Obama's Trade Quest

President Obama says he wants to double U.S. exports in five years as part of his plan to generate new jobs. It is an admirable and ambitious goal, but, to put it mildly, many trade experts are not buying it.

The last time the United States doubled its trade it took three times as long. From 1994 to 2009, according to Department of Commerce data, the value of U.S. exports of goods and services increased 97 percent.

Those 15 years saw the birth and expansion of the largest trade bloc in the world – NAFTA. In 1993, Canada, Mexico and the United States ratified the North American Free Trade Agreement, a deal that would eventually triple trade among the three nations.

Today there is no sign of an agreement in the pipeline anywhere near NAFTA’s magnitude. Last November, the Obama administration announced it would join negotiations toward a new trading bloc called the Trans-Pacific Partnership. The United States already has free trade agreements with four of the negotiating nations, Australia, Chile, Peru and Singapore. The remaining, Brunei, Vietnam and New Zealand, have a combined gross domestic product of the state of Georgia.

What’s more, Obama’s strategy, the National Export Initiative, differs little from the working strategy of the last 15 years. The three pronged approach -- to pursue more free and fair trade agreements, pressure trading partners to live up to their trade obligations and promote and finance exports from small and medium size companies --doesn’t propose anything that hasn’t been tried before.

Sure there could be some innovative plans still in the works, but even so would congressional Democrats, the greatest impediment to pending free trade agreements, support them?
When Obama announced his plan during the State of the Union address he offered to “strengthen our trade relations … with key partners like South Korea and Panama and Colombia.” Yet he failed to call on Congress to pass the pending free trade agreements with those same nations immediately. For those who have followed their painful and unfruitful ratification processes, Obama’s trade pledges seemed empty.

In the midst of a recession and with the unemployment rate the highest in 27 years, there is no question that the public sentiment against trade is running high. According to Gallup, from 1994 to 2003, Americans were more likely to perceive trade as an opportunity than a threat. Last year, a majority (52 percent) had a negative view of it.

With so many other contentious issues on the table and difficult mid-term elections coming up in November, the White House clearly seems in no rush to stir the trade pot too fast. Given labor union opposition, few expect any congressional movement on the pending trade deals before the fall elections.

Still, by championing trade, Obama seems to be borrowing a move from the Clinton playbook. When former President Bill Clinton took up the NAFTA mantel, he co-opted free trade from Republicans, and built bipartisan support for an issue that previously represented a political liability to Democrats.

Since his State of the Union address, Obama has been making overtures to Republicans, reminding them that their obstructionist tactics have made their own agenda much more difficult to achieve. At a recent House Republican retreat, Obama said Americans “sent us to Washington to work together, to get things done.”

It could be argued that Obama faces a much more divisive political environment than Clinton did. That will test Obama’s commitment to free trade even more. To get NAFTA done, Clinton risked alienating labor unions and challenged Democrats to compromise in a way they did not expect.

Economically, meeting the goal of doubling exports will have much to do with global recovery after this recession. “It will be a lot easier if our country is growing at 4 percent and China at 9 or 10 percent,” said Jake Colvin with the National Foreign Trade Council.

But even if there is no double-dip recession or a lost decade, as some economists have predicted, trade is still a fraction of the U.S. economy. Last year exports represented 11 percent of total U.S. production, so even if they double, their impact on job creation will have to be only part of the story.

Some may get hung up on how unrealistic or insufficient Obama’s trade goal is. But it is an important development that the U.S. president has recognized that his government cannot continue to drag its feet on trade. By tying it to a greater agenda of generating jobs perhaps more politicians will find it harder to get in the way.