Is Obama Mimicking 'W.' on Trade? 20 comments
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I'm a bit late to the party, I know (I've been busy), but apparently there's a trade skirmish going on that could escalate. I don't know... something about tires and chicken? Here's a bit of a recap: Ben Muse gives 11 reasons why this is bad, DeLong thinks Obama is doing something stupid, Emmanuel is practically gleeful here (and here and here), IELPB has had about 10 posts on the topic in the past half-week, and Drezner's freaking out.
That's just a slice of the running commentary, so what could I add to the discussion at this point? Maybe a bit of context. In 2001, during his first year in office, George W. Bush also raised tariffs in a similarly reckless and illegal way. Drezner noted this on his blog, but argued that this time it's different for two reasons:
1. Bush raised tariffs on a sector (steel); Obama raised tariffs on a country (China).
2. Bush didn't have general protectionist leanings, so it was never likely that widespread protectionism would be a feature of his regime; this is not true of Obama (or at least we don't know that it's true).
So why did Bush raise steel tariffs in 2001? He never wanted to, but doing so got Congress to give him fast-track negotiating authority in the Doha round of WTO talks. As Drezner notes, the Bush administration knew that the tariffs would be ruled against in the WTO, so they weren't actually having to compromise anything (and he should know; he was working in U.S. Treasury at the time). Instead, they were making an end-around Congress and public opinion. Pretty clever.
Why can't Obama do the same thing? Drezner says it's because he's more wedded to Big Labor than Bush was. Really? Big Labor is always going to vote for Obama against any Republican, while Bush knew that his re-election fight would be difficult, so appealing to voters in Rust Belt states could mean the difference between winning and losing. Like W.J. Clinton, Obama likely has more latitude than a Republican in a similar position would have; like W.J. Clinton, Obama could probably get more done on trade than any Republican facing an a Democratic Congress.
If he wants to. He may not, of course. I've expressed frustration at his lack of attention paid to trade so far, and I've previously tried to parse his mixed signals on trade. He hasn't been consistent on trade over the past few years, and I don't expect him to start now.
What I do think is that Obama very much values expert advice, and his approach to economic issues is mostly technocratic. Surely Summers and Geithner and Goolsbee are yelling into his ear on this. In fact, both Geithner and Goolsbee have been sent to reassure nervous trading partners before. And remember how Obama was for "Buy American" provisions in the stimulus bill before he was against them? He's been cagey on trade for awhile, and I think there's probably a reason for that: his supporters think that NAFTA was a mistake and that China is killing them. Obama doesn't share that belief, but he can't/won't say that (though he will hint at it). Especially not until something gets done on health care.
Which makes me think that there may be more to this than is immediately obvious. Perhaps Obama wants to signal to Big Labor that he's on their side, but do so in a way that doesn't handcuff him.
The wild card here is China. In 2001, the U.S. was taken to the WTO and smacked down by the Dispute Settlement Court. In fact, I think they were banking on that. This time, China started dispute settlement proceedings but didn't wait for the completion of that process; it retaliated immediately. Obama might not have been counting on that. But now Obama is facing more pressure to revoke the tariffs: those adversely affected by China's retaliatory tariffs, and those who generally prefer an open trading system (and/or don't want to anger China just now). In other words, Big Labor might be on his side, but Big Agriculture won't be.
In short, I'm not sure how this will play out just yet, but I don't expect a wide-ranging trade war between China and the U.S. (sorry Emmanuel). That's the M.A.D. of international trade, and there's just too much at stake for either side to push the button. Doesn't mean they won't butt heads or test each other from time to time, but a return to mercantilism just isn't on the table.
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However, in the short term, you are probably right that we have the upper hand, because they need to keep their exports going above all else. In the long term, they will have other consumer markets and they will have the upper hand in every way.
On Sep 18 03:34 PM Glen88 wrote:
> Just how can China retaliate? Refuse to import from the US, raw materials
> which it sends back as finished goods?
They are playing zero sum game and have no intention of ever trying to correct the balance of trade between us. The rapid rise of China as an industrialized nation was accomplished through so called free trade agreements, which means to China, you give us your technology, engineering and factories and we will lend you the money to buy our cheap products.
