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What President Obama Can Learn From President Clinton

Wednesday, July 15, 2009

Compete don't retreat.

In a recent opinion piece in Roll Call, my colleague at the American Enterprise Institute, Norm Ornstein, defended President Obama’s decision to delegate to Congress central policy and decision-making authority over the most important substantive details of the administration’s legislative agenda. In so doing, he attempted to rebut the arguments of the Financial Times’ Clive Crook and Washington Post columnist E.J. Dionne that Obama is “wasting his talent” and compromising too much with congressional leaders.

Norm took as his examples the ongoing struggles over healthcare and climate change and laid the blame for the president’s hang-back tactics to the purported reality that Congress is “dysfunctional,” with the Democratic majority “obtuse” and refusing to seek out minority support, and with the Republican minority leadership believing that a “united minority opposition” is the best strategy. In this situation, he posits, Obama’s approach of “cutting Congress a lot of slack and being supportive when necessary” has led to a string of “meaningful successes.” He concludes that “the approach the White House has used so far has actually been smart and tough, not simply expedient and weak.”

I will leave it to others who follow these issues more closely than I to react to Ornstein’s analysis of the unfolding healthcare and climate change legislative sagas.

On trade policy, however, where I spend my time, President Obama’s record is certainly not “smart and tough,” though it is too early to permanently brand it “expedient and weak.” The early tests are not promising, but there is a lot of history yet to be written.

Clearly candidate Obama sowed distrust among free-trade advocates with his promise to take a “hammer” if necessary to reopen the North American Free Trade Agreement (NAFTA) and his criticism of U.S. multinationals who have made big investments in other nations (shades of John Kerry’s “Benedict Arnold” accusations in 2004). Since becoming president, however, Obama has tacked back toward a more benign attitude toward trade and foreign direct investment—though he has yet to demonstrate any political leadership by opposing anti-globalization interests and elements within his own party. 

On trade policy, President Obama’s record is certainly not ‘smart and tough,’ though it is too early to permanently brand it ‘expedient and weak.’

Three incidents are telling, and they demonstrate the downside of presidential deference to Congress on trade issues. The first concerns the “buy American” provisions that ended up in the stimulus package. The administration was aware of the movement afoot to include this protectionist measure but the president waited until the House passed a bill before intervening. By then, it was impossible to stop the rule altogether, so the upshot was a late, weak amendment to the final bill stipulating that in implementing the “buy American” rule the United States must live up to its international obligations. As it has turned out, this promise had little practical significance, and so local and state governments have been busily (in order to be sure to get the money) turning down proposals that cannot guarantee the use of American manufactured products, including all parts and components. Canadian local and provincial governments have retaliated, and, more ominously for U.S. exporting companies, the Chinese have announced an identical rule.

Then, there was the acquiescence to a congressional provision in an appropriations bill that killed a pilot program to allow Mexican truckers to make international deliveries to the United States. This provision became law despite an earlier ruling by a NAFTA panel against the United States and the threat (since implemented) by Mexico to retaliate by imposing $2 billion in tariffs on U.S. goods and services. Once again, the president stood back and then could only lamely promise to have the transportation and state departments attempt to fashion some kind of remedy—we (and Mexico) are still waiting for details.

Canadian local and state governments have retaliated against the ‘buy American’ rule, and, more ominously for U.S. exporting companies, the Chinese have announced an identical rule.

Finally, the House recently passed climate change legislation that includes provisions for future punitive border tariffs against imports from nations deemed not have put in place adequate climate change rules (by U.S. unilateral standards). The bill strikes directly at presidential authority and discretion by severely limiting the president’s ability to mitigate the draconian measures through invocation of the national interest. In this case, Congress would have to agree before changes were made. President Obama spoke out against the provision just after the climate change bill passed the House. But in a now familiar pattern, he faces a fait accompli; though he can work with allies in the Senate to restore some leeway, it is likely that some form of border retaliation will remain in the final bill.

And so it goes in the broader arena of trade policy: on the pending free trade agreements with key U.S. allies, Colombia and Korea, the president and his trade officials promised to move forward, but recently have signaled that it may be next year before action is seen; similarly, with the centrally important World Trade Organization Doha Round, the president keeps reiterating that he wants a deal—but he has expended no political capital to back up his strong affirmations thus far.

The bottom line is that on trade policy President Obama faces a deeply divided party with a strong anti-globalization element concentrated among House Democrats. Left to their own devices, congressional Democrats—particularly in the House—will create endless mischief. At some point Obama will have to decide—as did President Clinton—whether to take on these anti-globalization Democratic interests groups, and whether on trade the Democratic Party and the United States must “compete not retreat,” as Clinton finally judged. So far, he has looked “expedient and weak” because he has not made that decision and commitment.

Claude Barfield is a resident scholar at the American Enterprise Institute.

FURTHER READING: Barfield wrote “Beware of Investment Protectionism”on how President Obama should announce to the world that the United States welcomes and encourages foreign investment. 

Image by Dianna Ingram/Bergman Group.

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