Saturday, February 25, 2012

The Department of State/Agriculture

Reorganizing some dozen or so trade agencies into a single department may not be a bad idea. It’s too bad, though, it comes so late in the Administration.

Rearranging the boxes, indeed, could put the US trade apparatus on par with those of other major trading nations, including – most notably – Japan’s Ministry of Economy, Trade and Industry. Other countries – such as Australia, New Zealand and the European Union – have gone even further by making a their "ministry" of trade subservient to the foreign affairs ministry.

It would provide for greater coordination among trade decision makers and contribute toward a more consistent and predictable trade policy.

But such a plan requires coordination with Congress, and there simply is not enough time in the current Congress or the present Administration to do that. If President Obama is serious, the plan might come to life in the early part of his next term or become an outline for the next Republican Administration.

The President should be commended for the thought, however. History has shown that the best inventions are usually the result of simple thinking.

Maybe it’s time to apply that simple thinking to US foreign policy as well. Since the United States has not been able fight and win wars – beginning with the horrible experience of Vietnam almost half a century ago, perhaps the State Department should turn its attention more toward keeping the peace around the world instead of mopping up after disastrous military operations.

(The best thing said in the innumerable Republican Presidential debates over the past few months has been libertarian Rep. Ron Paul’s mantra of "We don’t need these wars.")

I attended most of a two-day Agriculture Department outlook conference on Thursday and Friday. There was nothing notable to report, and trade hardly came up.

To celebrate the 150th anniversary of the department – which was founded by President Lincoln who was in the middle of directing a bloody civil war in this country – Secretary Tom Vilsack gathered together eight of his predecessors going back to President Reagan, with each reminiscing about their experiences.

But recent secretaries Anne Veneman – under the first Bush Administration – and now Sen. Mike Johanns, who also served the lesser Bush – stated that the biggest challenge for American agriculture and the country today is the steeply expanding world population and the real possibility of not being able to feed them.

The biggest near-term US danger from the outside world, all the former secretaries agreed, is not war, terrorism or energy shortages. It is the instability in the world if governments are unable to provide for their citizens’ welfare. And the basic purpose of any government is to see that their populace is fed.

Seventy percent more food must be grown in the first half of the new century to keep up the demands of population growth. There will be some 9 billion people in the world by 2050 – up from today’s 7 billion.

With President Obama so keen about reorganizing government functions, maybe the State Department – with its well-established string of offices and embassies around the world – should turn attention to the urgent need for food security and operate in close partnership with the Agriculture Department.

As former Agriculture Secretary Dan Glickman pointed out on Thursday, the future of food policy cannot be based on programs developed in the 1930s, when the country was in the depths of a deep depression and much of its farm land was simply known as the "dust bowl."

Current Secretary Vilsack even emphasized the need to focus his department’s programs to more of a science-based production.

Let’s take it a step further and discuss what a combined State/Agriculture Department could accomplish in the real world. And let’s start by erasing the requirement of a classic – and outdated – liberal arts education for college graduates who desire to enter the US foreign service. Let’s create in State a foundation based on agriculture. Foreign aid – instead of going down the sink-hole for such countries as Israel and Egypt – should be provided in the form of food growing, storage, transportation and trade to countries in need and as should a much greater emphasis on cooperative agriculture-based science. Washington should encourage – and support through federal programs, including money – more educational programs in agricultural research and related areas. Affiliated skills such as infrastructure development and publica administration should be promoted and become the basis of US foreign policy.

Just a thought.

Jim Berger

Tuesday, February 21, 2012

Re-inventing the Wheel

Well into his fourth year in office, President Obama seems to be just learning about trade.

In what was billed as far-reaching remarks and an ensuring President Memorandum to agencies issued after a swing across the west coast, "King" Obama issued his directive to his subjects to do what is right.

Below is a point-by-point description of how the pronouncements are far from revolutionary and amounts to simply "re-inventing the wheel."

Export Promotion Cabinet – already established as part of the 2010 National Export Initiative. As far as I could find out the cabinet has met once or twice since its inception. When first created, I immediately thought this would be a good way to hold "cabinet" meetings on trade without the President actually attending. President Reagan – who took trade seriously – had a better idea. He would call occasional cabinet meetings – that he attended – devoted to the topic of trade.

Last week the President also cited his previous idea of creating a super Department of Trade – which would integrate at least a half dozen US trade agencies, including the US Trade Representative. He also admits that Congress is not likely to give him that authority. Already on the books is a subcabinet-level coordinating structure known as the Trade Policy Review Committee. WTD was told recently that the committee has not met during the Obama Administration.

A Presidential memorandum to agencies released during his west coast visit also suggests greater "on the ground" coordination among the four major export and investment promotion agencies. Well, several years ago the Bush Administration established so-called "one-stop" shops whose responsibilities would be divvied up and shared among the various Commerce Department and Small Business Administration regional offices – and Ex-Im Bank’s two regional offices. As the case for most initiatives developed in Washington, the effort had a good start – and even a restart – a few years back, but succumbed to the fate of the Washington bureaucracy.

Budget constraints resulted in cut-backs on the ground. There was less and less money for Commerce/SBA officials to travel back to Washington to learn the inner workings of how to fill out applications the Export-Import Bank, for example. When push came to shove, international lending programs at the SBA came in low on the list of priorities, falling behind domestic lending programs. So that dried up a well.

The Friday memorandum also calls for a "consolidated" export budget that would compare spending – hence priorities – across agencies. Guess what? That law – drafted under a Congressional directive – is still on the books. But, the Office of Management and Budget has never implemented it because it would screw up the decades-old method of writing agency-centric budgets.

