Comments on the US Trade Budget FY2016



The Obama administration recently released its proposed budget for fiscal year 2016, so what would this mean for those at the helm of US trade policy? The budgets for most agencies and programs would increase, but there seems to be a disconnect between where the money is going and the priority US trade objectives that President Obama pointed to in his State of the Union address.

What the Budget Numbers Tell Us

First, the budget of the Office of the US Trade Representative (USTR), the major negotiating arm of US trade policy, would slightly increase from $54 million to $56 million. Most of the increase seems to be earmarked for legal staff to pursue litigation to enforce US rights under existing trade pacts.

Similarly, the Department of Commerce’s International Trade Administration, tasked with promoting trade and investment plus ensuring compliance with trade rules, gets $497 million, up from $462 million for FY2015. About 70 percent is for its US export and trade promotion arm, the Global Markets Program, but $82 million goes to Enforcement and Compliance, which includes monitoring but also aiding negotiations of US free trade agreements (FTAs). The International Trade Commission would likewise receive $89 million for its investigations on dumped or subsidized imports on the US market.

Conclusion #1: Enforcement of existing pacts gets priority over negotiation of new agreements.

Second, agricultural trade policy falls largely under the purview of US Department of Agriculture’s Foreign Agricultural Service (FAS), which gets $75 million for trade promotion and $81 million for trade policy functions—encompassing trade negotiations, dealing with World Trade Organization (WTO) notifications of sanitary and phytosanitary measures affecting agricultural trade, etc. Notably, FAS trade policy functions alone enjoy a 50 percent premium over the total USTR budget!

Conclusion #2: Agricultural interests get priority. Despite its small share of total US exports, agriculture punches above its weight in budget talks and trade negotiations.

Assistance for US Workers and Exporters

US trade policy and negotiations have been closely linked since 1962 to Trade Adjustment Assistance (TAA), the federal aid for workers dislocated from jobs on account of import competition. Congress refused to reauthorize TAA last year but the program continued to operate using funds remaining from FY2015 appropriations. The budget calls for TAA to get $664 million, down 6.6 percent from $711 million for FY2015. TAA is meant to at least partly address labor’s concerns about White House support for Trade Promotion Authority (TPA).

Conclusion #3: TAA remains a priority for the Obama administration as a complement to TPA.

The US Export-Import (Ex-Im) Bank, the US official export credit agency, is projected to have more than $1 billion in net receipts (after expected losses on prior transactions) of which about 10 percent will cover Ex-Im’s administrative costs. Ex-Im has faced its own reauthorization battles, related to political differences over its financing and lending activity.

Conclusion #4: The Ex-Im Bank is on balance a revenue enhancer, not a net expenditure.

Future Streamlining?

Numbers aside, President Obama’s budget also includes a proposal for a consolidated department to house US business and trade policy. The new department would include Commerce’s core trade functions, USTR, the Small Business Administration, the US Ex-Im Bank, the Overseas Private Investment Corporation and the US Trade and Development Agency. This idea is neither new nor necessarily good; indeed, Ronald Reagan tried to do basically the same thing to no avail in the early 1980s! President Obama issued a trade reorganization proposal several years ago; that plan was stillborn. This current reissue will likely suffer the same fate. But the bigger question is: Why raise such a distraction, with a small chance of success, when Congress’s trade agenda is already full?

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