Tuesday, December 11, 2012

New Multilateral Trade Agreements?

. Tuesday, December 11, 2012

Earlier today, USTR Ron Kirk suggested that multiparty regional trade agreements might be an emphasis of the Obama Administration’s second term.  Kirk emphasized that the President “has more of a bias toward multilateralism than anything else.”  Some have reacted to this announcement as suggesting a shift in policy – from a bilateral to a more multilateral approach toward trade agreements.  I’m not so sure.

Yes, in Obama’s first term significant bilateral treaties were signed with South Korea, Colombia and Panama.  But, the negotiation of these agreements began in earnest 5 years earlier under the Bush Administration.  That they were implemented in 2011, after some additional trade-related policy concessions were made to the President and Congressional Democrats, does not necessarily indicate that these agreements reflected the Administration’s ideal approach to trade policy.

Kirk’s announcement might also be significant in that it signals an emphasis on trade policymaking more generally.  Many criticized the Administration for a lack of attention to trade policy in the early years of Obama’s first term.*/**  Whether the critiques are justified is an open question.  On the one hand, there was the high-profile application of new tariffs to select tire products; there was also a domestic content component to the stimulus bill, etc.  But, let’s say trade policy was generally on the back-burner early on.  After all, Ron Kirk himself essentially admitted as much.***  Would this really be that surprising?  In the wake of the financial crisis and severe recession, would we expect the Administration to be especially aggressive in pursuing trade agreements of any sort?  In addition to the obvious preoccupation with stimulus legislation, there is also a long line of political economy literature finding that constituency preferences for trade liberalization are reduced in economic downturns (this applies to both interest group and individual-level preferences). 

With respect to individual-level preferences, I recently came across a Pew Research Center survey which found that public support for free trade waned at the onset of the global crisis.  In the seven years leading up to the financial crisis, about 44 percent of U.S. respondents were of the belief that free trade agreements like NAFTA and the policies of the World Trade Organization were good for the U.S. economy.  In April 2008, opposition to free trade grew, and only 35 percent of respondents answered that free trade agreements had a favorable impact on the economy.  While the figure subsequently rebounded to previous levels, the recession appears to have had a negative (albeit temporary) impact on views regarding free trade. 

If the USTR’s recent announcement does indicate that there will be a renewed focus on trade policymaking, maybe this shouldn’t surprise us at all.


*Reuters.  2011. “Fifty economists have written to ask U.S. President Barack Obama to ‘step up to the plate’ on World Trade and champion a last gasp deal on the moribund Doha round of world trade talks.”  Sept. 21, 2011.

**Sistema Econ√≥mico Latinoamericano y del Caribe (SELA). 2010.  U.S. Trade Policy under the Obama Administration: Implications for SELA Member States.  March 2010.



Emmanuel said...

Welcome to the blogosphere, Rob. Some questions for your initiation, though: (1) Why should we take three-year-old survey data as the current state of US public opinion on trade? (2) Why is there no mention of multilateral agreements whose talks are underway alike the TPP enlargement?

Rob Galantucci said...

1) We shouldn’t. In fact, public support in the U.S. toward trade deals has been pretty volatile in recent years. The point was simply that it isn’t especially surprising that the Administration didn’t devote a great deal of attention to trade early on in its first term, because (1) other legislation was being prioritized, and (2) there was a historically severe recession. To the extent that the economy improves, then maybe trade deals (of any variety) will be front-and-center again. Anyway, that there is a relationship between trade policymaking and the macroeconomic environment seems to be an unremarkable proposition.

2) Yep. Good point, TPP talks have been ongoing. A fact that’s entirely consistent with my suggestion that there has not been some sort of multilateral epiphany by the Obama administration. Thanks for pointing that out.

Rob Galantucci said...

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New Multilateral Trade Agreements?




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