Obama- good for unions, not for rest of the U.S.

In an interview on CNBC's Squawk Box from the Americas Competitiveness Forum in Atlanta two weeks ago, Commerce Secretary Gary Locke was asked if he found it awkward to face the attending Colombians, who have been waiting since 2008 for ratification of their free trade agreement (FTA) with the United States. "Actually," Mr. Locke declared, "there are a lot of intense negotiations going on as we... [more]

In an interview on CNBC's Squawk Box from the Americas Competitiveness Forum in Atlanta two weeks ago, Commerce Secretary Gary Locke was asked if he found it awkward to face the attending Colombians, who have been waiting since 2008 for ratification of their free trade agreement (FTA) with the United States. "Actually," Mr. Locke declared, "there are a lot of intense negotiations going on as we speak, and I've been meeting with some of the ministers and representatives of the government of Colombia here." That was news to my Colombian sources familiar with what happened. They told me that there were no such "intense negotiations." Why should there have been? This deal is already signed by both parties. It is even likely that it would be ratified if President Obama would only send it to Congress for an up-or-down vote under "fast-track negotiating authority." Instead, the administration has been letting it languish in a drawer, and its explanations for doing so grow more convoluted every day. There's a reason for that. Under Obamanomics, exports are supposed to play the leading role in putting Americans back to work. This makes the Colombia deal good, because it would increase U.S. competitiveness in that South American country. But Big Labor is against free trade agreements and Mr. Obama needs Big Labor. That makes the Colombia deal bad. How to make the policy fit the politics? Easy: Turn administration officials into contortionists who, while talking about "creating jobs," also justify a position that stands in the way of tariffs reductions for American exports. This would explain why Mr. Locke might have felt pressured to make things up. The secretary seems to have had damage control in mind when he went on CNBC. Asked about the president's failure to get the amendments he wanted on the signed U.S-South Korea free trade agreement in Seoul, Mr. Locke asserted that the U.S. can't accept "a deal for the sake of a deal" and complained that as it stands now, it doesn't open Korea enough to U.S. producers. This is mercantilism, a trade philosophy that promises national prosperity through exports. If you are not familiar with the term, it may be because it was last in vogue in the 18th century. It gradually went out of style when policy makers learned that by opening to foreign goods, they could increase the competitiveness of local producers and build wealth. It is true that mercantilism—a form of economic nationalism—made a comeback in the 20th century under fascism in Europe and Latin America. But that too ended in tears. After World War II, countries relearned the lesson that when both consumers and producers are able to choose from the globe's output, they have the advantage over their counterparts in closed economies. Chile became an export powerhouse by unilaterally opening its markets to the world. If only Mr. Locke's feeble reasoning ended there, it might be chalked up to confusion. But to make sense of the Obama administration's opposition to a Colombia FTA—when the U.S. is already open to Colombian exports under the Andean Trade Preference Act (ATPA)—takes real mind-bending. The advantage for Colombia of the trade agreement is that it will codify ATPA, so it doesn't have to be renewed every few years. In exchange, Colombia commits to opening to U.S. foreign investment and exports. Consumers, producers and investors in both countries come out winners. There are also geopolitical gains for the U.S., which benefits from the institutionalization of open markets. Ideas as well as goods can be expected to flow across the border, and a richer country has more resources and incentives to modernize its infrastructure, including its justice system. Left-wing calls for blocking the Colombian agreement because of political violence ignore the fact that it is isolation that makes populations vulnerable to tyrants. Poor countries have notably poor records of defending equality under the law. But let's assume the Obama administration is mentally stuck in 1930s Italy and thinking only of exports. It still can't justify its position on Colombia, the third largest market for agricultural imports in Latin America. American farmers now pay an average 16.5% tariff on exports to Colombia. As a result, according to Colombia's ministry of trade, "countries like Argentina [which is part of an FTA] are rapidly displacing U.S. producers. In 2008 American farmers had 46% of the Colombian market; today that share has diminished to 22%." Next year, Ottawa's Colombia free trade agreement will enter into force, and Canadian producers will join the list of competitors who have an advantage over Americans in the Colombian market. The European Union and South Korea have also signed FTAs with Colombia and will have advantages on the industrial production front. It's hard to understand what Mr. Obama is thinking about besides his loyalty to the AFL-CIO. But Colombia's plans are clear. It wants to trade with the U.S. But if it is rejected, it will simply buy and sell with the rest of the world. http://online.wsj.com/article/SB10001424052748704693104575638402644710436.html?mod=WSJ_Opinion_LEADTop [less]