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Protectionist Threat Level: Orange:

Daniel Drezner has resisted the temptation to label the Obama Administration "protectionist," but now he's finding it more difficult. He's particularly concerned about the recent tire tariffs, announced Friday, because it's not "your garden-variety protectionism" and China's response has been particularly strong and swift. He also thinks the Obama Administration will have difficulty reversing course and (rightly) fears the protectionist elements within the Obama's base: "If I knew this was where the Obama administration would stop with this sort of nonsense, I'd feel a bit queasy but chalk it up to routine trade politics. When I look at Obama's base, however, queasiness starts turning into true nausea."

More from noted right-wing Obama critic Brad DeLong.

Related Posts (on one page):

  1. Protectionist Threat Level: Orange:
  2. Tire Trade War?
  3. More on the Tire Tariff:
  4. A Protectionist President?
troll_dc2 (mail):
The base is concerned with the loss of well-paying industrial jobs and the disappearance of our manufacturing capacity. They are not economists who rely on fancy theories to justify the leakage of our jobs overseas. If these people are wrong, no one has clearly explained to them why this is so and why they should be pleased to be the victims of globalization.
9.14.2009 7:14pm
Curt Fischer:
troll_dc2: But I thought many people have tried to explain: the goods they buy with their salaries are cheaper when they come from overseas. Even if they lose their high-paying jobs, they can afford a better lifestyle at a lower salary, compared to if we had no globalization.

Of course, this argument is not a marginal one. If we had marginally more globalization, would (i) Americans in general and (ii) well-payed industrial blue-collar workers be marginally better off? It is undoubtedly true that some workers are worse off with globalization because their salary goes down more than their purchasing power goes up. So maybe the answer to (ii) is negative. I personally think the answer to (i) is likely affirmative. Of course, the relevant question is what do high-paid industrial workers think about the answer to (i)? Their answers are rarely quantitative, and instead amount to "America will be weak if we don't have jobs [like mine]."

So the problem I see is failure of pro-globalizers and anti-globalizers to frame the debate in the same way.
9.14.2009 7:33pm
Steve:
But we're not talking about eliminating globalization, even though I doubt you could convince someone who lost his job that the money he saves on imported consumer goods makes it all worthwhile. We're talking about a single tariff that is specifically authorized by the terms of a negotiated trade agreement with China.
9.14.2009 7:38pm
jorge (mail):
Imagine that this tariff is legalistically "justified" but that the Chinese will not agree to it without retaliation. Assume that further rounds of retaliation lead to a situation that is worse off for both countries. Who will take responsibility for rolling back these tariffs?
9.14.2009 8:06pm
early bird (mail):
One tariff raised the "protectionist threat level" to orange? Come on, get a grip. This may be a stupid move, but it hardly portends a wholesale move toward protectionism. Before I believe that this is the beginning of a rejection of free trade and a turn toward isolationism, I'm going to need more evidence than a single tariff and dark musings about Obama's protectionist "base."

I even heard some wonk on the radio today say that this may be a sop to the protectionist wing of the party in return for free trade agreements with Colombia and some other country which I've forgotten. Also, China's balistic reaction may very well make it easier to reject other tariffs in the future, such as on textiles.

So calm down and go breathe in a bag, this is nothing to hyperventilate over.
9.14.2009 8:07pm
Elliot123 (mail):

But we're not talking about eliminating globalization, even though I doubt you could convince someone who lost his job that the money he saves on imported consumer goods makes it all worthwhile. We're talking about a single tariff that is specifically authorized by the terms of a negotiated trade agreement with China.


Well, I suppose the Chinese may also find a single tariff that is specifically authorized by the terms of a negotiated trade agreement with the US.
9.14.2009 8:57pm
Sean O'Hara (mail) (www):

One tariff raised the "protectionist threat level" to orange? Come on, get a grip. This may be a stupid move, but it hardly portends a wholesale move toward protectionism.


