In 1933, a month long economic summit in London failed to bring the world out of an economic disaster through international cooperation. The result was a cascade of increased protectionism, devaluations and full-scale war. On April 2nd, eight leading industrialized nations - U.S., Japan, Germany, UK, France, Italy, Canada and Russia (the G-8) and Eleven emerging market and smaller industrialized countries: Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Saudi Arabia, South Africa, South Korea, Turkey, plus the EU (the G20), are coming together, in London, for an emergency economic summit. The goals and importance are similar to 1933 and the potential to end in failure has become a cause for concern in recent months. An increase in Transatlantic tensions caused, in large part, by Obama’s rookie mistakes and inexperience, are a majority stakeholder in the blame.
There is a universal belief that a severe outbreak of protectionism was a primary cause of the great depression in the 1930’s. Obama’s “Buy American Vote Obama” theme and protectionist campaign rhetoric, concerned world leaders, long before his inauguration. A memo from a Canadian embassy official claiming that Obama’s top campaign economic advisor, Austan Goolsby, assured him that Obama's anti-NAFTA remarks "should not be taken out of context and should be viewed as more about political positioning than a clear articulation of policy plans." It was apparent that foreign leaders were wondering if Obama planned to bring the US back to protectionism. In a matter of weeks, Obama’s transition team showed signs that Obama’s campaign rhetoric was more than just political positioning. On January 2nd , Jen Psaki, a spokeswoman for the Obama transition team, was quoted as saying, “We are reviewing the buy American proposal and we are committed to a plan that will save or create 3 million jobs, including jobs in manufacturing,”. Psaki also told Bloomberg that the proposal could boost the goal to ``save or create 3 million jobs, including jobs in manufacturing.'' On January 3rd, The Boston Globe reported that President Elect Obama’s advisors were considering a ``buy American'' requirement to be included in any stimulus legislation, which is expected to include a significant amount of public works and infrastructure projects. This prompted German Chancellor, Angela Merkle, to publicly warn Obama against the temptation to fall back on protectionist trade policies when faced with a worldwide economic crisis. Even the British Prime minister, Gordon Brown warned him about the dangers of protectionism. Obama’s final stimulus proposal could not include the provision without confirming his true protectionist ideals and damaging our trade relationships. So Congress attempted to sneak the provision into the stimulus bill hoping it would go unnoticed. Their “Buy American” provision dramatically expanded an already robust “Buy American” policy. The provision stated: “None of the funds appropriated or otherwise made available by this Act may be used for a project for the construction, alteration, maintenance or repair of a public building or public work unless all of the iron, steel and manufactured goods used in the project are produced in the United States” unless it increases the project’s overall cost by 25 percent. Obama signed the bill in spite of harsh rebuke from the EU, NAFTA, BRIC & WTO members and a G20 agreement to refrain from enacting protectionist policy for one year. After countless threats of litigation and trade wars, Obama urged the Senate to soften the provision instead of removing it entirely. The new wording is vague and only appears to exempt Japan, Canada and the European Union but ignores China, Brazil, India and Russia (BRIC). Obama is sending a message that he is more concerned about furthering his agenda than with the success of the coming G20 summit. Alienating the BRIC will only foster bitterness and rivalry and start an untimely trade war. Which is the least of our worries after Prime Minister Wen expressed some unusually blunt concerns during a news conference at the end of the Chinese Parliament's annual session. He said he was “worried” about China’s holdings of United States Treasury bonds and other debt, and that China was watching economic developments in the United States closely. He urged the Obama administration to provide assurances that its investment would keep its value in the face of a global financial crisis. The Chinese Government has already said it will be looking for more aggressive ways to invest sizable portions of its massive $1 trillion currency reserves. China’s response was not with threats of a trade war, but a reminder that a mass sell off of US bonds will devalue the dollar and cause a complete market collapse. Looking for more aggressive ways? The question is “How aggressive?” In February, China's National Energy Administration announced a possible fund for China's three state-owned energy giants PetroChina, Sinopec and the China National Offshore Oil Corp. (CNOOC) to purchase oil and gas companies overseas. They recently finalized an oil supply deal totaling $41 billion with Russia, Brazil and Venezuela & Xi Jinping signed a deal to lend $10 billion to Brazil's state-owned oil company Petrobras. These deals secured 20 years of oil for a bargain price of $20 a barrel & now they have their sites set on Australian natural gas and coal. Is China replacing US Bonds with the discounted natural resources available through offshore oil, gas and coal mining acquisitions? To say that the future of the Worlds economy hinges on the success of the G20 summit would be an understatement. One would assume that assembling a strong Treasury Department would be a top priority, after igniting outrage from the world’s top economic producers in the midst of a worldwide financial crisis. Yet not one Deputy, Undersecretary or Secretary Assistant has been confirmed, leaving the Treasury Secretary to fly solo. Inadequate senior leadership to make decisions and represent the government in crucial conversations with banks and others, makes managing the disbursement of stimulus funds overwhelming at best. Britain’s most senior civil servant was quoted as saying that the shortage of staff in Barack Obama’s two-month-old Treasury was making preparations for the summit “unbelievably difficult”. Transatlantic tensions are directly related to the worry that Obama isnt prepared to address the financial crisis & work with other leaders to prevent an economic disaster. The first two months of the Obama presidency are riddled with rookie mistakes that have annoyed the WTO and NAFTA, alienated the BRIC and created an atmosphere of mistrust. It’s unclear to the world whether our anemic Treasury Department can deliver and negotiate a viable proposal by April 2nd and rumors about Obama’s inability to lead us out of a financial crisis are circulating. A negative outcome to the G20 summit could mark a domino affect that has the potential to cause a worldwide depression &/or WWIII. Yet Obama feels that it is more important to campaign in California than it is to adequately equip his Treasury Department to prevent a global catastrophe. Only one day is slated for the upcoming G20 summit, which leaves very little time for more than presentations and speeches. 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