Distinguished Speaker Seminar: Clayton Yeutter - New United States Trade Policy under the Obama Administration

Clayton Yeutter, former United States (US) Trade Representative and Secretary of Agriculture, and currently, a senior advisor of International Trade at Hogan & Hartson, a Washington, D.C. law firm, delivered a lecture on the new United States trade policy under the Obama Administration at ADBI's Distinguished Speaker Seminar Series on 23 March 2010 in Tokyo. He started by pointing out that the issue the US has now with the People's Republic of China (PRC) is essentially a repeat of the history between the US and Japan 25 years ago. The only difference is that this time it is a more challenging situation: the US bilateral trade deficit with the PRC is significantly larger than the deficit with Japan; the PRC is holding far more US Treasury instruments than was Japan; the PRC's labor costs and productivity are perceived as more threatening; and the multilateral "safety value" of the Uruguay Round has not been replicated by the Doha Round.

Mr. Yeutter pointed out that President Obama is confronting a lot of political and economic challenges in the middle of a global recession, while trying to formulate US trade policy objectives and the strategy for achieving them. This strategy is still a work in progress, and US trade policy remains in a "pause" as the Administration tries to figure out a way to navigate the political shoals in Congress, the Democratic Party, and the US electorate. Meanwhile, what the world saw was inaction on the part of the US as can be observed from the failure to submit pending free trade agreements with Peru, Panama, and the Republic of Korea to the US Congress for approval, the failure to resolve pending disputes like Mexican trucks, the imposition of new trade barriers like expanded "Buy America" provisions, the imposition of import constraints on Chinese tires, and a lack of leadership in the Doha round. However, Mr. Yeutter mentioned some promising indications of the US trade policy, one of which is President Obama's newly launched National Export Initiative, which has the ambitious goal of doubling American exports to US $3 trillion over the next five years. The heart of the Initiative is the establishment of an Export Promotion Cabinet with high level representation from the Commerce, Treasury, Agriculture and State Departments, US Trade Representative, the Small Business Administration, and the Export-Import Bank. The Cabinet is expected to come up with a detailed plan of action within 180 days. Mr. Yeutter considers the following six major elements of the Initiative essential: (a) export promotion; (b) export controls; (c) trade facilitation; (d) enforcement; (e) opening markets; and (f) tax policy. He elaborated that helping small- and medium-sized exporters, loosening export controls for technology, removing non-tariff barriers at border, having effectively enforced trade agreements, promoting market opening actions by other countries, and embracing changes in tax laws that will stimulate foreign investment will all help to achieve the goal of doubling US exports over the next five years.

Mr. Yeutter argued that the success of the National Export Initiative would not only depend on the Obama Administration but also on the rest of the world. Fostering economic growth in the world, particularly in developing countries, will increase the demand for US exports. Moreover, he sees that exchange rate relationships affect trade flows in a major way and countries usually intervene by undervaluing their currencies to give their exports an artificial boost. He suggested that the Obama Administration should persuade its trading partners to avoid currency misalignments.

Mr. Yeutter concluded that an open, rules-based trading system has brought major gains to both US producers and consumers, leading to higher living standards. Thus, inaction on trade is highly costly to the US. He is hopeful that the Obama Administration's trade policy will succeed. He also hopes that the Doha Round will be in effect soon and the world will produce a host of bilateral and plurilateral agreements that significantly liberalize trade in all sectors of the participating nations.