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«CHUKWUMERIJE MACRO.DOCX5/19/2010 11:03 AM OBAMA‟S TRADE POLICY: TRENDS, PROSPECTS, AND PORTENDS Okezie Chukwumerije ABSTRACT This article ...»

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CHUKWUMERIJE MACRO.DOCX5/19/2010 11:03 AM

OBAMA‟S TRADE POLICY: TRENDS, PROSPECTS, AND PORTENDS

Okezie Chukwumerije

ABSTRACT

This article evaluates the implications of the emerging trade policy of

the Obama administration. The article begins by sketching a picture of the

administration‟s trade-related initiatives and situating them in the context of

the trade objectives articulated by the president during the last presidential

election. The article then examines the trade aspects of the administration‟s stimulus and economic recovery programs. It focuses on their consistency with U.S. international trade obligations and with the long-standing commitment of the United States to a free and open multilateral trading system.

The article further explores the policy and political considerations that would affect the implementation of the trade-related aspects of the administration‟s environmental and labor protection initiatives. The article concludes with the caution that Obama‟s mixed messages on trade, measured by his rhetoric and policies, are detrimental to the pro-trade reputation of the United States and might embolden protectionists, both within and outside the United States.

INTRODUCTION

A. Obama‟s Approach to Free Trade During His Presidential Campaign

I. THE EMERGING PICTURE

II. TRADE IMPLICATIONS OF THE U.S. STIMULUS AND ECONOMIC

RECOVERY PROGRAM

A. “Buy American”

B. “Cash for Clunkers”

C. The Auto Bailout

III. ENVIRONMENTAL AND LABOR PROTECTION INITIATIVES

A. Environmental Protection

B. Labor Protection

IV. LOOKING AHEAD

 Professor of Law, Thurgood Marshall School of Law, Texas Southern University, Houston, Texas.

CHUKWUMERIJE MACRO.DOCX5/19/2010 11:03 AM 40 University of California, Davis [Vol. 16:1

INTRODUCTION

With the U.S. economy experiencing a severe crisis as he assumed office,1 President Obama has understandably focused his attention on strategies for reviving the economy and preventing it from sliding into a protracted recession. Although he discussed global trade issues during the 2008 presidential election,2 the ongoing economic crisis has so drained the attention of the Obama administration that it has paid scant attention to articulating a coherent trade policy. The president has occasionally intervened in support of open markets, for example, by urging Congress to make the “Buy American” provision of the stimulus package conform with U.S. international obligations,3 and by urging Congress not to use trade sanctions as a means of enforcing provisions of the Climate Bill.4 While these interventions are indicative of the president‟s appreciation of the importance of free trade principles, he has not always demonstrated an unequivocal support for free trade. If anything, he has consistently sent mixed signals about his commitment to open markets. Observers expect that he will use a forthcoming speech to more clearly address the trade challenges facing the nation and outline his trade agenda more plainly.

Several factors make it necessary for the administration to act quickly in declaring its trade policy goals. First, during the presidential campaign, Obama promised to reshape U.S. foreign policy, in part by moving away from a unilateral strategy to a more multilateral approach for addressing the issues and challenges facing the world community.5 The world economic crisis is the most severe financial crisis the world community has faced since the Great Depression.6 The Economist estimated that world trade would shrink in 2008 for the first time since 1982, and that net private-sector capital investment in emerging economies would fall from $929 billion in 2007 See Martin Baily & Douglas Elliott, The U.S. Financial and Economic Crisis: Where Does it Stand and Where Do We Go From Here?, BROOKINGS INITIATIVE ON BUSINESS & PUB. POLICY, June 2009.

For a summary of the candidate‟s positions, see McCain, Obama Plans on U.S. Trade Policy, REUTERS, June 4, 2008, available at http://www.citizenstrade.org/pdf/Reuters_Mc CainObamaTradePolicy_06042008.pdf.

See Editorial, The Peril of „Buy American,‟ N.Y. TIMES, June 3, 2009.

See John Broder, Obama Opposes Trade Sanction in Climate Bill, N.Y. TIMES, June 29, 2009, available at http://www.nytimes.com/2009/06/29/us/politics/29climate.html.

Merle Kellerhals, Obama Emphasizes Multilateral U.S. Foreign Policymaking, July 25, 2008, available at http://www.america.gov/st/usgnglish/2008/July/20080725162819dmslahre llek0.840069.html.

