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Sunday, December 14, 2008

Xavier Becerra and Obama's challenge on trade

Obama's most important cabinet pick so far has been Xavier Becerra as United States Trade Representative. Becerra, a Los Angeles Congressperson, is a bit of a mystery on trade issues. He voted for NAFTA but later apologized for the vote; he voted for the Peru Free Trade Agreement, but he opposed the Central American Free Trade Agreement. He supported China's admission to the WTO, but he is a member of Bernie Sanders' Progressive Caucus, which has been increasingly hostile to trade deals.

The US Trade Rep's job is the most important position yet announced, because trade is the issue on which Obama's views are most enigmatic. On one hand, Obama is an academic surrounded by economic eggheads with unimpeachable academic credentials. Therefore, one can presume that he knows that raising U.S. trade barriers against foreign imports would be economically disastrous for the world, especially the developing world. On the other hand, Obama made some rash statements about "re-negotiating NAFTA" during the campaign to court union votes -- statements that supporters like myself hoped were insincere. (Our hopes were buoyed by the off-the-record remarks of his adviser, Austan Goolsbee, to the Canadian Consul-General in Chicago that Obama's NAFTA-bashing was mere "political positioning").

Right now, the Doha Round of trade talks are in their apparently perpetual state of being on endless life support. Despite rhetoric from the Luddite wing of the Democratic Party, it is the universal consensus of the economically literate that access to the markets of the developing world is critical for the welfare of the world's poor. (It is sometimes mistakenly said that reputable economists like Joseph Stiglitz support U.S. tariffs as a boon to developing economies. This is untrue: Stiglitz has argued that developing nations might be benefited by their own trade barriers but would be unequivocally injured by American restrictions on imports).

Is Becerra a "Nixon-to-China" trade pragmatist who will nudge Democratic autarkists Sanders and Sherrod Brown into supporting trade agreements? Or will he preside over the demise of Doha and watch as the United States hunkers down behind recession-promoting tariff walls? No one really knows. The elements of a grand trade deal are there: Generous transition relief, job training for the unions, and perhaps some sort of enforcement of ILO standards in exchange for reduction in tariffs. (The enforcement of ILO rules is the trickiest element). Prominent Democrats like Barney Frank have been pushing for such a deal for years. Will Becerra be able to swing the deal? Like Obama's own views (as opposed to "political positioning") on trade policy, the answer to this question is a mystery.

Posted by Rick Hills on December 14, 2008 at 03:54 PM | Permalink


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