US Exec to France: "Keep Your So-Called Workers"

[pampango]

21. GATT was "was built on the Reciprocal Trade Agreements Act of 1934" which FDR pushed through

a Democratic congress.

In the 1940s, working with the British government, the United States developed two innovations to expand and govern trade among nations. These mechanisms were called the General Agreement on Tariffs and Trade (GATT) and the ITO (International Trade Organization). GATT was simply a temporary multilateral agreement designed to provide a framework of rules and a forum to negotiate trade barrier reductions among nations. It was built on the Reciprocal Trade Agreements Act, which allowed the executive branch to negotiate trade agreements, with temporary authority from the Congress.

The ITO

The ITO, in contrast, set up a code of world trade principles and a formal international institution. ... The ITO represented an internationalization of the view that governments could play a positive role in encouraging international economic growth. It was incredibly comprehensive: including chapters on commercial policy, investment, employment and even business practices (what we call antitrust or competition policies today). The ITO also included a secretariat with the power to arbitrate trade disputes. ...The ITO missed the flurry of support for internationalism that accompanied the end of WWII and which led to the establishment of agencies such as the UN, the IMF and the World Bank. The US Congress never brought membership in the ITO to a vote ...

http://eh.net/encyclopedia/article/aaronson.gatt

GATT and the ITO were developed under Democratic presidents and congresses to 'expand and govern trade among nations'. As proposed by FDR and implemented by Truman was a temporary framework to reduce trade barriers. The ITO as envisioned by FDR and negotiated by Truman was to be a stronger trading body than the WTO is today with a strong dispute resolution mechanism removed from the control of national governments, antitrust powers and involvement in national employment and investment policy. Unfortunately republicans took control of the Senate in 1947 and rejected the ITO treaty on national sovereignty grounds.

"Now, FDR was tied in with the Breton Woods Accords of 1944:

"The Conference also proposed the creation of an International Trade Organization (ITO) to establish rules and regulations for international trade. The ITO would have complemented the other two Bretton Woods proposed international bodies: the IMF and the World Bank. The ITO charter was agreed on at the U.N. Conference on Trade and Employment (held in Havana, Cuba, in March 1948), but the charter was not ratified by the U.S. Senate. As a result, the ITO never came into existence.

How the RTAA was different from other trade agreements

Before the RTAA, if Congress wanted to establish a lower tariff for particular imports, it would act unilaterally, taking the foreign country’s tariff rate as fixed. Congress would choose a tariff rate that was either a little higher or lower than the median preferred tariff, depending upon the composition of the Congress. Generally, a Republican controlled Congress would prefer higher tariffs and a Democrat controlled Congress would prefer lower tariffs. Thus, tariffs were chosen based on the domestic politics of the United States. Individual members of Congress were under great pressure from industry lobbyists to raise tariffs to protect them from the negative effects of foreign imports.

After the Civil War, Democrats were generally the party of trade liberalization, while Republicans were generally for higher tariffs. This pattern was clear in congressional votes for tariffs from 1860 until 1930. Democrats were the congressional minority in the majority of Congresses between the Civil War and the election of Roosevelt. During their brief stints in the majority, Democrats passed several tariff reduction bills. Examples include the Wilson-Gorman Act of 1894 and the Underwood Tariff Act of 1913. However, subsequent Republican majorities always undid these unilateral tariff reductions.

By the Great Depression, tariffs were at historic highs. Members of Congress commonly entered in informal quid pro quo agreements where they voted for other members’ preferred tariffs in order to secure support for their own. At no point did anyone take into account the aggregate toll on American consumers or exporters. This practice is commonly referred to as logrolling. President Roosevelt and key members of his administration were intent on stopping this practice.

Democrats voted for trade liberalization far more often than Republicans...

http://en.wikipedia.org/wiki/Reciprocal_Tariff_Act

I agree with the background on the reasons that the US promoted the Marshall Plan, strong unions, the VAT and progressive government in general in Europe was out of fear of a communist takeover rather than out of a commitment to strong unions and progressive government per se. (Of course, Democratic administrations could have supported unions and progressivism on principle and Eisenhower was not anti-union like current republicans are.)

