The Obama Affect
As the results began to roll in with Electoral College votes taking Barack Obama over the magic number of 270, SMS and email messages were not far behind. “We won!” was the exclamation from an American colleague. “I am so excited, I can’t sleep,” was the next from an international friend who took a special trip to Washington to witness history. That back and forth messaging started with “You have the coolest President ever.”
It is not dissimilar to the coverage and the official accolades that were aired on CNN the day after the big vote. Many in the world see the President-elect as the great unifier, someone leaders from Asia, Europe and the Middle East can relate to and see eye-to-eye with.
Expectations are sky high and there is some danger inherent in that. The dollar rallied briefly, which kept oil prices near $70 a barrel and battered stock markets in the region moved up with only measured optimism. That spirit faded quickly, with investors looking at the task ahead and reservations about his perceived position on taxes and trade.
The new team knows the honeymoon period will be limited. Cabinet posts are being filled. There is a global emergency economic summit on November 15th in Washington to prepare for. The world is looking to the President elect for leadership on a new financial architecture, bringing new countries into the G-8 and revitalising or sidelining the International Monetary Fund and/or the World Bank.
If one adds up the current budget deficit, the bank bailout package, money put forward for Fannie Mae and Freddie Mac and allocations for Iraq, Mr Obama is looking at a shortfall of $1 trillion or more. That is a huge hole to fill no matter who runs his Treasury department and the Office of Management and Budget. If he manages his White House in the same fashion as he ran his campaign, we have a lot to look forward to. For a 47 year old junior senator from Illinois, he is long on poise and foresight, which many in region would privately say over a dinner, coffee or tea has been in short supply over the past eight years.
President Obama will take office during a time when the axis of the world is tilting east. Even during this downturn, global economic growth is being powered from the Middle East to China. Growth and natural resources are key components of power. At this juncture, the U.S. is falling short in both categories. It seems only natural that governments with reserves of some $3 trillion will seek a larger seat at the table of a new G-14 or G-15. That will take some fancy footwork from the new President because other existing members in the group don’t want to dilute their power.
Since the Dubai Ports deal imploded in the winter of 2006, the sovereign wealth funds and the recipient countries have accelerated a dialogue to agree on a set of guidelines for that investment. While on the campaign trail, Senator Obama expressed concern about the influence of those funds, but it is unclear if President Obama will act in a similar fashion.
The current U.S. Deputy Treasury Secretary Robert Kimmitt told Marketplace Middle East his recent five country tour of the region was an effort to “reach out to important actors elsewhere, including the Gulf.” He does not believe the new president will try to roll back voluntary guidelines, the so-called Santiago Principles, for sovereign wealth funds. Those funds Kimmitt says will be “welcomed by the new administration as they were by the current administration.”
While U.S. officials and British Prime Minister Gordon Brown toured the region, Sheikha Lubna al Qasimi was in Washington to meet with officials and help take the temperature for the U.A.E. ahead of the transition. You may recall she was the spokesperson during the Dubai Ports deal when she was Economy Minister of the United Arab Emirates. The dispute over six port operations in the U.S. was one of those nasty flare-ups where political expedience overrode long term relations.
She calls the Doha Development Round “a critical path” forward and requires “global responsibility” to reignite the process. As the dust settles in Washington, there is talk already of the new administration wanting to take a “timeout” from signing more free trade agreements. There are four in the region with the United States, but those with Egypt and the United Arab Emirates stalled after Fast Track Authority expired last year. Sheikha Lubna added there is an important role for the new administration to work with allies on bi-lateral trade. It hit $14 billion last year, which is higher than many who already have free trade agreements in place.
While President Obama will have no time to waste when dealing with the financial challenges at hand and the role of sovereign funds in that effort, his trade stance will probably evolve during his first year in office. Expectations are high and trying to deliver too much too soon not only increases the risk of failure but also seems to run counter to his style on the campaign trail.
ABOUT THIS BLOGJohn Defterios’ blog accompanies the weekly business program, Marketplace Middle East (MME) that is dedicated to the latest financial news from the Middle East. As MME anchor, John Defterios talks to the people in the know, finding out their opinions on the big business moves in the region, he provides his views via this weekly blog. We hope you will join the discussion around the issues raised.
SHOWTIMESFriday: 08:15, 19:45
ALL TIMES GMT