Some further thoughts on Obama's trade stategy

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

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. 

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

PCDE

4:23 PM ET

September 16, 2009

Chinese products are safe and delicious

America needs more Chinese tires. In fact, we need more of everything Chinese, especially their foodstuffs and medicines because they are so safe and exceed our Food and Drug Administration regs.

In fact, Drezner should vacate his jobs at FP-blog and Tufts Univ so that a Chinese pundit can take his place. The readers here would benefit from an Eastern view.

Keep up the good work undermining your fellow Americans. Your globalization fantasy has brought us over 10% unemployment, thanks.

 

HERESIARCH

6:36 PM ET

September 16, 2009

One not so minor point

The US' largest trading partner is not China but Canada. China's total balance of trade with the US is only/approximately 80% of the yearly cross border trade with Canada.

And the protectionism started well before this tire duty with the tightening of border controls between the two countries in spite of business groups on both sides of the border saying it was a bad idea.

Which makes most of us in the West wonder how long Ontario's love affair with Obama will last once the border controls and US union pressure to move jobs to the US finish killing Ontario's manufacturing industry.

-------------

@pcde: You may want to get your facts straight on the effects of globalisation. For every one job in the US that's been off-shored nine have been lost to automation.

 

RT68

9:11 PM ET

September 16, 2009

calm down

First, this was a discrete action. The Bush administration decision to apply countervailing duties to China has had, and will have a larger impact.
Second, Obama had to sign off on a 421 eventually. This doesn't open the door, it means he can pick and choose down the road.
Third, those in favor of free trade must stop relying on lazy arguments that say every protectionist step will lead to a trade war and all trade is a priori good and cannot be questioned. The old consensus in favor of free trade has fallen apart. Free traders must start building a new consensus based on hard facts. Right now they sound like those 2 years ago proclaiming that the stock market cannot be wrong because it reflects this wisdom of the market. No one believes in markets anymore. So arguments can't appeal to belief or faith, they must rely on facts.

 

HERESIARCH

9:25 PM ET

September 16, 2009

@rt68: So arguments can't

@rt68: So arguments can't appeal to belief or faith, they must rely on facts.

Fact is China reduced it's holdings of US treasuries in Jun by 25 billion dollars. That may not be much given they held 800 billion but it's a trend worth watching.

Keep annoying the largest purchaser of your debt and good luck funding your ever increasing federal spending habits.

I would expect that this year's federal deficit is going to come in at much higher than anticipated given the boot kicking tax receipts are going to take from the recession so encouraging China to place it's money elsewhere is not going to help keep American's employed.

And that doesn't even take into account the political ramifications from this on things like climate change and Iran. Obama may claim it's two separate things but that is most definitely not the way the PRC is taking it.

 

MARTY

7:56 PM ET

September 17, 2009

Obama Trade Strategy

I can't understand how anyone could ever have thought Obama cared about foreign policy. Everything he has ever done has been on teh domestic side, except opposing some Bush initiatives that was totally cost-free in his extremely libera State Senate district.

He wishes the rest of the world would just go away because it is at best a distraction from what he wants to do domestically.

Now, he may not get that wish, but it's waht he wants.

You think he would have put Hillary in charge of something really important to him? C'mon!!

 

LARK

4:46 AM ET

September 21, 2009

I hope you are right

...that Obama is so biased towards labor. All the arrows have been tilted the other way and I am tired of waiting for your glorious future to arrive.

So far, globalization and free trade have been losers for American workers. Deal with it.

And, the notion that we are dependent on China to buy our debt is a bunch of hooey. China buys our debt to keep their currency from rising, so they can saturation bomb - oops I mean saturation export - our market, undermining our manufacturers and super charging their export economy. It would be a Good Thing if they pulled back from their debt purchases. It would allow the global economy to rebalance.

But they won't do it, because they won't sacrifice the jobs during the adjustment process.

That means our only resort going forward will be tariffs and other protective measures.

Not a bad thing for us: we've lost so much manufacturing, we can put people to work in re-industrializiing. In case you hadn't noticed, we're going through some high unemployment.

 

Daniel W. Drezner is professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University.

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