It is perhaps ironic that the USSR brought progressive social democracy to the European continent - not directly through military or political victories - but indirectly by scaring the US into supporting strong unions and progressive policies for Europe that have survived the demise of the Soviet Union itself.

You referred several times to GATT as if it still exists. For better or worse it is long gone, replaced by a much stronger organization - the WTO (itself a version of the ITO that Truman negotiated but was repeatedly rejected by a republican Senate).

We probably share some common ground that the importance of the WTO is fading. The current Doha round of negotiations has gone on for 12 years and is going nowhere:

The WTO launched the current round of negotiations, the Doha Development Round, at the fourth ministerial conference in Doha, Qatar in November 2001. This was to be an ambitious effort to make globalization more inclusive and help the world's poor, particularly by slashing barriers and subsidies in farming. The initial agenda comprised both further trade liberalization and new rule-making, underpinned by commitments to strengthen substantial assistance to developing countries.

My reading is that Obama is consistent with Democratic presidents (like Wilson, FDR and Truman) throughout history in favoring low tariffs and (like FDR and Truman) is committed to a multilateral approach to international issues including trade but also climate change and other issues. He is much less of a unilateralist than his republican predecessors and unlikely to go down a "the US can do whatever it wants to do" policy whether that involves higher tariffs or anything else.

But he also sees that the WTO is headed nowhere good with outdated rules and a proven inability to update them. Rather than withdrawing from the WTO (an action favored by much of the republican base and tea party types) he is negotiating two major trade deals with Asia/Australia and Europe to circumvent the WTO while using the WTO to penalize China when possible.

As you say "the US, Japan and Western Europe are still in the Driver's seat of the world Economy". The countries involved in these trade negotiations represent 3/4 of the world economy and trade. (This will not always be true because these same countries represent only about 20% of the world's population.) Obama seems to want to take advantage of this fact to negotiate treaties that will supersede the WTO and make its outdated rules much less important.

Likely components of the administration's economic policy towards China

The first will likely be more complaints about Chinese subsidies and trade practices filed with the WTO, given the president’s campaign promises and his record during his first term. Washington has been relatively successful with such cases in the past, and pursuing multilateral dispute settlements has the added advantage of avoiding a direct bilateral confrontation with China.

The second will be the pursuit of trade agreements that notably do not include China. One of these is the Trans-Pacific Partnership (TPP), a trade agreement among a growing list of nations bordering the Pacific. It is the Obama administration’s avowed aim to construct a TPP with standards so high — especially rules regarding behavior by state-owned enterprises — that China could never join without transforming its economic system. At the very beginning of the negotiation, the United States reminded other members that the U.S. Congress would not accept a TPP without strong labor and environmental measures. Obviously, the United States aims to lower the comparative advantages of developing countries so as to create more job opportunities for itself.

The 2013 launch of a U.S.-European Union free trade negotiation — effectively a Trans-Atlantic Partnership, a bookend for the TPP — primarily reflects majority (58%) sentiment in the United States that increased trade with Europe would be a good thing for the United States. But it can also be seen as an attempt to establish U.S.-European, rather than Chinese, technical and regulatory standards as global business norms.

The Obama administration is unlikely to label China a currency manipulator, which is something Mitt Romney promised he would do on his first day in office. In Obama’s first term, the White House had multiple opportunities to do so and declined, even though the renminbi was weaker against the dollar than it is now.

http://www.pewglobal.org/2012/12/10/u-s-china-economic-relations-in-the-wake-of-the-u-s-election/

Obama's policy seems to be that successful negotiation of these trade agreements will change global trading rules to include labor and environmental standards that will favor the US, Europe, Japan and other countries with strong labor and environmental laws to the detriment of low-cost, low-regulation countries. (Of course, the US may have to then upgrade its own labor laws which are the worst in the developed world.)

Thanks for the detailed post, happyslug.