See United Nations, WORLD ECONOMIC SITUATION AND PROSPECTS 2009 (2009), available at http://www.unctad.org/en/docs/wesp2009pr_en.pdf (stating that “the world economy is now mired in the most severe crisis since the Great Depression”).

CHUKWUMERIJE MACRO.DOCX5/19/2010 11:03 AM

Obama‟s Trade Policy: Trends, Prospects, and Portends2009] 41

to $165 billion in 2008.7 This would represent a considerable reduction in the injection of foreign capital into these economies, a source of capital that has contributed significantly to the revival of these economies.8 The economies of Member States of the Organization for Economic Cooperation and Development (OECD) also weakened significantly in 2008,9 with the economic decline exacting pressures on both employment and wages. The global nature of the crisis presents an opportunity for the Obama administration to demonstrate how multilateral strategies can be used to effectively tackle global problems.





The second reason the administration must act quickly in declaring its trade policy goals is that the economic anxiety attendant with this recession has contributed to a backlash against globalization, with segments of labor and civil society organizations questioning the benefits of an open multilateral trading system.10 In the U.S., “[r]ising economic anxiety... is stoking a political backlash against free trade, raising worries American workers and businesses aren‟t getting a fair shake in the global marketplace.”11 Partly in response to the anxiety of their constituents about the benefits of free trade, some members of Congress, especially Democrats, are becoming “deeply conflicted on trade and globalization.”12 In fact, some members of Congress are using trade “fairness” as justification for seeking to reengineer U.S. trade policy to more closely conform to their conception of U.S. strategic trade interests.13 Leaders in other parts of the world are experiencing similar pressures to restrict open markets. In China, for example, the government is seeking to use the expansion of exports to revitalize its domestic economy. It is doing so by introducing “bans on government agencies using imported products, tax rebates and preferential financing to exporters,” and also by continuing to implement “an exchange rate policy that aims to suppress the Chinese currency, thereby making Chinese goods cheaper on global markets than The Return of Economic Nationalism, ECONOMIST, Feb. 5, 2009.

OECD, NEW HORIZONS FOR FOREIGN DIRECT INVESTMENT 4 (2002).

See OECD, ECONOMIC OUTLOOK, Vol. 2008, Issue 2.

See Nina Easton, America Sours on Free Trade, FORTUNE, Jan. 25, 2008, available at http://money.cnn.com/2008/01/18/news/economy/worldgoaway.fortune/.

Greg Hitt, Christopher Conkey & Jose de Cordoba, Mexico Strikes Back in Trade Spat, WALL ST. J., Mar. 17, 2009, available at http://online.wsj.com/article/SB12372319224084576

9.html.

Clause Barfield & Philip Levy, In Search of an Obama Trade Policy, AMERICAN ENTERPRISE INSTITUTE OUTLOOK SERIES, Aug. 2009, available at http://www.aei.org /outlook/100063.

See, e.g., Trade Reform, Accountability, Development and Employment Act of 2009, H.R. 3012, 11th Cong. (2009) see infra text accompanying note 224 (synopsis of the bill available at http://www.citizen.org/documents/TRADEActFactSheet2009.pdf) CHUKWUMERIJE MACRO.DOCX5/19/2010 11:03 AM

42 University of California, Davis [Vol. 16:1

they might otherwise be.”14 As anxiety about the state of the world economy fuels calls for protectionism, the Obama administration needs to articulate a clear trade agenda, with a coherent message on the centrality of open markets to world economic revival and prosperity.15 Finally, during the presidential campaign, Obama spoke of the need to address the environmental and labor implications of multilateral trade.16 Given the centrality of these issues to his presidential campaign and the protectionist pressures felt across the globe, it behooves the Obama administration politically to demonstrate how it can advance trade-related labor and environmental protection issues without compromising U.S. commitment to an open and free multilateral trading system.

A. Obama‟s Approach to Free Trade During His Presidential Campaign Obama indicated a qualified support for free trade principles throughout the presidential campaign. While recognizing that “[t]rade has been the cornerstone of our growth and global development,” he suggested that “we will not be able to sustain this growth if it favors the few, and not the many.”17 He cautioned that “we must forge trade that truly rewards the work that creates wealth, with meaningful protections for our people and our planet.”18 Acknowledging that the tide of globalization could not be turned back, Obama expressed confidence that the U.S. could compete in the global economy of the 21st century. However, he cautioned that “success will depend not on our government, but on the dynamism, determination, and innovation of the American people.”19 During the campaign, he outlined a three-pronged approach to trade isR. Taggart Murphy, China's Outward-Swinging Trade Doors – More Lessons from the 1970s? THE ASIA PACIFIC J.: JAPAN FOCUS, available at http://www.japanfocus.org/site/view /120.

