Fair to say, Obama’s trade policy has largely been indiscernible during his first 100 days in the Oval Office. It appears that the exigency from the financial crisis and his original anti-trade position in the campaign has complicated the setting of a clear future trade agenda. More recently, however, Obama seems to have shifted towards a more open, engaging trade policy.
What Obama said in the campaign trail…
In fact, Obama as a candidate in the Democratic Primary was not hostile to trade. While his rivals, Hilary Clinton and John Edwards, openly attacked the foundation of free trade in a strategic effort to rally support among traditional Democratic constituencies, such as labor organizations, Obama walked in a fine line. This was mainly because his support base was more diffused than the other two, including middle-class intellectuals and young voters most of whom subscribe to the basic tenet of free trade. For example, Obama said in New Hampshire in December 2007 that “global trade is not going away, (…) and that means enormous opportunities, but also means more dislocations.” Of course, this balanced, more pragmatic position on trade was influenced by his star advisors, including the University of Chicago economics professor Austan Goolsbee.
However, after chosen as a Democratic presidential candidate who had to duel with a pro-trade Republican candidate, Obama turned more anti-trade than he used to be in the primary campaign. For example, he vowed to overhaul and even re-negotiate existing free trade agreements, such as NAFTA, in a way which is more labor and environment-friendly. Of course, we all know the famous leakage from the Canadian side that Goolsbee hinted to the Canadian government that this was just a political posturing.
Right after he was elected…
Undoubtedly, the foremost focus of Obama’s first 100 days as the president was an effective response to the economic crisis which he inherited from the Bush administration. This exigency simply did not grant Obama enough time and energy for trade policy agenda. Also, he might have found it politically necessary to temporarily acquiesce to a protectionist sentiment within the Congress to glean more political capital to pass the economic stimulus package. Thus came along two infamous protectionist clauses inserted in the $ 787 billion package (the “American Recovery and Reinvestment Act of 2009”). The “Buy American” clause, which requires domestic infrastructure constructions to use only made-in-USA steel, rattled the world. Yet less known than the Buy American clause is what may be coined “Hire American” clause inserted in the same Act, which denies any Troubled Asset Relief Program (TARF) money to financial institutions applying for work (H-1B) visas in high skilled areas. Bank of America had to cancel many job offers extended to foreign MBAs in its reluctant compliance with the clause.
Obama’s subtle slant to anti-trade continued until the new trade chief Ron Kirk was confirmed in the Congress. In the “President’s Trade Policy Agenda” sent to the Congress in February, Obama implied that he would re-approach the Doha trade talks from the ground zero by declaring that what is currently on the Doha’s table is “imbalance” which must be corrected.
On his 100th day…
Nonetheless, Obama has recently demonstrated a clear departure from this ambivalence toward trade. Since his visit to Latin America, Obama as well as his trade chief Kirk has been sending constructive messages for two pending FTAs with Panama and Colombia. Markedly, Obama highlighted the critical foreign policy element in these FTAs. In a rare gesture, the Senate trade leadership, such as Max Baucus and Charles Grassley, has agreed. In a letter sent to the president on the 20th this month, Baucus and Grassley have hinted cooperation with Obama on the trade policy front by stressing the importance of passing the U.S. – Korea FTA to secure a strategic alliance between the U.S. and Korea in the aftermath of North Korea’s launch of a long-range missile. A few days later, Obama quietly reneged on his campaign pledge to renegotiate NAFTA. In a speech at Georgetown Law Center on the 23rd this month, Kirk finally heralded a “new paradigm” on trade policy, calling for reviving global trade in the time of global recession and supporting the U.S. exports, especially by small and medium-sized companies.
This paradigm shift appears to be not so much an abrupt policy change as a circumspect plan. In retrospect, one might speculate that Obama had diligently accumulated political capital necessary for open trade agenda by passing a big economic stimulus package, expanding the scope of trade adjustment assistance (TAA) and announcing the overhaul of the nation’s notorious heath insurance system powered by more progressive taxation. Certainly, he would like to earn some scores in his foreign policy platform. Trade policy can be a good vehicle for that purpose, covering a wide geography of the world from Latin American to Asia. He also would like to work with Republicans who are usually pro-trade and build up a broader political base among voters with an eye for re-election.
After all, Obama’s clairvoyance and pragmatism can bring a long-awaited global stimulus package – free trade.