Wednesday, March 18, 2009

Obama's messy stance on free trade

A CNN Money article by Nina Easton accuses President Obama of having a "messy" message about free trade. In part, he is trying to satisfy organized labor, which is often protectionist, and America's trading partners.

Obama is awkwardly trying to figure out how to position himself as a reformist free-trader without angering the anti-trade labor leaders who remain a central piece of his political coalition.

The Mexican trucking program was supposed to launch in 2000, but it was delayed repeatedly until 2007 because of organized labor and its allies in Congress. The Teamsters union, which has maintained that Mexican trucks are unsafe, is virulently opposed to it. (The Mexican trucks in the program are required to undergo safety certifications, and their government - which exported $215.9 billion worth of goods here last year - argues that its transporters shouldn't be forced into the costly and inefficient process of unloading cargo onto U.S. trucks.)

By keeping Mexican trucks off U.S. roads, the president sends a message that he wants to protect U.S. workers' jobs. But as he saw first-hand last month on his visit to Caterpillar Inc., the interests of workers - especially unemployed workers - aren't always in sync with the interests of their protectionist unions.

The Peoria, Ill.-based company - the world's largest mining and construction equipment manufacturer - has been battered by layoffs, and the White House had hoped its location at the heart of the nation's rust belt would provide an apt symbolism for the President's visit. "In many ways," Obama said there, "you can measure America's bottom line by looking at Caterpillar's bottom line."

What he didn't say was that Caterpillar counts on 60% of its revenue from foreign sales. Obama also didn't mention that Jim Owens, whom he appointed to his Economic Recovery Advisory Board, made it a point to tell him on Air Force One on the way to Peoria that a Buy America provision would mean retaliation from trading partners against companies like Cat.

That conversation may have contributed to the president's decision to recalibrate his message - he now says any Buy America provision must not violate World Trade Organization accords. And he told reporters during the Peoria trip that "a downward protectionist spiral [is] very dangerous."

Protectionism isn't the only problem on the table. The U.S. already risks falling out of step with the rest of the world on other trade fronts. During the height of the Democrats' protectionist rhetoric in last year's presidential campaign, then-U.S. Trade Representative Susan Schwab raised a serious concern: Even if a new White House didn't backtrack on trade - by reopening NAFTA, for example - a failure to move forward on new trade deals would put the U.S at a competitive disadvantage.

That failure is beginning to become apparent. This week, the South Korean government announced that it is close to a free-trade deal with the European Union. Meanwhile, a U.S. deal with South Korea is one of three trade agreements now languishing in Congress.

Let's hope President Obama's inability to deliver a clear message and act quickly aren't kicking off that downward spiral he claims to fear.

For the record, while I support unionization, I strongly disagree with organized labor's stances on protectionism.

Trade agreements between Western countries and less developed ones should contain labor and environmental protections. Western nations have no right to use protectionism to exploit countries in the Global South. You cannot deprive the poor of a possible livelihood. In turn, Western nations can benefit from their goods and services, and can help uphold human rights and the environment with trade treaties. Pity no one seems to have thought of this yet.

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