Reframing Trade: Obama, Democrats, and Trade Liberalization

By Kathy Bowen, BASC Research Assistant

With all but a cadre of Obama loyalists predicting a thumping for the Democrats this November, does the Administration have much, if anything, to look forward to after the midterm elections? The good news for liberals – of the Ricardian variety – is that a GOP majority in Congress may be more likely to approve bilateral deals with South Korea, Columbia, and Peru, a Trans-Pacific Strategic Economic Partnership agreement, and a final settlement to the Doha Round. Obama has thus far seen little movement on any of these initiatives, in part because many Democratic incumbents were elected with the support of organized labor, a group traditionally opposed to trade liberalization. Notwithstanding the outcome this November, future Democratic administrations may not have to sacrifice their party’s majority to achieve victories on trade. With an improved rhetorical packaging, the Obama Administration may be able to reframe the trade debate to make new agreements a winning issue for Democrats.

Pressure from labor unions and skyrocketing unemployment has increasingly shifted the Democratic Party’s rhetoric from ambivalence to antagonism on trade-related issues, manifested most recently by a wave of Congressional China-bashing. However, Democratic-led protectionism is not a new phenomenon. Trade liberalization has divided progressives for decades, splitting the party largely between politics and policy – or between traditional constituents and a ‘forward-looking’ economic agenda (Mishel and Teixeira, Economic Policy Institute). The former has dominated far more often than the latter, as blue collar workers and organized labor, empirical bastions of Democratic support, have fervently denounced new trade initiatives. This dynamic was evident during the Clinton years, with the Midwest and industrial Northeast heavily against ratification of the North American Free Trade Agreement (NAFTA), and reappeared again during George W. Bush’s fight over the Central American Free Trade Agreement (CAFTA). Non-college-educated middle-class workers, historically a significant source of Democratic electoral support, opposed NAFTA because of its potentially detrimental effects on American manufacturing jobs and wages; CAFTA debates recycled many of these same arguments, with the agreement ultimately passing by an incredibly narrow party-line vote.

The pressure is especially pervasive this session, with many incumbent Democrats facing tough reelection races and desperately needing the vote-gathering and financial potential of organized labor. According to Jagdish Bhagwati, senior fellow at the Council on Foreign Relations, this crop of Democrats is particularly ‘indebted to trade-fearing unions,’ inhibiting the otherwise pro-trade Obama Administration. United States Trade Representative Ron Kirk captured the Democrat’s bind in a speech to Arkansas farm interests this month, admitting that it was “only politics” that kept him from submitting free trade agreements with South Korea, Columbia, and Peru to Congress (Truitt, Ag Today).

Kirk’s moment of candor demonstrates the extent to which the Democrats’ rhetoric is damaging to Obama’s trade agenda, independent of members’ actual voting record on trade issues. First, vocal Democratic opposition to trade initiatives creates the perception of future legislative hurdles, dissuading the Administration from submitting already completed agreements to Congress and from negotiating them in the first place. Second, protectionist posturing transmits a broader signal that does not go unnoticed by Washington’s trade partners. Negotiations for what is arguably Obama’s top trade priority, the Trans-Pacific Partnership (TPP), have been put on hold until after the midterm elections because of uncertainty regarding Obama’s ability to muster sufficient Democratic support. Alex Frangos writes in the Wall Street Journal that “in Asia, the impression is also that any trade pact will require the political atmosphere in Washington to change.” Moreover, former ASEAN secretary-general Ruodolfo Severino was quoted as suggesting that the current mood in Congress would make it impossible to enter into a free-trade area like the TPP. He suggested that if Obama cannot get a bilateral deal with Korea approved, which has been in the works since 2007, it is unlikely he would get Democrats to move on a deal involving many more parties.

Thus, Democrats are contributing to Washington’s turn away from trade. Can policy overcome politics, or will Democratic administrations be perpetually forced to play up protectionism? While it remains unlikely we will see a push for trade-friendly initiatives prior to the midterm, Obama may be able to sell his own party on trade come January.

First, the immediate political pressures on Democrats to appease organized labor will have dissipated. Empirically, political pandering has been the largest proximate cause of Democratic protectionism.

Second, Obama has already begun to refashion the trade debate in his favor, and bolder steps in this direction could yield political pay-offs. While pundits have gone so far as to brand Obama’s trade agenda as “anemic” (Wolverson, CFR) and even a “contradiction in terms” (Drezner, WSJ), the National Export Initiative at least takes the right approach at framing the issue. By setting the goal at doubling US exports over the next five years, Obama officials can tout trade initiatives as a means to an end for American business. The language of keeping America competitive vis-à-vis exporters like China will make it difficult for opponents to capitalize on trade politically, and will allow Obama and Democrats to take the moral high-ground on Chinese trade and currency policy. While most Democratic China-bashing can be chalked up to an attempt at developing a winning issue for the midterm, this kind of rhetoric is unproductive at best, catastrophic at worst. Trade as a means of securing foreign market access and bolstering export-led growth can be spun as a way to beat China at its own game while avoiding its use of unfair fiscal and monetary practices. This framing may also create a longer-term political niche for Democrats between free-market liberalism and economic populism.

Finally, Obama should tacitly pursue labor protections in accordance with trade initiatives. While a persuasive argument exists to forgo muddying trade agreements with Christmas tree-like provisions, political realities require an acknowledgment of labor’s grievances. Obama should make concessions to organized labor as a means of currying favor with rank-and-file Democrats. In exchange, Democrats may be more willing to move on the Administration’s trade priorities. Labor standards can either be conditioned on the FTA itself, or can be disaggregated from the larger deal. The latter method could be adopted in contentious bargaining contexts, in order to avoid creating the perception among foreign governments that labor standards are a deal-breaker. Beyond its short-term political benefit, promoting labor protections alongside trade liberalization could help to avoid a broader public backlash to globalization.

With the midterm quickly approaching, and a presidential election in the not-too-distant future, any successful movement on the Administration’s trade initiatives will require a bolder effort to reframe the issue. Trade liberalization and a Democratically-controlled Congress do not have to be inimical objectives for the Obama Administration, but achieving both in the longer-term will necessitate a shift in the rhetoric surrounding trade. Democrat’s don’t have to tank their traditional sources of electoral support to champion a progressive trade agenda; however, Obama does need to more aggressively frame trade as a means to achieve export-led economic growth while simultaneously making side-deals to build up political capital with organized labor.

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