Group of Twenty, The Global Plan for Recovery and Reform, para. 3 & 22, available at http://www.g20.org/Documents/final-communique.pdf. (The Group of Twenty (G20) has cautioned that challenges facing world economy are not cause for retreating from an open multilateral trading system. In fact, it argues that “the only sure foundation for sustainable globalisation and rising prosperity for all is an open world economy based on market principles, effective regulation, and strong global institutions.” The G20 also noted that “[r]einvigorating world trade and investment is essential for restoring global growth” and pledged that its members “will not repeat the historic mistakes of protectionism of previous eras.”).

Council on Foreign Relations, The Candidates on Trade, July 30, 2008, available at http://www.cfr.org/publication/14762/.

Barack Obama, CHANGE WE CAN BELIEVE IN: BARACK OBAMA‟S PLAN TO RENEW AMERICA‟S PROMISE 268 (Three Rivers Press 2008) (citing Obama‟s 2008 speech in Berlin).

Id.

Barack Obama, President of the United States of America, Speech in Flint, Mich. (June 15, 2008); see CHANGE WE CAN BELIEVE IN, supra note 17, at 245-46.

CHUKWUMERIJE MACRO.DOCX5/19/2010 11:03 AM

Obama‟s Trade Policy: Trends, Prospects, and Portends2009] 43

sues: a pledge to improve labor and environmental protections in trade agreements, a pledge to improve adjustment assistance to displaced workers, and a pledge to renegotiate aspects of the North American Free Trade Agreement (NAFTA).20 With respect to labor and environmental protections, he promised to use “trade agreements to spread improved labor and environmental standards around the world,”21 and to only sign trade agreements that afford protections for our environment and for American workers.22 Concerned about the enforcement of existing trade obligations,23 Obama also insisted that enforcement of existing trade agreements should not take a backseat to the negotiation of new agreements.24 His promise to renegotiate NAFTA was motivated by a desire to include stricter labor protection provisions in the agreement.25 He felt that he could use “the hammer of a potential opt-out” of the agreement to leverage Canada and Mexico to agree to the inclusion of enforceable labor protections in the agreement.26 Furthermore, persuaded of the need to address the adverse impacts of free trade on some American workers and communities, Obama promised to broaden the trade adjustment program.27 He planned to accomplish this by extending benefits to workers displaced from the services sector, create education accounts to fund the retraining of workers, and provide assistance to communities adversely affected by global trade.28 Now that he is in office, Obama faces several trade-related challenges.

Foremost is how to ensure that his economic stimulus policies are consistent with the longstanding U.S. commitment both to the liberalization of markets NAFTA is a free trade agreement between the United States, Mexico and Canada. See North American Free Trade Agreement, U.S.-Can.-Mex., Dec. 17, 1992, 32 I.L.M. 605 (1993).

Campaign Website, BarackObama.com, “RESOURCE FLYERS” August 2007, quoted in Barack Obama on Free Trade, available at http://www.ontheissues.org/2008/Barack_ Obama_Free_Trade.htm.

Council on Foreign Relations, supra note 16.

Obama Campaign Booklet, Blueprint for Change, Feb. 2, 2008, at p. 15, available at http://www.barackobama.com/pdf/ObamaBlueprintForChange.pdf (Obama promised to take enforcement seriously and “to make enforcement the top priority of the U.S. Trade Representative (USTR) Office, and [to] increase resources for the USTR so it can carry out its responsibility to protect American interests.”).

Obama, supra note 17, at 257.

2007 AFL-CIO Democratic Primary Forum, Aug. 7, 2007, quoted in Barack Obama on Trade, supra note 21. (Obama promised to “Immediately call the president of Mexico and the Prime Minister of Canada to try to amend NAFTA because I think we can get labor agreements in that agreement right now.” Id.).

Council on Foreign Relations, supra note 16.

See Robert McMahon, No End of Free Trade, NEWSWEEK, Dec. 4, 2008, available at http://www.newsweek.com/id/172072/page/1.

Obama Campaign Booklet, Blueprint for Change, Feb. 2, 2008, at p. 15, available at http://www.barackobama.com/pdf/ObamaBlueprintForChange.pdf.

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44 University of California, Davis [Vol. 16:1



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