INTERNATIONAL ECONOMICS: OBAMA
SPECIFIC POLICY POSITIONS
President Obama has followed the same pro-free-trade approach as every Democrat since Bill Clinton but with a slight left-of-center slant. He delayed a trade agreement with Colombia after U.S. unions protested vigorously over violence against workers and union leaders, and he has doubled the rate of U.S. cases brought before the World Trade Organization since the Bush administration. He has also done little to negotiate new bilateral trade pacts, and he has consistently attacked his Republican rival, Mitt Romney, for driving jobs overseas while at Bain Capital. But as U.S. growth has lagged, Obama has increasingly made free trade a centerpiece of his economic plans, pledging to double U.S. exports over five years and pushing for a Trans-Pacific Partnership that would mark the biggest trade pact since NAFTA.
INTERNATIONAL ECONOMIC COORDINATION
Since the G-20 meeting in Pittsburgh in 2009, when the president managed to orchestrate a commitment to coordinate stimulus plans in the aftermath of the financial crisis, the Obama administration has had limited success in forging global consensus. Beginning with the Toronto G-20 summit in June 2010, the administration has encountered greater resistance to its agenda. Obama’s letter urging more fiscal stimulus was ignored; instead, the summiteers focused on deficit-cutting. The following year in Seoul, participants rejected Treasury Secretary Timothy Geithner’s proposal to place 4 percent curbs around current-account deficits and surpluses. Talks on financial coordination have also lagged, although at Geithner’s urging, Basel III bank-capital standards were negotiated in a lightning-fast two years.
THE EURO CRISIS
It is hardly Obama’s fault that he has been all but helpless to deal with the single biggest crisis in the international economy over the past two years: the fate of the eurozone. Lael Brainard, the undersecretary of Treasury for international affairs, has been practically “living in Europe” as part of the negotiations, according to one U.S. official, but mainly as an observer. European leaders have considered this entirely their project. Obama’s efforts to urge a resolution to the crisis at the G-20 summit in Cannes last fall earned him only enmity from the Germans. “Who did he think he was?” one German official asked.
The Obama administration has not been shy about criticizing China on exchange rates, interference in cyberspace, and intellectual-property-rights theft, to the point where it is risking Beijing’s wrath by negotiating the Trans-Pacific Partnership without China. Obama has also orchestrated a broad “pivot” of geostrategy aimed at delivering a show of strength in the Pacific, if not quite “containing” China. Nonetheless, following the lead of the Bush administration, Obama has stopped short of labeling Beijing a “currency manipulator.” Even some Democrats, such as Sen. Sherrod Brown of Ohio, have criticized Geithner’s Treasury for “giving China a pass.”
In Obama’s State of the Union address in 2010, he laid out a plan to help U.S. businesses double exports over five years and to add 2 million American jobs. The administration says it’s well on the way: Exports are up by 35 percent and adding 1.2 million jobs.
Obama doesn’t deserve all the blame, but at a time when most economists say that the U.S. and Europe should be forging new agreements to stimulate the international economy, both economies are doing the opposite, for domestic political reasons.
The Trans-Pacific pact would cover a market of about 40 percent of the world’s goods, but unions and consumer groups worry that corporations would be allowed to have extraterritorial rights.
Obama’s biggest triumph is probably the return of General Motors to global competitiveness.
Timothy Geithner: The Treasury secretary has had a dominant hand in shaping the Dodd-Frank law, and he has heavily influenced some international efforts like Basel III bank-capital standards. But he has trouble getting his way at international meetings.
Lael Brainard: Geithner’s deputy is an economic-policy whiz who served with him under Robert Rubin in the Clinton administration, and she occasionally goes to international meetings in his place. You may be looking at the (future) first female Treasury secretary.
Gene Sperling: Another holdover from the Clinton administration, the head of Obama’s Economic Policy Council is mostly domestically focused but has a voice in all big economic decisions.
Daniel Tarullo: After Ben Bernanke, he was Obama’s most important appointment to the Federal Reserve Board. Another former Clintonite, Tarullo is the “go-to” governor for international coordination on banking standards.