One tariff that's being met with reciprocity by the Chinese. That's how trade wars start.
9.14.2009 9:14pm
Steve:
I'm not a member of the "Blame America First" contingent, sorry. I think the Chinese have free will and if they choose to impose unjustified tariffs on us, that's their decision for which they will have to bear the consequences. I don't accept that we somehow "forced" them to begin a trade war.
9.14.2009 9:16pm
Anon Y. Mous:
Do you think that China is foolish enough to escalate this into a trade war? I suspect that is one war that Obama is just itching to fight. I think the Chinese recognize that they have more to lose, but they also can't been seen to do nothing. For them, the important thing is to not be seen as impotent, while doing nothing to give Obama an excuse to take further actions.
9.14.2009 9:32pm
Tatil:
The linked article is one of the least logical articles I have read recently. The author says this is worse than the steel tariffs, because it only targets China, instead of the whole world. Supposedly, the limited scope is going to make it a lot harder to repeal it later. This is also supposed to be worse than ever, because it uses a different section of the law (that this administration has refused to use four other times before.) I don't see how it would have been far better if the administration misapplied an old regulation that was widely expected to be ruled illegal in 18 months and raised tariffs on many more countries.

It seems some people were waiting for anything to raise the alarm bells about protectionism. I guess this will have to do. I would think the lack of progress in Doha round of WTO negotiations is more troubling, but maybe that would not allow the author to pin the blame on a particular party.
9.14.2009 10:48pm
Drew's inferno (mail):
It's clear, from a pure efficiency and general welfare standpoint that free trade produces the best results.

From a geopolitical standpoint, however, i'd rather not put our entire industrial base and warmaking capacity in the hands of our closest peer competitor, who have managed to blend the worst aspects of 19th century totalitarianism and 19th century capitalism into the worst dystopia this side of the soviet union.

So anything that secures our industrial base and immiserates China more than it does us is probably a good strategic move at this point, as it is more likely to cause peasant unrest and render the regime less legitimate.
9.14.2009 10:51pm
Chaon (www):

But I thought many people have tried to explain: the goods they buy with their salaries are cheaper when they come from overseas. Even if they lose their high-paying jobs, they can afford a better lifestyle at a lower salary, compared to if we had no globalization.


The cheapest imports in the world aren't much use to a man with no job.
9.14.2009 11:03pm
Floridan:
Just as there are no atheists in the foxhole, there are no advocates of globalization among the unemployed.
9.14.2009 11:30pm
Go Horns!:
When does Obama throw a tariff on the iphone? It is made in China too. Oh wait, the base likes their cheap gadgets.
9.15.2009 12:30am
GV:
Blog posts about this tariff have become a bit tiresome, pardon the pun. I'm tired of reading arm-chair economists (and some real economists too) reduce arguments about free trade to a simple question about economic efficiency. The issue of trade is complex and requires a difficult balancing of a number of political considerations beyond economic efficiency. For example, as someone else noted, there are benefits to limiting trade with a potential military rival that are not captured by a purely economic metric. It is also very possible that losing a slew of jobs will do more to disrupt the social order (which will have its own economic costs) than imposing the tariff and having the price of tires go up $3. There are also questions about whether the theoretical costs to imposing a tariff hold true here.

It's ironic that Alder is leading the charge on this issue. He had previously very astutely observed that, at times, liberal scientist will believe their expertise will resolve a political question. For example, scientists would claim that the Bush Administration was waging a war on science because the Administration refused to fully fund stem cell research. The reality, of course, is that whether to do stem cell research is a political question that can be informed by the science. In other words, science is only one part of the calculus, and scientists are not necessarily experts on the non-science-based factors in that calculus.

The same thing is true of economists and economic issues. Economists can tell you what empirical research or economic theory might say about a particular policy proposal. But since most policy proposals require a balancing beyond mere economic concerns, it makes no sense for economists to act like they are an expert on political economy theory and that there is only one question to ask (what proposal is most economically efficient?) on any economic issue.

I'm generally in favor of free trade for most of the reasons people favor free trade. But the decision to impose tariffs is often complicated and I've yet to see anyone actually deal with the potential nuance here. So you can continue to trot out political slogans regarding free trade, but you're not going to convince anyone but the already converted. Perhaps that's people's intention.
9.15.2009 3:49am
ERH:
Ok this isn't rocket science. When you're a next importer, some degree of protectionism is probably a good thing.
9.15.2009 7:21am
ERH:
That should be net importer.
9.15.2009 7:21am
Abdul Abulbul Amir (mail):



I don't accept that we somehow "forced" them to begin a trade war.


Forced? Obviously not. We invited and they accepted.


The issue of trade is complex and requires a difficult balancing of a number of political considerations beyond economic efficiency.


