Kolumni: America’s New Trade Policy:
A Balancing Act

Since World War II, Washington has been a fervent promoter of free trade. Now things are changing. But how?

“As the U.S. economy sputters, we are on the verge of becoming a country of economic nationalists,” reported Fortune during the U.S. presidential campaign.

In reality, Americans have not become economic nationalists, but nor are they free traders anymore.

The Great Reversal

Through much of the post-World War II era, the United States was the champion of global trade, overseeing the creation of the infrastructure of the multilateral world order. Today, Americans are increasingly skeptical about cross-border trade ties, according to U.S. surveys.

Senator Obama’s presidential campaign reflected these themes. Despite overall support for free trade, he was critical of globalization, offshoring, and free trade agreements (FTAs). Along with Senator Clinton, he also agreed to co-sponsor legislation that would levy punitive duties on Chinese goods and suggested he would “try to amend NAFTA.”

Still, it would be wrong to identify President Obama’s trade policy with his campaign promises.

The White House will not seek to amend the NAFTA with Canada and Mexico, at least not soon. The U.S.-Chinese strategic and economic dialogue has been upgraded and broadened. When Secretary of Treasury, Timothy Geithner, suggested in January that “China is manipulating its currency,” Vice President Joe Biden quickly noted that there had been no judgment in the administration over currency manipulation.

During the campaign, President Obama stressed that Washington has not adequately protected U.S. companies, or foreign laborers and environments. In the past few months, however, he has appeared more pro-trade than business had feared.

Recently, U.S Trade Representative Ron Kirk embarked on negotiations to complete bilateral trade agreements left over from the Bush administration with Colombia and Panama. The most difficult FTA yet to be completed is with South Korea.

The administration’s core constituencies include politically powerful labor unions and their backers in Congress, which tend to fault existing FTAs for the nation’s job losses.

Ambivalence over Cross-Border Trade

In recent weeks, President Obama has said repeatedly that he does not want to risk the rise of global protectionism that could make the financial crisis much worse.

Still, new controversies seem to reflect the administration’s ambivalence over cross-border trade.

It was only after criticism from the major U.S. trading partners that the Senate recently softened (but declined to remove) a protectionist “buy American” provision in the U.S. stimulus bill.

Nor will enforcement disappear from the agenda. USTR Kirk has argued for strong and effective protection of America’s intellectual property. For the first time, Canada has been placed on the ‘priority’ watch list (then again, Finland is now in the IPR-focused ‘watch list’).

For years, much of the world has been bashing America for refusing to cooperate in the fight against climate change. As a far-reaching package of green legislation begins to wind its way through the Congress, some observers have become concerned of the potential for the world’s first green trade war.

Most recently, the Obama administration unveiled a sweeping crackdown on offshore tax avoidance by U.S. companies, in a move likely to affect the operations of multinationals worldwide.

In the past, America’s priority was free trade. The idea was that, in the long run, everybody will benefit. Today, America is more “like other nations,” seeking to balance its own national interest with those of the broader world community.

Reassessments are understandable in the light of the grave economic problems. Yet, the rejuvenation of global growth is dependent on the ultimate success of the Obama administration’s difficult balancing act.

Dr. Dan Steinbock is Research Director of International Business at the India, China and America Institute.