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More on the Tire Tariff:

Irwin Stelzer thinks the tire tariff decision is a portent of bad trade policies to come.

Obama's decision on tires makes it clear that he has no intention of supporting efforts to revive the almost 8-year-old Doha trade-opening negotiations. Some 36 nations met in New Delhi earlier this month and professed interest in completing a deal by the end of next year. Not likely: the recession has made jobs, jobs, jobs politicians' central concern, and few are prepared to take the flak that will surely arise if they open their markets, and expose even a few domestic companies or farmers to job-destroying competition. The talks collapsed in July of 2008 precisely for that reason. Obama has been sitting on proposals for bilateral free trade agreements with Colombia and Korea, among others, and sees no reason to antagonize the strong, protectionist wing of his party, already unhappy with his failure -- so far - to throw his weight behind a bill that would end the secret ballot in union-recognition elections, and require compulsory arbitration when union-management negotiations break down. . . .

Almost every country is seeking to export its way out of the recession. Germany is relying on its exporters to create jobs; China is depending on its export machine to keep its economy growing fast enough to create millions of jobs and avoid social unrest; Japan's new government, no longer reflexively pro-American, also needs exports to end a decade of stagnation. But Obama, in charge of the world's consumer-of-last-resort, has decided to eschew that role in the future. Indeed, he has had his Trade Representative, Ron Kirk, announce that America will no longer allow its trade partners to "run roughshod over us." Some of the president's reasons for pushing exports and tightening up on imports are purely political -- he needs the trade unions and his party's left. Others are more fundamental -- he has to cut the U.S. trade deficit lest the value of the dollar continue its descent and add to the inflationary pressures created by his enormous deficits.

Meanwhile, he has sent a signal to the Sino-Franco-Russian et al. anti-dollar bloc that for all his talk about international cooperation to fight the recession, he is in the end willing to go it alone if domestic politics so dictate. That will increase their resolve to find some replacement for the dollar as the world's reserve currency. Obama might indeed turn out to be the "transformative" president he intends to be, but not quite in the way he intends.

Meanwhile, Josh Wright points to some Orwellian doublespeak on the tire decision:

The three-year remedies, consisting of an additional tariff of 35 percent ad valorem in the first year, 30 percent ad valorem in the second, and 25 percent ad valorem in the third year, are being imposed after a finding by the United States International Trade Commission that a harmful surge of imports of Chinese tires disrupted the U.S. market for those products. . . . "This Administration is doing what is necessary to enforce trade agreements on behalf of American workers and manufacturers. Enforcing trade laws is key to maintaining an open and free trading system."

Bruce Hayden (mail):
And we know how well Smoot-Hawley helped us out of the Great Depression (along with a string of protectionist legislation that predated the Depression).
9.13.2009 4:54pm
Bruce Hayden (mail):
"This Administration is doing what is necessary to enforce trade agreements on behalf of American workers and manufacturers. Enforcing trade laws is key to maintaining an open and free trading system."
Let me suggest that the President needs some remedial economics here, and, in particular, to learn about comparative advantage.

That is, unless you view this as political payoff to the unions that backed him.
9.13.2009 4:56pm
seadrive:

Let me suggest that the President needs some remedial economics here, and, in particular, to learn about comparative advantage.


Perhaps you can find the lesson plan that was prepared for George Bush. Steel was one of the commodities, I think.
9.13.2009 5:42pm
Off Kilter (mail):
Yes, seadrive. They're ALL bad on this topic, preferring favoring special interests to the general interests of Americans. We get it. Doesn't mean we don't have a problem now.
9.13.2009 5:59pm
DiversityHire (mail):
China and other outposts of tyreanny constitute an axle of evil.
9.13.2009 6:23pm
DiversityHire (mail):
"Let me suggest that the President needs some remedial economics here, and, in particular, to learn about comparative advantage."

He's still learning about inflation and deflation. Why do you think he chose tires for Summers's class project?
9.13.2009 6:26pm
Matt L (mail) (www):
I think the tire decision was bad and would have opposed it. But it's unclear why the author of the Weekly Standard piece thinks that all the other countries can and should export their way out of recession while the US remains the "consumer of last resort". Won't, and shouldn't, we try to export ourselves out of recession, too, and won't that require us to (perhaps greatly) reduce our trade deficit? I don't think that moves like the tire tariff are the right way to do this, but the logic of the article is pretty odd, to say the least. As for the "Orwelling" bit, it is odd but not quite as odd as it seems. My understanding (imperfect, I'm happy to admit) is that moves such as this were allowed under the agreement with China when it joined the WTO. I think this was a bad decision on our part at the time, and that it's the wrong move to make now. But, it was part of the trade law agreed to, or so I understand. We might reasonably think that enforcing the trade agreements we have will produce less over-all opposition to having new trade agreements in the future, and so that taking this path now will prevent even greater opposition to free trade in the future. In this reading the language, while somewhat inelegant, is not plausibly "Orwellian". I don't agree with this reasoning, but it's not crazy and is a perfectly plausible reading of what was said.
9.13.2009 6:30pm
EPluribusMoney (mail):
Perhaps you can find the lesson plan that was prepared for George Bush.

