The economics of Obama’s national security doctrine

Limiting myself to trade and economic matters,  I had two principal reactions to the new National Security Strategy:

1. Its treatment of international trade is highly compartmentalized and ambivalent;
2. While emphasizing the fundamental importance of a robust economy to national security, it misreads the sources of American economic strength.

Neither of these is terribly surprising. The document is full of aspirations and very light on firm stands or tough choices. With the exception of some references to contemporary events, much of the document could have been cribbed from November 2008 campaign themes. The administration gets points for consistency, but after 18 months it would have been nice to see more progress toward solutions.

On trade, the Obama administration has tended to either say the right thing — or something that could be positively interpreted by a charitable audience — and do very little. A standard version of the chorus appears in the NSS:

We will pursue a trade agenda that includes an ambitious and balanced Doha multilateral trade agreement, bilateral and multilateral trade agreements that reflect our values and interests, and engagement with the transpacific partnership countries to shape a regional agreement with high standards."

The problem is that global audiences have become less willing to accept empty rhetoric over time. Over a year into the Obama administration, governments abroad want to see active engagement and definite U.S. strategies to achieve a Doha agreement under the World Trade Organization. Instead, the administration keeps returning to its chorus of vague good will, without accompanying action (as one specific example, the administration has not event requested trade negotiating authority from the Congress).

Moving beyond Doha in the basic refrain, who could argue that trade agreements should not reflect our values and interests? Of course, it would help if we could be more transparent about what those interests are. Both Colombia and South Korea have complained that they have yet to receive a list of particulars that would allow them to remedy the alleged shortcomings of their stalled free trade agreements with the United States. After a while, the professions of love for good trade agreements begins to sound vacuous.

The administration has tended to treat trade separately from the rest of foreign policy. This compartmentalization can make for some interesting juxtapositions in a national security document:

• The NSS trumpets the importance of leading by example. In the trade world, this makes one think of the Obama administration’s protectionist misadventures with "Buy America" and Chinese tire tariffs.
• The admonition that "Rules of the road must be followed, and there must be consequences for those nations that break the rules" brings to mind the U.S. violation of NAFTA with its restrictions on Mexican cross-border trucking.
• A section on abiding by the rule of law summons thoughts of the administration’s ready disregard of bankruptcy law in the GM and Chrysler bankruptcies as it rushed to subsidize those companies.
• The emphasis on Korea’s strategic importance in Asia makes one wonder why the administration has not taken the easiest and most potent step it could to cement the relationship.
• The calls for renewed American leadership conjure up the administration’s abdication of leadership at the WTO.

The administration’s rhetorical embrace of trade now also carries the new taint of its fervent mercantilism.

We will see a greater emphasis on exports that we can build, produce, and sell all over the world, with the goal of doubling U.S. exports by 2014. This is ultimately an employment strategy, because higher exports will support millions of well-paying American jobs, including those that service innovative and profitable new technologies."

The exclusive focus on exports misses the value of imports to consumers and the globally integrated nature of production these days (trade in component parts). It also begs the question of why others should open their markets to us, if we are only interested in exports. Mercantilism is hardly a novelty in U.S. trade policy, but it is not usually this blatant.

Of course, as a card-carrying economist, I welcome the pride of place the NSS overall gives to economic matters.

"The foundation of American leadership must be a prosperous American economy. And a growing and open global economy serves as a source of opportunity for the American people and a source of strength for the United States." (p. 28)

Unfortunately, in its more detailed discussions the document identifies the ultimate font of this strength not in industrious entrepreneurs or a favorable business climate but in an ever-expanding list of government programs: health, infrastructure, science, and education are all particularly lauded. When I ultimately found a paean to the role of the individual – "The ideas, values, energy, creativity, and resilience of our citizens are America’s greatest resource."  (p. 16) – it is in a section on enhancing the capacity of the national government.

While the euro debt crisis was presumably too late-breaking to allow for inclusion, the NSS correctly identifies one of the great threats to our national well-being:

"We cannot grow our economy in the long term unless we put the United States back on a sustainable fiscal path." (p. 34)

Yet this resides awkwardly amongst all the enthusiasm for grand new spending plans. Perhaps cognizant of this dissonance, the NSS authors recite a list of fiscally trivial budget-cutting measures the administration has proposed and then conclude that a bipartisan fiscal commission will fix everything with some medium-term suggestions — to be produced after the November elections. The hard choices the NSS explicitly calls for are all postponed.

Not much of a strategy.