statement.

Consumer and environmental groups, which have sought access to the texts of pending trade agreements, were skeptical.

Backward Policies

Froman “has been instrumental in pushing President Barack Obama’s trade policies backward to the corporate agenda,” Lori Wallach, director of the Global Trade Watch for Public Citizen, a Washington-based consumer advocacy group, said in a statement.

“Froman must not allow international trade and investment rules to undercut the ability of nations to tackle climate disruption,” said Ilana Solomon, trade representative for the Sierra Club in Washington said.

As trade representative, a cabinet-level post, Froman will be responsible for negotiation of the Trans-Pacific Partnership and an accord between the U.S. and 27-nation EU. If concluded, they would be the largest free-trade agreements in U.S. history.

“Not every USTR gets the opportunities that he’s going to have if confirmed,” Shapiro said of Froman, whom he has known since the two worked together during the Clinton administration.

Trade Enforcement

As trade representative, Froman will have to win lawmakers’ support for trade agreements. The accords will attempt deal with issues such as Internet privacy that Congress has yet to fully address, Susan Ariel Aaronson, a professor of international affairs at George Washington University, said in a phone interview.

“This has been the logical appointment all along,” Clayton Yeutter, a former U.S. Trade Representative under President Ronald Reagan, said of Froman before the nomination was announced. “He knows the issues and he knows the people. That’s really the key.”

Robert Zoellick, a U.S. Trade Representative under President George W. Bush, said he and Froman recently had a long conversation about trade policy.

“I tried to say, ‘You cannot do this from the White House,’” Zoellick said May 1 at a trade conference at the law offices of McDermott, Will & Emery in Washington. “The president may think you can, but you can’t.”

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