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Froman Defends Administration Trade Policy Amid Mounting Criticism

Tuesday, February 25, 2014
Sandler, Travis & Rosenberg Trade Report

U.S. Trade Representative Mike Froman delivered a detailed defense of the Obama administration’s trade policy Feb. 19, asserting that it is consistent with U.S. values and aimed at helping the middle class by creating more jobs. Froman’s remarks make clear that the White House intends to press forward on initiatives such as trade promotion authority and free trade agreements with Europe and Pacific Rim countries despite a growing chorus of criticism that they will compromise the United States’ ability to set its own policies, benefit only large corporations and result in the further loss of domestic jobs to foreign competitors. Froman also announced measures to address some of the concerns that have been raised regarding the formulation of trade policy and the conduct of trade negotiations, although critics were quick to pan them as insufficient.

In a speech to the Center for American Progress between a two-day meeting to evaluate the status of trade talks with the European Union and a summit of NAFTA leaders in Mexico, Froman acknowledged that the Obama administration is “pursuing an aggressive trade strategy” but said it is “committed to doing trade in a way that is consistent not just with our economic interests, but also with our values.” He said that trade agreements get an unfair share of the blame for U.S. economic challenges, compared to other factors that have a more direct correlation, and he asserted that “done right” these agreements can enable the U.S. to respond to the accelerating pace of globalization and technological change in a way that “reflects our values.”

Froman specifically refuted criticism that trade liberalization is inconsistent with efforts to address income inequality, one of the president’s key goals for the remainder of his term. Opening foreign markets can increase U.S. exports, which “creates more and better paying jobs.” In addition, he said, half of U.S. imports are intermediate goods used in the domestic production of goods sold in the U.S. and overseas, so eliminating barriers to those imports can lower costs for U.S. manufacturers and help them be more competitive in the global economy. Trade liberalization also increases the attractiveness of the U.S. as a destination for foreign direct investment, which boosts employment, and “increased trade has added $9,000 on average to each American family’s real income.”

Froman spoke at length on the role of trade policy in protecting workers and the environment and promoting innovation. On labor, he asserted that the Trans-Pacific Partnership will fulfill a promise by President Obama to improve NAFTA by strengthening its labor and environment standards and making them enforceable and that the Transatlantic Trade and Investment Partnership is expected to “lay the foundation for cooperation with Europe in promoting high-standard labor practices around the world.” He highlighted the administration’s labor enforcement actions involving Guatemala, Bahrain, the Dominican Republic, Bangladesh, Colombia, noting that progress is being made but that “more work remains to be done.”

On the environment, the U.S. is pushing in its free trade agreement negotiations for “stronger legal frameworks, more cooperation and better enforcement” as well as provisions that put environmental commitments on equal footing with commercial obligations. TPA and TTIP offer opportunities for a breakthrough on subsidies that encourage overfishing, Froman added, and the U.S. is working with multilateral groups to reduce barriers to the trade of green goods and services.

On innovation, Froman said the U.S. is seeking to “cultivate global norms rooted in promoting commerce, scientific progress and the freedom of expression” and that the TPP and TTIP will reflect these principles. “At the same time,” he added, “we look to broaden the benefits of innovation” by fostering affordable access to medicines, supporting freedom of information and encouraging the free flow of ideas across the digital world. Froman denied claims that “TPP is in some way related to” the Stop Online Piracy Act, which was rejected by U.S. lawmakers in 2012 due to concerns that it could open the way for online censorship, and asserted that the U.S. “will agree to nothing in TPP that goes beyond existing U.S. intellectual property law.”

Another frequent criticism that Froman addressed is transparency and openness. He outlined ways the administration has worked to increase inclusiveness in trade negotiations, including increasing and diversifying membership in the trade policy advisory system to include “more voices from academia, NGOs and others with varying views” and setting aside time during trade talks to hear from stakeholders. He highlighted the administration’s consultations with Congress, noting that USTR has worked with “expert staff and interested members through nearly every decision and challenge” and has “consulted with Congress on TPP alone on more than 1,150 separate occasions.” At the same time, understanding that “there is always room to do better,” Froman announced additional steps to “improve public understanding of our work.” These include creating a new Public Interest Trade Advisory Committee (see related story this issue) and the pending release to the public of “an update on the status of negotiations in the TPP” and “a document that further describes our negotiating objectives” in the TTIP, as well as written updates after each round of negotiations.

(Senate Finance Committee Chairman Ron Wyden, D-Ore., welcomed the creation of the PITAC but indicated that “additional steps … to demonstrate that transparency is a priority” are needed. Public Citizen President Robert Weissman criticized the announcement as “optics” and said a more fundamental reform in “operations and policy” is needed, specifically by making all negotiating texts public and abandoning “the failed NAFTA template.” Lori Wallach, director of Public Citizen’s Global Trade Watch division, added that the PITAC is “too little, too late” because it will have little time to influence TPP negotiations that the White House hopes to conclude in the coming months.)

Froman concluded by warning of the consequences of abandoning the administration’s trade liberalization efforts in the face of the criticisms that have been leveled against it, emphasizing that doing so would increase the odds of the rules of global commerce being shaped in ways that do not reflect U.S. values. He specifically mentioned the possibility of losing “opportunities to create new, high-paying jobs through expanded exports,” ceding ground in “some of the largest and fastest-growing markets in the world” to foreign competitors, losing the ability to “secure enforceable commitments” on labor and the environment and possibly being forced accept rules set by “others for whom combatting wildlife trafficking and strengthening workplace safety are not priorities,” limited ability to protect U.S .intellectual property rights, and “an accelerated rise of ‘data nationalism’ and a digital world that begins to erect barriers rather than transcend them.”

To avoid these outcomes, Froman said, Congress needs to renew its grant of trade promotion authority to the president. Froman rejected the contention that TPA is a congressional surrender of its constitutional authority to regulate international trade, asserting that instead it allows Congress to “define its marching orders on what to negotiate, … lays out how the administration should work with Congress before and during the negotiations ... [and] sets the legislative procedures for votes to approve or disapprove agreements.” These instructions were last updated 12 years ago, he noted, and so a renewal is needed to take account of developments like the digital economy, address concerns like state-owned enterprises, and codify the so-called May 10 agreement on labor, the environment and intellectual property rights.

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