Barack Hussein Obama’s landslide victory in the US presidential poll on Tuesday will herald a new chapter in the country’s international economic cooperation. His victory has dramatically raised expectations both at home and abroad.
“Given the sweeping mandate he secured from the American electorate and his party’s impressive performance in Senate and House elections, President-elect Obama is in a strong position to negotiate with countries on trade, climate change and other economic issues on a stronger footing,” said a Geneva-based international civil servant who has worked closely with previous Democratic administrations in Washington.
Having fought a Herculean battle on the strength of his political and economic agenda, which aims to provide economic security to the American citizens who are caught in one of the worst economic and financial turmoil in the recent past, all eyes are on what the administration will do in areas like the global economic crisis, Doha trade negotiations and climate change talks.
“It will take several weeks before we have a clear picture of the departures that will be made from the discredited Bush administration,” the official added. “Obama will try to fashion a government coalition on priority issues and will reach out to other nations on mutually-supportive policy prescriptions to address global economic issues.”
Besides, it will be easier for governments to cooperate with the new US administration when it assumes office in the third week of January next year. The immediate priority for the Obama administration is economy and how to overcome the mutating economic crisis that has spread from the shores of New York.
On the trade front, there will be some major shifts, including outsourcing and export of jobs. The new president and his party are also skeptical about bilateral trade agreements. Consequently, there would be fewer bilateral trade agreements with some intrusive labour and environment conditions to satisfy the unions that supported Obama.
However, it is difficult to gauge the stand the administration will adopt on the multilateral trade front, particularly the Doha trade negotiations. But for governments negotiating with Washington on the Doha trade commitments, it is a risky gamble to enter into any deal with the lame-duck Bush administration at this juncture.
Over the last three days, Brazilian Foreign Minister Celso Amorim, Australian Trade Minister Simon Craen and WTO chief Pascal Lamy stepped up efforts for a ministerial meeting to finalise the Doha modalities by the end of December. The modalities specify the level of tariff and subsidy commitments in agriculture and tariff cuts in industrial goods that members will undertake at the end of the Doha Round.
“There is no guarantee that if the Bush administration enters into an agreement, it will be adhered to by the new Democratic administration,” said a long-standing trade negotiator from an industrialised country, suggesting that “it is a gamble for countries before they take any decision on the modalities agreement”.
In the past, the outgoing administrations have concluded major trade agreements. The former US trade representative, Ambassador Carl Hills, for example, completed much of the Uruguay Round Agreement before the Clinton administration took office.
“However, there is a sea change in global realities today,” the negotiator said, arguing that it would be difficult for the Obama administration to accept whatever is agreed by the lame-duck Bush administration.
The Congress, led by the Democratic party, has already passed a new Farm Bill, which is a radical departure from what the Bush administration is negotiating in the ongoing Doha negotiations. The Bill seeks to substantially increase trade-distorting farm subsidies, called counter-cyclical payments, which was opposed by several WTO members. Besides, the president-elect and his party have spoken their mind in favour of ethanol and other farm subsidies. This, experts said, would put paid to what the US administration was ready to offer at the failed ministerial meeting in July, that is, a ceiling of $14.5 billion on farm support.
The Democratic leadership will also adopt a tough stance on China, especially on its currency and textile issues. Apparently, an incumbent Republican senator lost her seat in North Carolina on the issue of cheap Chinese textile imports.
Against this backdrop, it would be ideal for WTO members to wait till the new administration assumes office and prepares its team as well as priorities. It would be foolish to “leverage” any trade deal with the outgoing Bush administration on the promise that it would be agreed to by the Obama administration, said a long-serving trade official from a farm exporting country.