Is there some kind of Democratic book on how to argue that says whenever someone criticizes The One, you should either say "Bush was worse" or "That's Racist!"?
9.13.2009 6:45pm
Oren:

Let me suggest that the President needs some remedial economics here, and, in particular, to learn about comparative advantage.

Let me suggest that most of the readers here should read the Trade Act of 1974 and lobby Congress to amend it.
9.13.2009 7:07pm
kietharch (mail):
"... he needs the trade unions and his party's left."

Some of us in the middle see endless trade deficits as pretty damned threatening. I don't think you have to be a trade unionist or a leftist
to worry about our future if the only things we produce for export are grains and aircraft. Rectifying this situation has to start somewhere.
9.13.2009 7:16pm
Mac (mail):

But it's unclear why the author of the Weekly Standard piece thinks that all the other countries can and should export their way out of recession while the US remains the "consumer of last resort".



Won't, and shouldn't, we try to export ourselves out of recession, too, and won't that require us to (perhaps greatly) reduce our trade deficit?



Matt L,

If they retaliate against us by imposing tariffs on US goods, how will that help us export ourselves out of a recession? We will have greatly reduced exports. One in seven jobs in the US depends on exports. We have history with this, Smoot-Hawley, and it put the whole world into a Depression. I don't know of many other things that sound so good and reasonable and, in practice, are so destructive.


Others are more fundamental -- he has to cut the U.S. trade deficit lest the value of the dollar continue its descent and add to the inflationary pressures created by his enormous deficits.


Not adding even more to the enormous deficits would be a first step, it seems to me.

And the second would be to quit printing money like it is confetti.

Third, if Obama would stop demonizing business and threatening them with much higher taxes and, if that were not enough, much higher costs from "health care reform" so corporations and small business could plan in a reasonable fashion, that would help a lot, too.

Another unanswered question is what are his plans when the Chinese tell him to go pound sand and won't buy any more of our debt? We are living totally on borrowed money. Our finances are so bad that we are now the third largest debtor nation in the world behind Italy and Japan and are in such bad shape that we could not qualify for admission into the EU.



Is there some kind of Democratic book on how to argue that says whenever someone criticizes The One, you should either say "Bush was worse" or "That's Racist!"?


EPluribusMoney,

Yes.
9.13.2009 7:17pm
Tim Nuccio (mail) (www):
Yah for more Smoot-Hawley. As if the Mexico trade war this spring wasn't enough?
9.13.2009 7:19pm
Blar (mail) (www):
This was a bad decision by the White House. The question is whether it's an ominous portent of things to come from an unusually protectionist administration, or if it's just more of the same sort of thing that we always get from our government. My suspicion is that it's just more of the same - it's hard to take something as a portent of change when it's so similar to what's been done by previous administrations.
9.13.2009 7:21pm
Matt L (mail) (www):
Mac- you didn't, I think, read my comment carefully enough. I said I was against the tire tariff, and thought it was a bad idea, for reasons like those you suggest, among others. But that's beside the point that the reasoning of the Weekly Standard piece is odd in suggesting that _other_ countries will have to export their way out of recession, and that _we_ can be the "consumer of last resort", even if that means maintaining a large trade deficit. That doesn't seem plausible to me. It would be a stronger piece if it noticed this trouble and suggested better ways to go about solving it.
9.13.2009 7:23pm
mbilinsky (mail) (www):



Is there some kind of Democratic book on how to argue that says whenever someone criticizes The One, you should either say "Bush was worse" or "That's Racist!"?




The point of course being that there is a helluva lot of criticism aimed at Obama from parties who stayed suspciously quiet while GWB was making similar decisions.

It severely undermines credibility to do so.
9.13.2009 7:55pm
Mac (mail):

That doesn't seem plausible to me. It would be a stronger piece if it noticed this trouble and suggested better ways to go about solving it.


Sorry. Agreed. However, we have had a large trade deficit for years and have not been in a recession like this nor have we had runaway inflation. I think it is unlikely that solving the trade deficit has much too do with either problem and the solution proposed by Obama we know, by past history, will not only not work but will make things a lot worse and it will cost American jobs far more than it saves.

