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Thursday, November 4, 2010

U.S. Midterm Election Results: A Bumpy Road Ahead for International Development Agenda?

Like every good Harvard Kennedy School student, I spent Tuesday night nervously jittering in my seat while watching the 2010 midterm election results, fixated on my computer screen and clicking "refresh" over and over until my index finger hurt. Although the 2010 election issues centered on domestic economic recovery and health care reform, I couldn't help but wonder what the Republican gains would mean abroad.

What do the US mid-term election results mean for the U.S. international development agenda?
In his lecture this afternoon and on his Foreign Policy blog, Harvard Kennedy School Professor Stephen Walt re-assuredly answered the question with, "probably not much." Although the Democrats have to forfeit US House of Representatives control to John Boehner, when it comes to USAID, Departments of Defense, State, Treasury, and the intelligence agencies, Barack and his appointees still call the shots.

OK, I can breathe a little bit easier now. But wait, what about all of the anti-trade campaign rhetoric we were barraged with for the last 6 months? China was the punching bag of choice for most politicians this time around, and the attacks seemed to successfully translate into votes in light of the sluggish economic recovery at home. My favorite campaign ad was Congressman Zack Space's attack on free trade proponent Bob Gibbs, ending with the line, "as they say in China, sze sze (thank you), Mr. Gibbs." Even Harry Reid joined the protectionist bandwagon this election season to score some leverage with Nevada voters. (Really, Harry? I expected more from you.)

Whether we like it or not, the rhetoric of the mid-term elections was heavily anti-trade. For now, the state-run news agency of Xinhua has dismissed the rhetoric as "much ado about nothing" and desperate attempts to win votes. But when it comes time to make hard legislative decisions, campaign promises may raise the political pressure for Congress to urge punitive measures against China, responding to the U.S. perception that China is not playing fairly by swindling U.S. jobs.

Let me be clear - protectionist trade behavior against China will only dig the U.S. economic hole deeper. Dangerous protectionist policies could manifest itself in increased support for the controversial House bill aimed at punishing China for supposedly keeping its currency undervalued, which could be the first shot fired in an all-out U.S.-China trade war. In addition, Congress may prove less likely to endorse any free-trade agreement, such as the one pending with South Korea, which has the potential to really stimulate some U.S. export industries.

Next week as Obama enters G20 talks in Seoul, he will be faced with tough issues that directly affect the international development agenda, including issues of trade and currency wars. Let's only hope that Obama does not stifle economic development opportunities abroad by further succumbing to the anti-free trade rhetoric back home.

Beyond campaign rhetoric, the changes in U.S. House of Representatives committee leadership may also prove detrimental to providing necessary funding for international development initiatives. Replacing Rep. Howard Berman (D-CA) as Committee Chair of the House of Representatives Committee on Foreign Relations, Rep. Ileana Ross-Lehtinen (R-FL) will likely re-possess the gavel.

A Cuban-American, our new committee chair is likely to oppose Obama's efforts to move towards repealing sanctions on Fidel Castro, not to mention thwart Berman's foreign aid reform bill and seek cuts in foreign aid budget in her authorization bill. The Washington Post also reports that Ross-Lehtinen has a penchant for withholding contributions from the United Nations to force organizational reforms. Similarly, as the likely new head of the Appropriations panel that oversees foreign aid spending, Rep. Kay Granger (R-TX) has been known to be tight with the purse strings when it comes to development aid.

Buckle your seatbelts for what may prove to be a rocky ride for the U.S. international trade and development agenda. Today, more than ever, Obama needs our support to help him hold onto the reigns.


  1. Do you have any sense of how anti-trade rhetoric was distributed across the two parties? Republicans have historically been more pro-trade, on average, than Democrats, so my prior is that their takeover of the House should be a positive for trade liberalization. I have no idea if that holds for this particular Congress, however.

    Also, inasmuch as populist anti-trade sentiment is politically useful these days, a split Congress and the ensuing gridlock would seem like a plus.

    I can't argue with your overall reasoning but those two points seem to be reasons for a tiny bit of optimism, at least on trade.

  2. Hi Pam- this is a great analysis. Two things:

    1) It seems to me that all the legislation bandied about is mostly symbolic and doesn't actually undercut trade with China ( Do you think that's true?

    2) While getting overly punitive with China is probably not a good strategy for the American people (or those folks over in China), do you think the undervaluing of the yuan is a serious problem that needs to be addressed? Or is it more of a talking point/scapegoat? How do we even go about encouraging China to appropriately value its currency?

  3. Thanks for your comments. Jason - I hope your optimism turns out to be warranted on the trade front; despite typically stronger Republican support, I wonder if the economic crisis sort of trumps any pro-trade support there might be.

    And Adam, in response to the undervaluing of the yuan, from what I read it seems like more of a talking point than a serious point of contention. But I imagine Jason with his PhD Econ background can likely provide a better answer to that question than I can!

  4. I'm not much of an international finance guy but I don't personally see the Yuan's undervaluation as a big problem. To distort trade you need to affect the real (inflation-adjusted) exchange rate and the last time I looked into this the conclusion was China wasn't really doing that. I could be wrong, though - it's not something I follow closely.


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