There is a reason that it’s hard to find high-quality winter tomatoes from Mexico or textiles and apparel from poor countries in Asia, Africa and South America. Those markets have been largely closed off to the U.S., in an example of our government’s refusal to abandon old-fashioned 20th –century protectionism in agriculture and manufacturing. After dawdling about the issue most of his first term, President Obama is supposed to embark on a very ambitious trade agenda over the next four years. But it remains to be seen whether new U.S.-backed trans-Pacific and European trade pacts will result in model “21st Century agreements,” and delve deep into domestic barriers to trade such as service sector protection and the monopoly practices of state-owned companies.
This drama is being played out most starkly in the Trans-Pacific Partnership agreement (TPP) negotiations, which Obama has identified as a top priority for his second administration and which has become the central symbol for the so-called U.S. “pivot” to Asia. From the outset of the negotiations, the U.S. has touted the TPP as the model for the new century’s trade agenda: a “comprehensive, high standard agreement.” While border tariffs will still form a part of the agenda (a goal of almost 100 percent zero tariffs within a short time span), the real focus of the negotiations will center on behind-the-border, non-tariff barriers to trade and investment. Thus, among the 29 chapters in the TPP, there will be new rules for services (de)regulation, intellectual property, government procurement, competition policy – including disciplines for state-owned-enterprises (SOEs), science-based rules for trade in food products, management of supply chains, regulatory coherence, and labor and the environment.
This is a huge, complex negotiating agenda—and to achieve its goals, the U.S. will certainly have to make concessions to accommodate the equally urgent priorities of its 11 TPP negotiating partners. Thus – in some cases for the first time ever – the U.S. will have to tackle its own long-standing protectionist practices and rules. This means liberalizing high tariffs (and low quotas) on textiles, apparel and footwear. It will also means loosening market-distorting rules of origin that drastically curtail supply chains by excluding parts and components from non-TPP members. Then there are the highly restrictive quotas and tariffs in key agricultural sectors such as sugar, dairy products and cotton.
On sugar, the U.S. has adamantly opposed curbing a protectionist regime that uses price supports, combined with quotas and sky-high tariffs, to keep out competitors and force U.S. consumers to pay on average twice the world price for the commodity. Similarly, for dairy products, a combination of subsidies, quotas and tariffs “milks” U.S. consumers and keeps out foreign competitors. Cotton, however, is the real mindblower: currently U.S. taxpayers are shelling out $147 million per year to buy off Brazilian cotton magnates who quite rightly won a case against U.S. subsidy programs in the WTO.
With the presidential election out of the way, there was hope that the president’s trade team would reveal a braver face on trade policy. Alas, in January the administration delivered a backhanded, protectionist slap to our NAFTA and TPP partner, Mexico. As anyone who has suffered through rock-hard, unripe, and gassed Florida winter tomatoes knows full well, the arrival over the past decade of riper, juicier Mexican winter tomatoes has been a godsend. When the Obama administration signaled last year that it would go along with Florida tomato growers’ demands for more protection, the thought was that it was bowing to election pressure. Well, Barack Obama won decisively. But a few weeks ago, the U.S. mandated a steep price rise for Mexican tomatoes and cut the amount of the fruit that could be imported—one can only assume out of conviction that U.S. producers must be protected no matter the cost or quality considerations for the consumer.
If this craven attitude and stance prevails in the TPP negotiations, they will surely fail. This would be a double blow to the U.S. and the world trading system. First, on most of the 21st century TPP issues, the president and his team are spot on—these are the central issues to ensure more open future markets. Beyond economics, however, TPP failure would be disastrous for U.S. strategic leadership in East Asia where the regional pact has become the central symbol of the U.S. “pivot” and rebalancing.
In coming months, it will be imperative for President Obama to use his hard-won political capital to challenge entrenched protectionist interest groups and policies. After all, on his own word a central element of his legacy is wrapped up in getting the TPP over the finish line. More parochially, during these grey days of February it would be a boon to enjoy an edible Mexican tomato again.