Shadow Government

Northern Lights, American Opportunity for International Trade

In the United States, the prospects for additional international trade opportunities look dim. The continuing fallout from revelations that the National Security Agency snooped through millions of pieces of European telephone data has cast a pall upon the Trans-Atlantic Trade and Investment Partnership (TTIP) talks. Additionally, the government shutdown forced the cancellation of the second round of negotiations on the pact, as well as forcing President Obama to miss the Asian Pacific Economic Cooperation summit, which squandered an opportunity to push to finalize a similar commercial agreement in Asia. Internally, past and future fiscal fights are likely to further sour the possibility of future collaborative action between President Obama and Congressional Republicans, which will be necessary to pass any trade legislation.

However, it is always darkest before the dawn, and our neighbor to the north provides a light for those interested in promoting international trade.

Canada and the European Union have come to an agreement on a bilateral trade accord that would eliminate tariffs and open new markets to companies on both sides of the Atlantic. Thanks to some shrewd politicking from Canadian Prime Minster Stephen Harper, the measure enjoys overwhelming support from the public and could be finalized by 2015, practically light speed for a trade agreement.

Economists from both sides foresee financial benefits. Canada would join a select coterie of nations that have preferential access to the United States and the European Union, the two largest markets in the world. Increased exports, particularly in the services industry, could help inject some dynamism into a sclerotic European economy.

A leaked EU analysis of the trade agreement with Canada gives the United States a leg up when it comes to negotiating with the continent. If the EU views the recent bilateral accord as a guide, America has the benefit of knowing where the box canyons and strong currents are located.

There will be plenty of challenges and debates with European negotiators, so President Obama should be doing as much as he can to limit friction over the deal at home. That will require a more hands on approach to getting Trade Promotion Authority passed through Congress. In addition to the inside game in Washington, the White House will also have to play a strong outside game with businesses and unions that may not have as much to gain from tariff reductions as other sectors of the economy. A serious breakthrough on trade could provide some spark to a second term that is losing power fast.

If enacted, TTIP has the potential to boost economic output by some $100 billion a year on each side of the Atlantic, according to trade officials. It would offer the prospect of much needed job growth and improve the ability for America and Europe to compete with emerging markets. Additionally the maneuver would go a long way towards setting a global standard for bilateral trade agreements and commerce more generally.

There's no doubt that the task will be difficult, but the United States and Europe have worked together to slay more vicious dragons in the past. The scourge of communism was more formidable than any special interest group could ever dream of becoming.

The United States joined Europe to form the G-6 in 1975 to initiate the idea of global economic cooperation for mutual benefit. Canada followed suit a year later to make it the G-7, and today the pact has evolved into the G-20.

It is now the United States' turn to follow Canada's lead.  If both America and Europe can break through gridlock at home and once again join hands, each side will benefit immensely, and the world economy could get a much-needed boost from the transatlantic partners who have long been the twin engines powering global prosperity.

Hon. Mark R. Kennedy (@HonMarkKennedy) leads George Washington University's Graduate School of Political Management and is Chairman of the Economic Club of Minnesota. He previously served three terms in the U.S. House of Representatives and was Senior Vice President and Treasurer of Federated Department Stores (now Macy's).

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Shadow Government

Hagel's Priorities

I agree with Dov that the White House is behaving utterly irresponsibly with regard to defense spending and policy -- and I even favor further spending cuts, which Dov does not. President Obama has for his entire term in office treated DOD like an ATM machine, cutting its budget to free up money for his priorities while excoriating Congress for the consequences of those cuts. President Obama clearly doesn't share the Pentagon's concern about further cuts, blithely saying the $490 billion already cut can be matched. The White House chose to exclude personnel costs from budget cuts, ratcheting up pressure on other parts of the budget. The president was shameless enough to go to Camp Pendleton during the government shutdown, stand in front of the assembled Marines and say "what makes me frustrated is that sometimes the very folks who say they stand with our military, the same folks are standing in the way of the sequester. It's important to look at deeds, and not just words."

But Hagel is also to blame for the mismanagement evident at DOD. The Defense Department turned in a FY 2014 budget $54 billion in excess of the Budget Control Act ceiling, exacerbating the cuts that would need to be made when sequestration came into effect. Services were permitted to spend in excess of their annual burn rate in the months before sequestration went into effect, in order to accentuate the degree of cuts and therefore the damage they could claim was the result of sequestration. According to former Deputy Secretary Ashton Carter, the Pentagon only began "prudent planning" for sequestration two weeks before it came into effect. Services that had programmed their money carefully enough that they didn't need to furlough civilian employees (the Navy) were required out of solidarity to transfer money to the other services and participate in furloughs.

Hagel's Strategic Choices Management Review was supposed to identify where trade-offs would need to be made. Beyond the simplistic "quantity or quality" metric Hagel summarized in his out-brief to the press, it produced very little. Army end strength wasn't even raised as an issue. The leader of the Air Force Quadrennial Defense Review team said of the SCMR "there was no strategy in it, there were no choices in it."

Dov is exactly right that the cutting-edge enablers of our military proficiency (ISR, precision strike) and shielding our vulnerabilities (space, cyber) are where to prioritize spending, but very little in Hagel's actual choices as secretary suggests he is doing so. The criticism holds across all six of Hagel's priorities: reduce "the world's biggest back office" by 20 percent; make contingency scenarios drive force structure; tier readiness; protect emerging capabilities; "preserve balance" between compensation, training, and equipment; and reform personnel compensation.

Compensation reform is the most egregious illustration: it needs doing, but DOD isn't doing it. It's great that he set up a commission to review compensation...except that the Quadrennial Review of Military Compensation concluded its work less than a year ago. Budget experts like the estimable Todd Harrison at the Center for Strategic and Budgetary Assessments have provided a welter of suggestions for curbing the runaway cost of personnel compensation. The debate is not lacking ideas or alternatives, it is lacking the leadership heft -- both from DOD's civilian and military leaders -- to shame Congress into accepting that not every "vote to support our men and women in uniform" is actually good for the Department of Defense in these austere times. Especially when denying them the training and equipment that will make them effective and reduce the risk of casualties is the alternative.

I very much hope Secretary Hagel will actually take up some of these ideas, and those that his own commission will put forward, but giving speeches and setting up commissions are not the same as taking on the Military Officers Association of America and other lobbying groups that will make votes uncomfortable for members of Congress to cast. The service chiefs will have to play an active part in changing the political dynamic from one that rewards compensation votes to one that educates the Congress and public to understand greater compensation will actually be harmful because training and equipment will get short shrift.

That DOD is in such a parlous state is largely its own fault, the result of weak leadership and bad management. Even former Defense Secretary Leon Panetta has been critical, saying "these decisions have been by the seat of the pants, what's essential and what's not essential. I think not enough thought was put into how exactly this would be implemented." Hagel needs to up his game, and so does the military leadership.

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