Big game hunting

* Trade posts represent solely my own opinions.

At a recent conference that I attended, one of the speakers borrowed a quote from Ike Eisenhower to great effect: “if a problem cannot be solved, enlarge it.” It occurs to me that this sentiment directly applies to the politics of trade in the United States. The public is divided on whether trade is beneficial to the economy, the 111th Congress has already demonstrated protectionist instincts, and it is increasingly difficult to advocate openness as jobs are lost and the recession deepens. How should President Obama, who understands the benefits of trade, address these political realities?

Enlarge the problem substantially by negotiating a comprehensive free trade agreement with the European Union or Japan. First, such an agreement would have huge economic benefits: EU-US trade flows were worth more than $640 billion in 2008. Export-oriented industries on both sides could be counted on to exert a lot of political pressure for that kind of market access. Second, a USEUFTA would take a very long time to negotiate due to the complexity of the trade relationship and both sides’ preference for high-quality agreements. This would put trade on the backburner for at least several years, which would help diffuse political tensions and give the economy time to recover, thereby mitigating the political influence of import-exposed industries. Negotiating with the EU would eliminate the standards (labor, environmental or otherwise) problem.

There are serious drawbacks to such an approach, such as the fact that it shuts out China, India, Brazil and other developing countries (though if you believe in competitive liberalization, you might argue that this would spur further negotiations.) Perhaps most worrisome, by establishing a substantive parallel system, it could easily undermine the multilateral trading system and provide a final knockout blow to the Doha Round. That would be terrible.

Still, the Obama Administration made it clear in its 2009 trade policy agenda that it would seek more economically meaningful agreements. Indeed, in a lot of ways, it would be better to complete one really big one instead of many smaller ones. Perhaps it’s time for trade policy-makers to consider big game hunting.