International trade will be an important test of leadership for the new U.S. President.
On one hand, U.S. interests in international trade have perhaps never been greater.
Seventy-five percent of global purchasing power and 95 percent of the world's consumers
now reside beyond U.S. borders.
With U.S. consumer spending still sluggish, it will need to be international trade and
access with these fast-growing developing country markets that drives U.S. economic
and employment growth in the future.
On the other hand, however, U.S. popular and political support for the initiatives needed
to take advantage of these trade opportunities has perhaps never been lower.
Recent surveys have shown that a plurality of Americans now believe free trade agreements
hurt the United States.
Deep political divisions around labor rights, environmental protections, and intellectual
property continue to bedevil U.S. trade policy.
It took five years to pass the three most recent U.S. free trade agreements with Colombia,
Panama, and South Korea.
President Obama is likely to be the rare U.S. President to have operated for his entire
term without trade promotion authority to negotiate and conclude trade agreements with
limited interference from Congress.
While the U.S. has been stymied on international trade investment, its economic rivals have
not.
Bilateral and regional trade agreements that exclude the U.S. are proliferating, and it's
U.S. companies that are paying the price with less favorable treatment for their goods,
services, and investments.
The new U.S. President will have three important opportunities to exercise leadership on trade
and to make progress.
The first will be the Trans-Pacific Partnership talks.
When these talks were launched in 2009, they received little fanfare.
Now, some are comparing them to NATO and the Marshall Plan in terms of their potential
economic and strategic significance.
When taken together, the eight other countries involved in the TPP would be the U.S.'s fourth
largest trading partner and represent 25 percent of global economic output.
If Japan joins the talks, TPP countries would be the U.S.'s second largest trading partner
and represent 36 percent of global GDP.
With Canada, Mexico, and other Latin American countries considering joining, the Trans-Pacific
Partnership Agreement is the potential regional platform for trade and investment in the important
Asia-Pacific region for years to come.
The challenge will be that people are uncertain whether the U.S. will be able to conclude
and enact this agreement due to political divisions in the U.S. around trade policy.
The second opportunity for the President to exercise leadership on trade will be with
regard to China and trade enforcement.
The new U.S. president will have to walk a fine line between fulfilling campaign promises
to level the playing field for U.S. investors and companies, while still avoiding a trade
war with China in the midst of an economic recovery that's still fragile after the recession.
The need to incorporate alternatives to dispute resolution are only greater because the U.S.'s
big challenges with China on issues like subsidies, preferential procurement policies, and state
ownership of Chinese enterprises, all issues on which there are limited WTO tools, which
leads us to the third and last important opportunity for the U.S. president on international trade,
and that is at the World Trade Organization.
The Doha Development Agenda, the most recent negotiation round at the WTO, is now in its
second decade and stalled.
The new U.S. President is going to have to find ways to make progress at the WTO, even
if these involve more modest sectoral initiatives or reforms in the dispute resolution process.
The United States has significant interest in a vibrant, relevant WTO as a guarantor
of a rules-based global trading system.
So in sum, the U.S. President takes office at a moment of significant crossroads for
U.S. engagement on international trade.
There are significant challenges with China and liberalization at the WTO but also tremendous
opporunities such as at the TPP.
The new U.S. President is going to have to spend political capital early and personally
to convince Congress and the public of the benefits of free trade.
U.S. trade officials will also have to be ingenious in identifying new ways to ensure
those benefits are tangible and go beyond the diffuse economic gains of U.S. trade agreements
past.