Obama and the Free Trade Paradox

Which U.S. presidential candidate, Barack Obama or John McCain, is more likely to pursue an active free-trade agenda? Coming away from the presidential campaign, observers would be forgiven for wrongly concluding that solely the president determines U.S. trade policy -- and that on that basis, John McCain is better for free trade.

The battle for Congress -- not the White House -- will have the greatest near-term impact on U.S. trade policy. This point is repeatedly missed amid the horse-race coverage of a presidential election focusing on the potential executive's intentions.

Whatever the outcome of the presidential election, Democrats are highly likely to retain majority control of both houses of Congress. That's why, paradoxically, an Obama White House might accomplish more on trade than a McCain administration, despite the Republican nominee's sterling free-trade credentials.

McCain's trade track record speaks for itself. The CATO Institute gives the Arizona Republican one of its highest ratings on the issue. If McCain speaks less about trade than other candidates, it's largely because his support for it is so well known.

A President McCain and a Republican-dominated Congress might do more to advance an aggressive free-trade agenda than any U.S. government in recent memory. But the point is almost certainly moot; Republicans have little hope of regaining the majorities they lost in 2006.

For GOP congressional candidates, the numbers tell a frightening story. On the Senate side, there will be 35 contested seats this fall. Republicans now hold 23 of them. The Republican brand has taken so many hits over the past seven years that even a level playing field would favor Democrats in 2008. But the playing field is far from level. Defending 23 seats -- more than eight of which are very vulnerable -- will prove a nearly impossible task. The House, where Democrats' already have a 36-seat advantage, is much the same story given funding constraints faced by the Republican National Committee.

Another reason an Obama administration might outperform low expectations on trade: The candidate is not as protectionist as he appears. Democratic rival Hillary Clinton pushed him hard on the issue during primaries in states like Pennsylvania and Ohio, where trade takes much of the blame for the loss of large numbers of manufacturing jobs. In these states and others, Obama responded to the political needs of the moment by laying down a series of protectionist markers. His vow to unilaterally press the governments of Canada and Mexico to reopen NAFTA falls squarely in this category. So did his pledge not to sign new trade agreements that lack enforceable labor and environmental protections.

Almost from day one of the general election, Obama has shifted toward a more nuanced trade policy, one meant to reduce the gap between his views and McCain's, while holding to pledges to help states where globalization has taken a toll on local workers. He has presented a much less protectionist version of his "patriot employer" scheme to reward companies for adding domestic jobs. And recently he flatly declared: "I believe in free trade."

This is a believable line given that he has surrounded himself with pro-trade economic advisers. But he followed this statement with reasons why he would add labor and environmental protections to NAFTA; wait on a Colombia free-trade agreement; and potentially press South Korea for further automobile concessions on the pending free-trade agreement with that country. So while he believes in free trade, his unwillingness to proceed with trade deals that do not have enforceable labor and environmental protections -- or that have negative impact on sensitive industries or even human rights implications -- may limit the pool of willing partners.

Yet trade looks different from the Oval Office than from the Senate or the campaign trail. Any president has built-in incentives to pursue trade deals, since promises of greater access to U.S. markets can help his administration win concessions from foreign governments on a diverse range of other issues. Consider Bill Clinton's tough rhetoric toward China during the 1992 presidential campaign. Then remember that it was the Clinton White House that took credit for permanent normalized trade relations with Beijing.

Whatever the differences in their trade philosophies, which are probably much narrower than campaign rhetoric would suggest, it's Congress that will drive trade policy over the next four years -- and lawmakers have an entirely different set of incentives. Members of Congress cast votes on trade with an eye toward local constituents, not foreign governments. That's why it's hardly a surprise when a downturn in local economies pushes legislators toward protectionism.

In January 2009, President McCain or Obama will face just such a Congress all too aware that American public opinion has soured on free trade largely due to economic conditions. A June 2008 poll from Rasmussen Reports found that a larger percentage of Americans think free trade harms the U.S. economy than believe it plays a positive role. Even among registered Republicans, historically more likely than Democrats to support foreign-trade deals, just 41 percent now say that trade serves U.S. economic interests. And since this campaign has revolved around which candidate's picture of economic crisis voters believe, this sentiment will only continue to trend in that direction.

A President McCain's trade agenda will face resolute opposition from a Democratic Congress, particularly as likely disputes over taxes, health care and the war in Iraq generate political hostility on both sides. Yet, even congressional Democrats may not prove as resistant to trade deals as they often seem.

It would have been easy for Congress to close the door on trade deals with Colombia and South Korea earlier this year. By delaying votes on these issues, rather than simply voting them down, it's possible that deals could be reached once election-year pressures have subsided -- particularly if Democratic lawmakers can share credit for changes to the deals with a Democratic president. Most pro-trade Republicans can be counted to support trade liberalization no matter which party holds the White House.

Only Nixon could go to China. Perhaps it is only a Democratic president who can work with an incoming Democratic Congress to get the U.S. free-trade agenda back on track. Much will depend on the state of the U.S. economy next year, which could continue to limit trade movement. But when economic conditions begin to recover, Obama stands a better chance of success with Capitol Hill on trade than McCain can hope for.