Election 2012: U.S. Trade Policy and What to Expect
What would be the international economic policies of a reelected President Obama or a newly elected President Romney? The candidates’ stump speeches and campaign ads give few clues—beyond agreement on China’s practices being villainous. Setting aside this characterization of our third-largest (and fastest-growing) export market, what can we conclude from each campaign’s public statements?
Let’s start with the challenger. Governor Romney’s overall vision—“free trade is essential to restoring robust economic growth”—puts him in the mainstream of U.S. presidents since Franklin Roosevelt. Importantly, two of Romney’s “Five Bills for Day One” focus on international trade and global competitiveness. The “Open Markets Act” would reinstate trade-promotion authority, while the “American Competitiveness Act” would reduce corporate income tax rates and transition to a territorial system, which would boost U.S. exporters that compete globally with foreign-headquartered firms. The Romney campaign website mentions other initiatives, like enhancing trade with Latin America and creating “Reagan Economic Zones,” but offers few details.
On the other side, President Obama’s campaign website focuses principally on his first-term record, saying little about a trade agenda for a second term. In contrast to Governor Romney’s “Day One” bills, the president makes no mention of seeking trade negotiating authority from Congress (authority he never sought during his first term), while arguing against corporate tax reform, promising instead to “eliminate tax breaks for companies that send jobs and profits overseas.” There’s no mention of his main first-term promise, the “National Export Initiative (NEI).” Since the NEI’s 2010 launch, exports have grown (compared to the awful baseline year of 2009), but most observers agree that the NEI has never had a policy agenda robust enough to “double exports in five years.” Most unfortunate is the fact that the campaign never connects trade policy to either economic growth or foreign policy goals. It’s as if “the less said, the better.”
It’s not that President Obama’s record on trade is indefensible—during a tumultuous four years with domestic policy at the center of the agenda, the president worked with Congress to ratify three Bush-era free-trade agreements (FTAs), built the Trans-Pacific Partnership into a meaningful platform for Asia-Pacific trade, and advanced U.S. economic interests in forums such as the G-20 and APEC. Politically, a second term would give the president more room to maneuver—many of us recall that the 1992 Governor Clinton who criticized President Bush for “coddling dictators” is the same President Clinton who in 2000 signed Permanent Normal Trade Relations with China. But on trade policy, as with other topics, Obama sends very few signals about a second-term agenda.
As others have observed, President Obama and Governor Romney are running opposite campaigns. The president says a lot about the tactics he’s proud of, but barely says anything about what he wants to accomplish in the next four years. Governor Romney spells out exactly what he wants to do, but his campaign says little about how he plans to achieve it. Given this dilemma, let me offer two likely outcomes for 2013, regardless of which candidate wins.
First, either President Obama or President Romney will quickly begin a “walk back” on China. A President Romney will likely listen to his own economic team and not risk a trade war over currency valuation. In fact, China has been moving its currency closer to market levels since 2005, and so far that movement has not been correlated with either the bilateral trade balance or U.S. employment. Moreover, those same advisers will probably mention that retaliatory tariffs are a tax on U.S. consumers, which seems to be the only tax Romney wants to raise.
Similarly, President Obama is unlikely to repeat the tire tariffs he brags about on the campaign trail. The respected Peterson Institute for International Economics found that the action destroyed more than 2,500 jobs, not including losses from the retaliatory actions taken by China, all while raising prices for U.S. consumers. The U.S.-China economic relationship is big, complicated, and delicate, and Americans deserve better than misguided protectionism masquerading as policy.
Second, the new president or the reelected president will face the problem of slow growth with precious few fiscal policy tools available. As Governor Romney’s campaign acknowledges, trade matters for growth and jobs. U.S. leadership in opening markets can give this country and the world a real economic boost and do so at very low cost. In other words, it’s a “shovel-ready” stimulus.
If the next president seizes the opportunity, 2013 could be a banner year for the trade agenda. The Trans-Pacific Partnership will be ripe for completion. There’s energy to launch a U.S.-EU FTA or perhaps a “Trans-Atlantic Partnership” that unifies and deepens trade between the United States and the European Union and among our common FTA partners. Key Latin American economies like Mexico, Colombia, and Peru are looking for deeper economic integration. In Geneva, the International Services Agreement waits for leadership. Finally, the Congress is a willing partner, showing its free trade bona fides with comfortable victory margins on three FTAs in 2011. The U.S. president should roll up his sleeves and work with Congress to launch a vigorous free-trade agenda in order to restore growth at home and abroad.
Scott Miller is a senior adviser and holds the William M. Scholl Chair in International Business at the Center for Strategic and International Studies (CSIS) in Washington, D.C.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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