I don't think the Weekly Standard article said or suggested that other countries will have to export their way out of the recession. It said,

Almost every country is seeking to export its way out of the recession
It is silent on whether or not that will work, it seems. I agree, it would have been informative if they had given their opinion on whether it will succeed or not. But, we do know that Obama's policy will not succeed and will make things a lot worse.
9.13.2009 8:02pm
Mac (mail):

The point of course being that there is a helluva lot of criticism aimed at Obama from parties who stayed suspciously quiet while GWB was making similar decisions



When was Bush against free trade?
9.13.2009 8:04pm
GatoRat:
http://en.wikipedia.org/wiki/2002_United_States_steel_tariff

Bush lifted the tariff in 2003. He did do some token efforts with free trade, though I didn't believe he pushed hard enough.
9.13.2009 8:10pm
Jonathan H. Adler (mail) (www):
Mac --

Bush was hardly a free trade President.

mbilinsky --

I, for one, was quite critical of Bush's trade policy lapses (both on the VC and NRO), as I noted here.

JHA
9.13.2009 8:16pm
Cato The Elder (mail) (www):
Oren, can you be more specific about which sections of the Act you just linked apply in this situation, if you know it?
9.13.2009 8:20pm
Mac (mail):
Jonathan H. Adler,

I am not finding the information in the link. I have not found any tremendous antagonism on the part of Bush to free trade with the exception of steel. I have found a number of free trade agreements Bush signed including 6 with countries of So. America.

It could be I am looking in the wrong places. Could you be more specific, please?
9.13.2009 8:36pm
Mac (mail):
Jonathan H. Adler,


Never mind. Someday, I will learn all about links. Sorry.

I still can't say he was against free trade. He did sign a lot of agreements. But the point about the individual agreements is noted. I would have to devote more time to it than I now have to make comprehensive sense of this, so I will accept your word for the time being. Thank you.
9.13.2009 8:43pm
kietharch (mail):
Question for free traders: have you bought anything in the past year that was made in the United States? clothing? furniture? automobile? computer gear?
I am a free trader too but where does this lead? the obvious answer is to more nearly equal wage rates across the manufacturing world. OK, those of you who favor this happening in the next ten years raise your hands; how about in your lifetime? the prognosis for high wage countries is not good without some protectionism; free trade theory is just that. Theory.
9.13.2009 8:58pm
purplekoolaid (mail):
(link)mbilinsky
The point of course being that there is a helluva lot of criticism aimed at Obama from parties who stayed suspciously quiet while GWB was making similar decisions.

It severely undermines credibility to do so.


If this is a criticism aimed at particular people, please advise. If you are talking about repubs, then you're right in some areas. If you are speaking of libertarians, then you are not reading libertarian blogs. I cannot think of 10 good things that libertarians had to say about GWB.
9.13.2009 9:41pm
Bruce Hayden (mail):
I am a free trader too but where does this lead? the obvious answer is to more nearly equal wage rates across the manufacturing world. OK, those of you who favor this happening in the next ten years raise your hands; how about in your lifetime? the prognosis for high wage countries is not good without some protectionism; free trade theory is just that. Theory.
Well, maybe I am a bit naive, but I think that we can operate just fine with the rest of the world providing stuff for us where their cost of labor gives them a comparative advantage. And we can concentrate where we have a comparative advantage.

If you were to extend your suggestion to its natural limits, it would seem that we shouldn't import anything that we buy. After all, if we should be supplying at least 10% of something domestically, then why not 20%? 50%? 100%? And why just tires? Why not underwear? ICs? etc. And why shouldn't the Chinese produce all their software, etc. domestically for the same reasons? (yes, they are coming along there, but last I knew, they were still using a lot of Microsoft software to run their computers).
9.13.2009 9:51pm
SG:
The point of course being that there is a helluva lot of criticism aimed at Obama from parties who stayed suspicously quiet while GWB was making similar decisions.

The first link Google turns up for "bush steel tariff conservative" is from that Republican propaganda organ foxnews.com and opens with the following opening sentence, "In how many ways is George W. Bush's decision to impose tariffs on imported steel so completely wrong that it physically hurts?"

Reason wrote, "Not only is Bush more of a big spender than his predecessor; he's less of a free trader. The other day, to no one's surprise, the World Trade Organization ruled that Bush's steel tariffs violate the trade rules by which the U.S. has promised to abide. [...] It's gratifying to see the president's cynical maneuver backfire so spectacularly [...] Unfortunately, there has been no similar political fallout from the president's support of the 2002 bill that substantially expanded farm subsidies, a major obstacle to freer trade."

