Shadow Government is pleased to run thus post from guest-blogger, Mark Kennedy, a former member of congress and former key advisor on trade issues in the Bush Administration. He is currently Director of the Graduate School of Political management at George Washington University.
President Obama's surprise announcement in his State of the Union address that he plans to start talks on a free trade deal between the United States and the European Union could serve as a boon to the nation's economy or a bust for the nation's competitiveness. Though reaching any sort of deal will be difficult, leaders in the United States should avoid a proposal that could make American markets more like their European counterparts and should instead seek a plan that helps introduce the best of the American labor markets to the EU in order to boost growth on both sides of the Atlantic.
A successful free trade agreement (FTA) will achieve the following: expand U.S./EU trade, renew the Atlantic political/economic alliance, improve competitiveness in both markets, and set a benchmark for future trade accords.
In order to walk across the finish line together, the United States and the EU must effectively resolve their differences on two key economic policies.
The EU has several long-standing regulations preventing many U.S. agricultural products from coming to market. America has long argued that European demonization of genetically modified (GMO) crops as "Frankenfood" is not grounded in science. With the pressing need to meet the nutritional needs of a growing planet, the potential of GMO crops should not be set aside so quickly.
The United States' previous treatment of food controversies in free trade agreements can serve as a benchmark in this respect. The terms of the South Korean free trade agreement provided a timeline for when U.S. beef would gain access to Korean markets. A similar time-delayed structure with the EU would allow for officials to adjudicate the safety of American agriculture and for producers to make adjustments necessary to compete in a more open market. Allowing scare tactics to dominate what should be an economic and scientific debate is a loser for consumers on both sides of the Atlantic.
A common stumbling block for free trade agreements concern the differences between nations' labor regulations. American labor unions often balk at FTAs with the countries from the developing world because they fear that their members will be unable to compete with the emerging market's low-wage employees. This time around the shoe is on the other foot.
According to the World Economic Forum's 2012-13 Global Competitiveness Report, the United States' approach to labor flexibility is among the best in the world. EU nations tend to take a more populist and protectionist approach, which can limit productivity and harm young workers. Those protectionist policies have lead to high youth unemployment and unrest in EU nations like Greece and Spain. A final deal should recognize that and center labor arrangements around the idea that a growing economy can provide more job security than government rules.
European Commission President José Manuel Barroso warned at a press conference recently that the EU would not compromise on its "basic legislation" in trade talks.
Rather than approaching these trade discussions in a defensive posture, leaders on both sides should aggressively pursue outcomes that would be highly beneficial to their citizens and the world:
It is critical that those who support lower economic barriers stay engaged in support of a joint accord, but one that fosters openness rather than protectionism. A successful deal will expand Atlantic trade, strengthen the Atlantic alliance, improve competitiveness on both continents, and set a standard that stimulates expanded trade agreements with other regions
CHARLY TRIBALLEAU/AFP/Getty Images
Colombian President Juan Manuel Santos met today with President Obama at the White House to end an impasse blocking adoption of a trade agreement first concluded in November of 2006. The Colombian government has agreed to rewrite parts of their labor law to U.S. specifications.
The resolution came after mounting calls for movement from Capitol Hill. House Republicans had been particularly vocal about the need to advance the pending Colombia and Panama agreements alongside the South Korean accord after years of delay. Of late, though, the calls had grown bipartisan. On Monday, Senate Finance Committee Chairman Max Baucus (D-MT) and Senate Foreign Relations Committee Chairman John Kerry (D-MA) published a joint op-ed in the Wall Street Journal describing the Colombia pact as an important spur to employment:
Each day we fail to act costs American jobs and sales-and sends them elsewhere.
So, 1,091 days after the Bush administration submitted the Colombia FTA to Congress, the Obama administration has found a path to move forward. The plaudits for this move have been rolling in since it was announced yesterday. Not only does the Colombia FTA offer its own array of benefits, but the move has the potential to unblock U.S. trade policy more broadly. To lever the administration into action on the pending FTAs, Republicans had linked the passage of the Korean FTA, renewal of trade adjustment assistance programs, trade preference programs, and even confirmation of a new commerce secretary. It is not clear that all of the timing issues have been worked out between House Republicans and the White House, but the agreement with Colombia significantly enhances prospects for movement on a trade agenda this summer.
Lest there be excessive rejoicing, though, it is worth keeping in mind that passage of the three agreements would partially complete the trade agenda of 2007, and there was a cost to the dithering. The pending FTAs offered benefits in two important dimensions: access to the markets for American exporters and stronger diplomatic ties. On the economic front, this access was originally set to grant American businesses and farmers preferential access to the Korean and Colombian markets, ahead of global competitors. Now, there is a scramble just to keep U.S. exporters on an even footing. While the agreements were stymied by domestic political fights in the United States, our partner countries reached other agreements to open their markets to the world. A prime motivation for the mid-summer deadline on passing the Korea-U.S. FTA is the looming passage into force of Korea's FTA with the European Union.
On the diplomatic front, the FTAs were meant to send a signal of friendship and allegiance. While the partner countries certainly welcome passage now, that signal has been somewhat diminished by years of slapping them around through public criticism.
There is a pending, post-2007 trade agenda out there. The eternal but deeply-troubled global trade talks (the Doha Round) are in desperate need of American leadership. The WTO's director-general, Pascal Lamy, sounded the alarm to members last week:
Now is the time for all of you, and in particular those among you who bear the largest responsibility in the system, to reflect on the consequences of failure ... to think about the consequences of the non-Round to the multilateral trading system which we have so patiently built over the last 70 years. It is the time to think hard about multilateralism, which your leaders, yourselves and myself preach at every occasion. In politics, as in life, there is always a moment when intentions and reality face the test of truth. We are nearly there today.
Then there are the Bush-launched, Obama-embraced talks to expand the Trans-Pacific Partnership (TPP). A number of the participants in those talks are earnestly shooting for a conclusion this November, when the United States hosts the APEC meetings in Hawaii. This seems implausible, since the administration has not yet broached the question of trade negotiating authority for those talks with the Congress. And if labor and human rights issues with Colombia stirred controversy, wait until we start discussing Vietnam, a TPP participant.
The biggest question surrounding this week's breakthrough on the Colombia FTA is where it leaves relations between the White House and the American labor movement, which has been the most outspoken opponent of recent trade agreements. The administration made some inroads with labor through its reworking of the Korea-U.S. FTA at the end of last year. That won the support of the United Auto Workers, though that support did not extend beyond Korea. The AFL-CIO has remained opposed to all of the pending FTAs. Yesterday, it released a statement:
We are deeply disappointed that the Obama administration has signaled that it will move forward to submit the proposed U.S.-Colombia Trade Agreement to Congress for a vote in the near future ... on the basis of the information provided to us at this time, we remain strongly opposed to the Colombia trade agreement.
It remains to be seen whether this opposition will be vigorous or muted. The Obama administration will also need to decide whether, on trade issues, it has now cast its lot with a coalition of pro-trade Republicans and internationalist Democrats, or whether it has pushed its labor allies as far as it dares.
Those are questions for another day, though. Today, Presidents Obama and Santos had cause to celebrate.
Spencer Platt/Getty Images
Shadow Government is a blog about U.S. foreign policy under the Obama administration, written by experienced policy makers from the loyal opposition and curated by Peter D. Feaver and William Inboden.