The Economist applauds Bush’s “great efforts” on trade and blames Democrats for Friday’s imposition of CVDs on Chinese paper:
Despite a dispiriting start that saw the imposition of steel tariffs, the Bush administration has made great efforts on trade, pushing forward with both multilateral and bilateral deals. Its biggest goal, a substantive deal from the Doha round of World Trade Organisation negotiations, is currently on life support. But the administration has managed to secure a variety of smaller deals, while letting steel tariffs die a death at the hands of the WTO. Now even progress of that sort may end.
Already, the Democratic influence is showing on the administration’s trade team. On Friday March 30th it announced that it was imposing countervailing tariffs on Chinese manufacturers of high-gloss paper to offset indirect subsidies they get from the state. America has usually steered clear of this sort of action against state-run economies, saying it is prohibitively difficult to calculate excess subsidies. But the gaping trade deficit with China, and growing protectionist forces, have altered the political calculus. New tariffs of up to 20% will be imposed immediately. The American economy will survive without cheap Chinese paper products. But this could open the way to tariffs on a wide variety of critical products and signals an unwelcome shift in American trade policy.
Kash Mansori (via DeLong) calls them out:
The Bush administration has made great efforts on trade?!? The Bush administration’s imposition of tariffs on China are due to “Democratic influence”?!?
Please. With the imposition of tariffs on China last Friday, the Bush administration acted in exactly the same way that they’ve acted for their entire 6+ years in office: being in favor of free trade whenever and wherever it helps important friends industries, and being more than happy to impose trade protection whenever and wherever it helps important friends industries. The Bush administration enacted a host of tariffs, quotas, and subsidies during the six years when it had a compliant Congress, and last week’s action was just more of the same.
Furthermore, the Doha Round (the round of multilateral trade negotiations that is intended to finally take serious steps toward helping the developing world) is “on life support” in no small measure because the Bush administration has never seriously tried to make it work, instead focusing on small bilateral agreements that make no difference to anyone in the US except for a few individual corporations. And there are good theoretical reasons to think that a bunch of small bilateral trade deals may actually make it harder to conduct multilateral trade negotiations, putting a world-wide level playing field further out of reach than ever before.
The Bush administration’s record on trade policy is a hodge-podge of opportunism and indifference, and owes nothing to Democratic pressures or desires. For the Economist to pretend otherwise is a sad continuation of their baffling tolerance of Bush’s long record of incompetence and misplaced priorities.
This echoes what I wrote in reaction to November’s election:
[I]f public opinion of trade liberalization is so low, would Republican victories have made a difference? Sen. Charles Grassley recently noted that “even if the Republicans continue to control the Congress we’ve already moved into a more protectionist atmosphere.”
President Bush imposed steel tariffs a few months before the 2002 mid-terms in order to win TPA and the election, and free traders were told that a bit of protectionism up-front would buy them much greater liberalization in the future. It didn’t pan out. Then, in 2004, we were told that the Doha round needed to wait until after the presidential election so that Republicans wouldn’t lose critical farm state votes. But the administration didn’t make any serious push at the WTO in 2005, and by the Hong Kong ministerial in December, you could look ahead to Tuesday’s mid-terms. Moreover, the July 2005 pork-laden passage of CAFTA exposed the President’s limited ability to pressure Congress on even the most watered-down trade deals and made me pessimistic about the future of trade liberalization long before a Democratic takeover of Congress seemed likely.
That’s why I disagree with Bronwen Maddox, who wrote that “if the Democrats win back the House of Representatives today, that is the end of the enthusiasm in the US for free-trade deals.” There never was any enthusiasm. Congressional staffers tell me that no one in Washington has considered TPA renewal to be feasible for a couple of years, and Chuck Grassley told Pascal Lamy that it had no chance back in February. While the Democratic Congress will “probably be marginally more protectionist than the current one,” I don’t think that means much difference in terms of further liberalization.
I agree with the Economist that the CVD decision “could open the way to tariffs on a wide variety of critical products and signals an unwelcome shift in American trade policy,” and I do agree that the election brought in a number of new representatives hostile to trade, but granting so much favor to Bush and acting as if partisanship is the best explanation for recent developments is a bit naïve.
Trade Diversion 