Brand Politics

Posted by: amritha3012 | November 18, 2010

Stalked by failure- A SWOT on Obama’s trade policy

Gary C. Hufbauer, Senior Fellow, Institute for International Economics from Washington D.C, pointed out the cruel realities of President Obama’s export policy by saying, “only if we cut the trade deficit by $200 billion, which is a big number over five years, and multiply that by eight thousand, you get about 1.6 million new jobs, which is in the ballpark of what the president is talking about”

President Obama exuding confidence about his export policy

But President Obama’s optimism regarding, the South Korean trade pact is short lived. The reasons for the failure of the free trade agreement, was his recent defeat in the mid-term elections. The much anticipated trade pact fell through, as South Korea was apprehensive that the newly hostile Congress might shoot it down.

The difficulties of delivering on a promise seem to be mounting for President Obama. But he continued to stress his ‘balanced growth’ agenda by saying, “the need to boost exports to Asia’s rapidly growing markets and to create jobs at home, where unemployment has been around 9.5 percent for the past year.”

While Obama had harsh words for China’s decision to keep its currency artificially low, he was thwarted in his attempt to rally the world’s largest economies, to pressure China to change its policy. Obama said he was also committed to doing what was necessary, to cut the U.S. budget deficit in half by 2013.

Even though his ‘Asia tour’ was dubbed a failure for the most part, he had reasonable success in India. In his speeches he emphasised on, India’s importance in the emerging Asian order, affirming its role as a global player, rather than as a local South Asian power, and deepening its inclusion in the institutions of global governance. His support to India, over allies like Germany, for a permanent seat on the United Nations Security Council, has gone a long way in securing India’s co-operation with regard to bi-lateral trade with the U.S.

“One of the important lessons the economic crisis taught us is the limits of depending primarily on American consumers and Asian exports to drive economic growth,” Obama said in a speech to a business leaders, meeting in Yokohama recently.

President Obama with his Chinese counterpart Hu Jintao

But experts continue to urge the President to change his narrow vision for the future. They feel deregulating at home is the need of the hour, but the President continues to waste time venturing into exports. A popular blogger in a recent blog post said, “The president would have been wise to start over, and use the Korean negotiations as a precursor for how to deal with China. Instead, the President’s endorsement, a dutiful recitation of free trade peities, is a tribute to the free trade priesthood that has hounded him to return to the faith.”

Experts emphasise on the fact that America has never doubled its exports in a five-year span in its history. But President Obama focuses on exports, (and excludes import) neglecting the fact that there is a trade imbalance at a time when only record trade surpluses would create jobs.

WATCH RELATED VIDEOS:

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SEOUL SUMMIT 2010

President Obama speaks of the importance of the economic relationships between the U.S. and Asia in remarks to the APEC CEO Business Summit in Yokohama, Japan.

PRESIDENT’S SPEECH AT SME FINANCE AWARDS

Dreams come crashing down

Common Admissions Test (CAT) and Xavier’s Admissions Test (XAT) are the most popular competitive exams in the country. More than 3 lakh aspirants write the CAT every year and XAT is attempted by close to 1 lakh aspirants. Therefore, we must look deeper into the system that screens the largest number of candidates. Are they really choosing the best? Or only the so called “brightest minds”? Does this system really present fair opportunities to the 3 Lakh students who write this exam every year, hoping to gain admission into the IIMs or the XLRI?

These are very valid questions that deserve an answer. The CAT last year went online and with it came a host of problems. From systems crashing, to students being given extra time, the chaos ensued throughout the entire 10 day period. Some questions were even repeated in exams, making students question the integrity of the test. Students ask themselves, why a candidate who scores .001% more than the other, is considered more intelligent. “Why should a few points decide, whose dream gets fulfilled and whose doesn’t,”asks Malini, a CAT aspirant. Students persevere and try for years together to get into the IIM’s and fail in spite of a good percentile, all because of a flawed system. Karan Gupta, a student, said “This selection process is skewed. On what basis is a cut-off decided? These exams do not allow the best candidate to enter a B-school, just someone who probably even got lucky with the answers on the day of the test.”

