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Will President Obama Be Good For Global Trade?

  • By Josh Green
  • · November 5, 2008
  • ·

Now that CNN has called the race for Senator Barack Obama, it’s time to ask — Will President Obama be good for global trade? My prediction: yes.

Over the last several months, I’ve been asked this question by a lot of people who care about global trade. Indeed, Candidate Obama generated a fair amount of concern with statements that suggested he’d put the brakes on trade. For instance, he called the North American Free Trade Agreement (NAFTA) a “bad” trade deal, criticized the U.S.-South Korea Free Trade Agreement, and opposed the Central American Free Trade Agreement (CAFTA). For a detailed accounting of Candidate Obama’s statements on the subject of trade, visit the Council on Foreign Relations website.

Candidate Obama’s statements notwithstanding, I predict President Obama will be good for trade. Some more specific predictions:

1) President Obama will be far more pro-trade than his campaign statements would suggest

Because of the electoral college system, U.S. presidential campaigns are all about swing states — states where the electorate is evenly divided between Democrats and Republicans. For some reason, the most evenly divided states (Ohio, Pennsylvania, Michigan) are states that have been particularly hard hit by globalization. Therefore, it’s not surprising that a candidate for president would employ anti-trade rhetoric. (Indeed, I’m surprised when candidates don’t employ anti-trade rhetoric!) With the campaign over, President Obama will be intensely focused on enacting policies that can jump-start America’s economy. Will these policies be pro-trade or anti-trade? To answer this question, I look at the economic advisers that Obama has surrounded himself with. At the top of this list: Robert Rubin, the former Goldman Sachs executive turned Clinton Treasury Secretary, who is decidedly pro-trade. In the months ahead, look at who President Obama appoints to key economic posts in order to assess whether my prediction is likely to be right or wrong.

2) President Obama will be more effective than his predecessor at facilitating new trade agreements

Over the last eight years, America’s unilateralist stance — in a number of arenas — has diminished its ability to play a constructive role on issues of concern to the global community. President Obama will put an end to America’s unilateralist stance which will likely enhance America’s ability to lead on, among other things, trade. And leadership is needed. The failure of the Doha round and the failure of governments to effectively coordinate on consumer safety issues are just two examples.

But let’s say President Obama proves effective at facilitating new trade agreements; will he be able to get them passed here in the U.S.? My prediction: yes. Republicans tend to support free trade, while Democrats need some convincing. A Democratic president is far more likely to succeed in bringing enough Democrats along to ensure passage — either by including “fair trade” provisions, or via old-fashioned arm-twisting. It’s no accident that NAFTA was passed while a Democrat was in the White House.

Your thoughts?

  1. Thomson  ·  November 5, 2008

    Interesting arguments, but I find it difficult to believe that Obama will be able to accomplish much on the free trade front given the emergence of India and China as strong international players. The Wall Street Journal had an article today that highlights this concern.

    http://online.wsj.com/article/SB122588551940101355.html?mod=vocus
    I quote- “EU officials say they believe Mr. Obama to be more of a convinced free trader than he let on during his election run. “Europe will be looking for the next president to be a strong partner, including in our effort to conclude the Doha round,” Catherine Ashton, the EU’s new trade commissioner said in an interview.

    But no matter Mr. Obama’s enthusiasm for the so-called Doha round of world trade talks, he has no better chance of concluding a multilateral trade deal than his predecessor, especially at a time of a global financial crisis and economic recession. The talks broke down in July over India and China’s right to impose special tariffs on food imports, and EU and U.S. farm tariffs and subsidies.

    “It’s frankly hard to see Doha going forward, whatever the president does,” said Richard Weiner of Chicago-based Sidley Austin, the law firm where Mr. Obama started his career and met his wife.”

  2. Lisa Reisman  ·  November 6, 2008

    I think the first point of this post is spot on…I do believe Obama to be more free-trade then he let on in order to appease voters. But I have to disagree with your prediction on no. 2.

    It’s unfair to blame Bush for failed Doha rounds. You can actually thank the US senate for passing an Agricultural Farm Bill chock full of subsidies and benefits to US farmers. Bush vetoed the bill and Obama voted for it. That bill (which also authorized these crazy ethanol incentives skewing corn prices for much of this year) has created a lot of international trade ill will. The US refused to remove the farm subsidies and that was the main area of contention around Doha. No I don’t think Obama is going to lead the way in international trade. He can help regarding Kyoto but he has been largely silent on international trade as a policy. I don’t see it in his top 10 agenda…

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