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21/02/2014 | How to make the world $600 billion poorer

The Economist Staff

Barack Obama’s unwillingness to fight for free trade is an expensive mistake

 

IN JULY 2008 Barack Obama, then a candidate for the presidency, declared before an adoring crowd in Berlin that “true partnership and true progress [require] constant work and sustained sacrifice.” So it is with free trade. If not championed by leaders who understand its broad benefits, it will constantly be eroded by narrow economic nationalism. Mr Obama now appears to be surrendering to protectionists within his own party. If he cannot drag Democrats back to their senses, the world will lose its best opportunity in two decades for a burst of liberalisation. It will also be a signal that America is giving up its role as defender of an open global economy in the same way that Mr Obama has retreated in foreign policy.

Mr Obama did little to promote free trade during his first term, but has seemed bolder in his second. He launched America into ambitious new deals with large Pacific economies and the European Union, breathing new life into global trade talks. Momentum built up; the “constant work and sacrifice” paid dividends. Members of the World Trade Organisation agreed on a package of trade reforms in December—the first truly multilateral deal in the organisation’s 20-year history. Diplomats credit the White House’s new resolve for helping to bring stubborn parties to the table. Progress suddenly seemed possible in other areas, such as liberalising trade in services and information technology, and reducing barriers to the exchange of “environmental goods and services”, which would make it cheaper to curb carbon emissions.

First, shoot yourself in the foot. Then repeat…

The hitch is that Congress must approve trade agreements. Previous presidents had the advantage of “fast-track” trade promotion authority, which let them present deals to Congress for a simple yes or no vote. Without it, lawmakers can wreck carefully negotiated deals with toxic amendments. No country would engage in serious talks with America under such circumstances. Fast-track is therefore essential—and elusive. Congress last granted it in 2002; it expired in 2007. The Obama administration blithely asserted that Congress would renew it, but many lawmakers, primarily Democrats, have signed letters opposing it. Harry Reid, the Senate majority leader, has all but ruled out a vote this year. And on February 14th Joe Biden, the vice-president, told a gathering of Democratic leaders that he understood their opposition. The White House appears to have given up with scarcely a fight. A fast-track vote before November’s mid-term elections seems unlikely (see article).

Why panic about this? Tactically, it could just be another piece of Washington politicking: some optimists claim that Congress will return after the mid-terms ready to back fast-track, providing Mr Obama allows some boilerplate language in the bill chiding China for allegedly manipulating its currency. Others wonder whether the trade deals are really so vital. Indeed, the idea that they will not do much to help the economy is one excuse for Democrats undermining their president.

In fact, the deals on the table are big. Reasonable estimates say that the Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP) could boost the world’s annual output by $600 billion—equivalent to adding another Saudi Arabia. Some $200 billion of that would accrue to America. And the actual gains could be even larger. The agreements would clear the way for freer trade in services, which account for most of rich countries’ GDP but only a small share of trade. Opening up trade in services could help reduce the cost of everything from shipping to banking, education and health care. Exposing professional occupations to the same global competition that factory workers have faced for decades could even strike a blow against the income inequality that Mr Obama so often decries.

Tactically, even a short delay could prove fatal to both deals. Pacific negotiations have been extended while America and Japan hammer out compromises on agriculture. Why should Japanese politicians risk infuriating their farmers when any agreement can be torn up on Capitol Hill? The deal with the EU was meant to be done swiftly—perhaps in as little as two years—to keep politics from mucking it up. Europe’s leaders will now doubt America’s commitment, given how feebly Mr Obama has fought for fast-track. Trade sceptics, such as French farmers, are drooling. Angela Merkel, Germany’s chancellor, who is already furious about American spying, may decide that a trade deal is not worth battling for.

The greatest risk of all is that the political momentum in America, having swung against free trade, will be hard to reverse. Some Tea Party Republicans oppose fast-track because they are loth to grant Mr Obama the authority to do anything. Democrats, keen to brand themselves as the anti-inequality party, may find economic nationalism an easy sell on the campaign stump: and, once pledged to that cause in November, candidates will not vote for the opposite in Congress.

And for this Mr Obama deserves some blame. He is far more ardent in bemoaning inequality than in explaining why an American retreat from the world would be the wrong way to address it. He seldom mentions, for example, that cheap imports help the poor by cutting their shopping bills, and so reduce inequality of consumption.

It’s not a zero-sum world

There is nothing inevitable about globalisation. Governments have put up barriers before—with disastrous consequences during the 1930s—and could do so again. So it is alarming when America, the mainstay of an open global economy, gives off isolationist signals. Only recently Congress childishly refused to honour an agreed-upon increase in America’s financial commitment to the International Monetary Fund. The Federal Reserve is pushing forward with new banking regulations that could penalise foreign banks and further Balkanise global finance (see article). Mr Obama continues to delay approval of a critical oil pipeline from Canada, and is slow to grant permits to export American natural gas.