CAT goes online

“Last year percentile 98 – this year 21.5, how is it possible? This clearly shows you how unfair the system really is,” said Ramya. Many hard working and bright students have scored a low percentile in the last CAT, posing serious questions as to the efficiency and legitimacy of the results.

“Every year there has been at least one error in every CAT paper; this was when the number of questions was less (around 75-90). Now with the number of questions increasing, errors will increase dramatically. The problem is, different students will face different errors and more importantly different number of errors,” complained Munira Lokhandwala.

The format gets tougher every year.

The XAT also has its fair share of problems, right from the amount to time given to answer the paper to the amount of errors detected in the test every year. Though this exams still follows the traditional format of paper and pen, it has close to 130 questions to be answered in 2 hours. Many students feel that the exam must either reduce the number of questions, or increase the time limit, as this format presents an enormous challenge.

Students are becoming increasingly restless over the ineffectiveness of the education system in India. They are demanding a GMAT or GRE format, wherein they only have to compete against themselves, in a manner of speaking. “I resent the fact that my results depend on how badly or how well my peers have done. I answered just 2 questions in quantitative section of XAT and got 40%. This is because many have gotten negative marking and answering just 2 questions right gets me this score,” said Prakash, a XAT aspirant.

Scientists say that a high IQ does not necessarily mean that the person gets the highest grades in class. Therefore the question of street smarts vs. book smarts comes into play. And so, a person who has scored 99% in CAT may not be able to perform in an interview because of his/her introverted nature. So do these institutes really train the best minds in the country? Are these exams really foolproof as the management claims it is?

Trade is a two-way street

In spite of mounting criticism President Barack Obama is set on driving up the volume of Ameican exports. With Americans clamouring for more jobs, the best way to explore their trade options is with developing countries in Asia. In a recent OP-ED in the New York Times, he wrote, “The more we export abroad, the more jobs we create in America. In fact, every $1 billion we export supports more than 5,000 jobs at home.” He has promised to generate 2 million jobs by the end of 2015. His political critics believe that this is an unrealistic target and gives false hope to the American people.

The President of the United States, Barack Obama

Experts argue that this policy in one-sided with no mention of imports to balance the trade equation. “The critical omission of imports shows how the President’s rickety and one-sided trade policy is doomed to fail from the outset. His static model does not let him mention, let alone understand, that gains from trade should drive a policy of trade liberalization.” says Richard Epstein a well known law professor.

Trade is not a ‘one-way street’ and it may be fair on America’s part to expect their exports to be accepted and trade barriers reduced. But we must ask ourselves if exports are the answer to America’s problem. China is determined to keep its currency at a low value to prosper in exports. It is a country that is almost purely dependant on exports for economic growth. In the quarter ending September 30, the net exports in China had returned to more than a third of GDP growth. China’s share of goods and services exports in GDP grew from 7.9% in 2008 to 8.4% in 2009. This year, World Bank forecasts that the figure will shoot to 9.4%. At this rate, China is likely to supply 100% of the world’s imports by the end of the century.

The promise to double export growth would require Obama’s administration to fight with the liberal wing of its own party. It would involve a depreciating value of the dollar not to mention persuading China to appreciate its currency value by atleast 40%. Therefore the expectation of increasing exports to a phenomenal level wherein millions of jobs can be created in the U.S is not realistic.

India has voiced a demand to the U.S. to lower duties on textiles and chemicals and allow greater access to its service sectors, a day after President Obama sought easier and larger access for US companies to venture into the Indian market. The U.S. has in turn asked India to cut tariffs on processed food and auto components. It has also specified the need to institute a stronger intellectual property regime.

Many of these counter demands may not constitute a viable option for the United States, yet the President’s faith in his export policy seems unshakable. “The great challenge of our time is to make sure that America is ready to compete for the jobs and industries of the future. It can be tempting, in times of economic difficulty, to turn inward, away from trade and commerce with other nations. But in our interconnected world, that is not a path to growth, and that is not a path to jobs”, wrote President Obama.

This week he pursues a trade pact worth tens of billions of dollars with South Korea, which aims to increase exports, and in tandem, jobs in the U.S. Canada and European Union are already negotiating with the South Korean government for similar trade pacts, and so the competition is fierce.

Whether the President will make good on his promise to create jobs and revive the thoroughly battered U.S. economy remains to be seen.