From a trade perspective, it is remarkable to think how little has been accomplished in the first two years of the Obama presidency. When he took office, President Obama inherited an agenda that included stalled global trade talks (the Doha round of World Trade Organization negotiations), three already-negotiated free trade agreements (South Korea, Colombia, and Panama), and a troubled trade relationship with China. Across all of these items, the only achievement approaching progress was the revision to the Korean free trade agreement, and that came at the very end of 2010. The revision left Ford and the United Auto Workers happier, but came at the expense of other sectors, such as pork producers.
Better late than never, but there were costs to the lost time. Free trade agreements that promised U.S. producers at least a period of privileged access to a trading partner's market are now just offering the prospect of equal access, since our jilted partners went and negotiated agreements with other countries while the United States dallied. Frustration was already high with the lagging global trade talks; it has since mounted. What's more, the repeated empty promises of the G-20 nations to conclude the Doha round undermined that group's credibility.
The ineffectiveness of the G-20 was also revealed in the sad Seoul summit, in which China and Germany objected to any global rebalancing plan that pushed past platitudes. The Obama administration--Treasury Secretary Timothy Geithner in particular--deserves credit for putting forth a credible approach; it just didn't seem to gain traction. As with trade liberalization, the administration might have been more credible had it led by example. In trade, it called for a new WTO agreement while condoning "Buy America" protectionism and showing that it would not spend the political capital to push through existing agreements. In international finance, it called for global rebalancing while dramatically increasing spending, creating a significant new entitlement program through its health care plans, and relegating any plans for fiscal restraint to a separate deficit commission (as opposed to using its own Office of Management and Budget).
So what happens when you defer serious action on the international economic front for a couple of years? Institutions (in this case the WTO) deteriorate, problems (resurgent global imbalances) fester and grow, and resolutions to address these issues soon may be undercut by new crises that demand attention.
Looking ahead to the rest of Obama's term, my top candidate for major distracting crisis to come is the bubbling debt trouble in Europe. The leaders of the Euro nations have been working furiously to address problems as they pop up in Greece, then Ireland, then Portugal, with Spain and Belgium starting to simmer. But all of their remedies have done little more than buy time and, in some cases, allow the problems to grow. There are fundamental inconsistencies ripping the euro apart. When that happens, it will not simply be a matter of having to deal with currency exchange at the borders; it will likely involve a significant banking crisis. Those, it turns out, can be nasty.
Philip I. Levy is a resident scholar at AEI.