“America cannot turn inward,” the Obama of 2008 said in Berlin. The Obama of 2014 is now responding: “Yes we can.”

The Economist (Reino Unido)

 



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03/01/2010|
17/12/2009|
15/12/2009|
15/12/2009|
13/12/2009|
13/12/2009|
28/11/2009|
28/11/2009|
28/11/2009|
28/11/2009|
27/11/2009|
27/11/2009|
27/11/2009|
27/11/2009|
27/11/2009|
27/11/2009|
21/11/2009|
21/11/2009|
18/11/2009|
18/11/2009|
16/11/2009|
16/11/2009|
30/10/2009|
30/10/2009|
11/10/2009|
10/10/2009|
10/10/2009|
07/10/2009|
07/10/2009|
04/10/2009|
30/09/2009|
30/09/2009|
27/09/2009|
27/09/2009|
27/09/2009|
22/09/2009|
20/09/2009|
18/09/2009|
18/09/2009|
18/09/2009|
16/09/2009|
16/09/2009|
16/09/2009|
08/09/2009|
07/09/2009|
06/09/2009|
06/09/2009|
05/09/2009|
05/09/2009|
26/08/2009|
21/08/2009|
19/08/2009|
19/08/2009|
15/08/2009|
15/08/2009|
15/08/2009|
11/08/2009|
11/08/2009|
11/08/2009|
11/08/2009|
19/07/2009|
19/07/2009|
18/07/2009|
18/07/2009|
27/03/2009|
22/03/2009|
22/03/2009|
27/01/2009|
27/01/2009|
27/01/2009|
17/01/2009|
17/01/2009|
17/01/2009|
17/01/2009|
17/01/2009|
17/01/2009|
11/01/2009|
06/12/2008|
06/12/2008|
06/12/2008|
06/12/2008|
23/11/2008|
23/11/2008|
16/11/2008|
16/11/2008|
04/11/2008|
04/11/2008|
03/11/2008|
03/11/2008|
24/10/2008|
24/10/2008|
24/10/2008|
24/10/2008|
15/09/2008|
15/09/2008|
15/09/2008|
15/09/2008|
15/09/2008|
15/09/2008|
06/09/2008|
06/09/2008|
05/09/2008|
05/09/2008|
05/09/2008|
05/09/2008|
01/09/2008|
01/09/2008|
01/09/2008|
01/09/2008|
22/08/2008|
22/08/2008|
17/08/2008|
17/08/2008|
16/08/2008|
16/08/2008|
28/07/2008|
28/07/2008|
28/07/2008|
28/07/2008|
28/07/2008|
28/07/2008|
19/07/2008|
19/07/2008|
24/05/2008|
24/05/2008|
03/05/2008|
03/05/2008|
29/04/2008|
11/02/2008|
05/01/2008|
09/12/2007|
18/11/2007|
10/11/2007|
10/11/2007|
06/11/2007|
06/11/2007|
06/09/2007|
26/08/2007|
25/08/2007|
11/07/2007|
16/06/2007|
16/06/2007|
10/06/2007|
10/06/2007|
19/05/2007|
19/05/2007|
19/05/2007|
19/05/2007|
24/04/2007|
24/04/2007|
14/04/2007|
14/04/2007|
05/04/2007|
05/04/2007|
05/04/2007|
28/02/2007|
28/02/2007|
05/02/2007|
05/02/2007|
04/02/2007|
04/02/2007|
04/02/2007|
04/02/2007|
04/02/2007|
04/02/2007|
29/01/2007|
29/01/2007|
29/01/2007|
29/01/2007|
11/01/2007|
11/01/2007|
11/01/2007|
11/01/2007|
27/12/2006|
27/12/2006|
27/12/2006|
27/12/2006|
27/12/2006|
27/12/2006|
20/12/2006|
20/12/2006|
17/11/2006|
30/09/2006|
28/07/2006|
12/04/2006|
12/04/2006|
12/04/2006|
06/03/2006|
21/02/2006|
17/02/2006|
31/01/2006|
10/01/2006|
28/12/2005|
31/10/2005|
26/09/2005|
29/08/2005|
11/08/2005|
08/08/2005|
24/06/2005|
24/06/2005|
24/06/2005|
03/04/2005|
03/04/2005|
03/04/2005|
03/04/2005|

ver + notas
 
Center for the Study of the Presidency
Freedom House