NEWS,10.11.2012

Obama 'open to compromise' to avoid cuts

Newly re-elected President Barack Obama has offered to deal with Republicans to avert a looming US fiscal calamity but insisted a tax increase for the very rich must be part of the bargain.Obama reminded Republicans that his approach to avoiding steep tax hikes and spending cuts due in January, which could trigger another recession, had just won the backing of Americans at the polls.He spoke just hours after John Boehner, the Republican Speaker of the House of Representatives, had repeated his party's commitment not to raise anyone's tax rates as part of a deal to address the fiscal crisis.In his first event at the White House since beating Republican Mitt Romney in Tuesday's election, Obama called on Congress to work with him to produce a plan and invited congressional leaders to meet with him next week."I'm not wedded to every detail of my plan. I'm open to compromise. I'm open to new ideas," he said.The "fiscal cliff" of steep government spending cuts and tax increases due to be implemented under existing law in early 2013 is Obama's most pressing challenge after winning a second term.Aimed at cutting the federal budget deficit, the planned measures could take an estimated $600 billion out of the economy and severely hinder economic growth.While striking a conciliatory tone toward the Republican House majority, Obama said voters supported his ideas, including raising taxes on the wealthiest Americans."I just want to point out, this was a central question during the election. It was debated over and over again. And on Tuesday night we found out that the majority of Americans agree with my approach," he said.Earlier, Boehner called on Obama to play a more active role in addressing the issue and urged the president to take the lead in negotiations."This is an opportunity for the president to lead. This is his moment to engage the Congress and work towards a solution that can pass both chambers," Boehner told a news conference.While disagreeing on immediate measures to avert the looming crisis, Obama and Republicans may find common ground in calls for enactment over the next six months of a larger package of deficit reduction measures, including a rewrite of US tax laws.The non-partisan Congressional Budget Office reiterated on Thursday that if left unaddressed, the abrupt fiscal tightening would knock the economy back into recession, with unemployment rates soaring back to about 9%. The rate is now 7.9%.But it also warned of a crisis ahead if the United States does not stem the growth of its exploding deficit.Partisan squabbling over the budget crisis will also harm the US economy, according to a strong majority of economists polled after Tuesday's presidential election.

Chavez On Obama Reelection: President Should Forget Global Wars, Fix Domestic Problems

 

The U.S. government's chief antagonist in Latin America, Hugo Chavez of Venezuela, has advised newly re-elected U.S. President Barack Obama to avoid further entanglement in international conflicts and concentrate on fixing internal problems."He should reflect first on his own nation, which has a lot of economic and social problems. It's a divided, socially fractured country with a super-elite exploiting the people," the socialist president said late on Thursday in his first reaction to Obama's victory this week.The maverick Chavez, who has inherited Fidel Castro's mantle as Latin America's most voluble challenger of U.S. power and policy, said it was time Obama pulled back from global affairs."He should dedicate himself to governing his country and forget dividing and invading other nations," added Chavez, who has constantly criticized U.S. involvement in Iraq, Afghanistan and other hot spots around the world.To the disappointment of the U.S. government, Chavez was re-elected for another six-year term in October, providing a continued platform to implement his self-styled socialist revolution and keep railing against Washington.The 58-year-old Chavez, a quieter figure these days after a year of debilitating treatment for two bouts of cancer, had backed Obama over Republican challenger Mitt Romney in the White House.Nevertheless, he does not disguise his disappointment in Obama, accusing him of perpetuating the same aggressive foreign policies as his predecessor, George W. Bush.Since his Oct. 7 presidential election victory over opposition challenge Henrique Capriles, Chavez has been relatively subdued, only popping up on state television once or twice a week in meetings with ministers.He has made no major new policy announcements, beyond promising more efficiency in government and a widening of socialist "communes" across Venezuelan society.Many Venezuelans expect a devaluation of the bolivar currency in coming months the black market rate is three times the official one and perhaps more nationalizations in an economy where Chavez has radically increased state ownership.Speaking at a Cabinet meeting, Chavez made light of nationalization concerns, urging businesses not to fear him."Come and invest! Don't believe the fairy tale that we're going to expropriate you," he said in comments on state TV.Earlier in the week, Chavez plied the same line, espousing a supposed new moderation toward private business that critics scoff at as hypocritical and barely believable."It's totally false that I have a plan to expropriate everyone," he said then. "Don't be deceived by that tale of 'here comes the wolf.' Lies. I'm urging you to come and work."He was less conciliatory in his view of Venezuela's upcoming state elections on Dec. 16, casting them in his Thursday appearance as a continuation of the state's battle against "counter-revolutionary" candidates of "the bourgeoisie.""We have to keep fighting this ideological confrontation," he urged his candidates for governorships in the 23 states.The most closely watched vote is in Miranda state, where incumbent governor Capriles aims to hold off a challenge from Elias Jaua, a heavyweight Chavez ally and former vice president.Should Capriles lose, it would dent his status as Venezuela's main opposition leader and deal another blow to the coalition of anti-Chavez parties already demoralized by their failure to oust him from the presidency.However, pollster IVAD put Capriles way ahead this week, with 55 percent of voter intentions versus 34 percent for Jaua. The opposition currently holds seven states.

