BY DAVID ROTHKOPF
JUNE 11, 2015
While national security policy continues to flounder, real progress is being made on the economic front.
Update: This afternoon the House rejected Obama’s trade initiative after failing to approve the trade adjustment assistance, a major setback for the president’s efforts to strike a major trade deal before he leaves office.
While U.S. President Barack Obama’s national security team remains adrift, strategy-less, incremental, and reactive in crisis zones worldwide, the rest of his international team seems poised to achieve a series of successes that could make 2015 the best year yet for Obama’s foreign policy. The key question will be whether progress with acronyms and abbreviations like TPA, TPP, and Exim can drown out the setbacks and frustrations associated with others, like IS, ISIS, and ISIL, the plethora of shorthand monikers by which we refer to the brutal thugs rampaging through Syria and Iraq.
Approval of the Trade Promotion Authority (TPA) in the House of Representatives on Friday will clear the way for the final agreements to be worked out on the Trans-Pacific Partnership (TPP) trade agreement. That deal will remove trade barriers for countries — on both sides of the world’s largest ocean — whose combined economies comprise 40 percent of the world’s total output. It will be the most significant international trade deal struck in over two decades, and it will be one for which President Obama will deserve great credit.
According to one senior administration economic official, the president and his team “put their shoulders into this deal with a kind of effort I haven’t seen since the fight to pass healthcare reform.” It has not been easy. As has been the case since the 1990s, trade deals are among the few things that bring together the far left and the far right — both sides hate trade deals though for very different reasons. (The left sees free trade as a job suck, the right fears the government ceding U.S. sovereignty or cutting deals that have hidden implications on hot-button issues like climate change or immigration.)
The result has been old-fashioned horse-trading and a refreshingly intensive effort by the White House to use the president’s power, prestige, and persuasive capabilities to eke out the votes they needed to win the day. Friday’s vote will be close. But with “fast-track” TPA assuring that there will be only an up or down vote on the ultimate TPP deal that is struck, the way will be clear for U.S. negotiators to hammer out the final details of the agreement with the Japanese and others who have open issues. The senior economic official cited above also said that with the TPA in place he expects the TPP deal itself to be done and approved “very quickly … hopefully this summer.”
The president has made passage of the deal, which he argues will both promote export-driven job creation and send a message to China — not a party to TPP — that it will have to rise up and meet international trade standards or risk getting left behind economically. The positive impact on both fronts is probably somewhat overstated by the White House, but that’s always the case in such campaigns for a new deal. Nevertheless, the deal strengthens economic ties with some of the world’s most dynamic economies, removes key barriers to exports, and represents the most important progress on global trade since the Uruguay Round and NAFTA in the early 1990s. (It should be noted that, like both of those deals, the process that led to the deal began in administrations preceding those that will ultimately get to close and celebrate them. Therefore, Bush administration U.S. Trade Representative (USTR) Susan Schwab deserves as much credit on this deal as current Obama USTR Michael Froman. Both have been among the most effective to occupy the trade rep’s office.)
Speaking of which, first-class personnel are a key to the international economic team’s success. As noted here before, I was once a senior Commerce Department official who had the privilege to work with a great commerce secretary, the late Ron Brown. I have known every commerce secretary in my adult lifetime. And I can say without fear of contradiction that Penny Pritzker is among the smartest, most energetic, and capable people ever to hold the job. Her team is already making plans to follow up the approval of TPP with a series of trips to signatory countries to ensure U.S. companies can take advantage of the opportunities the deal presents.
Another victory on this front to likely come this summer (and be even harder won) will be the reauthorization of the United States Eximbank. Whether that reauthorization occurs before or after the June 30 due date is still uncertain given the vagaries associated, resulting from the absolutely bizarre politics that have turned what should have been an automatic reauthorization into one of the most ridiculous displays of Congressional malpractice we have ever seen. And this Congress has given us a lot of instances to choose from.
