Blog PostFebruary 12, 2013

Will the President use SOTU to endorse trade?

As President Obama prepares for his fifth State of the Union address, speculation is underway about which policies and priorities he will highlight this year. Weekend predictions suggest we?re in for a presidential pivot towards job creation, with odds favoring mentions of immigration, education and public investment in roads and research. This theme comes as no surprise given the current state of the economy. The most recent Jobs Day Cheat Sheet by Hamilton Place Strategies shows that another 3.2 million jobs need to be created to return to our pre-recession peak.

By Tucker Warren, [email protected] and Kate Bernard, [email protected], 202-822-1205

Free trade should also be up for discussion, which would serve several purposes for the President: a plank supporting job creation, an olive-branch to the business community, the realization of his goal to triple exports by 2015 and an opportunity for bipartisan leadership. In fact, the proposed Trans-Pacific Partnership (TPP) agreement has long enjoyed bipartisan support, having originated during the Bush Administration and garnering support from both 2012 presidential candidates and former House Trade Subcommittee Chairman Kevin Brady (R-TX). Plus, recent House and Senate passage of Permanent Normal Trade Relations with Russia might suggest a broader appetite for future agreements given the overwhelming support the measure received in both Chambers (House: 365 ? 43; Senate: 92 ? 4).

As far as the Administration?s relationship with the business community is concerned, top business advocates including the U.S. Chamber of Commerce and the Business Roundtable have already offered their support for a U.S.-EU free trade agreement. The AFL-CIO has also expressed interest in its benefits to American workers.

Will Americans support his endorsement?

While there is support for free trade on Capitol Hill and in the White House, the general public is more skeptical. Last March, HPS commissioned an online poll conducted by Civic Science of more than 35,000 respondents over an eleven-month period of time.

When asked whether Americans have benefited from supporting free trade, 44 percent said Americans have not benefited, compared to 41 percent who said Americans have. 15 percent of all respondents indicated they were unsure whether trade benefited Americans and women were twice as likely to be unsure compared to men.

The survey also revealed that higher income earners expressed greater support for free trade compared to lower income earners (Exhibit 1).

These survey results highlight the mixed views the general public has toward trade and are consistent with a poll commissioned by Gallup fourteen years after the North American Free Trade Agreement took effect (2008). That survey found that 37 percent of respondents believed the agreement had a mainly positive effect on the U.S. economy, while 53 percent said that it had a negative effect.

Economists, however, are more convinced of free trade?s benefits. A panel of leading economists assembled by the IGM Forum in March 2012 overwhelmingly agreed (85 percent) that ?freer trade improves productive efficiency and offers consumers better choices, and in the long run these gains are much larger than any effects on employment.?

Therein lies the challenge for a President who wants to make the case that free trade is good for the long-term health of the economy, while appealing to concerns about greater competition for products and services in a struggling economy.

Will this endorsement lead to action?

The potential for both a TPP agreement and a U.S.-EU agreement present the Obama Administration with an opportunity to enact transformative trade relationships with existing and new partners. However, charting the course for 21st Century trade presents negotiators with a set of 21st Century challenges when it comes to the protection of American jobs and workers. TPP negotiations, for example, must address the protection of intellectual property and foreign investors, while better enabling cross-border data flows.

William Krist, a Senior Policy Scholar at the Woodrow Wilson International Center for Scholars points out, ?The main importance of the TPP negotiations is that a successful negotiation could provide a template for future agreements with other APEC countries, including Japan and China, and possibly for future multilateral WTO negotiations.?

Meanwhile, an agreement between the U.S. and the EU would have to mitigate the effects of structural governmental differences, including agricultural subsidies, regulatory standards and health protections. According to a 2010 U.S. Chamber of Commerce report, eliminating existing tariffs would boost U.S.- European economic output nearly $180 billion within five years. But already low tariffs (currently less than 3%) means the typical ?sweetener? (tariff reductions) isn?t quite as sweet and the real work lies in resolving other more difficult matters.

Ultimately, the President will have his work cut out for him when it comes to resolving the economic and social issues at play in the TPP and a U.S.-EU free trade agreement. But first, he must persuasively frame free trade as a potential job creator. Our poll shows that he will have to overcome fundamental skepticism about the benefits of free trade to the U.S. economy. To do that, President Obama will have to explain diffuse, long-term benefits of free trade directly to lower income earners.

Tucker Warren is a Managing Director at Hamilton Place Strategies and former Communications Director at the Financial Crisis Inquiry Commission. Prior to joining the Commission, Tucker served as a senior supervisor at Edelman public relations.

Kate Bernard is a Director at Hamilton Place Strategies. Most recently, Kate served as Press Secretary to United States Senator Olympia J. Snowe (R-Maine). Kate also served as a Legislative Assistant to Former Congressman Christopher Shays (R-CT), where she oversaw a wide array of domestic policy issues.