Category Archives: Politics

Is the FTAAP any more likely than it was three years ago?

At their meeting last week, APEC leaders announced intentions to negotiate a Free Trade Area of the Asia-Pacific (FTAAP) by 2020. Emmanuel lists reasons to think it’s empty rhetoric:

Again, there is much reason for scepticism. How can the US complete a deal with nine participants when it cannot even complete a bilateral arrangement with South Koreaafter three years, for example? Recall, too, that the Bogor Goals are well off track. The text of the 1994 Leaders’ Declaration says APEC’s achievements should include “the industrialized economies achieving the goal of free and open trade and investment no later than the year 2010 and developing economies no later than the year 2020.” 2010 is about to end, yet agricultural protectionism remains rife in the likes of the US and Japan. As for the Doha Development Round, forget about it since most of the rest of the world already has.

Importantly, remember that this is not the first time the US has tabled the FTAAP idea. Alike the Free Trade Area of the Americas (FTAA), FTAAP has singularly failed to find adherents. Ah well, hope always springs eternal for some.

I don’t see how the FTAAP’s prospects have improved since 2007, which is the last time I discussed the proposal, echoing the skepticism of Chris Dent and Jagdish Bhagwati. That year, Vinod Aggarwal laid out the skeptical case (pdf) at length in a chapter titled “The Political Economy of a Free Trade Area of the Asia-Pacific: A U.S. Perspective” in An APEC Trade Agenda?.

Maintaining the status quo in trade policy

The trade policy agenda has been relatively quiet since President Obama took office (notwithstanding a few murmurs about the Korea-US trade deal triggered by last week’s G20 meeting). The administration has been content to let the WTO system maintain the status quo and address disputes, as it has invested its political capital elsewhere. But trade does need to show up on the Congressional agenda occasionally, if only to maintain status-quo policy. “Congress needs to act during the lame duck session on renewal of the Generalized System of Preferences (GSP) program and the Andean Trade Preference Act (ATPA), both of which expire at the end of 2010.”

House schedules vote on renminbi bill

If you want some humorous updates regarding world trade, you should follow Alan Beattie on Twitter. In a single update, you get a Doug Palmer story and a comedy video.

U.S. lawmakers may vote next week on legislation that would penalize China for keeping its currency artificially low, a touchy issue that has gained broader political support as congressional elections approach.

The decision to move a bill to pressure China to let its yuan currency appreciate against the U.S. dollar comes a day before President Barack Obama is due to meet with Chinese Premier Wen Jiabao in New York.

A House of Representatives committee scheduled a vote for Friday on a China currency bill, and a Democratic aide said the full House was expected to vote on the measure next week.

Hufbauer and Lawrence: “Let’s Make a Deal”

In Foreign Affairs, Gary Hufbauer and Robert Lawrence posit a deal that they think would make concluding Doha feasible:

Many observers blame the complexity involved in getting 153 WTO members to reach consensus on an agenda with dozens of issues, but in fact the matter is far simpler. If China and the United States produced the sort of new offers described below, the momentum for a speedy agreement would be unstoppable.

Yet it appears that political considerations will prevent this from happening. US President Barack Obama pushed trade policy to the back burner while he concentrated on health care and financial reform. He needed nearly unanimous support from Democrats in Congress to enact his domestic agenda; trade agreements, meanwhile, are risky for Democratic politicians because many depend on unions, which wrongly believe that free trade means lost jobs. To counter such arguments, the Obama administration must demonstrate that trade agreements would boost US employment by doubling exports. The White House also needs strong support from Republicans, who tend to be allied with business. So far, US firms are lukewarm about the Doha Round because it seems to offer little from the large emerging economies, especially China…

These proposals could make the Doha Round a political winner: Major concessions by China and a few other emerging countries would be seen in the United States as evidence of greater access in markets that count. And China would advance its status as a full participant in the world trading system, while also positioning itself as the leader that delivered the benefits of the Doha agenda to all developing countries. The world would recover that much faster from the hangover of the Great Recession.

They want China to join the Government Procurement Agreement and liberalize services in exchange for the US recognizing China as a market economy and ending its annual compliance reviews. They also suggest that the US should end its cotton subsidies and ethanol tariffs. I doubt we’ll see these suggestions implemented any time soon.

NAFTA trucking dispute “rumbles toward a dead end”

The long-running NAFTA trucking dispute remains deadlocked. After 15 years, the US continues to refuse to allow Mexican trucks on US roads, citing safety concerns as cover for political motives. Cato’s Dan Ikenson says that Mexico is right to retaliate with tariffs after winning at both the NAFTA dispute settlement panel (2001) and the US Supreme Court (2004) and yet seeing little-to-no progress. But Washington insiders say the issue won’t be resolved any time soon.

Freedom fries: How attitudes shape trade flows

Guy Michaels & Xiaojia Zhi, 2010. “Freedom Fries,” American Economic Journal: Applied Economics, vol. 2(3), pages 256-81, July.

Do firms always choose the cheapest suitable inputs, or can group attitudes affect their choices? To investigate this question, we examine the deterioration of relations between the United States and France from 2002-2003, when France’s favorability rating in the US fell by 48 percentage points. We estimate that the worsening attitudes reduced bilateral trade by about 9 percent and that trade in inputs probably declined similarly, by about 8 percent. We use these estimates to calculate the average decrease in firms’ willingness to pay for French (or US) commodities when attitudes worsened.

[HT: Pierre-Louis]

Whither US trade policy?

Bernard Gordon:

From a US government perspective, the Trans Pacific Partnership is the only game in town. Three main reasons explain why: the state of the WTO’s Doha Round; China’s role in Asia; and America’s self-image of its place in the Pacific. A possible fourth reason is that Washington regards the TPP is the only doable multilateral trade initiative…

For a United States that almost singlehandedly launched both the global GATT and then the WTO, a ‘Trans-Pacific Partnership’ is quite a comedown. All the more so when, if the WTO’s Doha Round were completed, its ‘most favoured nation’ clause would render moot most of the preferential trade agreements now cluttering world trade, and simultaneously kick-start global trade growth. And yet only the unlikely goal of a TPP, so 20th century, will be pressed by the US because that’s all the President is prepared to undertake at this point.

Read the whole thing. (HT: Larry.)

US Treasury delays April 15 currency manipulation report

Geithner:

I have decided to delay publication of the report to Congress on the international economic and exchange rate policies of our major trading partners due on April 15.  There are a series of very important high-level meetings over the next three months that will be critical to bringing about policies that will help create a stronger, more sustainable, and more balanced global economy.  Those meetings include a G-20 Finance Ministers and Central Bank Governors meeting in Washington later this month, the Strategic and Economic Dialogue (S&ED) with China in May, and the G-20 Finance Ministers and Leaders meetings in June. I believe these meetings are the best avenue for advancing U.S. interests at this time.

Via Emmanuel.