International Law

U.S. Trade Priorities

By Stan

From Politico:

Rep. Xavier Becerra tells the editorial board of La Opinion that he has turned down the job of U.S. trade representative, having concluded — trade watchers take note — that trade won’t be the first, second, or third priority of the Obama administration.

From Pilar Marrero’s report:

He apparently didn’t hold out much hope that the post would be accompanied with much authority or that it would be part of the new government’s priorities. "My worry [was] how much weight this position would hold, and I came to the conclusion that it wouldn’t be priority number one, and it might not be number to or three," he said.

Here’s my problem with this statement. I think it’s accurate to the extent that Obama’s econ and foreign policy folks are not sitting around talking about trade disputes at the moment.

However, the global economy may grow at something like 0.9% next year (just read that today somewhere — IMF or WB?), and global international trade may actually fall for the first time since 1982.

Times will be difficult for a while, and countries are going to be looking out for themselves. China, for example, needs to worry about employment first, and the U.S. economy second. To the extent that those two things are related, perhaps some coordination will take place. To the extent that their are two separate goals, however, Beijing will focus on numero uno.

What happens when times are hard? Countries look inward and do not necessarily fulfill all of their prior promises when it comes to free trade. The U.S. does this, Japan does this, so does China and the EU, etc. and so on. Next year will be a tough year for international trade and for free trade principles.

Obama and his team may not be thinking about trade at the moment, but as time goes on and, for example, China continues to hit record bilateral trade surpluses with respect to U.S. trade, don’t you think U.S. politicians are going to demand action? When millions of people are out of work, don’t you think it will be convenient to blame foreign countries?

At some point next year, when the worst of the financial crisis has been taken care of and the economies of the world settle down into the doldrums of the recession (Q1 ‘09 and maybe Q2), I think trade will eventually emerge as a big issue.

I think Becerra just made a bad decision.

UPDATE: Michael Pettis explains why international trade generally, and U.S.-China trade specifically, will likely be a big issue next year. This is the grown-up version of this argument, as compared to the above post, which was geared towards those in the Fourth Grade.

Full post as published by China Hearsay on December 17, 2008 (boomark / email).