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Obama risks killing world trade softly with his song
Guest columnist
The Great Recession. Health care reform. Wars in Iraq and Afghanistan. Climate change. Nuclear proliferation.
With monumental problems such as these, it's easy to lose sight of the economic harm arising from increasing U.S. trade protectionism. Nonetheless, the Obama administration's recent moves are troubling, for, taken together, they signal a shift away from the bipartisan market-liberalizing policies that for the past 60 years have promoted freer trade, and, in so doing, have on balance brought huge economic benefits to developed and less developed countries alike.
For the record, I voted for President Obama. I don't believe that the U.S. is about to enter into a full-scale trade war with China or pass a general tariff bill similar to the Smoot-Hawley Tariff of 1930 that did so much to exacerbate existing economic problems in the U.S. and to usher in a worldwide depression.
Generally speaking, I think President Obama understands the economic efficacy of freer trade and expanding markets. The protectionist measures undertaken so far have been relatively minor, involving little more, I hope, than repayment of political IOUs owed by the administration to labor and to left Democrats who helped elect the president.
This said, I'm troubled about the cumulative effects of a number of minor administrative decisions, policy changes, shifts in emphases and alterations in tone regarding international trade, which, taken together, might well add up to what Richard Baldwin and Simon Evenett have referred to as "murky protectionism"--insidious, subtle and difficult to detect. Such actions are already endangering the liberal international trade regime established after World War II -- a regime created largely at the behest of the U.S. and vigorously supported ever since by the U.S. -- that has helped bring about and underpin the longest sustained period of global development the world has ever known.
Why my concern? Let me count the ways:
n The recent move to slap a 35-percent tariff on cheap tires made in China (by American companies mainly).
n Recent calls by the Administration (and in Congress) for a "carbon tax on imports."
n "Buy American" provisions in the economic stimulus package passed earlier this year.
n The Congressional bill banning Mexican long-haul trucks from U.S. roads.
n Exorbitant import duties on Brazilian ethanol.
n The manner in which the administration handled the crisis in the auto industry -- extending aid only to "American" companies and mandating that the firms being aided produce X number of cars in the U.S.
n The stalled Doha Development Round of trade talks under the WTO, which began in 2001.
n The placement on the back burner of bilateral trade-liberalizing trade agreements with South Korea, Colombia and Panama.
n The variety of irritating NTBs (non-tariff barriers) still in place.
n And, of course, then-presidential candidate Obama's campaign pledge in February 2008 to renegotiate the NAFTA treaty of 1993, the cynicism of which was demonstrated when a conversation between Obama's economic adviser Austan Goolsbee and a Canadian consular official was leaked. In essence, Goolsbee, a University of Chicago economist who understands trade, signaled to our northern neighbors not to worry -- this pledge was basically political positioning to help Obama get out of the Midwestern primaries alive.
Would that President Obama return to Goolsbee's conversation and reflect a bit on why nations trade in the first place. Despite some qualifications, we still live in a world where trade helps bring into play efficiency-enhancing forces relating to comparative advantage and comparative cost, powerful forces the overall effects of which are positive for all nations participating. To be sure, some individuals, companies, industries and even entire regions will at times be hurt by trade, but the answer is not to impede, much less stop it, but to use some portion of the large but diffuse benefits accruing from it to help the concentrated groups or regions being hurt to adjust, and to transition over time into economic activities that are more viable.
Unfortunately, right now President Obama, needing help on issues such as health care reform, is not inclined to speak economic truth to trade protectionists in his own party. One telling example is his unwillingness to break with Leo Gerard, president of the United Steelworkers (USW), who has been the labor leader most adamant regarding protectionism. It was Gerard and the USW who were behind the recent tariff increase on cheap Chinese tires -- no U.S. tire companies asked for such protection -- and last week Gerard's USW joined three paper companies in filing a dubious anti-dumping case against Indonesian and Chinese paper-makers. And Gerard threatens more such cases.
Let me end with a delicious irony: Leo Gerard is a Canadian heading up a union comprised overwhelmingly of Americans and headquartered in Pittsburgh. Where is protectionism when you need it?
Peter A. Coclanis is associate provost for international affairs and Albert R. Newsome Professor of History at UNC-Chapel Hill.
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