Given the caliber of President Obama's economic team, I have remained somewhat hopeful the Administration would avoid the protectionist impulse within the Democratic Party. So I was dismayed to read about the apparent decision to impose tariffs on Chinese tires. Particularly troubling, as the WSJ reports in an editorial today, is that the Administration has chosen to utilize a rarely (if ever) used provision of trade law, Section 421, setting a bad precedent and encouraging other industries to seek equivalent "relief." President Bush was far-from perfect on trade policy (one of many disappointments), but he rejected all four of the Section 421 petitions he received. I hope this latest decision is an aberration, but I am not optimistic.
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."
This isn't good. From the FT:
A full-blown trade row erupted on Sunday night between the US and China after Beijing accused Washington of "rampant protectionism" for imposing heavy duties on imported Chinese tyres and threatened action against imports of US poultry and vehicles.
Trade relations between two of the world's biggest economies deteriorated after Barack Obama, US president, signed an order late on Friday to impose a new duty of 35 per cent on Chinese tyre imports on top of an existing 4 per cent tariff.
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.