Shadow Government

A tricked-out trade bureaucracy

Late last week, President Obama unveiled his concept for a slimmed-down trade team. He proposed consolidating six existing agencies into one new body focused on global commerce. The headline change was the merging of the United States Trade Representative’s office with large chunks of the Department of Commerce. There are reasons to question how serious ...

Brendan Smialowski/Getty Images
Brendan Smialowski/Getty Images

Late last week, President Obama unveiled his concept for a slimmed-down trade team. He proposed consolidating six existing agencies into one new body focused on global commerce. The headline change was the merging of the United States Trade Representative’s office with large chunks of the Department of Commerce.

There are reasons to question how serious the president might be about the plan. A roll-out on the Friday before a three-day weekend in Washington is not so much "prime time" as "wee hour infomercials." The president also seems to have neglected to keep key Congressional leaders apprised of his thinking — rarely a recipe for successful cooperation. Congress tends to care deeply when reorganizations change the jurisdiction of its committees. Congress also has a particular interest in trade, since Article 1, Section 8 of the Constitution grants the legislature authority over the topic.

This all has led some skeptics to wonder whether this might be simple election-year positioning. It could be a trifecta play for independent voters: reform government, promote trade, and demonstrate Congress’ truculence (after deliberately provoking it). Or perhaps it’s just a wry, vestigial tribute to departing pro-trade Chief of Staff William Daley.

Whatever the case, the proposal raises at least a couple major concerns:

1. Should there be a White House trade agency?

Once upon a time, trade was handled out of a cabinet agency — State. There was concern that State might put too much emphasis on striking deals with foreign counterparts and not give enough weight to domestic concerns. So, in the early 1960s, Congress and President Kennedy created USTR’s precursor, the Special Trade Representative, as part of the Executive Office of the President. In 1979, the STR grew into USTR.

With the benefit of a few decades experience, is there any good reason to retain a trade agency in the White House, as opposed to nestling it into a cabinet agency? Yes.

In describing its latest proposal, the White House states: "[T]here are six major departments and agencies that focus primarily on business and trade in the federal government." The key word in that claim is primarily. The modern trade agenda involves a significantly larger number of government agencies. When financial services are on the table, Treasury is concerned. When intellectual property questions arise, there’s the Patent and Trademark Office. When the discussion turns to beef market access, it’s Agriculture. On export control questions, Defense speaks up. Almost every trade agreement raises diplomatic (State) and economic (CEA) questions and could well have an impact on workers (Labor) and business (Commerce). The list goes on.

For this reason, trade issues are commonly hashed out through an interagency process. With the benefit of its position in the White House, USTR serves as an impartial chair of this policy process. If USTR and the trade-related components of Commerce were to merge, how would an administration handle interagency disputes? Of course, a White House body like the National Security Council or the National Economic Council could play the impartial chairing role, but that would require a vastly expanded support staff to cover the broad range of intricate issues. That could effectively mean a re-creation of the current USTR, resulting in minimal savings.

Or the administration may just be arguing that it cares only about export promotion, the traditional domain of the Commerce Department. That would be consistent with the President’s mercantilist view of trade, in which exports are good and imports are better left unmentioned. But it would be bad policy.

2. Is this trade process politics in lieu of actual trade progress?

This is not the first trade process reform advocated by the administration. In August 2009, President Obama launched a review to reform the U.S. export control system. Over two years later, progress has been minimal. It is the same sort of issue that requires Congressional action and threatens committee jurisdictions.

To avoid lengthy delays with his latest reform, the president is seeking a version of "fast track" authority from Congress to conduct the reorganization. This request comes just months after refusing to seek new "fast track" authority to pursue actual trade liberalization. When Senate Minority Leader Mitch McConnell (R-KY) tried to attach such authority (Trade Promotion Authority, or TPA) to the September trade package, opponents argued that the issue was too complicated and needed a more thorough rethink. Yet, years after TPA lapsed, no rethink or request has been forthcoming from the White House. TPA not only paves the way for a trade agreement to move through Congress, it also provides crucial signals in the negotiating stage about whether any given White House trade stance will have Congressional backing.

This choice of agency reorganization over trade negotiating authority may sound hopelessly arcane to any but the most devoted Beltway trade devotee. There are some serious foreign policy implications, however.

If history is any guide, the president will devote limited political capital to pushing trade matters through Congress in the foreseeable future (he devoted none over his first two years). He has just declared that his priority will be a contentious organization chart reshuffle. If this is in lieu of TPA, then the president will have no hope of getting trade agreements through Congress in the near future. If that’s the case, his vaunted Trans-Pacific Partnership will be little more than endless talk. And, if that’s the case, his trumpeted pivot to Asia will have lost its economic pillar.

The president just asked for the wrong fast track. He must hope independent voters don’t notice.

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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