Incumbency Implications for Trade

In a recent article by the Economist, the reelection of President Obama is questioned as to what this means for future trade policy. On the one hand, “there are hopes that a second-term president might inch closer to European views on the Middle East or climate change” because incumbents no longer have to put on a façade to keep the voters happy.  However, they address that Europe’s supposed declining status could put a damper on things. If Obama claims that sanctions have failed in the Middle East, as we discussed in class earlier in the term, he may not have enough support from Europe to become even tougher. The situation is similar in China, as the US may not have support from Europe to enact its intended policies.

            Regarding Europe specifically, the article urges European countries to “refrain from throwing Greece out of the Euro and move towards deeper integration,” thus making things even tougher on Germany, as we discussed today in class. President Obama does not advocate for “everlasting austerity” domestically or internationally, which is, I think, an interesting application considering most austerity we have spoken of involves development. It is obvious that austerity can be applied amongst developed countries, but it takes a slightly different connotation in this light, as it is more a matter of cooperation and good relations than the survival of a country.

            Setting aside their disagreements, America and Europe still maintain the “closest and richest” relationship in the world, accounting for almost half of global GDP and almost 1/3 of trade. This being said, their alliance is critical, and the Economist pushes for a “free-trade agreement” between the two entities. The European Commission indicates this would increase trans-atlantic trade by almost 50% even though tariffs are already very low.

            First off, this raises the question of non-tariff barriers, which the Economist addresses, but is very dismissive about. Non-tariff barriers were addressed extensively in the Coughlin reading, and regulations specifically would be a major setback if trying to establish free trade.

            However, the biggest concern this raised for me was one of morality. I’m not entirely sure the process countries go through when establishing free trade, but it seems as though our country’s efforts and funds would be better spent towards developing countries. If President Obama is truly not practicing austerity, the government should redirect its attention to lessening austerity on underdeveloped areas. The US is obviously aware of the current success of China and the setbacks it has created for the underdeveloped world, and the US and Europe both have the capacity to lessen this enormous gap in development. While we should not swoop in to save these countries, we must give them the opportunity for success. Now that it is Obama’s second term in office, he does have more leeway in his actions and has the opportunity to focus on international issues on a larger scale. As he does so, I can only hope he doesn’t get completely caught up in European agreements and sets some of his efforts aside towards countries that would benefit much more from free-trade or simply lower tariffs than the most developed nations in the world.