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November 19, 2014

Can President Obama Work with the Republican Congress on Trade?

 
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An obvious question after the sweeping Republican election win is: “What hope is there for constructive outcomes between President Obama and the Republican Congress during the next two years?”

President Obama and Republican leaders have both answered this question with at least one answer in common: Trade policy. New Senate Majority Leader Mitch McConnell says that he and the President have already discussed trade as one area of possible cooperation,

There now appears to be a renewed possibility of Republicans passing fast track trade promotion authority early in the new Congress, which would revitalize trade negotiations such as the Trans Pacific Partnership (TPP) and other agreements. In general, it’s fair to say that Republicans are more favorably inclined toward trade liberalization than are Democrats, which is at least part of why Democrat Senate leader Harry Reid went out of his way to kill any possibility of progress on trade agreements early in 2014.

Support for freer trade has always been a hallmark of free-market conservative philosophy, although Republicans have also occasionally been guilty of protectionism, and there seems to be a disturbing distrust of free trade among some in the Tea Party movement that policy thought leaders like IPI will be addressing as part of our trade policy program. Ultimately, the evidence is overwhelming that freer trade leads to more economic efficiency and to greater job creation in areas of each nation’s competitive advantage.

Reviving the TPP is a great first step, but it shouldn’t stop there. Globally, the trade liberalization process at the World Trade Organization (WTO) has been moribund for several years, which at least in part has been due to U.S. unwillingness to consider relief on our agriculture subsidies. Conservatives have long recognized the problems associated with agriculture subsidies, but we have a dismal track record of reforming and removing such subsidies, mostly because of the trade-related issues. Absent trade agreements governing national subsidies, preferences and tariffs, such protections become a sort of arms race, with countries alternately protecting their producers from international competition and subsidizing exports to appease domestic producers, with subsidized dumping being the worst end result. This is nothing even vaguely resembling a competitive market.

There’s an enormous amount of frustration on the political right about agriculture subsidies, and about how it’s been difficult to impossible to make any progress on eliminating them. We’ve attempted to deal with the agriculture subsidy issue at IPI, using sugar subsidies as an example. In our view, it’s not as simple (and politically almost impossible) to simply eliminate subsidies, and for those who disagree with us, all the proofs seem to be on our side. Those who argue simply for the unilateral elimination of subsidies end up simply muttering about the lack of political courage, or something. Meanwhile, absent a solution, the subsidies continue.

The ultimate solution to sugar and other agriculture subsidies, in our view, is a revived trade process at the WTO. With a trade agreement among major agricultural producers, countries would be required to dramatically reduce supports, subsidies and other protections, and allow something much more resembling a free global market for agricultural products.

We’re not the only ones who see this as the solution. In the area of sugar subsidies, for instance, Congressman Ted Yoho (R-FL) has put forth a proposal in which the United States would drop our subsidies once there is a trade agreement among the major sugar producers to do the same. The result would be a true global free market in sugar, and if in fact foreign producers can out-produce U.S. sugar producers on a level playing field, they would succeed. But such an agreement would put an end to heavily subsidized foreign producers attempting to put their much less subsidized American competitors out of business.

So here’s a suggestion: President Obama, with the support of Republican congressional leaders, could make a move to reinvigorate the WTO process by making Rep. Yoho’s proposal the basis of a U.S. proposal to jump-start talks at the WTO. Combined with a grant of trade promotion authority (TPA) by Congress, President Obama might be able to leave a substantial trade-related legacy in his final two years in office, and the stage could be set for other productive areas of cooperation between the President and Congress as well.




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