Obama administration has done things “I wouldn’t be proud of” says Schwab

The former US Trade Representative, Susan Schwab, has admitted that she “wouldn’t be proud” of some of the activities carried out by the new Democrat administration during President Obama’s first 100 days.

The 54-year-old professor at the University of Maryland’s public policy school, who served in George Bush’s administration from 2006 to 2009, was critical of protectionist moves such as the Mexican truck ban, which saw Mexico retaliate by slapping higher tariffs on US exports like fruit and industrial goods.

“These are the sort of smaller, pernicious kinds of protectionism that we’re seeing all over the world that don’t have a dramatic effect on trade flows but can have a very negative, narrow effect on attitudes,” she said. “You get a domino effect where one country says if you’re doing that to me I’ll do that to you or somebody else.”

In a wide-ranging interview with TM, she acknowledged that it was “unfortunate” the Doha round of trade negotiations had been allowed to collapse, but insisted the US was not the central spoiler. “It was attributable to a number of things,” she argued. “A number of countries wanted to raise barriers to agricultural trade. Never mind how much they would lower them, they wanted to raise barriers, which would have been hard to explain at the end of a multi-lateral trade liberalising negotiation. The breakdown last year in the Doha round interestingly enough was not a North-South breakdown. It wasn’t a developed-developing country breakdown. As for the disagreements, you had on one side the US, Brazil, Thailand, Malaysia, Paraguay, Uruguay, Chile, Costa Rica and others and then on the other side you had India, to an extent Indonesia and China was sort of straddling. The geopolitics of the Doha round was fascinating.”

We know what we shouldn’t do; the lessons of the 1930s really do resonate. We should be using trade and trade liberalisation to harness our way out of the recession. I’m more sceptical at this point whether this is doable. We really should be redoubling our efforts on the Doha round

Looking back she said the Indian elections “had a far more profound impact on what was going on in the Doha round than the US elections” and that there was now an opportunity for India to “be more substantive and perhaps a little less political” in its approach. She did, however, concede that after many years of negotiations people were entitled to want a round that will generate new trade flows and economic development. “It can’t just be a piece of paper that everyone can sign and put out press releases without any trade to show for it.”

Asked about the World Bank’s call on world leaders to resist the ‘siren song’ of protectionism, she said it remained to be seen whether global Government intervention in the market would translate into more protectionism.

“We know what we shouldn’t do; the lessons of the 1930s really do resonate. We should be using trade and trade liberalisation to harness our way out of the recession. I’m more sceptical at this point whether this is doable. We really should be redoubling our efforts on the Doha round, in particular having advanced developing countries and emerging markets opening their markets to each other and to the rest of the world. If you think about it the vast majority of global economic growth in the next 5-10 years is going to come from China, India and so on. I think it is a good thing that these countries are very actively engaged in the Doha negotiations. The question is will they undertake the responsibility that comes with being such a profound beneficiary of decades of an open trading system?”

Responding to criticism of the Bush administration she rejected the view that George Bush had been far too slow in recognising the urgency of climate change. “When it comes to trade negotiations and trade agreements we’ve done a great deal to help shift to a low carbon economy,” she argued. “In the case of the last four bilateral free trade agreements that I negotiated we added enforceable labour and environmental provisions that are unique among trade agreements anywhere in the world.

“In addition to that if you look at the Doha round there are major environmental proposals we worked hard on – one being a proposal with the US and the EU, referred to as the Environmental Goods and Services Agreement. This would eliminate tariffs globally in environmental technologies, clean energy technology, photovoltaic cells that kind of thing. The World Bank estimated that this would increase trade in these technologies and presumably usage by 7-14 per cent. If we can get through the industrial and agricultural so-called modalities then that’s a part of the deal that could make a very positive contribution. This is what we were pushing under the Bush administration in what can only be seen as a pro-environment approach.”

After recently stating that the Obama administration could “start moving the needle on trade policy in a positive direction that I could never have”, she admitted that efforts to push policy in these areas were often hampered by a negative perception of the Bush administration.

“Some of it was just a straight misperception,” she shrugged. “Part of it was media bias and not wanting to say anything positive or nice about the Bush administration. Part of it goes back obviously to the Kyoto protocol. But many chose to forget that even though the Clinton administration endorsed it, before Clinton left office 98 out of 100 members of the US Senate rejected it.”