was my Trade Tripper column in last Friday-Saturday's issue of BusinessWorld:
While many people are celebrating the reelection
of US President Barack Obama (for who knows what reason), the realities
that such brings are none too cheerful. For an administration that
seemingly has been focused on reviving its sputtering economy, its lack
of engagement in the area of international trade is quite disconcerting.
Furthermore, while there have been promises indeed about placing
focus on the Asia-Pacific region (again bringing cheers from this part
of the world), the reality actually is far different. As Greg Rushford
("Disconnect," Nov. 13, 2012) insightfully puts it: "There’s a
disconnect. Obama’s foreign policy -- the so-called Asian ‘pivot,’ or
‘rebalancing’ -- promotes closer security ties across the region, with a
particular emphasis on traditional Asia-Pacific treaty allies like
Japan and the Philippines (which are embroiled in threatening maritime
disputes with China). But the president’s trade agenda excludes the
Japanese, the Filipinos, and other important Asian trading partners from
participation anytime soon in the ongoing Trans-Pacific Partnership
trade talks."
The quandary is evident. With a more energetic economy, the desire for
increased trade by Asian countries is understandable. Whether Mr. Obama
will respond positively to such is another matter. His administration
has been noticeably detached, even perhaps wary, of trade. Mr. Obama
certainly has no affection for the WTO: "Doha was a
multilateral-liberalization initiative; and ironically, it was killed by
President Obama who had ironically been awarded the Nobel Peace Prize
by Norway in the expectation that he would promote multilateralism and
turn his back on US unilateralism! [This is so because] under the Obama
Administration, already under siege from the labour unions who were
hostile to trade, was resolutely opposed to closing the Doha Round
unless numerous concessions were made to appease its business lobbies."
(see Jagdish Baghwati, writing for Handelsblatt)
Instead, what Mr. Obama decided to do is: 1) center his trade policy
around threatening other countries who, in his mind, are engaged in
unfair trade; and 2) dangle the Trans-Pacific Partnership in front of
other countries.
But this strategy, coming from a country of which leadership in the
global economy is expected, is not helpful. To have an energetic dispute
policy would make sense, perhaps even beneficial, in a situation where
you have a healthy global economy. But in a time when the European
countries are staggering under the weight of their own entitlement
systems, with Japan still unable to get fully going, China under fears
of a bubble bursting, and the US misguidedly wanting to spend their way
out of their problems, to aggressively proclaim disputes (either as a
political sopping rhetoric or as an actual policy to be carried out) is
bizarre.
As for the TPP, Mr. Rushford was more trenchant: "The TPP… is
increasingly being perceived as ‘part of a U.S. foreign policy strategy
to contain China.’ Already the White House has heard from officials in
Australia, New Zealand that ‘it is not in their interests to participate
in trade arrangements that are seen to be hostile to China.’ The
Aussies and Kiwis have laid down a red line that they could bolt the
talks, if the Americans don’t step up their economic game." Furthermore,
while "the White House has been happy to use such high-sounding
rhetoric, much of what Washington has actually put on the negotiating
table is a familiar litany of old-style protectionism aimed at pleasing
Obama’s base in the anti-trade wing of his Democratic Party. It mainly
comes down to special carve-outs to protect US sugar quotas, subsidies
for US dairy farmers, legally binding rules on labor and the environment
to satisfy US labor unions, no liberalization of widely-resented US
anti-dumping rules, high tariffs on athletic footwear, and complex rules
of origin aimed at preventing Vietnam from expanding its exports of
garments to the United States. (Strident American demands for just the
latter two alone could be deal killers.) Consequently, the
once-promising TPP is beginning to look like just another ordinary
trade-distorting scheme, and one that is not particularly economically
important.
The Philippines, correctly, has expressed no hurry in signing on to the
TPP. Baghwati calls free trade agreements (of which the TPP is one) as
"termites in the trading system," used "by hegemonic powers to foist on
weaker trading partners demands unrelated to trade but desired by
domestic lobbies, at times in a markedly asymmetric way." Such is a
sentiment this column shares. Specifically, the TPP imposes certain
conditions, a lot requiring constitutional amendments, as well as
measures that for a still developing country like the Philippines, would
simply not make sense. This is on top of this column’s repeatedly
stated position that free trade agreements are just poor trade
distorting substitutes for the WTO.
However, there is an added point: perhaps what’s worse than an
ill-conceived US trade policy is an ill-conceived trade policy
half-heartedly carried out by the US. For a country presumably wanting
to maintain its sole superpower status, such flip-flopping is
unbecoming.