A Trade Policy for President Obama's Second Term

 

President Obama's trade policy in his first term included working with Congress to pass free trade agreements with South Korea, Colombia and Panama, continuing negotiations on the Trans-Pacific Partnership and expanding it to include Canada and Mexico. Moreover, Obama set a goal of doubling exports by 2014, established a trade enforcement council and increased WTO dispute settlement to enforce existing international trade laws. He also effectively managed the complex U.S.China economic relationship, getting China to more effectively protect US intellectual property rights and ending China's so-called indigenous innovation policies. During the next four years the president should build on this progress and develop a comprehensive trade policy that does three things: 1) builds greater cooperation with China 2) pursues comprehensive and high quality free trade agreements; and 3) articulates a vision for moving the WTO Doha Round forward.The size of U.S.-China trade makes building this bilateral relationship key to achieving Obama's goal of doubling exports and for making progress on broader U.S. goals on an international level. But the size and growing trade deficit - which in 2011 was $295 billion and is on track to be even larger in 2012 - feeds concerns about unfair Chinese business practices and American economic and manufacturing decline, which ultimately makes advancing the economic relationship with China rather difficult.The challenge for Obama is that the size of trade deficit is unlikely going to change much in the next four years because of China's role in global supply chains as the major assembly point for goods made from components sourced from South East Asia, Europe, the U.S. and Japan. In this light, the U.S.-China trade deficit is the accumulation of declining U.S. trade deficits with countries like Japan, South Korea and Malaysia as businesses in these countries have shifted production to China. This shift to more efficient and cost-effective production conditions has led to significant decreases in the prices of these imported goods to American businesses and consumers. One way to reduce the bilateral trade deficit would be to address China's undervalued currency. An undervalued renminbi (RMB) has the effect of making Chinese imports cheaper and American exports to China more expensive. Therefore a revaluation would reduce the deficit by increasing U.S. exports to China and reducing imports from China. The dispute about China's undervalued currency has also negatively affected broader U.S. trade goals, such as concluding the WTO Doha Round since the undervalued RMB caused developing country to resist further reductions in tariffs due to concerns about competition from cheap Chinese imports. That said, the net economic impacts of China's undervalued currency for the U.S. are unclear as a lower RMB also leads to cheaper goods for American consumers and businesses. While an appreciating RMB will likely lead businesses to relocate to lower cost countries and thereby reduce the U.S.China trade deficit, it will not lead to a decrease in the overall U.S. trade deficit.But reducing these US concerns about the RMB and the trade deficit, other areas for cooperation with China like clean energy should open up. President Obama supports developing green energy in the U.S. and China's 12th Five Year Plan includes ambitious domestic renewable energy goals. These goals could be complimentary with the U.S. specializing in high-end green technologies and services and China manufacturing components like solar photovoltaic cells. A liberalized trading regime in green energy would underpin this outcome, leading to the most efficient allocation of resources and reducing the costs of renewable energy in both countries. But concerns in the U.S. about Chinese subsidies for renewable energy and a U.S. focus on developing green manufacturing capacity has already led to WTO litigation. Both countries should instead use the trading system to support this common goal and build on the recent agreement in APEC to reduce tariffs on a range of environmental goods by expanding the list of environmental goods and addressing other trade barriers affecting green energy goods and services.Currently, the Trans-Pacific Partnership is the only significant free trade agreement (FTA) the U.S. is pursuing and completing the negotiations should certainly be a priority for the next Obama administration. The main outstanding issue is whether Japan will join the current negotiations. While Japan's participation would slow down the talks, it would secure Japan's support for the trade and investment rules that the U.S. wants for the Asia-Pacific region and provide economic heft to the TPP. All this would increase the incentive for other countries to join the TPP and create further momentum toward an Asia-Pacific FTA, reinforcing Obama's broader strategic "pivot" towards Asia.A big potential new FTA is with the EU the US's largest bilateral trading partner. Most tariffs between the US and the EU are already low, so improving market access will require addressing so-called behind the border regulatory measures such as on genetically modified organisms, vehicle safety standards and pharmaceutical health and safety laws. Prior experience addressing trade barriers in the Transatlantic Economic Council suggests that making progress on these issues will not be easy. However a US-EU FTA would certainly deliver economic benefits for the U.S. and European Union.President Obama can be expected to continue to efforts to conclude parts of the WTO Doha Round, focusing on a services agreement, expansion of the international technology agreement and trade facilitation. However, only multilateral trade liberalization will deliver the largest economic benefits for the U.S. and globally, and the U.S. as the necessary leader and largest beneficiary of the multilateral trading system should develop a strategy for concluding the WTO Doha Round during the next four years.