Re-thinking Trade, Re-creating Consensus

March 13, 2009

Based on the testimony of USTR-designate Ron Kirk this week before the Senate Finance Committee - brief though it was - the Obama Administration is moving in an entirely different direction than we have seen over the last eight years. The concept of a "progressive trade agenda for America," though as yet undefined, certainly suggests that the administration will be looking at the global economy from a very different perspective. That is not necessarily a bad thing, as long as they keep in mind the big picture links between trade and development.If you take a look at the 2008 Trade Agenda released by USTR in the final year of the Bush administration the crux of the problem becomes apparent. Absent from the document is any serious reference to potential negative impacts of trade liberalization on the United States or, for that matter, the rest of the world. Because the benefits of trade were considered automatic, and the outcomes of liberalization seen as inevitably win-win, new trade agreements were effectively the only goal at hand. This in spite of very clear signals from Congress and the American public that they had serious doubts about the adequacy of trade theories as they applied to our economic welfare and international competitiveness.As states lost critical industries and no viable strategy existed to replace them, constituencies asked what was next. Programs that offered re-training for the unemployed, promoted investment in new technologies, created regional initiatives for small businesses, or provided health care to workers were cut, underfunded, or ignored. When Congressional moderates on trade, members of Congress who had voted for trade agreements time and time again, realized the administration had no cogent response to market failures, they were forced to re-consider long and strongly-held positions on trade. Ultimately, reality caught up with rhetoric and the longstanding bi-partisan consensus on trade collapsed.The 2009 Trade Agenda released last week represents a dramatic departure from the economic assumptions that guided the previous administration. The concept of "social accountability" is itself an indicator that success under the Obama Administration will be measured not just by quantitative measurements like increasing trade flows but also by qualitative measurements like mitigating economic costs. The result, in my view, will be a complete re-think on what U.S. priorities are on trade and what trade agreements look like in the future.I think that this process is long overdue. In order to regain and retain public support, our trade policy must provide some indication that policy makers are responsive to the concerns of Americans facing an ever-changing global marketplace. We have not done that sufficiently for the past eight years. Individuals and communities need some assurance that their government has a vision that creates a foundation for their economic future. It is only through this re-think that bi-partisan consensus can be re-created on trade.But we should not lose sight of other essential policy goals. Missing entirely from USTR-designate Kirk's testimony yesterday was any reference to complex problems faced by the developing world, or any recognition that the U.S. economic welfare is inextricably linked to that of other countries. A new World Bank report released on March 8 states in stark terms the dangers that developing countries face as a result of the global economic crisis. World trade is on track to its largest decline in 80 years and millions of people are slipping back into poverty.The impact of economic uncertainty on political stability cannot be ignored. They have been made profoundly clear in the past. There is a direct and compelling feedback loop that connects our future with that of individuals in developing countries. It is essential that the Obama Administration recognize the critical importance of global leadership on trade, and emphasize to the American people that only through international economic cooperation do we secure our own national security.


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.