With Mitt Romney about to accept the nomination to be the 2012 Presidential candidate for the Republican Party, this seems an appropriate time to revisit the issue raised in a previous post about the trade platforms, or lack thereof, of the four main candidates in the Republican primary.
As I indicated then, Mitt Romney’s platform most clearly articulated a direction for his trade policy. This is briefly outlined on his website, where he generally supports free trade, opening markets through new trade agreements, and implementing a new trade structure with China. Details are left for his American Century White Paper and his book, Believe in America: Mitt Romney’s Plan for Jobs and Economic Growth.
Two primary themes emerge from the Presidential candidate’s positions on trade:
- Expand market access for US businesses through trade agreements; and
- Confront China.
Negotiate new trade agreements
Romney promises to pursue new trade agreements with nations committed to free enterprise and open markets, and to create a Reagan Economic Zone.
Within his first 100 days in office, he commits to launch a public diplomacy and trade promotion effort in the Americas – the Campaign for Economic Opportunity in Latin America (CEOLA) to “extol the virtues of democracy and free trade” and build on the benefits conferred by the free trade agreements already in force between the United States and countries in the region (Chile, Colombia, Panama, Peru, CAFTA, etc.) Apart from planning to use it as a campaign to isolate Cuba and Venezuela, CEOLA will also seek to involve US and Latin American private sectors to expand trade through the region with initiatives that help US companies do business in LA and vice versa.
CEOLA will be the Latin American precursor to the Reagan Economic Zone which will involve pursuing deeper economic cooperation among like-minded countries (code for excluding Cuba, Russia) around the world that are committed to principles of open markets. The benefits of the zone, which will codify the principles of free trade, will be a “powerful magnet that draws in an expanding circle of nations seeking greater access to other markets”. China, the plan continues, will be offered the opportunity to join as an incentive to end its “abusive commercial practices”. However, should it choose not to join, the trade with its regional neighbors will isolate China. Trade pacts with Russia’s neighbors will presumably have a similar effect on that other giant.
Should China continue to pursue its own interests, Mitt Romney promises to: (i) impose targeted tariffs or economic sanctions; and (ii) designate China a currency manipulator and impose countervailing duties, i.e., increased duties imposed by an importing country to compensate for subsidies given to producers or exporters of the exporting country.
As noted in my earlier post, any plan which has the goal of “isolating” two of the world’s largest economies, China and Russia, simply cannot be taken seriously. More importantly, Romney’s platform ignores the existence, and the lessons to be learnt, from the World Trade Organisation (WTO). The WTO already has the mission of liberalizing access to markets around the world among its 153 members, including China and now even Russia, which since my last post has become the latest WTO member. The WTO is the club to which all countries aspire to join because, despite its shortcomings, it provides a multilateral forum within which developed and developing countries can operate. Despite the challenges of operating in such a forum, it is unlikely to be replaced by a Reagan Economic Zone any time soon!
We also note the absence of any discussion that recognizes the essential role of small businesses in the economy and growing presence in international trade. In fact, small businesses are mentioned only a few times in Mitt Romney’s book, and only in the context of criticizing the policies of the current Administration. However, none of his own proposals refer to or target the special needs of small businesses.
The next US President needs to focus his administration’s efforts on pursuing goals and objectives that are likely to yield success. This includes working within the WTO to address troublesome aspects of trade policy, as well as on the initiatives that address the special needs of small businesses.
As the person who will be the Republican candidate for U.S. President, Mitt Romney’s positions require intense examination and future posts will return to this issue, as well as to the legacy and current platform on trade of President Obama.