Its not complex at all. A free people make their own buying decisions one person and one transaction at a time. The politically powerful have no role to play. If you want to buy a tire made in Ohio, do so. Using the power of the state to force your preferences on others is not complex, it is immoral.
9.15.2009 9:36am
Steve:
We invited and they accepted.

Right, by the same logic that we invited 9/11 by basing troops in the Middle East. I don't think that way. And one tariff flowing each way hardly constitutes a "trade war" in any event.
9.15.2009 11:00am
LarryR (mail):
A quick scan of the comments suggests a minority in support of free trade. When you can't even get a majority of the commenters on a fairly libertarian legal blog to come out to oppose protectionist action, what does that mean? Support for free trade is one of the fundamentals of libertarian philosophy.

When I see VC polls, I usually find the responses much more closely track the core libertarian/moderate conservative beliefs the Conspirators hold.

I know we're still early in the comments to this post. Lots of free trade commenters may appear later. But I wonder whether the commenters are much more statist than the general population of VC readers. And, of so, why?
9.15.2009 11:31am
Blargh:
We invited and they accepted.

Right, by the same logic that we invited 9/11 by basing troops in the Middle East. I don't think that way. And one tariff flowing each way hardly constitutes a "trade war" in any event.


Steve, let's say you traveled back in time 3 days and Obama wants to know if his tariff makes a trade war (or if you like, any adverse response) more likely, or less likely. Could you give him an answer?
9.15.2009 12:00pm
ShelbyC:

Ok this isn't rocket science. When you're a next importer, some degree of protectionism is probably a good thing.


How 'bout we just balance the budget instead? It's all the borrowing we do that makes us a net importer.
9.15.2009 12:21pm
Kazinski:
The problem with this tariff is that it is going to kick of a round of rent seeking by both unions and politically connected industries. American workers are also consumers, and the tire unions are leaches on the backs of the American consumer.

The ignorance displayed by some of the commenters above is appalling. Ricardo explained how free trade benefits everybody 200 years ago, and it really should not be that hard a concept to grasp.
9.15.2009 12:45pm
Abdul Abulbul Amir (mail):

And one tariff flowing each way hardly constitutes a "trade war" in any event.


Doh! Obviously. However, hhats exactly how trade wars start. We can all hope it stops here. But given the success of the tire makers rent seeking we can expect the same thing from other industries at the expense of both consumers and the tire service industry.

BTW, Bush's steel protectionism was horrible. There are about steel fabricating jobs for every steel making job.
9.15.2009 1:03pm
Guest14:
Ricardo explained how free trade benefits everybody 200 years ago, and it really should not be that hard a concept to grasp.
Such nonsense. Free trade will often leave people jobless, homeless, and dead. Now, you probably won't be one of those people, and I'm sure you don't care about them, but don't pretend like they don't exist.
9.15.2009 3:22pm
ShelbyC:

Such nonsense. Free trade will often leave people jobless, homeless, and dead. Now, you probably won't be one of those people, and I'm sure you don't care about them, but don't pretend like they don't exist.


Yeah. Inventing a pill that cures cancer would hurt lots of doctors, too.
9.15.2009 4:11pm
Tom B (www):
There are only a few reasons that trade between U.S. states should be free and trade with foreign nations be otherwise. Cheap tires is not one of those reasons. Free trade is one of the few issues that most economists of all political persuasions support. Somewhere in the 85-90% range of all economists agree on it, even if the slice of VC readers at this moment is not overwhelmingly free trade.

This move is more than just a small tariff on one product from China. The petition was not supported by tire companies - it was brought by the United Steel Workers Union. Second, the grant of relief was purely discretionary - the President did not have to do anything. Third, the availability of relief is intended to lessen the impact on domestic industry when new competition arises to give domestic workers time to adjust. Here, the competition from China was not new. Finally, some guy on the news said that the petition did not allege any factual injury. You will have a hard time convincing me that it was not a give away to a political constituency. You should have a hard time convincing yourself.
9.15.2009 5:38pm
Tom B (www):
Also, I am unemployed and am pro free trade.
9.15.2009 5:54pm
Tom B (www):
Not that anyone is reading the comments anymore, but here is a link for posterity's sake.

AEA Survey Sept 2009

83% of AEA economists agree that trade should be free and unfettered, while only 10% disagree.
9.16.2009 10:07am

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