The Political Chessboard and the Prospects for Trade

An Interview with the Honorable Mickey Kantor

Mickey Kantor has been at the center of both Democratic Party politics and free trade for decades.  As campaign manager, Kantor ran the legendary 1992 Clinton-Gore campaign, and then served in the administration as United States Trade Representative, where he negotiated NAFTA, and as Secretary of Commerce. In an exclusive interview with The Octavian Report, Kantor offers his predictions about the midterm and next Presidential election, his views of the current major pending free trade agreements and his thoughts on the Asian diplomatic and economic landscape. 

 

 

 

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The Race for the Presidency

The Octavian Report: Let’s start with politics.  Looking ahead to 2016, how do you see the Republican presidential field?

Mickey Kantor: Well, not many Republicans call me to give me information as to where the Republican Party is going.  From afar, as an outsider, you look at Jeb Bush and you say he’d be their strongest candidate.  There’s no doubt about it.  Jeb Bush is very slightly right of center in what he believes.  He is very balanced and thoughtful.  He has a good sense of humor.  He connects with people as he moves around the country.  He’d be their best candidate.

Whether he can win a Republican nomination is quite another question.  They are so controlled in some ways by the right that it’s been very difficult for him. Rand Paul or others might be more in keeping with the primary electorate for the Republican Party, especially in Iowa, New Hampshire, et cetera, but we’ll see.

I’m not sure Jeb Bush is going to run. It’s interesting. He continues to step up to the line, go around the country, and then he steps back.  And so I’m confused as to what he wants to do.  But again, he’d be their best candidate.  And if he can get the nomination, it will be a very difficult race for whomever the Democrats nominate, Hillary Clinton or, if she doesn’t run, someone else.

OR: What do you think of Hillary Clinton’s chances?

Kantor: You’d have to make her the odds on favorite right now, no matter who she runs against in the Democratic primaries or, of course, in the general election. Now again we don’t know where we’re going to be at that point and what the issues are going to be. But on today’s facts, the American people trust her on foreign policy and on domestic policy she’s a Clinton. She’s right where she should be in terms of strong on fiscal integrity, as her husband was, moving towards a balanced budget. He reached a balanced budget, the only one in our memory who ever reached a balanced budget.  She would have the same policies. And I think in terms of social issues, she is right where the American public is.

So she’s going to be tough to beat if she decides to run.  That’s, I think, a serious question.  She’s now a grandmother.  You know, I’m a grandfather. It changes your vision of life and what’s important. So we’ll see. But Republicans have to fear her.  She’ll be very tough. [Her chances are] very good if she decides to run.  Now, you know, no one knows whether she will run or not.

Let me say something about Hillary, maybe it’s relevant, maybe it’s not.  If you look at what’s happening today, everyone worries, “What is Putin going to do?”  If she were president, Putin would have to worry what she’s going to do.  I think she is viewed both by foreign leaders and by American voters as very tough, very direct, and able to deal with these issues and can’t be pushed around.

OR: Who do you think might run if she doesn’t?

Kantor: If Hillary does not run, of course, there’ll be a vacuum.  I think a number of people will jump into the fray. And I’m guessing, of course, we all are at this point. Governor Cuomo of New York, very bright, able, energetic, a great speaker, would be quite formidable.  I think the Governor of Maryland, [Martin] O’Malley, would also look at this very seriously and might jump in. What will Rahm Emanuel do in Chicago?  I think you’ve got to look at that.  He’s been a very, very committed, organized, thoughtful, and tough mayor.  He’s taken on some very tough problems like education.  He’s taken on some difficult problems with his unions, and he’s been very forthright.  I think he’d be an interesting candidate.  Now whether it’s too early for him and he wouldn’t see it as something he should do, I don’t know, but he’d be an interesting person to look at.

“If you look at what’s happening today, everyone worries, “What is Putin going to do?” If Hillary were president, Putin would have to worry what she’s going to do. I think she is viewed both by foreign leaders and by American voters as very tough, very direct, and can’t be pushed around.”

—Honorable Mickey Kantor

Joe Biden, I think Joe will run if Hillary doesn’t and Joe is very experienced, obviously.  You know, no one has more experience than Joe other than Hillary, and his strength will be that. But his weakness is going to be how this administration is viewed when they come out. Now, maybe this administration will strengthen, they’ll be more popular than it looks today.  I’m a Democrat, hopefully, it is. But if it’s not, then it’d be difficult for Joe.

So you have a number of people, maybe four or five other people, who might run, who are formidable in a Democratic primary situation. But it will be a free-for-all.  I would bet seven, eight people will run for president if Hillary doesn’t.  Elizabeth Warren, I would mention, in Massachusetts, might run if Hillary doesn’t.

The 2014 Elections

OR: How do you see the 2014 mid-term elections playing out and do you see the Republicans taking the Senate?

Kantor: Well, it’s hard to tell right now, except the Republicans seem to have an advantage in every poll that you see. [Editor’s Note: this interview took place in summer 2014].  The Democrats have at least seven seats which are vulnerable at this point.