While slam-dunks have gotten a bad name in Washington ever since George Tenet abused the term in the days before the Iraq War, the reauthorization of the U.S. Export-Import Bank (or Exim) should have been one of them. The bank is led by another of the Obama team’s standouts, Fred Hochberg. Hochberg has overseen a vast expansion of its lending, major pushes to extend its reach and support to small- and medium-sized enterprises, measures to ensure more lending on green projects, and active support for creating U.S. jobs through leveling the playing field against the super-aggressive tactics of other governments in the export financing space. Deals and lending have achieved all-time highs under his tenure and unlike most parts of the government, this one is actually profitable, returning over $1 billion to U.S. government coffers. That’s right, to shut down the bank, Congress would actually have to come up with new revenue to make up for that which the bank regularly produces.
Think about that. Despite the fact that Exim is a profitable agency that creates much-needed jobs, supports businesses of every size from coast to coast, and also ensures fairer global competition, some in Congress have targeted the agency and tried to shut it down. Why? Because to some, it represents “corporate welfare.” (Meaning that it is seen as a subsidy to big companies that don’t need the help.) But not only does it finance many deals that couldn’t get commercial financing and many for smaller businesses, it also ensures that U.S. companies don’t lose out when other governments subsidize financing to their own companies. (Which virtually every other developed economy in the world and many smaller ones do.) Would the world be better off if every export-import financing agency were shut down? Sure. And when that happens we should revisit this discussion. Until then the idea of shutting down Exim is ridiculous — unilateral disarmament at precisely the wrong time penalizes an agency doing the best work it has ever done.
And that’s why, in the end, the bank will be reauthorized; and that will rightly be considered another victory. But there are still other promising developments in areas outside the national security mess that has commanded most of the attention directed toward Obama’s foreign policy.
One thing Exim does is help support some of the administration’s worthy development efforts like Power Africa, programs that can help the neediest economies in the world grow and have the kind of steady economic growth that is the best defense against instability and extremism. That work has been led in this administration by an extremely effective partnership between the U.S. Agency for International Development (USAID) and the White House. Until recently, USAID has been led by Raj Shah, one of the most creative and impressive senior officials to enter the U.S. government in many years. Shah not only effectively managed the agency that plays such a key role in post-conflict reconstruction, stabilization, and development, but he also actively explored the use of new technologies and approaches in ways that triggered a much-needed rethink about how to make the most of the (too little) the United States spends in this area. Now that Shah has departed the government, President Obama has nominated Gayle Smith for the job. He could not have made a better choice. Smith, who worked with Shah as the quarterback of White House efforts on these issues, is someone who had devoted her life to development issues whether as a journalist, in the NGO community, or during productive stints in the Clinton and Obama White Houses. (She is the co-founder of the Modernizing Foreign Assistance Network and served on a bipartisan Congressional commission on foreign aid.) I know Smith well, having worked with her in the past, and while she is not someone you want to bump heads with, she is the best kind of public servant, one who deeply believes in the mission and knows how to get things done. Her confirmation would also be a significant win for the White House.
Later this year, there is also an increasingly good chance that careful administration legwork will play a role in producing a climate summit in Paris that will lead to very significant commitments to cut emissions worldwide and will perhaps deal more substantively with threats to our climate than any past such meeting. The recent statement on their commitment to such an outcome by the G-7 leaders at their summit last week in Bavaria is a sign that the groundwork is being effectively laid here. (Someday people will likely look back on this administration and see the intensive effort and leadership on climate by John Podesta, when he was at the White House, as one of the single-most important international policy successes and perhaps as the most important of the Obama years.)
At a time when turning on the news in the morning typically makes one want to roll over and go back to sleep, it is worth noting and celebrating when progress is achieved. Of course, in some areas, such as the impending nuclear deal with Iran, we need to be careful about celebrating apparent successes when the real test of accomplishments occurs over extended periods of time. But even with such caveats included, if the Obama team can achieve TPA, TPP, reauthorizing Exim, continued U.S. economic leadership through the example of our sustained growth, a climate agreement in Paris, and a nuclear agreement with Iran, there will be no denying that the second half of 2015 will be the high-water mark of a foreign policy that has often spluttered and stumbled.
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