In early 2009, before the inauguration of President Obama, Kim Elliott and I decided it was time to think seriously and coherently about the future direction of U.S. trade policy, especially as it relates to developing countries. The collapse of the Doha Round was one of the critical motivating factors, as it was now clear to all involved that there was no obvious trajectory for the international trading system. There was also talk among key trade leaders of a complete freeze on trade agreements of any type, leading one to wonder what the next step might be for the United States and whether we would maintain a leadership role on trade.
Concern about “backsliding” on trade – governments moving away from previous commitments to cut tariffs and subsidies – grew stronger. Government officials from other countries contacted us and asked what would come next on U.S. trade policy, and, significantly, whether CGD would play an active role in doing new research and creating viable policy alternatives that would benefit developing countries in a changing global economy.
This led us to consider the possibility that we might influence the Obama Administration trade agenda if we inserted innovative policy ideas in a constructive way. To this end, we invited approximately 15 representatives from the development, business, and faith-based communities to CGD and carefully considered if there were areas where we could find common interest and pursue collective action. The meeting was remarkably congenial and productive. There were far more areas of agreement than disagreement, although some controversial issues, such as whether and how to address labor and environmental concerns in trade agreements (see the May 10th Agreement), were left firmly on the backburner.
The group decided to draft a carefully balanced letter to President Obama and key Congressional leaders that outlines the critical importance of global trade as a mechanism for poverty alleviation, economic growth, and political stability. That letter, released today, urges the Administration and Congress to enact policies that promote global economic growth and increase international trade and investment flows. It says, in part:
During this difficult period for economies around the world, it is necessary to recognize that the economic welfare of Americans is inextricably linked with the well-being of men, women, and children across the globe. It is essential, therefore, that the United States reject those policies that will worsen the impact of the current economic crisis on global economic growth and development, particularly with respect to poor nations, and work instead alongside the people of these nations to further their own sustainable development. By doing so, we ultimately secure our own economic future.
The timing of this letter could not be better. If crisis creates the conditions for change, now is the time for action. Recent reports from the World Bank and the International Monetary Fund reinforce the fact that the global economy is in an increasingly precarious position, with developing countries in particular suffering potentially irreversible damage from declining exports, lowering commodity prices, decreasing investment, and repatriating capital.
The long term consequences of this economic vortex have yet to be seen. As social spending collapses in developing countries, and as education and healthcare become unaffordable, it is obvious that impacts will worsen. Already it is likely that the crisis will undermine decades of the admittedly insufficient progress that has been made on development, and will most certainly lead to social unrest and political instability. Trade policy thus becomes a national security issue.
It is encouraging that that USTR-designate Ron Kirk has been confirmed by the Senate and will be sworn into office today by Vice-President Joe Biden. The USTR has released a 2009 Trade Agenda, but much remains to be done in terms of defining concrete policy proposals. This joint letter not only sends a strong message about what U.S. priorities should be on trade, but also provides tangible evidence that new coalitions on trade are possible. CGD will be extremely active in this effort.