Shadow Government

Asian leaders to Obama: Where’s the beef?

By Phil Levy In Tokyo, President Obama spoke out in favor of trade. It was not exactly the much-heralded Trade Speech, in which he would lay out a detailed agenda and soothe U.S. public fears that he himself had helped to arouse. Instead, this talk was addressed to an Asian audience, but it offered some ...


By Phil Levy

In Tokyo, President Obama spoke out in favor of trade. It was not exactly the much-heralded Trade Speech, in which he would lay out a detailed agenda and soothe U.S. public fears that he himself had helped to arouse. Instead, this talk was addressed to an Asian audience, but it offered some tantalizing new details and a near embrace of some free trade agreements. The President said:

Continued integration of the economies of this region will benefit workers, consumers, and businesses in all of our nations. Together, with our South Korean friends, we will work through the issues necessary to move forward on a trade agreement with them. The United States will also be engaging with the Trans Pacific partnership countries with the goal of shaping a regional agreement that will have broad-based membership and the high standards worthy of a 21st century trade agreement.

Rather than drawing inspiration from the president’s oratory, as U.S. and European audiences often had, Asian leaders greeted the president’s trade stance with skepticism. As the Financial Times reported:

Lee Kuan Yew, Singapore’s first prime minister and a regional elder statesman, said the US risked economic exclusion from Asia unless it reversed its protectionist stance. …

Najib Razak, Malaysia’s prime minister, … told the Asia Pacific Economic Cooperation summit in Singapore that progress on trade liberalisation was “imperative” for global recovery. “The thing I liked about President Bush’s foreign policy is that he was very pro-free trade. I hope the same message will be repeated.”

– some evidence that the Bush administration did not entirely neglect Asia for eight years.

One might have expected Obama’s vague statements in favor of the Doha trade talks, moving forward with South Korea, and engaging with the mysterious Trans Pacific Partnership to have at least created a warm glow about U.S. sentiments. After all, similarly vague statements about avoiding protectionism and supporting the WTO garnered kudos at G-20 summits in London and Pittsburgh earlier this year.

Whether the APEC leaders were more discriminating than other audiences, cared more about trade, were more astute in their reading of American trade politics, or had just learned from past experience, they seemed unsatisfied. Perhaps with recent disputes fresh in their minds, they seemed to ask, “where’s the beef?” And they were right to worry.

The global trading system has not been lacking in kindly thoughts and well wishes. It’s been lacking in strong leadership and specific proposals. Fingers have been pointing at the Obama administration. The Doha global trade talks that were declared essential in the G-20 sessions have been foundering. Last month, the European Union and Brazil criticized the United States for failing to put forward specific demands. This month, WTO Director General Pascal Lamy commented that “the U.S. is proving to be slow in reaching a clear and articulated negotiating position.” If it were translated from the excessively cordial language of international diplomacy, that remark would likely be unprintable in a family publication.

Ostensibly, the Korean FTA is unacceptable to President Obama and Congressional Democrats because the Koreans have had the audacity to intervene in their auto market. Korea, as a major trading nation, has not been as pliable as other U.S. FTA partners and has made clear in the past that they are not interested in renegotiating the agreement with the United States. Instead, Korea has just concluded a similar agreement with the European Union that will put American exporters at a disadvantage in the Korean market.

The novelty in the president’s announcement concerned the Trans Pacific Partnership (TPP) and was sufficiently obscure to leave many people scratching their heads. In fact, the United States had already joined TPP talks with Brunei, Chile, New Zealand, and Singapore late in 2008 under President Bush’s direction. Obama’s announcement in Tokyo seemed to indicate a lifting of his administration’s suspension decision from earlier this year: small wonder that it received a tepid response. Even had the President wholeheartedly embraced a TPP deal, that would not have meant much on its own, since the United States already has FTAs with Chile and Singapore. Brunei’s entire annual GDP is roughly $20 billion, which is less than the U.S. government has poured into Citigroup.

The reason to care about the TPP was its potential to serve as a platform for serious integration throughout Asia. For a region that places a high value on trade, the Asia-Pacific has had a great deal of difficulty finding the right path toward liberalization. APEC has made trade pledges in the past, but the group has a very diverse membership and likely cannot serve as the vehicle for a high-standards regional FTA. More promising was the idea that if Australia and Japan were coaxed into joining a sophisticated TPP, the resulting FTA might then have opened its doors to any other Pacific nation willing to accept its terms. Unfortunately, the Obama administration has given no indication that it’s willing to lead such an ambitious undertaking

A prerequisite for a serious U.S. trade policy would be new trade negotiating authority for the president, which the Obama administration has not even requested from the Congress. For any of these trade initiatives to advance would require persistent and detailed effort of a sort we have yet to see. Obama may be a Pacific president, but he has not been a very specific president. Asian leaders last week were asking for more than platitudes.


Phil Levy is the chief economist at Flexport and a former senior economist for trade on the Council of Economic Advisers in the George W. Bush administration. Twitter: @philipilevy

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