Trade policy largely has been in hibernation during the presidency of Barack Obama. That’s unfortunate given how important trade is to U.S. businesses and workers.
During and after one of the worst recessions since the Great Depression, trade has suffered greatly. From a peak in July 2008 to April 2009, U.S. exports dropped by 26 percent. Imports also hit a high in July 2008, and then declined by 35 percent through May 2009.
But in 2010, while the economy expanded at a less-than-stellar 2.9 percent real rate of growth, real exports grew by 11.7 percent, and real imports rose by 12.6 percent. Exports alone last year actually accounted for 46 percent of U.S. real GDP growth.
Consider that exports equaled 12.5 percent of GDP in 2010, with total trade (exports plus imports) coming in at 28.6 percent of GDP. Compare that to the economic realities of 1960, for example, when exports equaled only 5.1 percent of GDP and total trade registered a mere 9.5 percent of GDP.
It is worth noting, though, that the latest data from the U.S. Bureau of Economic Analysis show that both exports and imports fell in February. Given that exports provide information about the state of our trading partners’ economies and imports reflect the state of domestic growth, these numbers warrant attention. Are these just one-month drops during a period of continued recovery, or are they the beginning, or resumption, of a more worrisome trend?
Unfortunately, nothing has happened on the policy front to boost U.S. trade in over three years. In December 2007, after both the U.S. House of Representatives and the Senate voted in favor, President George W. Bush signed the U.S.-Peru Trade Promotion Agreement into law. That marked the ninth free trade deal — covering a total of 14 nations — signed into law during the Bush administration.
In addition, three deals signed by Bush still await action by the Obama administration and Congress — agreements with Colombia, South Korea and Panama.
That’s by far the most action on trade agreements under any U.S. president.
By the way, one of the tools used to advance trade accords was “trade promotion authority,” also known as “fast-track” authority. Trade promotion authority was first granted in 1974, and it allowed the president to send a trade agreement to Congress for an up-or-down vote, without amendments. This provided trading partners assurance that any deal hammered out would not be altered due to special interest pressures. But that authority expired in July 2007.
So, the U.S. arguably moved from the most aggressively pro-trade administration to the current White House, which has been largely indifferent on trade. For good measure, no additional free trade accords have been negotiated since the end of trade promotion authority. That’s almost four years of nearly standing still on trade policy, while the rest of the world moves ahead.
Since the November 2010 elections, some stirrings have been detected, however.
In early December, for example, the President announced a small re-working of the South Korea agreement, and declared his newfound support for the accord. Likewise, early this month, President Obama and Colombian President Juan Manuel Santos signed off on revisions to the U.S.-Colombia accord. Those changes focused on enhanced legal protections in Colombia for labor union organizers.
But it’s clearly congressional Republicans taking the lead and pushing the Obama White House along by linking together consideration of the South Korea, Colombia and Panama accords. On April 7, with the release of a U.S. International Trade Commission report noting the positive impact that the U.S.-South Korea trade deal would have on the American auto industry, House Ways and Means Committee Chairman Dave Camp (R-MI) observed: “All three of our pending agreements have been closely studied over the last several years, they are ready for consideration. If we fail to act on all three before July 1, we will risk losing critical market share in those countries and falling further behind our foreign competitors.”
July 1, 2011, by the way, marks the date when agreements between the European Union and South Korea, and Canada and Colombia go into effect.
The pending accords are overwhelmingly about lowering barriers in South Korea, Colombia and Panama to U.S. products, to the benefit of U.S. exporters and consumers in those nations. These agreements deserve to passed and signed into law as quickly as possible. It would send a positive signal to entrepreneurs, businesses and investors that the U.S. is back in the trade policy game.
At the same time, however, the Obama administration and various members of Congress (mainly Democrats), by circumventing the fact that these accords were negotiated under trade promotion authority and therefore opening the door to certain special interest influences (mainly, labor unions), have made clear the need for the return of trade promotion authority.
Again, it will be up to Congress to lead by passing trade promotion authority. Would President Obama regress and veto such a measure, thereby sending an anti-trade message to U.S. businesses, workers and the world? Given how important trade is to the U.S. economy, one would hope that economic common sense would prevail.
Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council, can be reached at email@example.com. His new book is titled Warrior Monk: A Pastor Stephen Grant Novel.