Monday, November 12, 2012


Almost $6 billions of dollars were spent by the two political parties over the past year to pay for the Presidential and Congressional election contests – and the end result was essentially no change.  Barack Obama remains President; the House and Senate both have picked up a few Democrats.

But Republicans still control the House and Democrats are running the Senate – so don’t expect any easy answers for at least the next two years.

With no worries about getting re-elected in another four years, many Democrats in Washington are expecting – hoping – that President Obama will take a more active stance in promoting Democratic policies, including in trade.

But there is likely to be nothing new.  The domestically oriented President will stay on that track – perhaps turning even more inward looking.  Trade will not be a priority for the second term.

But, what’s the trade agenda for the second term?  Old stuff –

1)   As late as a few weeks ago in the heat of the political campaign, Mr. Obama told MSNBC news in an interview that he still intends to pursue a major reorganization of trade agencies – into a new Department of Business.  On paper, it may be a good idea, but analyses of similar past plans have shown rearranging boxes in an organization chart have very little real impact.

Congress is likely to kick that ball off Capitol Hill shortly after it is mentioned again in January’s State of the Union Address – as happened in January this year when the President first proposed it.  The rub is two-fold.  Essentially abolishing the US Trade Representative’s office – a creation of Congress and a darling of the powerful House Ways and Means and Senate Finance committees – simply won’t happen.

The broader problem is getting the half-dozen oversight committees in both chambers to give up their special jurisdiction over agencies like the US Export-Import Bank, aid and trade and the US Small Business Administration, along with USTR.

2)   The TransPacific Partnership – Entering its fourth year of negotiation among 11 Pacific/Asian nations very little has been seen.  Prospects – and attention from the White House – also appears to be fading.

After an optimistic scenario of reaching a final agreement was dashed in 2011, this year is coming to an end with another miss.  The United States this year had three consecutive negotiating sessions in the United States – with the serious intent to conclude an agreement before the end of the year.  That’s not a possibility.

There also have been indications expressed by negotiators of the growing frustrations with the lack of progress driven, they say, by an unrealistically tough “no-compromise” US negotiating stance.  Some delegations are restating their threat to abandon the effort – and turn to a host of other bilateral and regional trade efforts in waiting.

3)  European Union-US Free Trade Accord.  Former British Prime Minister Winston Churchill once had the idea of a United States of Europe, which would include the then free nations of Western Europe, the United States and Canada.  Since then a free trade agreement between the world’s two greatest economies has been an unattainable wish.  The same problem that thwarted similar efforts over the past half century exist today – different ways of doing things.

In practice, a commercial US-EU FTA already exists.  Duties on both sides have little effect on the amount and pace of transAtlantic business ties.  What is – and has been – the rub are the different approaches to domestic regulations, which make simple trading of goods and services across the Atlantic not so easy.  Those separate approaches are deeply rooted in domestic concerns over the health and safety of each’s citizenry.

Reaching a so-called “gold standard” FTA just ain’t going to happen this century.

4)  Export Controls Reform.  Since the ongoing effort to streamline US export controls involves only one government – albeit several agencies, that project is likely to come to fruition next year.  But as more than one US reform official told WTD, what is emerging is far from what former Secretary of Defense Robert Gates had in mind when he announced the objective over two years ago.

As of today, not all militarily critical goods and technologies are coming off the US Munitions List – which will continue to be jealously guarded by the departments of State and Defense.  Munitions list goods that do move over to the more commerce-oriented Commerce Department for review now fall into a category of its own – where exports would generally be allowed to 36 of the closest US allies.

Mr. Gates originally had in mind the transfer of all Munitions List goods to a single control list – arranged in an pyramid-shaped arrangement.  The pointed top would include “crown jewels” of US technology not available elsewhere in the world and would be prohibited from any kind export.  The middle tier would be license-able products and services to a score of friendly US buyers.  Goods and technologies in the broad-based third-tier would be freely exportable.

At this point in the reform, it is still uncertain whether there will be any real impact on US exports at all.

And then there’s Congress – which will also have its say.

Jim Berger