INTERNATIONAL ECONOMICS: ROMNEY
SPECIFIC POLICY POSITIONS
Mitt Romney, the ex-Wall Street financier, was probably the most enthusiastic of all the Republican primary candidates when it came to pushing free-trade agreements as a means of promoting domestic job growth. He has also aggressively criticized China, which he threatened to label a currency manipulator on “Day One” of his presidency. Romney’s signature proposal is to create a “Reagan Economic Zone” of free-trading nations that will put pressure on rogues like Beijing that flout the rules and steal intellectual capital, as well as other nations that are emulating China, such as Brazil, India, and Russia. Romney respects the World Trade Organization, but he wants to go beyond it in enforcing trade rules and to show that “free-riding is not going to be tolerated any more,” in the words of one adviser.
INTERNATIONAL ECONOMIC COORDINATION
The former Massachusetts governor has little experience in this arena. But he is committed to working with the WTO and other dispute-resolution bodies. And he criticizes Obama for a failure of leadership, saying the president lost the moral high ground against China and other nations that flout global economic rules. Obama, says the Romney adviser, “has completely failed to stand up for American interests and protest unfair trade, to the point where he’s actually drifting in the other direction and adopting some of these practices. We can complain about China’s state-owned enterprises, but it’s more difficult to do that if our government owns the automakers” and is subsidizing other industries like green energy.
THE EURO CRISIS
Romney has said that the United States should stay out of the euro crisis, so as not to jeopardize America’s “national balance sheet,” and let the Europeans solve their own problems. He has also hammered Obama for what Romney says is an economic philosophy that “will turn the United States into a European-style entitlement society.” At the same time, however, Romney is looking to enlist the major European nations in his Reagan Economic Zone of like-minded free-trading countries. During his only overseas trip as a candidate so far, he was endorsed by Poland’s legendary freedom fighter, Lech Walesa.
This is by far the most detailed part of Romney’s agenda on the international economy. The Obama administration, like the Bush administration before it, has declined to go so far as to label America’s No. 1 financier a “currency manipulator,” but Romney has no such compunctions, saying that it’s time to make an example of China in much the same way President Reagan did with Japan in the 1980s. “He recognizes that free trade only works if it is reciprocal and everyone’s playing by the same rules,” says his adviser. “This is a key reason we have not been able to make progress in the Doha round.” Romney worries, he adds, that “other countries are starting to emulate China” because the U.S. has sacrificed its leadership.
How many jobs Bain sent overseas when Romney was CEO is hardly disqualifying. As FDR once supposedly said of Wall Streeter Joseph Kennedy, the wheeler-dealer he appointed to run the SEC, “It takes one to catch one.”
Romney’s biggest international success was restoring the 2002 Winter Olympics in Salt Lake City, which had been scarred by an influence-peddling scandal, to respectability and profitability as 2.1 billion people watched.
When Romney was governor, Massachusetts lost far more manufacturing jobs than it gained, and overseas investment in his state stayed about the same.
THE ‘BAIN MENTALITY’
Democratic critics use this phrase, but Romney defenders say his under-standing of sophisticated finance is a big strength, and he built a $60 billion business out of it.
Oren Cass: The Harvard Law graduate, a veteran of Romney’s 2008 campaign, is the candidate’s domestic-policy director and is responsible for overseeing trade policy.
Glenn Hubbard: The dean of the Columbia Business School and a former chairman of George W. Bush’s Council of Economic Advisers, he is coauthor of the main document that Romney cites as his plan to add 12 million jobs.
Gregory Mankiw: The Harvard professor and renowned economist is also a coauthor of the chief Romney paper, along with John Taylor of Stanford and Kevin Hassett of the American Enterprise Institute.
Jim Talent: A former U.S. senator and House member, Talent chaired the Small Business Committee in the House. Talent is a fellow at the Heritage Foundation.
This article appears in the September 15, 2012 edition of National Journal Magazine.