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The Bid to Bundle U.S. Trade Agencies

Author: Jonathan Masters, Deputy Editor
January 17, 2012

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President Obama requested Congressional approval Friday to reorganize the federal government, a plan that includes consolidation of six trade and commerce agencies into a single, streamlined department. The creation of an umbrella department is geared toward the administration's goal of increasing the competitiveness of U.S. companies in the global economy, and spurring export-led growth. Through his National Export Initiative, the president has pledged to double U.S. exports within five years, which he argues would create up to two million new jobs. Some lawmakers welcomed the proposal as a necessary reduction in the size of government (WashPost), while critics questioned the logic of creating a "new bureaucratic behemoth" to enhance efficiency.

What's at Stake

Specifics of the White House proposal are forthcoming, but any plan that enhances the ability of U.S. corporations to tap into the global marketplace could have significant ramifications for domestic job creation and economic growth. Exports supplied nearly half of U.S. GDP growth in 2010, and access to foreign markets is likely to be a primary factor in the country's longterm prosperity. The Department of Commerce reports that 95 percent of global consumers live outside the United States, while the IMF states that roughly 87 percent of global growth over the next five years will take place overseas.

A CFR task force report on U.S. trade emphasizes the trend: "With the fastest growth now taking place in emerging markets that are often unfamiliar to U.S. companies, the U.S. government needs to expand its trade promotion efforts." The United States currently ranks second-to-last among developed economies in trade as a percentage of GDP. In November 2011 (Bloomberg), the U.S. trade gap hit a five-month high, exceeding analysts' estimates at $47.8 billion.

The Debate

The White House claims a consolidated trade/commerce department would eliminate redundancies and provide U.S. firms and small businesses in particular with a "one-stop shop" in navigating the federal bureaucracy. The administration expects the plan to garner bipartisan support, but some legislators have already pushed back.

A joint statement from Senate Finance Committee Chairman Max Baucus (D-MT) and House Ways and Means Committee Chairman Dave Camp (R-MI) criticized the idea of folding the office of the U.S. Trade Representative (WashPost) into the proposed new department, saying it would hurt U.S. exports and job creation. Amy Wilkinson, a public policy scholar at Harvard's Kennedy School, raised questions over integrating the Small Business Administration into a "larger bureaucracy," saying it should be at cabinet level (CNN). David Rothkopf of ForeignPolicy.com called the consolidation long overdue and "an excellent initial step toward more sweeping reforms."

Policy Options

Outside of agency restructuring, experts have a variety of suggestions for how Washington can revive trade. Former Senator Tom Daschle says the U.S. needs a more assertive trade policy, and recommends the Congress grant the president greater leeway to negotiate trade agreements under the Trade Promotion Authority. "We haven't had TPA authority now for many years," he says, "and it's not a coincidence that the trade agenda has languished.

The Peterson Institute's C. Fred Bergsten says the United States should first attain a fully competitive exchange rate for the dollar. "The bulk of our current misalignment," he notes, "is vis-ŕ-vis the Chinese renminbi and small group of other Asian currencies, which must be permitted to strengthen substantially."

Background Materials

This CFR Task Force report on U.S. Trade and Investment Policy recommends several new policies to spur exports and increase the competitiveness of U.S. firms abroad, including an ambitious trade-negotiations agenda, a robust and strategic trade enforcement effort, a comprehensive worker retraining policy, and more competitive export financing.

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