WASHINGTON – President Barack Obama is pursuing what are arguably the most aggressive trade talks in a generation, an unexpectedly broad initiative for a politician who has been critical of free-trade pacts.
Taken together, the negotiations are global in ambition, encompassing Europe and potentially much of Asia, and covering economic sectors that are particularly important to the United States. Even major economies not directly at the table — notably China, India and Brazil — are meant to be influenced by the outcome.
If the effort pays off, it could boost some of America’s most competitive and important companies. Finance and consulting firms would be able to move more deeply into Europe, Japan and some developing countries. Technology leaders would have freedom to source their software and place their computers where it makes the most economic sense. The biotech industry would see longer patent protections, and carmakers could get access to the coveted Japanese auto market.
The risks are the same ones critics have attributed to earlier pacts, such as the North American Free Trade Agreement: that liberalized rules will drain more jobs from the U.S. than they create and undermine today’s leading-edge sectors the way textiles, automobiles and steel were weakened in the past.
To the Obama administration, it’s the logical response to sluggish job growth, the failure of the Doha round of global trade talks and the fear that trade restrictions incubated in places such as China and India could become the global norm unless countered.”Going through this crisis and recovery has pushed us all to focus on what it is we can do to create jobs and growth in every area of policy,” said Mike Froman, deputy national security adviser for international economics. “If we are able to execute on this, it will be the most ambitious trade agenda in a very long time.”
It is a wager, in a sense, of robots over running shoes as the administration tries to create trading rules that play to U.S. strengths in innovation, technology and high-end services but could mean more competition for basic manufacturing.
The discussions include the 11-nation Trans-Pacific Partnership, a potentially sweeping agreement that would tie the U.S. more closely to North American neighbors Canada and Mexico and open new relations with growing Asian economies such as Vietnam. South Korea and Japan, the world’s third-largest economy, may join as well.
The tradeoffs could be stark. Vietnam wants to do away with high U.S. tariffs on footwear, a step that could eliminate the few U.S. athletic shoe manufacturing jobs that remain. The benefit for the U.S. would be a vastly deregulated Vietnamese economy that shows how a communist country — optimistically China in the future — might limit the role of state-owned businesses and open sensitive sectors to international competition.
Other negotiations include the recently announced Trans-Atlantic Trade and Investment Partnership with the European Union, a pact U.S. and European officials say would create the world’s largest economic zone, eliminate long-standing restrictions on agricultural trade and simplify regulations for an array of goods and services. The U.S. also has joined 47 other nations in talks on an agreement to liberalize the services sector — a significant issue for American firms that feel they have an advantage in areas such as consulting, energy management, insurance and other fields.
Other talks aim to expand an existing agreement on trade in technology goods and to lower the time and expense it takes to send intermediate goods across national borders to a final assembly point.
The range of negotiations now under way has surprised Obama’s critics and allies alike, who note the contrast with his vote against the Central American Free Trade Agreement as a senator and his criticism as a Democratic primary candidate of the North American trade pact with Canada and Mexico.
“It is not just reflexive free trade. . . . They are looking for strategic openings,” said Robert Atkinson, president of the Information Technology and Innovation Foundation, a Washington-based think tank. He credited the administration for battling in the current talks against what he called “innovation mercantilism” — policies in a growing number of countries that force the use of locally written software, demand that data be stored on local computers and set other restrictions that function as trade barriers in the technology world just as surely as tariffs.
Still, “it’s a crapshoot” whether the set of agreements under discussion will be a net plus for U.S. workers, said Thea Lee, chief international economist for the AFL-CIO. The administration’s emerging emphasis on issues such as investment and patent protection, she said, could ultimately make more types of U.S. companies comfortable moving abroad, while doing little to curb a U.S. import bill that suppresses American jobs and growth.
U.S. Trade Representative Ron Kirk said the expansive trade agenda, starting with the approval of free-trade agreements with South Korea, Colombia and Panama in Obama’s first term, is not the philosophical shift it might seem. After a first year in which the administration was focused on the country’s acute financial crisis, Kirk said, trade officials “were given wide latitude to run.”
Kirk, a former Dallas mayor who is comfortable with one-on-one politicking, was tasked with carrying that message to the labor unions, blue-collar manufacturing areas and Democratic strongholds that had secured Obama’s victory.
It was not popular, and traditional free-trade critics remain unconvinced there is much new about Obama’s approach.
The Korea pact, held over from the Bush administration, for example, was rewritten at U.S. insistence to include better access to the vibrant South Korean auto market. Administration officials say their willingness to walk away from the talks with Seoul until those auto concessions were secured marks a distinct change of strategy — proof they were not just negotiating to conclude a deal, regardless of the substance.
But in its first year, the agreement with Seoul has produced mixed results. Auto exports have increased from their very low base — but so has the overall U.S. trade deficit with South Korea.
“It is really frustrating,” said Rep. Michael Michaud, whose state has been buffeted by competition from overseas paper producers and, depending on the outcome of the TPP talks, could lose several hundred jobs at a New Balance shoe plant. “At the end of the day, President Obama is unlikely to be much different than Bush or Clinton.”
Michaud said the administration deserves credit for more aggressive trade enforcement overall. But he argues Obama has not struck as hard a line as promised in a 2008 letter in which he pledged to battle the “entrenched forces” in China that are “profiting from the dramatic undervaluation of the Chinese yuan and the lack of regulatory enforcement in the Chinese market.”
Underlying the administration’s trade initiatives, however, are some broader truths about the U.S. and global economies, and some calculated guessing about where both may be heading.
Administration officials argue that industries that may be most important to future U.S. growth are not well covered by existing trade agreements and treaties. The lackluster pace of job creation in the U.S. and among allies in Europe created a try-anything attitude on both sides of the Atlantic. China’s rise has led to a broader U.S. effort to deepen relationships with Asian nations that share many of the same anxieties about their behemoth neighbor.
“If Obama pulls this off, it will be path-breaking, precedent-shattering,” said Bruce Stokes, head of the global economic program at the Pew Research Center. “They appear to have moved from a risk-averse first term to creating a legacy in international economic and trade policy.”