As an afterthought, the President announced in his speech in Seattle establishment of a new small-business direct lending program run by Ex-Im Bank – which has been under the Bank’s consideration for some time. A new revolving credit fund of up to $500,000 would be provided in six- to 12-month terms to qualified small business exporters. Well, that program – at least in theory – already is in place. There has been an understanding for years between policy-makers at Ex-Im and SBA that very small small business loans would be provided by SBA and Ex-Im would do the bigger small business business. One problem is the inadequate administrative budget at Ex-Im which limits the time personnel can spend on scrutinizing and approving applications.

As a footnote in the piles of paper coming out from the White House last week was something billed as the first major overall of the Foreign Trade Zones program in 40 years. A read-through indicates that application approvals for full trade zones should be shortened from 12 months to four months. Applications of subzones would be done in five months instead of 10. The real problem with the Commerce Department-run FTZ program is that it is situated in the department’s import administration – with its unique mind set – even though the great bulk of manufacturing and assembly taking place in those zones are directly exported and never enter the country. One big flaw in the program requires zone-based firms to pay antidumping and countervailing duties on their "imported" inputs. The National Association of Foreign Trade Zones has been fighting unsuccessfully for years to get both aspects of the program changed.

Wednesday, February 15, 2012

Another Kirk Failure

CAUTION! The following is the second in a series of hyper-critical blogs on why US Trade Representative Kirk is a woeful failure at his job.

Congratulations are in order for US Trade Representative Ron Kirk for achieving another milestone toward his ultimate goal of dismantling his office.

The latest success came in the introduction this week of the President’s fiscal 2013 government-wide budget. Billed as a trade enforcement budget by Administration officials, the money proposal to Congress suggests a boost in trade enforcement funds by $26 million – of which $24 million will go to a new trade enforcement center within the Commerce Department’s International Trade Administration. Two million dollars – a little less than 8 percent of the increase – will be allocated to USTR.

The last I’ve heard is that USTR’s job is to negotiate new trade rules – either bilaterally, regionally or multilaterally – and then enforce those rules through the World Trade Organization or other tribunals. Commerce’s ITA has a hard-working staff within its foreign commercial service which quietly and effectively resolves some real-time problems that US exporters have on the ground. But, except for litigating import cases, it has no real expertise in trade warring.

Under terms of the new budget proposal, USTR – along with other agencies, including the Small Business Administration, the US Export-Import Bank, the Overseas Private Investment Corporation and the tiny US Trade and Development Agency – will feed into the new coordination role of Commerce.

So USTR becomes a bit player in the process?

The last self-destructive move by USTR Kirk was his failure to even moderate President Obama’s "brain-child" of an idea to construct a super Commerce Department, which would encompass the other trade-related agencies – minus those in the Agriculture Department and State Department. USTR would be a subservient part of that restructured bureaucracy with no special role.

The singular – and initial – mistake made by Mr. Kirk was to pull the rug out from under the 10-year-old Doha Development Agenda multilateral trade negotiations. By doing so he essentially undercut his own agency’s reason for being.

The only optimistic scenario that can be seen for the near future is the election of a Republican to the White House. Leading Republican candidate Mitt Romney has already said as President he would move quickly to call a summit of Western Hemisphere leaders because the region has been largely ignored by the current Democratic Administration. Under "Republicanship" you can also look to US strong backing for a real re-start to the Doha trade round in Geneva.

Any comments?

Jim Berger

Thursday, February 2, 2012

Steve Lande -- A Consummate Negotiator

WTD published last week an extensive "interview" with consummate US trade negotiator and long-time Washington advisor on trade policy Stephen Lande. To say that it was an interview is a misnomer. It was really like a negotiation which took over two months of going back and forth until both sides got it right – and Mr. Lande was happy.

But that is what Mr. Lande has been all about during his 40-plus years of trade negotiating.

I first met Steve during the Reagan Administration when he was assistant US Trade Representative for the Americas – and one of the chief authors of the revolutionary Caribbean Basin Initiative program for poor countries in the Caribbean area and later Central America.

As a young reporter I had tried repeatedly – but unsuccessfully – to contact Mr. Lande at USTR to find out more about the initiative. I got used to "answers" from his secretary that he was not in, or busy with something else or otherwise unavailable.

Then I discovered a copy of a Presidential Action Memo (something or other) which outlined the new CBI program, leaving a few square brackets for decision by the White House or the President himself.

I made a call again to Mr. Lande, telling his secretary that I had a copy of the memo and just had one questions relating to one of the square brackets – which appeared to leave it up to the White House to pick one alternative over the other. One alternative, to me, seemed to be very protectionist.

About five minutes later I got a return call from Mr. Lande himself. I immediately suggested that the first – less restrictive – alternative would likely be more appropriate. Without caution, he said "yes," and then jumped in to ask where I got that memo.

To this day it remains a secret.

Since then, we have been good friends as I followed him from one public forum – some tiny – to another to explain the CBI initiative once it broke out of the White House and had the strong backing of President Reagan.

Another story. A year or so ago I had an opportunity – quite by accident – to sit at a table at the National Press Club during one of its luncheon speeches with several USTR staffers including its head at the time of the Caribbean/Central American office. I mentioned that I had known Steve Lande for quite a long time. They asked me who he was.

I conveyed that response to Steve, who I bumped into later in the day. In his own manner, he expressed surprise and immediately got on the phone to the Caribbean office to reintroduce himself.

Another long-time Washington trade guru – also a former official of USTR – whom I talked to recently about the incident said he not surprised. It unfortunately is too often the case at USTR – where there is a very serious lack of institutional memory.

Jim Berger