Some further thoughts on Obama's trade stategy

Posted By Daniel W. Drezner Wednesday, September 16, 2009 - 1:20 PM

My latest column for The National Interest Online is now available. It takes a longer look at the implications of Obama's tire tariff decision. The more I look at this move, the more freaked out I get. I think I've figured out the precise contours of Obama's trade strategy -- and trade plays a very small role:

With Obama... this dip in the protectionism pool feels like the beginning of something much greater. Many Democrats feel warm and fluffy about protectionism, as a mechanism to improve labor standards or an ironclad guarantor of union jobs. This love affair isn’t going to stop. Thea Lee, the chief economist of the AFL-CIO, told the New York Times that “the trade decision was the president’s first down payment on his promise to more effectively enforce trade laws, and it’s very much appreciated.” Unions are already demanding additional action against Chinese steel....
All presidential administrations engage in protectionism—it’s often the cost of pushing through other forms of trade liberalization. While the previous two administrations engaged in these kinds of actions, they could proudly point to ambitious agendas of trade liberalization as well. The Clinton administration sought to add contentious labor and environmental side agreements to its trade deals—but Clinton also spent political capital to get NAFTA and the Uruguay round through Congress. Bush imposed the steel tariffs—but his administration also secured the passage of (now expired) trade promotion authority, launched the Doha round, and completed major trade agreements with Australia and Central America. President Bush also rejected this action against Chinese tires on four separate occasions.
Barack Obama has no record of trade liberalization to fall back on when defending this measure. Indeed, this is the first major trade action his administration has taken. Based on the political reporting of this trade action, it seems clear that Obama will use trade policy as a sop to his base in order to keep them behind his major policy initiatives on health care, financial regulation, and environmental protection.
Obama has largely decided to become a domestic-policy president. His supporters, his base and the politicking of his underlings indicate things will only get worse. With the global economy in deep crisis, protectionism is a terrible way to build a recovery.

Go read the whole thing.

COMMENTS (6)

EXPLORE:ECONOMICS, GLOBAL POLITICAL ECONOMY, GLOBALIZATION, OBAMA, PROTECTIONISM, SMOOT-HAWLEY, TRADE, TRADE POLITICS

Let's talk Paul Krugman down from the ledge

Posted By Daniel W. Drezner Friday, August 15, 2008 - 4:29 PM

A few years ago, at some long-forgotten conference, I was on a panel with Paul Krugman about the future of trade openness. I was in a pretty gloomy mood at the time because of all of the protectionist rhetoric coming out of world capitals. Krugman was more optimistic; he thought that the postwar trade institutions could withstand a little protectionist rhetoric. I bring this up because Krugman is the one in a gloomy mood today:

[C]an things fall apart again? Yes, they can. Consider how things have played out in the current food crisis. For years we were told that self-sufficiency was an outmoded concept, and that it was safe to rely on world markets for food supplies. But when the prices of wheat, rice and corn soared, Keynes’s “projects and politics” of “restrictions and exclusion” made a comeback: many governments rushed to protect domestic consumers by banning or limiting exports, leaving food-importing countries in dire straits. And now comes “militarism and imperialism.” By itself, as I said, the war in Georgia isn’t that big a deal economically. But it does mark the end of the Pax Americana — the era in which the United States more or less maintained a monopoly on the use of military force. And that raises some real questions about the future of globalization. Most obviously, Europe’s dependence on Russian energy, especially natural gas, now looks very dangerous — more dangerous, arguably, than its dependence on Middle Eastern oil. After all, Russia has already used gas as a weapon: in 2006, it cut off supplies to Ukraine amid a dispute over prices. And if Russia is willing and able to use force to assert control over its self-declared sphere of influence, won’t others do the same? Just think about the global economic disruption that would follow if China — which is about to surpass the United States as the world’s largest manufacturing nation — were to forcibly assert its claim to Taiwan.

I can understand Krugman's concerns, and if George W. Bush keeps demanding things that Russia ain't going to do, then the official Drezner Protectionism Advisory System will shift from Edge of the Cliff to Crossed the Rubicon.* It's that last paragraph where the slippery slope problem creeps up, however. I know it's cool and hip to lump all non-democratic states together right now, but it's worth pointing out that China is not Russia. Oh, and Taiwan is not Georgia. The last thing the Chinese want right now is a major disruption of the system. And, thankfully, in the last Taiwanese elections, the Saakashvili-type candidate lost. Even before he lost, the Bush administration had sided with China more than Taiwan. The point is, while I'm not thrilled with recent developments, I'm not as gloomy as Paul Krugman. *Based on this post, the five advisory levels of the Drezner System are, in ascending order of worry: