- To help readers better understand the nuances of foreign policy, CFR staff writers and Consulting Editor Bernard Gwertzman conduct in-depth interviews with a wide range of international experts, as well as newsmakers.
A new CFR Task Force Report on U.S. Trade and Investment Policy asserts that free trade is essential for the United States to maintain its economic competitiveness in an increasingly global economy. Moreover, with U.S. unemployment stuck above 9 percent, President Barack Obama is urging Congress to approve new free trade agreements as part of his plan to create jobs. While some congressional Democrats oppose the president, former Democratic Senate majority leader Thomas A. Daschle, co-chair of the CFR report, says the United States needs to enact a "robust" free trade agenda. "We need to have an active trade policy, one that’s focused on opening the overseas markets for a more competitive U.S. goods and services strategy, to bring the benefits of trade to more Americans--with higher incomes and additional jobs," Daschle says.
President Obama called on lawmakers September 8 to approve stalled trade agreements with South Korea, Colombia, and Panama as a means of generating employment. How would those agreements accomplish that?
First and foremost, it would open up new markets that would give us an opportunity to be more competitive in those countries. Secondly, it sends the message to the rest of the world that we are once again going to be engaged in building our overseas markets, and that we intend to be more competitive in other markets outside of the three countries [South Korea, Colombia, and Panama]. That sends a very positive employment message. And third, it’s very important for us to build closer economic ties with the developing world. That, too, can mean more jobs, more markets, more opportunities. In developing those relationships, the free trade agreements are just the beginning.
Why does President Obama face so much resistance from Democrats on this?
There is a great deal of concern about the degree to which we have enforced trade agreements in the past-- concerns about whether or not once these agreements are signed it becomes a one-way street. That other countries have access to our markets, but we don’t enforce the rules enough to get access to theirs, and so they think it becomes more lopsided. Our report calls for greater enforcements and the need for [trade regulation] enforcement to become a much higher government priority, and I strongly endorse that recommendation.
The Task Force report contends that trade has not done enough in recent years to deliver "broad-based" job and income growth, triggering a "reversal of the optimism" that existed in the 1990s. What does the Task Force recommend to make trade an engine for job and income growth?
The only way we’re going to grow this economy is to recognize that our economic strength lies not only with our own productivity, but with our ability to apply that productivity worldwide.
First of all, we need to have an active trade policy, one that’s focused on opening the overseas markets for a more competitive U.S. goods and services strategy, to bring the benefits of trade to more Americans--with higher incomes and additional jobs. It’s also clear that we’re falling behind on trade, while other countries are pushing ahead. I would cite, for example, the European Union negotiations with India; or the Canada-EU free trade talks; China’s free trade deals with many Asian neighbors. We also must have what we call a National Investment Initiative. And by that I mean we need to attract and retain foreign investment. We need to encourage investment from China, and we need to ensure that we can be competitive with our own investment here.
The report also notes that over the past two decades, growth has mainly occurred in the non-tradable employment sector. What are the advantages of investing in the tradable employment sector for overall economic growth?
The only way we’re going to grow this economy is to recognize that our economic strength lies not only with our own productivity, but with our ability to apply that productivity worldwide. That is, to ensure that we have the markets abroad that will give us the kind of confidence we need that that productivity can be rewarded--with markets, with competitive strategies that will allow us greater opportunities to enhance our economic strength beyond our borders. But the only way that’s going to happen is if we have the capacity to invest in our tradable economy in a way that goes way beyond what we’ve done in recent years. Until we do, we’re not going to bring ourselves out of the economic doldrums we’ve faced for three years.
What is the best way to invest in the tradable sector?
There’s three things in particular: Corporate tax reform that would allow us to become more competitive and more in line with our major trading partners and competitors abroad; a national effort to attract and retain foreign investment; and also a real effort to incent investment here at home.
With what sort of negotiating authority should the president be empowered to negotiate free trade agreements?
It’s extremely difficult without TPA [Trade Promotion Authority (PDF), by which Congress grants the president leverage to negotiate free trade agreements] to enact trade agreements today. We haven’t had TPA authority now for many years [since June 30, 2007], and it’s not a coincidence that the trade agenda has languished. We need to continue to try to find ways with which to enhance any president’s authority, and his or her tool box with regard to the implementation of good trade policy and TPA is certainly a part of it. There’s skepticism here, too, with regard to our capacity and ability to produce a new TPA framework, but I do believe that until we do, it’s going to be very, very difficult for us to enact the robust trade agenda that this committee [Task Force] foresees as necessary.
If we’re going to help balance the equation between global supply and demand, it’s critical that we become much more active in our trade policy and far more visible and engaged than we have been in recent years.
What can the government do to promote U.S. trade competitiveness?
We have to prioritize trade more effectively. We have to do a better job of putting a greater emphasis on trade policy and trade agenda. It’s imperative that we recognize that, as we look at our own economic challenges, as we look at our extraordinary need for growth and jobs in this country, as we look at our presence abroad, as we look at the need for better economic partnership with the developing world--all of those challenges cause us to appreciate the need for a higher priority for trade policy.
Can you talk about trade as U.S. foreign policy tool and how free trade agreements can advance U.S. strategic interests?
As the challenges of our deficit and debt continue to mount, it is becoming increasingly apparent that public-private partnerships in economic development abroad are essential. The only way that’s going to happen is if we broaden our definition of strategy in our foreign affairs by relying on four key cornerstones. The first is, of course, defense--that will always be one of the foundations of our international presence. The second is diplomacy. I don’t think there’s any doubt that we can do a better job with diplomacy in future decades if we put the emphasis and priority [on diplomacy] and give [diplomats] the resources they need to do the job. The third is democracy, to continue to encourage and promote democratic institution-building around the world. But the fourth, and, in some ways I would argue, the most relevant to many of these countries right now, is development. And that is where public-private partnerships, trade agreements, and economic partnership can really make a big difference. We need far more development. It’s part of the 4-D approach to a sound foreign policy.
The report notes that the U.S. should be doing more to exploit its advantages in the global supply chain. What does that mean in practice?
What it means is that we have a significant responsibility, really, to ensure that as we consider increasing international demand, that we consider our resources and our capacity to meet that demand with the tremendous resources [in terms of U.S. education, technology, and manufacturing capabilities]that we have available to us. But if we’re going to help balance the equation between global supply and demand, it’s critical that we become much more active in our trade policy and far more visible and engaged than we have been in recent years.
Can you discuss the difference between multilateral and bilateral trade agreements, and the relative advantages of each?
It’s important for us to recognize that both are necessary, that there are times when bilateral trade agreements--as the free trade agreements we’re considering now are considered and voted upon in the Congress--and that we understand that often times it’s those individual bilateral agreements that are the building blocks to a broader multilateral strategy. But, at the same time, it’s also true that multilateral approaches to trade bring about greater reform and greater opportunities for international trade governance on a grander scale. And while they may not be as specific, as tangible in terms of direct trading impact with regard to our relationship with a particular country, we need that framework. I’m concerned about our lack of progress with regard to multi-trade agreements in recent years; we have a long way to go to restore people’s trust and confidence in that approach.
Can you speak to the stalled Doha Round of trade negotiations?
I would like to think that there is still a possibility of building on Doha, but I also recognize that as the economies weaken and as our challenges, both at home and abroad, continue to become more complicated and far more difficult, it is perhaps unlikely that any major new momentum can be achieved in multilateral negotiations through Doha-like experiences.