Category Archives: Protectionism

Economist: “Barack Obama and free trade: Economic vandalism”

Contra Doug Irwin, the Economist is quite pessimistic about President Obama’s tire tariffs: “A protectionist move that is bad politics, bad economics, bad diplomacy and hurts America. Did we miss anything?”

One might argue that these tariffs don’t matter much. They apply, after all, only to imports worth a couple of billion dollars last year, hardly the stuff of a great trade war… Presidents, after all, sometimes have to throw a bit of red meat to their supporters: Mr Obama needs to keep the unions on side to help his health-reform bill.
That view seems naive. It is not just that workers in all sorts of other industries that have suffered at the hands of Chinese competitors will now be emboldened to seek the same kind of protection from a president who has given in to the unions at the first opportunity. The tyre decision needs to be set into the context of a string of ominously protectionist policies which started within weeks of the inauguration with a nasty set of “Buy America” provisions for public-works contracts. The president watered these down a bit, but was not brave enough to veto. Next, the president stayed silent as Congress shut down a project that was meant to lead to the opening of the border to Mexican trucks, something promised in the NAFTA agreement of 1994. Besides these sins of commission sit the sins of omission: the president has done nothing at all to advance the three free-trade packages that are pending in Congress, with Colombia, Panama and South Korea, three solid American allies who deserve much better. And much more serious than that, because it affects the whole world, is his failure to put anything worthwhile on the table to help revive the moribund Doha round of trade talks. Mr Bush’s tariffs, like the Reagan-era export restraints on Japanese cars and semiconductors, came from a president who was fundamentally committed to free trade. Mr Obama’s, it seems, do not.

One might argue that these tariffs don’t matter much. They apply, after all, only to imports worth a couple of billion dollars last year, hardly the stuff of a great trade war… Presidents, after all, sometimes have to throw a bit of red meat to their supporters: Mr Obama needs to keep the unions on side to help his health-reform bill.

That view seems naive. It is not just that workers in all sorts of other industries that have suffered at the hands of Chinese competitors will now be emboldened to seek the same kind of protection from a president who has given in to the unions at the first opportunity. The tyre decision needs to be set into the context of a string of ominously protectionist policies which started within weeks of the inauguration with a nasty set of “Buy America” provisions for public-works contracts. The president watered these down a bit, but was not brave enough to veto. Next, the president stayed silent as Congress shut down a project that was meant to lead to the opening of the border to Mexican trucks, something promised in the NAFTA agreement of 1994. Besides these sins of commission sit the sins of omission: the president has done nothing at all to advance the three free-trade packages that are pending in Congress, with Colombia, Panama and South Korea, three solid American allies who deserve much better. And much more serious than that, because it affects the whole world, is his failure to put anything worthwhile on the table to help revive the moribund Doha round of trade talks. Mr Bush’s tariffs, like the Reagan-era export restraints on Japanese cars and semiconductors, came from a president who was fundamentally committed to free trade. Mr Obama’s, it seems, do not.

Chinese tire tariff reactions

“We may import fewer tyres from China, but this decision is not going to jumpstart moribund domestic tyre production. This is protectionism without the protection. Pure appeasement politics: calculated and cynical.” – Charles Freeman, CSIS

“This is a grave act of trade protectionism. Not only does it violate WTO rules, it contravenes commitments the United States government made at the [April] G20 financial summit.” – Chen Deming, China’s minister of commerce

“Barack Obama does something really stupid.” – Brad DeLong

Obama invokes safeguards against Chinese tires: 35% tariff

The Obama administration will put steep import duties of 35% in the first year on Chinese passenger and light truck tires, responding to what the U.S. International Trade Commission determined to be a surge of Chinese tire exports that has rocked the domestic U.S. tire industry and displaced thousands of jobs, U.S. Trade Representative Ron Kirk announced Friday night.

China’s government responded quickly to the announcement, saying in a statement that it “strongly opposes” what it called “a serious act of trade protectionism.”

Thankfully these safeguards expire in 2013. Meanwhile, keep an eye out to see if a mob mentality develops.

Climate protectionism

The latest South Centre Bulletin:

This issue focuses on a new and dangerous trend – the rise of trade and technology protectionism, in the name of climate change. New laws pending in the United States Congress contain trade measures linked to emissions that cause climate change, that are targeted at imports coming from developing countries. The laws also hinder technology transfer to developing countries as they prevent the relaxation of intellectual property rules. The new climate protectionism is causing controversy at the UN’s climate talks, and is also likely to be taken up at the WTO. The South Bulletin has 6 articles on this issue, explaining how the US laws work and their effects on developing countries, as well as reporting on how the developing countries took up the issue in the recent climate talks in Bonn.

The articles are on:

  • The rise of climate protectionism
  • Threat to block South’s exports on climate grounds
  • India, G77 propose text against trade protection in Copenhagen Draft
  • Analysis of the trade measures in the US climate bill
  • Competitiveness, trade and climate change linkages: Developing countries’ perspectives
  • Climate-technology protectionism and IPRs

    • Chinese tire safeguards and "the anti-trade mobs"

    In the FT, Chad Bown warns that the Obama administration risks unleashing a global “crisis-driven mob mentality” that will impose numerous trade protections if the US imposes new import restrictions on Chinese tires under its “China safeguard” law. He highlights a number of concerns, but this one stood out:

    [A] little-known loophole in the rules governing China’s 2001 WTO accession makes it easy for a global protectionist response to spread faster and further than that which took hold in 2002. Nowadays, once any one country imposes a China safeguard on imports, all other WTO members can immediately follow suit, without investigating whether their own industries have been injured.

    Not everything is made in America

    The “Buy American” provision is causing some practical difficulties for those implementing stimulus-funded projects:

    Contractors are searching the U.S. in vain for filters as well as bolts and manhole covers needed to build wastewater plants, sewers and water pipes financed by the economic stimulus. As officials wait for federal waivers to buy those goods outside the U.S., water projects from Maine to Kansas have been delayed.