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The United States cannot afford to be left behind, in part because such negotiations often establish the basis
for product and other regulatory standards. By allowing the EU, in particular, to gain a first-move
advantage, U.S. companies may find themselves forced to conform to European regulatory standards if
they are to sell into the worlds fastest growing markets.
The federal government is also lackadaisical in its practical support for trade. Less than 2% of its capitalgoods exports received government export financing, compared to 3% to 8% in Germany, France and
Canada. Meanwhile, America does seem to be on the losing end of the trade-dispute system. The World
Trade Organisation is a marvel of international economic diplomacy but the report notes that Americas
frequent victories there are often pyrrhic because years may elapse before the WTO passes judgment, by
which time other countries unfair practices have already done their damage on American industry. What is
the solution? The authors propose an ambitious National Investment Initiative alongside Obamas
National Export Initiative. This would break down various domestic barriers to attracting foreign
investment, the source of high-paying jobs, investment and innovation. Given their diagnosis of the
problem this is a reasonable and ambitious prescription. But their vision involves promoting many
individual policies that stand little chance in todays polarised political world, such as reducing the
corporate income tax rate, ending the taxation of foreign-source income, encouraging more high-skilled
immigration and spending more on infrastructure.
A warmer welcome will await their advice that America more aggressively punish other countries for
unfair trade practices, either through the WTO or through its own authority to launch anti-dumping and
countervailing duty cases, which has atrophied. This, they say, should be paired with efforts to open up
foreign markets. This might have the benefit of persuading Americans, who have turned hostile to free
trade, that they will not be played for chumps from further liberalisation. But while this might bring
temporary breathing room to embattled industries, I doubt it will provide much lasting relief. Bringing
more trade cases would push America onto shakier legal ground, increasing the odds it would lose, or
provoke retaliation, or both. That would not leave the world better off.
More promising are the reports recommendations for approaching trade policy differently. The political
capital invested in TPA has been wasted on too many small-bore trade deals that dont materially alter
Americas economic fortunes. Better, they say, to focus energy and capital on big ticket deals with major
countries like India and Brazil. America should pursue more liberalisation in high-end services, where it is
especially competitive, if not through the WTO then through a comprehensive services agreement with
Japan, the EU and Canada. This is one policy on which Mr Obama and his Republican adversaries might
actually find some common ground.