Hillary Clinton ingests the Commerce Department

If you have been wondering where America's Commerce Secretary was, I have finally found the answer. Hillary Clinton ate him.

The evidence for this assertion is that once again Hillary Clinton has demonstrated just the kind of leadership and insight into international economic policies that one might hope for from a Commerce Secretary if Congress actually thought the position important enough to confirm one.

Of course, I am kidding. About Hillary Clinton eating the Commerce Secretary. Not about anyone thinking the job was important enough to fill. Clearly, the Republicans in Congress don't seem to think that confirming a business leader like John Bryson to add needed heft and his considerable and useful experience to the President's team is a good idea in the middle of the kind of economic crisis we are currently enduring.

No, I make the comment about Clinton because once again she has stepped up and shown herself to be both an innovative Secretary of State and President Obama's most valuable cabinet member. For the second week in a row she is devoting her Friday to demonstrating how central she sees economic work to be to the job of the State Department and the international standing of the United States. Last week, the interaction turned on a meeting with the President's job council at which the focus was how to help America grow through international economic engagement, such as the smart initiative led by her Under Secretary Bob Hormats to promote more foreign investment in the United States. (It's what I call the OPM Stimulus...in which OPM stands for "other people's money.")


Today, Clinton spoke at the Economic Club of New York, delivering a speech entitled "Economic Statecraft for a New Era." The speech is part of a series of four she is delivering on key themes of this key dimension of the administration's foreign policy agenda. As she noted in the speech, according to a pre-delivery draft I reviewed:

...Economic forces are transforming foreign policy realities around the globe. We have seen governments toppled by economic crisis. Revolutions born in a Tunisian marketplace have swept across an entire region. Europe faces its strongest test in a generation, thanks to recession and debt. And everywhere I travel, I see countries gaining influence not because of the size of their armies, but because of the growth of their economies.

She then went on to say,

Simply put, America's economic strength and our global leadership are a package deal. A strong American economy has long been a quiet pillar of our power in the world. It gives us the leverage we need to exert influence and advance our interests. It gives other countries confidence in our leadership and a greater stake in a deeper partnership with us. And over time, it underwrites all the elements of "smart power": robust diplomacy and development and the strongest military the world has ever seen.

The speech turned on four key points -- that the administration is "updating foreign policy priorities to include economics every step of the way", that the State Department is "honing" its "ability to find and execute economic solutions to strategic challenges" (from energy to supporting democracy in the Middle East), that the Obama team is "modernizing our agenda on trade, investment and commercial diplomacy to deliver jobs and growth", and that they are focusing on the challenge of growing wealth being wielded by state controlled funds and companies.

That a Secretary of State asserts an economic agenda is not news. Clinton's predecessors have regularly done so and the reality of course is that economics has always played a big role in foreign policy from wars fought over oil to the centrality of revitalizing economies to enhance security as during the Marshall Plan. That a leading figure in a government whose fate depends on job creation and restarting growth would raise such an issue is also not that shocking. What makes this speech different is that Clinton is not just talking the talk she is walking the walk, restructuring State to enhance its economic resources significantly, placing economic issues more central to our policies in places like the Middle East where promoting reforms that create opportunity is seen as a better alternative than say, invasion, when it comes to enhancing stability, mobilizing her team and embassies around the world on these issues and simply by actually credibly engaging with the business community in a way that has eluded many of her predecessors.

Like her excellent Hong Kong speech regarding the administration's "pivot" toward Asia-another element of foreign policy with important economic consequences and in which economics is among the most vital levers -- the New York Economic Club leader provides among the very best examples of the Obama Administration taking its international economic policies and putting them in a coherent framework. Take Clinton's good work in this regard, the recent trade deals and Tim Geithner's excellent and, one might add, courageous engagement with the Europeans in the recent crisis, and you have the most impressive sustained international economic initiative the U.S. has mounted in years.

And early in this administration it was hardly a foregone conclusion there was ever going to be such an initiative. I recall eating a soggy tuna fish on whole wheat toast sandwich in the White House mess with a former senior Obama official who said, "this administration isn't like we were back in the Clinton administration. Back then, international economics was one of our central priorities. Today, it seldom comes up except in terms of financial markets." That was in the wake of the 2008-2009 crisis and the focus on stimulus and health care had put domestic issues center stage. Inevitably however, what has happened is that the administration has come to realize that there are no such thing as domestic economic issues that don't have important international components -- nor are there security interests worldwide without economic components.

The Clinton speech therefore is not only a sign of a successful Secretary of State continuing to work to reinvent the department she leads -- to "think different" in the words of Steve Jobs which she quoted in today's remarks -- it is also the sign of an administration maturing and developing better priorities and vital competencies where they are needed. (Although it still might help to have a Secretary of Commerce. I'm just sayin'...)