Politics changes.  Disraeli said once that in politics, a week is a long time. And we have seen so many incredible events happen, it’s hard to predict. Except the Democrats are looking at a Congress that’s not getting anything done and the party in power gets the blame for that.  The Congress is too big to get the blame, so the President gets the blame for that.  And so when he gets the blame, he’s a Democrat and it affects these Senate races.  Many of them are in states that you call red states now or at least purple, not blue states, not Democratic states.

So I think it’s going to be quite difficult. However, the Republicans have to run the table.  They have to win all seven.

OR: Do you see a continuing impact from ObamaCare in the election?

Kantor: It will affect it, no doubt about it.  The Affordable Care Act is controversial. However, with the millions of people who have signed up, with the problems they had administratively now many months behind us, I think it’s beginning to fade from people’s memory.

I think it’s not going to have the effect that many believed, that the Republican Party believes. However, it is not a positive as you might have expected. I thought a few years ago it would be a positive. It’s not.  And so the best the Democrats can hope for is neutral.

The Trans-Pacific and Transatlantic Trade Agreements

OR: It’s hard to think of someone who knows more about free trade agreements than you.  Can you talk about the proposed Trans-Pacific Partnership in Asia and the Transatlantic Trade and Investment Partnership with Europe and their prospects?  Free trade has historically been a moderate issue; do you think the extreme left and right will prevent ratification?

Kantor: The Trans-Pacific Partnership, known as TPP, is languishing at this point.  It’s twelve nations right now trying to reach a free trade agreement, as it’s called. I call them rules-based trade agreements. Free trade is chaos. You don’t want free trade.  What you want is rules-based trade and that’s what we’ve always wanted.  That’s what Bill Clinton was so good at getting and others have tried to make progress in it. I think we can.

Look, this has foreign policy implications. These twelve nations in Asia are critical nations. However, the problem I see in it, just personally, is where are China and Korea?  Why aren’t they part of this agreement?  China has made noises like they want to get in.  We should want them in.  We don’t want to surround China, we don’t want to contain China, we want to engage China and this is the best way to do it.  It’s hard sometimes politically or strategically with China, but not economically. And we ought to go to Xi Jinping and say, “Okay, we want you in.  What do we have to do to get you in?” Then it would be the largest trade agreement on the blocks and it would really make a difference and it would have tremendous foreign policy implications.

Now the Transatlantic Trade and Investment Partnership – our negotiations with the Europeans over a free trade agreement—should be easy to do but it’s not going to be.  There are differences of opinion in terms of how we make our regulations compatible, what regulations do we make, what do we do in financial services, how do we handle investment protection. There are a number of things that are going to be difficult. But it can be done.

Hilary-Aligned

Secretary Hillary Clinton JStone / Shutterstock.com

It is less critical because our relations with our European friends are so good.  It doesn’t have the same implications as the Trans-Pacific Partnership.  So my view is, in a new administration, if Trans-Pacific Partnership doesn’t get done now, I believe the first step ought to be to go to Beijing and go to Seoul and say, “We want you in.”  Look, we already have a free trade agreement with South Korea anyway.  But with China, it would really make a difference.  That really would open up the world and build trade, but it would do even more.  It would say to China, “We’re not surrounding you.  We’re not containing you.  We’re engaging you.”

The US and China have to cooperate if we’re going to have peace and stability in the world.  And I think China would like that to happen.

OR: There has been a lot of saber rattling between China and Japan.  How should the US be approaching this issue?

Kantor: Trade is one way.  Of course, it’s not the only way, but it’s a good way because everyone has a self-interest.  It’s a win-win situation.

Now we need to work with our Japanese friends on the Japanese-China relationship because it’s very dangerous what’s happening now.  They’ve been confronting each other now for some time. We need to make sure that they back off the Senkaku Islands and that fight over them.  They’re a bunch of rocks in the Pacific between the two countries.  Both could claim ownership.  The Japanese probably have a greater claim to ownership or administration, but that’s not what we’re trying to do.  This is about resources, about oil and other resources.  We need an international agreement and the US ought to lead that effort.

Look, if we could bring China into TPP and then work with Japan and China on some sort of international agreement on those islands, then we can work on the islands in the South China Sea where the Philippines and others are so upset with China as well.

It’s time to work with China in a real way where they have interests at stake.  The Chinese understand self-interest and they’re very good at it.  What we haven’t been doing is playing into that enough.  We’ve done some, we’ve made some progress, not to criticize.  We need to take the next steps and the next administration should do it and should be vigorous about it.

Now, trade is a middle-of-the-road issue politically.  Democrats and Republicans of sort of a more moderate stripe support it.  If you’re on the right or the left, you tend not to support rules-based trade agreements.  Why that is I have never figured out but that’s another question.  Trade is in our interest, it builds jobs, it builds national income, it brings countries together done correctly.  Now I’ve been known as sort of a tough guy on trade, sure.  I’ve been known as someone who brings a lot of trade actions, who walks away from the table if the US can’t get what we want.  That’s okay, but what we need to do is really reach agreements.  They don’t give parades for people who can’t reach agreements.  We reached 200 trade agreements in the first four years of the Clinton Administration.

