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Talking Trade blog

My “state of the union” is stronger on trade


Published 22 January 2015

President Barack Obama gave his annual State of the Union address on January 20, 2015. In a familiar refrain heard in such speeches, he characterized the state of the union as strong. While the speech may have been strong, the trade portion of his remarks could have been more powerful and persuasive.

The specific portion of his speech covering trade ran for several paragraphs

“21st century businesses, including small businesses, need to sell more American products overseas. Today, our businesses export more than ever, and exporters tend to pay their workers higher wages.

But as we speak, China wants to write the rules for the world’s fastest-growing region. That would put our workers and our businesses at a disadvantage.

Why would we let that happen? We should write those rules. We should level the playing field.

That’s why I’m asking both parties to give me trade promotion authority to protect American workers with strong new trade deals from Asia to Europe --(applause) -- that aren’t just free but are also fair. It’s the right thing to do.

Look, I’m -- I’m the first one to admit -- I’m the first one to admit that past trade deals haven’t always lived up to the hype, and that’s why we’ve gone after countries –- (applause) -- that break the rules at our expense. But 95 percent of the world’s customers live outside our borders. We can’t close ourselves off from those opportunities. More than half of manufacturing executives have said they’re actively looking to bring jobs back from China. So let’s give them one more reason to get it done.”

The good news? 

1) This is the lengthiest statement on trade out of President Obama in a long time.  The relevant trade portions of last year’s State of the Union address contained only the following:

“…And when ninety-eight percent of our exporters are small businesses, new trade partnerships with Europe and the Asia-Pacific will help them create more jobs.  We need to work together on tools like bipartisan trade promotion authority to protect our workers, protect our environment, and open new markets to new goods stamped “Made in the USA.”  China and Europe aren’t standing on the sidelines.  Neither should we.”

2) This year, by contrast, the President specifically asked Congress to grant Trade Promotion Authority (TPA). 

3) The President expanded the argument about why he needs TPA from a set of pure economic arguments into suggesting it is necessary to protect American workers and set new rules of the game for fairness.

The less positive news? 

1)  Obama specifically fingered China to provide the frame for why TPA is needed at this time.  Arguing that China will rewrite the rules of the trading game might get him more votes and more support from Congress in passing TPA in the short run.  But this statement may ultimately cost him (and the United States more broadly) significantly in the longer term. 

China needs to be inside the TPP agreement in the future.  This is important not just for helping ensure that Chinese economic growth and restructuring takes place along the most compatible lines for the United States, but also because China’s eventual entry into the TPP will deliver significant benefits to the United States and to American companies.

2) By commenting that the United States should “write the rules” it suggests that the Americans have not already done so, especially in the context of the TPP.  This is clearly not true.

How else could Obama have discussed trade?  By going on offense and not just playing defense, for a start.  If I had been asked to write the justification for TPA and support for American trade agreements, my own State of the Union speech draft would have read:

The data shows that the American economy remains the primary engine for global economic growth.  While we continue to grow, the rest of the world is starting to struggle.  This presents an important opportunity for us. 

The United States has some of the most productive, innovative and creative companies in the world. High quality products can be found in manufacturing, in services, and in companies both large and small.  

It is critical that we continue to show economic leadership and write rules for the global economy that will empower our companies in the future.  We need to work together to pass trade promotion authority to give our negotiators a key tool to close economic deals.

The United States has always been a leader in the global economy.  We must maintain our seat at the head of the table in discussions at the World Trade Organization on goods and services, and in key trade agreements with both Asia and Europe. 

These are the types of trade agreements that can provide American companies with greater opportunities for exports and give American workers a shot at broader range of high quality jobs.

Look, I’m the first one to admit that past trade deals haven’t always lived up to the hype.  But we cannot respond to a world where 95% of the world’s customer’s live outside the United States by withdrawing.  We must provide opportunities for the millions of Americans who work hard every day by continuing to design a global economy that works for everyone.”

***

My State of the Union would remind everyone that the United States has always shown strength in trade.  Now, partisan battles in Washington threaten to keep the U.S. on the sidelines.  But this need not be the case.  It is time to show leadership, starting with the passage of TPA.

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Dr. Deborah Elms is Head of Trade Policy at the Hinrich Foundation in Singapore.  Prior to joining the Foundation, she was the Executive Director and Founder of the Asian Trade Centre (ATC). She was also President of the Asia Business Trade Association (ABTA) and the Board Director of the Asian Trade Centre Foundation (ATCF).

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