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On this site earlier this year, Jagdish Bhagwati presciently labelled US
President Barack Obama “The Lithium President”–”Surrounded by rising
protectionism and near-xenophobic sentiments . . . President Obama has
kept a low, indeed an invisible, profile.” Bhagwati urged the President
to utilise “his remarkable oratorical gifts . . . to take a bold,
comprehensive overview and confront the real danger that the open
economy might unravel in terms of trade, multinational investment and
immigration . . . ” (Bhagwati 2009)
Six months into his presidency, Obama has notably failed to heed the
urgent pleas of Bhagwati and others to grasp the nettle on trade and
investment policy. And indeed, his style of presidential leadership and
the deep divisions within the Democratic Party over the issues of
international economic policy and the effects of globalisation may
preclude such boldness. Faced with huge problems stemming from the
global financial crisis and a deep recession, as well as the challenge
of reforming the US health care system and framing a climate change
policy, President Obama and his key advisers have decided that the best
course of action is to hang back and delegate large decision-making
authority to Congress.
Some, such as Norman Ornstein (2009), the astute political analyst at the American Enterprise Institute, have defended
the President’s tactical decisions, arguing that given the fact that
Congress is “dysfunctional” because of defects in both major parties,
the President will more likely achieve his goals by letting
congressional leaders sweat the details and only intervening at crucial
decision points on major issues.
Despite Ornstein’s keen political senses, I doubt the wisdom of this
reticent leadership on the evolving domestic agenda: hanging back on
the stimulus package produced a bill loaded with pork barrel projects
and less than optimal stimulus elements; climate change, as passed by
the House of Representatives, is a noxious concoction of corporate
welfare and border retribution measures; and now the President is
facing the supreme test on health care, where Congress seems descending
into chaos, not least because the President thus far has refused to
disclose the administration’s real programmatic bottom line.
The Cost of Presidential Deference to Congress on Trade
With regard to trade policy, three notable incidents demonstrate the downside of presidential deference to Congress.
The “Buy American” provisions that ended up in the stimulus package.
The administration was aware of the movement afoot to include this
protectionist measure, but the President waited until the House passed
a bill before intervening. By then, it was impossible to stop the rule
altogether, so the upshot was a late, weak amendment to the final bill
stipulating that in implementing the Buy American rule, the US must
live up to its international obligations. As it has turned out, this
promise had little practical significance, and so state and local
governments have been busily (in order to be sure to get the money)
turning down proposals that cannot guarantee the use of American
manufactured products, including all parts and components. Canadian
local and provincial governments are moving to retaliate, and, more
ominously for US exporting companies, the Chinese have announced an
The acquiescence to a congressional provision in an
appropriations bill that killed a pilot program to allow Mexican
truckers to make international deliveries to the US.
This provision became law despite an earlier ruling by a NAFTA panel
against the US and the threat (since implemented) by Mexico to impose
$2 billion retaliation against US goods and services. Once again, the
President stood back and then could only lamely promise to have the
transportation and state departments attempt to fashion some kind of
remedy–we (and Mexico) are still waiting for details.
Several weeks ago, the House passed climate change legislation
that includes provisions for future punitive border tariffs against
imports from nations deemed not have put in place adequate climate
change rules (by US unilateral standards).
The bill strikes directly at presidential authority and discretion
by severely limiting the President’s ability to mitigate the draconian
measures through invocation of the national interest. In this case,
Congress would have to agree before changes were made. President Obama
spoke out against the provision just after the climate change bill
passed the House. But in a now familiar pattern, he faces a fait
accompli, and though he can work with allies in the Senate to restore
some leeway, it is likely that some form of border retaliation will
remain in the final bill.
Other Areas of Hesitation
And so it goes in the broader arena of trade policy–on the pending
FTAs with key US allies, Colombia and Korea, the President and his
trade officials first promised to move forward “sooner rather than
later,” but they recently have signalled that it may be next year
before action is seen. Similarly, with the centrally important WTO Doha
Round, the President keeps reiterating that he wants a deal–but he has
expended no political capital to back up his strong affirmations thus
far. And over the past several weeks in Geneva, US officials have
warned that it will be well into 2010 before real progress can be
The Bottom Line
The bottom line is that on trade policy President Obama faces a
deeply divided party with a strong anti-global element concentrated
among House Democrats. Left to their own devices, congressional
Democrats–particularly in the House–will create endless mischief. At
some point, President Obama, like President Clinton, will have to
decide whether to take on these anti-global Democratic interests groups
and whether he will make Clinton’s final decision that, on trade, the
Democratic Party and the US must “compete not retreat.” So far, Obama
has looked weak and indecisive because he has yet to make that decision
Claude Barfield is a resident scholar at AEI.
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