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Barack Obama’s election was welcomed in many parts of the world, but America’s global partners are already concerned about his administration’s approach to trade, writes Ewen MacAskill in this article for The House Magazine.
Even while Barack Obama’s election victory in November was being celebrated around the world, hard-headed realists in foreign ministries and treasuries in Europe, Canada, Australia, Mexico and elsewhere were worrying about whether the arrival of a new president might mark the start of a new round of trade wars.
There would have been no such worry had John McCain won. The Republican is one of the most outspoken and committed advocates of free trade in American politics. In speech after speech on the campaign trail, he talked up the benefits of free trade and the dangers of protectionism.
By contrast, Washington-based diplomats had been sending home alarming reports about Obama and his fellow Democrats. In spite of a Democratic history of support for free trade – John Kennedy and Bill Clinton both embraced it – Obama’s speeches were full of anti-free trade rhetoric.
He was reacting to an outcry among US workers angry over the steady loss of jobs to cheaper labour markets in Asia and Central America. Blame was put on free trade agreements, particularly the North American Free Trade Agreement (NAFTA) with Canada and Mexico. Obama hinted on the campaign trail that he would reopen negotiations on NAFTA.
One of Obama’s economic advisers, Austan Goolsbee, confused matters early last year when he tried to reassure Canadian diplomats at a private meeting that the candidate’s remarks were campaign rhetoric rather than an articulation of future trade policy.
So, now Obama is in office, what is it to be? Is Obama, faced with the biggest recession to hit the US since the 1930s, going to retreat behind protectionist policies? Or is he going to embrace free trade as being in the best long-term interests of the US? The easy answer is it’s too early to say; that his economic policy is still under review and only slowly emerging.
His first few weeks in office produced mixed signals. Inserted into the biggest spending bill in US history, aimed at helping the country out of recession, was a ‘Buy America’ provision. A large part of the $900bn spending package is for new bridges, roads, schools, hospitals and other infrastructure projects. The original bill, which passed through the House of Representatives, included the provision. Leaders in the European Union, Canada, Australia and elsewhere, who would normally be reluctant to openly criticise US policy so early in a presidency, publicly voiced their opposition.
The White House and the US Senate backed off, putting into the bill the critical caveat that the ‘Buy America’ policy should not contravene any international trade agreements. That appeased the free traders, at least temporarily.
Obama’s background suggests he should be sympathetic towards free trade. He taught for 12 years at the University of Chicago, one of the bastions of free trade in the US. And his two main economic appointments, Tim Geithner to head the treasury and Larry Summers as his White House adviser, are both free traders.
But Obama is not immune from the pressures on the Democratic Party from the trade unions, who have identified trade agreements as a prime cause of job losses and wage stagnation. That will make it harder for him to take a positive lead in international trade talks, in particular the Doha negotiations.
He may compromise by promising to stick to America’s international trade obligations but not embracing any new deals. His White House press spokesman, Robert Gibbs, hinted at such an approach earlier this month when, in response to questions about ‘Buy America’, he said:
“The balance [Obama] wants to strike is to continue to get our economy going, without unnecessarily starting something with trading partners all over the world and global partners that will hinder getting our economy moving again.”
Professor Jagdish Bhagwati, professor at Columbia University, senior fellow at the Council on Foreign Relations, and former adviser to the WTO, told reporters that simply abiding by existing regulations was not sufficient and that, without pro-active moves, the US could face retaliatory action from developing countries. “Obama is not stepping up to the plate,” Bhagwati said.
Although Bill Clinton is now remembered for having started negotiations on the North America Free Trade agreement and other free trade moves, he was ambiguous about it on the campaign trail and during his first year in office. He came to office against a background of concern about Japanese trade expansion, comparable to concerns at present about China. But Clinton eventually came to the conclusion that free trade was in the best interests not only of the world, but also the US.
Ewen MacAskill is the Guardian’s Washington DC bureau chief
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