You have got to understand that compromise is what you have to do and you’ve got to move the ball forward. None of us is going to solve every problem. No agreement will solve every problem. But you can make progress. And that’s what people have to understand.  You can’t say, “Oh, my God!  Politically, we just look like we lost this negotiation.”  If you reach a good agreement, you don’t lose, you win and that’s the kind of spirit and notion we have to get across.

There is a misnomer that if you have a bigger trade deficit that somehow you’re costing jobs.  It’s just the opposite.  If you look historically, the bigger our trade deficits, the more jobs we created.  Why?  Because that means the American people are buying more and more goods that are coming from somewhere else and therefore they’re creating more jobs at home that are based upon creating not only some goods, but also the associated retail sales and other jobs.

If you look in the ‘90’s, when we did so well, the bigger the deficit, the larger the jobs are created. It’s fascinating.  People make the mistake: imports aren’t bad per se nor are exports good per se.  What you need to do is look at what are you exporting, what are you importing, what does it mean, what kind of jobs are being created, and are you in fact penetrating other markets in this way?

Remember, of most goods that come from Mexico, for instance, under NAFTA, a huge percentage are American. The parts are made in the US  They’re just assembled in Mexico and they come back here. The same with much of what comes out of Asia in electronic goods.  People don’t look at this in a serious and sober way and say, “Oh!  That’s good for us.”  If seventy percent of what comes out of Mexico is made in America, even with the symbol in Mexico, what’s wrong with that?  Why shouldn’t it be imported into the United States?

Open trade, rules-based trade is good for everyone but particularly good for the US since we’re the largest market in the world.

OR: What do you think the prospects are of ratifications in Congress if we reach an agreement?

Kantor: Next year is an odd-numbered year, 2015.  That’s when we’re going to have to get the Trans-Pacific Partnership done because there are no elections and therefore it’s easier to work with the Congress in a non-election year, an odd-numbered year, than it is an even-numbered year.

However, there are some very difficult issues particularly with Japan on automobiles and on agricultural goods, and those are going to be very difficult negotiations as we’ve seen.  But I think it gets done.  I think Trans-Pacific Partnership gets done.  I don’t think the Transatlantic Trade and Investment Partnership with Europe – it’s so large – can be done next year or even the year after.

We need to get Trade Promotion Authority or Fast Track Authority which allows you to get trade agreements through without amendment which is the only way you can get a trade agreement through because other countries won’t negotiate with you if they think it’s going to be amended when it gets to the Congress of the United States.

So the first fight is going to be over Fast Track or Trade Promotion Authority.  That will come, I think, in the first or second quarter of next year.  If it passes, which I think it will, then it’s going to be fairly easy to get the Trans-Pacific Partnership through because by that time, I think, you would have solved your problems with Japan.  At some point, [Prime Minister Shinzo] Abe is going to give in on some of these things where they have been very rigid.  Not that he’s weak, just because he wants the Trans-Pacific Partnership to work as well.  It’s good for Japan and so that’s going to happen.

So my prediction is by the end of ’15, we’ll have it but not the Transatlantic Trade and Investment Partnership.  I just think it’s too complicated and too large.  It hasn’t had enough time.  And the negotiators are the same.  Michael Froman is a terrific USTR. He’s going to have to do both.

Now let me say one more thing.  Nothing can get done, we cannot get Fast Track and we can’t get these trade agreements unless the President spends a lot of time and political capital on it.  It just won’t happen.  We’ve all watched this happen over the years and that’s what is needed to make this happen. So I think the President is ready to do it.  I hope there’s nothing else that gets in the way of it that seems to be a higher priority. But that is the sine qua non of getting trade agreements through. But I think he will do it.  I think that it’s so important to him and his legacy. Both ways: one, to get it; but second, not to get it. To let it languish somehow, I think, would be a real negative and I think he sees that.

Abe and Japan

OR: You’ve spent a lot of time and done a lot of business over the years in Japan.  What is your view of Abe and his economic policies?

Kantor: Abenomics is difficult to implement for the Japanese.  The Japanese are, if anything, the most cautious political group on the face of the earth.  They do not move very fast, and I think Prime Minister Abe is facing that right now.  I think he’s trying to do the right thing but they have a huge debt and deficit.  They continue to borrow to fund their government.

Now, most of the borrowing is from the Japan Post, their own system. It’s internal, so it’s not as difficult as if a country is borrowing externally.  So Abe has to face that and the problem is that he’s going both ways: one, he’s trying to stimulate but, at the same time, he’s trying to raise taxes.  I don’t understand that as a policy for him right now.  And I think that raising taxes is going to have a negative effect on the Japanese economy and it will hurt his ability to try to cut his deficit and to build his economy.

Now, the Japanese have a larger problem.  It has no immigration.  They are opposed to immigration. Women are not treated well in the Japanese economy and so therefore they lose the value of women working and women contributing to their economy in the way they should.  The Japanese have a lot of major issues they have to get to and they’re not doing it.  Abe is trying to face economic issues.  He’s not facing the social issues.

OR: Mickey, thank you very much.  This was very interesting.