In fact, the Clinton speech has to be seen as a big success except for one egregious error. Seeking to describe the changes she seeks within State, Clinton asserted, "We need to be a Department where more people can read both Foreign Affairs and a Bloomberg Terminal." I get the bit about a Bloomberg Terminal. But I think she misspoke. A really forward-thinking State Department should probably be turning to a different foreign policy-focused media organization, don't you think?


David Rothkopf

Hurray for the last three trade deals of the 1990s

I have had two really scarring experiences in my time. One was my childhood. The other was my adult life.

As a child, despite growing up in Beaver Cleaver's America with two loving parents, generally hygienic siblings, and the usual allotment of hamsters, turtles, cats, and a dog, there was still plenty of room for psychological trauma. Most of it came subtly but the damage has been irreversible (as my wife and children will attest). For example, I would bounce in the house beaming to report my grades, be asked how I did, describe the triumph of all As and a B and then, after a long pause, be greeted with "What was the B in?"

As an adult, well, it's much too complicated to go into here. But certainly one scarring experience was working in the United States Department of Commerce. For one thing, the inside of the Commerce Building was so dark, featureless and cavernous that it actually became a kind of spiritual black hole, sucking the souls out of its occupants with a ruthless efficiency that calls to mind a kind of industrial-strength version of the movie Poltergeist. Next, while you may have heard of Churchill's famous description of Russia as a riddle wrapped in a mystery inside an enigma, well Commerce was a backwater wrapped in a bureaucracy inside a dysfunctional political system.

On top of that, I was largely involved in trade policy which involved making assertions about which we had no substantiation in support of policies we were not sure would work while hoping the negative consequences would not be so bad. And as it turned out, while my pro-trade reflex is still intact, it has over the years been tempered by the kind of caution blended with cynicism that can only come from exposure to the hype associated with the economic benefits associated with trade deals.

So, in short, not only am damaged goods but I have special experience which may account for how underwhelmed I am by the just achieved trade deals with Korea, Colombia, and Panama.  I mean I know people are celebrating. I even have friends who are and I don't want to spoil their fun. So I offer my psychological history as a kind of an excuse for being a spoil-sport.

Not that these deals aren't net net a good thing.  They are. The Korea deal is even potentially economically significant ... in a smallish kind of way. And there are those 70,000 jobs the administration is claiming will be created by the $13-15 billion in new exports the deals might help generate.  But I can't help but think this is all pretty weak beer and that these deals are more like a throw-back to a bygone era of activist trade policy than they are indicator of some new push toward opening global markets.

In a way, not only are these Bush Administration policies come to long overdue fruition, but they kind of feel like they are simply the last spasm of 1990s trade liberalization.

Given the way we in the Clinton years oversold NAFTA (guilty) and how the China FTA has worked out (we've still got a host of problems with them from currency manipulation to IP extortion) and the fact that we've been bleeding jobs for a decade and have stubbornly high unemployment and the world is heading into a recession, it's not surprising that this administration doesn't have much appetite for new trade deals. Indeed, given all those things, getting these deals approved represents something of a triumph for the Obama trade team. It wasn't easy and it is clear there was deep apprehensiveness about aspects of these deals within the administration and within Democratic Party ranks on the Hill.

And for Asia policy hands and industries like the auto and agriculture sectors, the Korea deal represents the important solidification of a key relationship and access to a rapidly growing market of some size. And for Latin policy hands, well, they're just happy to have something to talk about other than Mexican cartels and the gnawing sense that Washington thinks South America snapped off and drifted away in a recent earthquake or hurricane.

But having said that, the most important reaction to these trade deals is akin to my parents' reaction to my report card in that it looks past the accomplishment to the deflating underlying issue.  In this case, the issue is "now what?" What is the next chapter in U.S. trade policy going to look like?  A protracted period of inaction in terms of new deals with a major shift in focus (generally justified) to enforcement issues seems most likely. But with world markets representing vital potential growth for U.S. companies and workers and with material tariff and non-tariff barriers still in place, it's time for a new conversation and new ideas. Some have come from smart past USTRs like Sue Schwab (see her Foreign Affairs piece from a while back on this) and Charlene Barshefsky, who has written and spoken persuasively about the need to focus on sectoral deals. Agricultural trade liberalization is certainly one of the next big hurdles as is dealing with questions of currency manipulation and growing "conditions" imposed on companies that would trade with big markets like the forced transfer of IP or the forced location of factories in the target country.

We have to deal with a world in which most other countries aggressively practice industrial policies that tilt the playing field in their direction and we more or less passively complain about conditions without doing much about it. And we have to deal more effectively with dislocated workers while they search for new jobs, not just providing training but the kind of economic safety net that will have the embracing the benefits of trade much as some European workers do because they don't fear it will undermine their families' well-being.

In all likelihood however, the conversation about what is next is going to unfold slowly and the cheers for these deals will quickly give way to the same deafening silence that rings in the head of aging little boys who weren't sufficiently appreciated in their youth.