Administrative reform is needed but may result in troubling consequences for free traders

Last week, President Obama announced plans to consolidate six federal agencies related to business and trade into a single agency in order to improve efficiency and the international competitiveness of American companies.

Writing in the New York Times “Economix” blog, former Reagan and Bush economic policy advisor Bruce Bartlett outlined The Pros and Cons of Obama’s Reorganization Plan – a dubious title given the only “pro” in the article appears to be that it would necessitate elimination of the Small Business Administration, something that conservative groups such as the Heritage Foundation have long called for.

Aside from suggesting the proposal may be nothing more than an election ploy (a not unreasonable assumption, although the same could be said of just about any policy advanced by the administration between now and next November), Bartlett also wonders if it may be indicative of a commitment by President Obama to “discredited industrial policies” (i.e., a heavy-handed command and control model that was ultimately rejected by the Japanese more than a decade ago) and “a subordination of trade policy to political interests.” With regard to the latter concern, Bartlett contends that folding the Office of the Trade Representative into the Commerce Department is a “dreadful idea” that should be troubling to free traders.

I know from personal experience at the Treasury Department that in internal administration discussions of trade policy the various agencies are expected to play certain roles. Commerce always defends whatever business wants because that’s its job. The Council of Economic Advisers always takes the principled free trade position, and so on.

At the end, the Office of the Trade Representative is the “honest broker,” a role that would be impossible for it to play as part of the parochial Commerce Department. The Office of the Trade Representative’s ability to fulfill this function is now assured by its position as part of the executive office of the president. This allows it to take the broad view of what is in the best interest of the country as a whole and bargain with our trading partners in good faith.

To effectively abolish the Office of the Trade Representative is a dreadful idea. It is a small agency; there are no efficiency gains to be realized by making it another bureau within Commerce. And no matter what promises are made to guarantee its independence, placing the Office of the Trade Representative within Commerce will inevitably politicize the office.

Considering the infamous partisan political gridlock that presently exists in Washington, it seems highly improbable Obama’s reorganization proposal will amount to anything in the immediate future.  Even despite that, swift action on something this complex would be quite astounding. As Bartlett notes, President Reagan asked Congress for a similar federal trade agency shake-up almost 20 years ago!

Of course, times have changed radically since then. In the face of challenging economic circumstances and fierce global competition, where the creaking apparatus of government is widely regarded as a hindrance to growth and badly in need of significant overhaul, efforts to modernize and efficiently streamline its workings for the benefit of traders are unavoidable. Whether that comes in the form proposed by the current administration or that of another, it should be hoped the role of those agencies and various aspects of the government that do actually work effectively at present (the Office of the Trade Representative in Bartlett’s example) aren’t unintentionally diminished in the process of reform.