Now there is no question that a trade war with China would be very damaging, even devastating to our economy for a long while, but the alternative to placing high tariffs on Chinese product is the slow strangulation of our economy. (read livelihood). It was a colossal blunder to have a free trade agreement with countries that do not have economic parity with us. This is typical laissez faire capitalism, a total disregard for this nations welfare for the sake of profit, it's called Darwinian capitalism. It will take a lot of work and time to rebuild our manufacturing infrastructure, but it must be done. We need to tighten our belts, bite the bullet and get on with it.
www.nytimes.com/2009/0...
You mention:
"What I do think is that Obama very much values expert advice, and his approach to economic issues is mostly technocratic. Surely Summers and Geithner and Goolsbee are yelling into his ear on this".
However, The King of Spin Jared Bernstein , the non-economist Chief Economist, is the Union Lackey in the crowd.
With the USD and the pressure being applied to it by the amount of debt being issued by Washington, as the other 'hot' topic.
Certainly the hypocracy of starting a trade war after they initiated such protectionism is patently absurd. If yopu don't believe China is protectionist, just try investing in production there and getting your money back out.
www.nytimes.com/2009/0...
"Indeed, subsidies abound at all levels of government: the Wuxi municipal government just offered up to $146,000 to each local business that increases exports in the last three months of this year."
On Sep 19 03:43 PM Moon Kil Woong wrote:
> I agree protectionism has long been a factor from China. It is silly
> to believe a shot across the bow from the US will inflame them.
>
>
> Certainly the hypocracy of starting a trade war after they initiated
> such protectionism is patently absurd. If yopu don't believe China
> is protectionist, just try investing in production there and getting
> your money back out.
He'll do as they say!
The oligarchs who thrive from the so-called Free Trade are major contributors to Election Campaign funds, directly or indiretly. His appointment of Summers and Geithner shows that he is obedient to the oligarchs that created the Financial Meltdown. Since Obama is taking orders
from the same set of people as 'W', we can expect similar trade policies, with perhaps an occasional bone being thrown to the protesting employees/voters/taxpa... It is surprising that Obama's justice department wants to persecute CIA operatives involved in fighting terrororists, but nothing is being done to investigate those who brought the US economy to it's knees.
My guess is that the top players play the entire globe, circling around like clouds. Must be interesting.
On Sep 18 04:29 PM sod wrote:
... rebuild our manufacturing infrastructure, but it must be
> done. We need to tighten our belts, bite the bullet and get on with
> it.
Since 1991, the trade deficit grew in leaps and bounds with each free trade treaty. It nearly hit a trillion dollars a year in 2007. The only thin that reduced it by 50% was a global depression.
But we are still in a massive, massive trade deficit. We import energy, manufactured goods and services. Most of which we could very easily produce at home, ourselves. So our entire economic structure was hollowed out.
emsnews.wordpress.com/...
The NYT ran an editorial yesterday demanding even more 'free trade'. The Washington Post loves free trade. Many media outlets love free trade. These same outfits are either owned by foreigners, funded by foreigners or were bought out by foreigners who then got US citizenship so they could weasel their way into our public discourse.
For example, the NYT new half-owner is a billionaire in Mexico. Mexico runs a big trade surplus with the US.
Every single fix applied to our trade problems has made this worse. Selective tariffs don't work. We need to rip up all our free trade treaties and impose PROTECTIONISM or we will be enslaved.
Protectionism is an interesting name: it means to preserve and control. If there is an economy on this planet screaming for protection, it is the US economy. Far from being evil, this is, for us, a good thing. Asia wants access to all our markets. We have to stop them.
Like it or not, this is a world economy and it should be an exciting time to be working toward common solutions. We in the US will either join in or get left further behind as we have been over recent years.
Stop aligning with the political idioits on both sides that continue to say no to everything and divide all of us.
We have always been able to build a better mouse trap.
China still has a situation within its borders where foreign intellectual property is copied without regard for trade treaties. 80% business software pirated; 90% music and movie dvds; pervasive counterfeitting of pharmaceuticals. Joint venture competition and certification vetting for the purpose of copying trade secrets.
The American and Chinese people are suffering in the non-compete arrangement being tolerated by the U.S.
We as citizens are committing suicides by allowing all these imports into US. I have been living in China half time for almost four years now. I do not see that China has foreign ownership in telecoms, energy, minerals industries. The foreign bank and financial presence is so small that it is insignificant.
- A Chinese American Expat Living In GZ
Source : geraldcelentechannel.b...