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Barack Obama and Trade

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Barack Obama

Barack Obama (Source: Ethan Miller/Getty Images)

What Is Barack Obama's Position on Free Trade?:

While running for office, Obama's campaign was based on opposition to many current trade agreements, which he says are bad for the economy because they provide perks for businesses but don't protect workers. (Source: IHT, Clinton and Obama address economic fears, February 18, 2008)

However, since being elected President, Obama has softened his view. He did not try to change NAFTA, as he had promised. In 2011, he included approval of several free-trade agreements, most notably Colombia and South Korea, as part of his State of the Union Address.

Obama's Campaign Had Three Main Proposals:

  1. Amend NAFTA - He would re-open NAFTA to beef up protection for labor and the environment.
  2. Fight for Fair Trade - He opposed pending Free Trade Agreements (FTA's) with Colombia because it allowed violence against labor leaders and South Korea because it restricted U.S. auto imports. He also wanted to pressure the World Trade Organization to enforce current agreements and stop unfair subsidies.
  3. Improve Transition Assistance - He supported Federal funding for retraining displaced U.S. workers.
(Source: Reuters, Obama and McCain offer voters a choice on trade, June 2, 2008; BarackObama.com)

How Would Obama's Free Trade Position Impact the Economy?:

Putting more job protection for U.S. workers in NAFTA and other FTAs may not help American workers because it doesn't get at the source. Job outsourcing is a result of declining U.S. competitiveness, which is itself a result of decades of the U.S. not investing in education. This is particularly true for high tech, engineering, and science. (See The U.S. Is Losing Its Competitive Edge)

Opposing FTAs for two of America's closest allies, Colombia and South Korea, may damage our relationship with them while hurting the U.S. economy. In fact, Colombia's homicide rate against union members, and the public as a whole, has dropped 40% since 2002 thanks to a government protection program. (Source: USTR, Colombia Free Trade Agreement)

Rejection of the South Korean FTA could cause newly-elected South Korean President Lee Myung-bak to further lose support among a population who are already upset that he agreed to allow U.S. beef to be imported as part of the agreement. South Koreans remember the cases of mad cow disease found in U.S. beef four years ago.

The agreement actually levels the playing field for the auto industry. Current South Korean tariffs of 8% would be removed, as would current U.S. tariffs, which are lower at 3.5%. (Source: Bilaterals.org, Obama urges Bush to back off, May 23, 2008)

FTAs open new markets for businesses by removing trade barriers. For example, NAFTA increased trade from $297 billion to $810 billion. The Peterson Institute for International Economics estimates that ending all trade barriers would increase U.S. income by $500 billion. (See Pros and Cons of Free Trade Agreements)

Opening NAFTA to renegotiation would allow Mexico to address its complaints, including immigration reform, U.S. farm subsidies and an unfulfilled NAFTA promise to allow Mexican commercial trucks further into the U.S. (Source: Reuters, Obama and McCain offer voters a choice on trade, June 2, 2008)

Free trade creates more jobs than it outsources. For example, the formation of the European Union free trade area created 300,000–900,000 net new jobs. In the U.S, 1.3 million export-related jobs were created between 1994 and 1998. (Source: World Trade Organization,Benefits of Free Trade)

Increasing U.S. protectionism will further slow economic growth and cause more layoffs, not less. If the U.S. regresses and closes its borders, other countries will do the same. This could cause layoffs among the 12 million U.S. workers who owe their jobs to exports.

What Free Trade Issues Is Obama Missing?:

One of the key obstacles to the Doha round of the World Trade Organization agreement was U.S. agricultural subsidies. Developing countries are afraid of low-cost, subsidized U.S. farm products flooding their markets, essentially putting family farmers out of business. Until the U.S. significantly reduces these subsidies, further progress on this multi-lateral trade agreement is effectively dead in its tracks.

Contrary to popular opinion, agricultural subsidies no longer go to U.S. family farms. Instead, tax programs that were designed to help Depression-era families keep their farms are now effectively subsidizing huge corporations who have, in turn, put these family farms out of business. (Source: USA Today, Bill includes billions in farm subsidies, May 15, 2008; Gourmet, Betting the Farm, April 2008)

In fact, Obama's renewed pressure on the WTO to enforce other countries' subsidies could then bring into question the subject of U.S. agricultural subsidies - still a sore point in the international trade community. The failure of the Doha round has led to a fresh wave of bilateral trade agreements between China, the Middle East, Latin America and Africa. Further U.S. protectionism at this time will only increase this activity, thus pushing the U.S. economy further out of the trade loop, and further into economic decline.

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