Wikipedia summarizes the issue as, "Some of the president's political opponents, such as Representative Dick Gephardt, criticized the plan for not going far enough. For some of the president's conservative allies, imposing the tariff was a step away from Bush's commitment to free trade."

You're free to believe whatever you like, but it's just a false to claim that conservative &libertarian free traders gave Bush a free pass on his flirtations with protectionism.

Could you clarify how even your false claims would provide a defense for Obama's actions?
9.13.2009 11:12pm
Mac (mail):

Question for free traders: have you bought anything in the past year that was made in the United States?


Yes, I have. You can buy some things made locally. My dog food is made in the USA. It is reasonably priced and I did not have to worry about it being contaminated when others, including some high priced varieties, were. On the other hand, peanut butter made in the USA was contaminated and the company covered it up.

I am trying now to buy furniture made in the USA. It is extremely expensive. I can't afford it. I have been able to have some things made and found one store with a reasonable price. That store is now out of business.
I shudder to think of what would happen to our standard of living if we imported nothing.
It is not an either or proposition. You must understand that one in seven jobs are due to our exports. That is a lot of jobs to lose. Also, consider that the people doing the manufacturing are developing countries. We cut them off and what happens to their societies? China has a billion people to feed. India has multitudes as do many other nations that we help with our trade.
It has happened, but it is much rarer for nations to go to war with their trade partners.
You think this would make us popular? All the foreign aid in the world, which is mostly useless anyway, will not replace a solid work force and a developing middle class in these countries.

Also, other countries locating their businesses here e.g. Toyota, Nissan, and many others hire more people than the jobs we export. At least, that was true before the recession. We can't do anything without creating a reaction. In the past, a protectionist action has hurt us and the world. It is not going to change now.
9.13.2009 11:23pm
John (mail):
I would sure like to hear any of Obama's top economics advisers say this is a good idea for the country, and explain why.
9.14.2009 12:08am
Oren:

Oren, can you be more specific about which sections of the Act you just linked apply in this situation, if you know it?

S2251-2253 and the "serious damage" clause.

I think the tire manufacturers have met the statutory burden put forth in that section. Yes, I know the President has discretion as to whether to award relief, but I think it's instructive (at least as an academic exercise) to read the statute and pretend like we were objectively adjudicating it.

Of course, I think the statute is bad policy. But that's a problem for Congress, not the President.
9.14.2009 12:35am
Ricardo (mail):
I am a free trader too but where does this lead? the obvious answer is to more nearly equal wage rates across the manufacturing world. OK, those of you who favor this happening in the next ten years raise your hands; how about in your lifetime? the prognosis for high wage countries is not good without some protectionism; free trade theory is just that. Theory.

Not to play gotcha too much, but the "obvious answer" you mention above about equal wage rates across the manufacturing world is known in economic theory as the Factor Price Equalization Theorem which is derived from the Heckscher-Ohlin model of trade. It's also a theory and one that, I should note, is not very well-supported by empirical evidence. High-wage, capital abundant economies tend to trade with other high-wage, capital abundant economies much more than they do with low-wage, labor abundant countries.
9.14.2009 5:02am
ERH:
Back when I was in grad school I used to hate to get into arguments with guys from the economics schools. There's a reason it's called the dismal science, economist can only see as far as their theories. The fact is there may be every economic reason to exploit the comparative advantage between two nations but there is likely to be a host of social and political reasons to keep economically inefficient industries alive in a state.
9.14.2009 9:37am
ShelbyC:

There's a reason it's called the dismal science, economist can only see as far as their theories. The fact is there may be every economic reason to exploit the comparative advantage between two nations but there is likely to be a host of social and political reasons to keep economically inefficient industries alive in a state.


Well, that's why it's economics. If there are social and political reasons to create less wealth (usually to steer the wealth to socially and politically favored groups) that's the sociologists and politician's business. I take it Jim Crow would be a good example of what you're talking about; creating an economically inefficient apparatus for social and political reasons.
9.14.2009 10:13am
Bob from Ohio (mail):
What is either "Orwellian" or "doublespeak" about the bolded portion of the quote?

If there is a free trade agreement that forbids certain actions and China violated it, then what in theory is wrong with invoking the tariff section?
9.14.2009 10:20am
kietharch (mail):
" High-wage, capital abundant economies tend to trade with other high-wage, capital abundant economies much more than they do with low-wage, labor abundant countries."

I see your point Ricardo, and that's why I see all those Made in UK and Made in Germany identifications as opposed to, say, Made in Sri Lanka or Made in China.

I take no offence regarding the "Gotcha" if that is what it was.
9.14.2009 6:17pm

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