President Obama has taken a number of actions since the beginning of the year that could potentially impact, either directly or indirectly, U.S. economic and trade relations with mainland China. Perhaps the most important development is the establishment of a new trade enforcement unit that, according to the president, “will be charged with investigating unfair trading practices in countries like China.” The president promised in his 24 January state of the union address not to “stand by while our competitors don’t play by the rules” and highlighted the trade enforcement cases his administration has brought against mainland China in recent years, including a September 2009 safeguard action against mainland Chinese tyres that the president claims has led to the preservation of “over a thousand” U.S. jobs. Specific concerns highlighted by the president during his speech included the piracy of U.S. movies, music and software and the heavy subsidisation of foreign manufacturers. The president also indicated that “there will be more inspections to prevent counterfeit or unsafe goods” from entering the commerce of the United States and said that the administration is on track to meet ahead of schedule its goal of doubling exports over five years, a target that the free trade agreements with Colombia, South Korea and Panama will help achieve.
A White House document entitled Blueprint for an America Built to Last offers additional details on the new trade enforcement unit and other initiatives. It notes, for example, that this task force is conceived as an inter-agency effort that “will bring together resources and investigators from across the Federal Government.” The task force will reportedly be headed by Deputy National Security Advisor for International Economic Affairs Mike Froman, and participants are expected to include the departments of Commerce, Energy and the Treasury as well as the Office of the U.S. Trade Representative. The document also indicates that the U.S. will provide financing to U.S. companies to put them “on an even footing” when “competitors like China offer unfair export financing to help their companies with business overseas.”
Also of special importance is a proposal unveiled by the president on 13 January to consolidate six federal trade agencies into one department whose function would be to “promote competitiveness, exports and American business.” The agencies affected are the Department of Commerce (core business and trade functions), the USTR, the Export-Import Bank, the Overseas Private Investment Corporation, the U.S. Trade and Development Agency and the Small Business Administration, along with other related programmes. The president believes that the current multi-agency structure is “redundant and inefficient” and has resulted in business owners “confused about where to go for assistance and often … unaware of services that would help them, particularly those trying to break into the export market for the first time.” Instead, the president is proposing to establish “one department where entrepreneurs can go from the day they come up with an idea and need a patent, to the day they start building a product and need a warehouse, to the day they are ready to export and need help breaking into new markets overseas.”
Initial reaction to the proposal has not been very supportive. Former trade officials disapproved of the idea of combining USTR and DOC because of their different roles in trade policy and key lawmakers such as Senate Finance Committee Chairman Max Baucus (Democrat-Montana) and House Ways and Means Committee Chairman Dave Camp (Republican-Michigan) have come out against such a move. In a 13 January press release, Baucus and Camp expressed concern about “the impact that the President’s proposal could have on the ability of the United States to aggressively open new markets to American-made goods and services and create U.S. jobs.” The two lawmakers believe that incorporating the “nimble, lean and effective” USTR into a “new bureaucratic behemoth” agency would “hurt American exports and hinder American job creation.”
For his part, Senate Finance Committee senior Republican Orrin Hatch (Utah) described the failure of the administration to work with Congress on this proposal as “disconcerting.” Hatch favours the elimination of wasteful government spending but believes that the timing of the president’s announcements and his failure to consult with Congress call into question the president’s “commitment to a real reorganization and reduction in size of the federal government.” Other observers noted that the proposal could harm international trade negotiations by demoting the U.S. trade representative from a Cabinet-level official with ambassadorial rank.
The president said he would also ask Congress to reinstate authority given to past presidents to reorganise and consolidate the federal government, which he said he would only use “for reforms that result in more efficiency, better service and a leaner government.” The White House added that this proposal “would initiate new accountability by mandating that any plan must reduce the number of government agencies or save taxpayer dollars.”
Finally, the president unveiled on 11 January a new “insourcing” initiative that would provide new tax and other incentives to companies that bring jobs back to the United States and invest in domestic projects. In addition, the existing tax breaks for companies that move jobs overseas would be eliminated. A White House fact sheet on the administration’s support for repatriating jobs to, and increasing foreign investment in, the U.S. asserts that “there is a critical role for government policies that support new investments,” including with respect to tax, trade, financing, energy and education. The fact sheet outlines actions taken to date in these areas (e.g., tax breaks for small businesses, launching the National Export Initiative, advancing FTAs, expanding access to capital and new investment in infrastructure) as well as additional measures being put forward, such as reforming the corporate tax code, making progress on the Trans-Pacific Partnership agreement and modernising schools.
In related news, the President’s Council on Jobs and Competitiveness recently issued a report that includes several additional recommendations to improve the long-term competitiveness of the U.S. economy. The White House indicates in a press release that it has taken action on 33 of the 35 Council recommendations that do not require legislative action and has completed implementation of 16. Some of the new recommendations outlined in the report include investing in education and innovation, building U.S. strength in the critical sectors of energy and manufacturing, instituting longer term regulatory and corporate tax reform to support job creation, and building a comprehensive worldwide foreign direct investment promotion programme. More specific proposals include building competitiveness broadly by addressing key barriers to competitiveness in the areas of skill, regulation, taxation and infrastructure; reforming export controls to help small manufacturers dramatically boost exports and spur local manufacturing cluster development; bolstering private research and development through a competitive R&D tax credit, speedy technology transfer and strong intellectual property enforcement; ensuring that entrepreneurs can access financing to scale up their firms through traditional funding methods and new ones; and lowering the corporate tax and broadening the base.
