More Trade News
My colleague Dan Griswold pointed out yesterday some unfortunate editing in the Washington Post. Here are a couple of other trade-related items in the news recently:
I think often the United States has to lead,” Baucus said, noting that what lawmakers come up could be used as a model for other countries to copy.
So the U.S. would saddle its consumers with higher prices in exchange for little benefit environmentally and in the process risk retaliation and alienating countries who it insists are necessary for global cooperation on climate change?
Some leadership.
And it may well be that the Chinese have the jump on the United States here, in any case. They’re proposing to introduce a carbon tax of their own, to prevent double-taxation in the form of carbon tariffs by the developed countries (banned under WTO rules) and to keep the carbon tax revenue — collected, remember, from U.S. consumers! — for themselves, all while seeming to play nice on climate change. I bet those who proposed carbon tariffs are sorry they spoke out now. (HT: Scott Lincicome)
Filed under: Energy and Environment; Trade and Immigration
Cato Podcast Exposes Anti-Poor Bias of U.S. Tariffs
The dirty secret of the U.S. tariff code is that it is not only insanely complex but that it is biased against the poor. Our highest remaining trade barriers are imposed on goods that loom the largest in the budgets of poor and middle-income families — such as food, shoes, and clothing.
Politicians and interest groups that fight any reduction of U.S. tariffs are unwittingly picking the pockets of the poor every day. I discuss how President Obama supports this unfair status quo in a new Cato podcast, in an earlier newspaper column, and in Chapter 9 of Mad about Trade.
And you can bet your imported t-shirt that I will highlight this inconvenient truth during my presentation at today’s Cato book forum. You can watch it live online beginning at noon, eastern time. Commenting on Mad about Trade will be Steven Pearlstein, business columnist for the Washington Post.
Curbing Free Trade to Save It
In the latest example of “We had to burn the village to save it” logic, Sen. Sherrod Brown (D-OH) argues in a letter in the Washington Post this morning that the way to “support more trade” in the future is to raise barriers to trade today.
Brown criticizes Post columnist George Will for criticizing President Obama for imposing new tariffs on imported tires from China. Like President Obama himself, Brown claims that by invoking the Section 421 safeguard, the president was merely “enforcing” the trade laws that China agreed to but has failed to follow. He scolds advocates of trade for talking about the “rule of law” but failing to enforce it when it comes to trade agreements. Brown concludes, “If America is ever to support more trade, its people need to know that the rules will be enforced. And Mr. Obama did exactly that.”
Nothing in U.S. trade law required President Obama to impose tariffs on imported Chinese tires. As my colleague Dan Ikenson explained in a recent Free Trade Bulletin, Section 421 allows private parties to petition the U.S. government for protection if rising imports from China have caused or just threaten to cause “market disruption” to domestic producers. If the U.S. International Trade Commission recommends tariff relief, the president can decide to impose tariffs, or not.
The law allows the president to refrain from imposing tariffs if he finds they are “not in the national economic interest of the United States or … would cause serious harm to the national security of the United States.”
As I argue at length in my new Cato book Mad about Trade, trade barriers invariably damage our national economic interests and weaken our national security, and the tire tariffs are no exception. If the president had followed the letter and spirit of the law, he would have rejected the tariff.
And since when is causing “market disruption” something to be punished by law? Isn’t that what capitalism and market competition are all about? New competitors and new products are constantly disrupting markets, to the discomfort of entrenched producers but to the great benefit of the general public and the economy as a whole.
Human beings once widely practiced an economic system that minimized market disruption. It was called feudalism.
C/P Mad About Trade
Filed under: International Economics and Development; Trade and Immigration
The Tire Tariff and the Invertebrate President: A Fable
Anyone still inclined to minimize the meaning of President Obama’s Chinese tire tariff decision should read George Will’s column today.
It is not only the direct costs of this particular decision, which are numerous and tallied in the article (and in this paper), that should concern us. Will’s bigger concern is the foreshadowing of more protectionism from a president who has proven to have no qualms about looking straight into other people’s eyes and claiming that his administration opposes protectionism, favors free trade, and is working to advance pending trade agreements through Congress, all while remaining “invertebrate as he invariably is when organized labor barks.”
Is this a sign of schizophrenia? No, it’s worse. What we have here is a president who views trade policy as nothing more than a tool to advance his own political standing with groups that are hostile to commerce. Since groups on the left have grown disenchanted that some of the most socialist elements of the health care debate might be left on the cutting room floor, why not try to placate them with anti-business, anti-consumer, anti-globalization protectionism? Will makes the link between tire tariffs and the health care debate in his concluding sentence.
A president who fancies himself economically enlightened and internationalist would treat trade policy as a means to promoting economic growth and sound foreign relations. This president, regrettably, views trade policy as a sacrificial pawn in the service of politics as usual.
It’s Friday — What Bad News Will Be Released Late Tonight?
President Obama promised to change the way things are done in Washington, but his administration has mastered one old Washington trick: releasing bad news late on Friday, or even on Saturday night of a long weekend, in the hope that journalists won’t have much chance to ask questions or get into the next day’s papers. Consider:
- The nation would be forced to borrow more than $9 trillion over the next decade under President Obama’s policies, the White House acknowledged late Friday.
—Washington Post, Saturday, August 22 - White House environmental adviser Van Jones resigned late Saturday after weeks of pressure from the right over his past activism. “On the eve of historic fights for health care and clean energy, opponents of reform have mounted a vicious smear campaign against me,” Jones, special adviser for green jobs at the White House Council on Environmental Quality, said in a statement announcing his resignation just after midnight Saturday.
—Washington Post, Sunday, September 6, 2009 - The White House late Friday announced it would impose high tariffs on imports of Chinese tires in a case seen as the first test of trade policy under President Barack Obama… The announcement was made in a release sent out by the White House press office at about 9:30 p.m. Friday night, a time when news is sometimes “dumped” in the hope it will attract less attention.
—TheHill.com, 10:56 p.m., Friday, September 11, 2009
So what will it be tonight? A late-night tax increase? The resignation of another administration appointee who didn’t pay his own taxes? More troops for Iraq?
Return of the Trade Enforcement Canard
In defending its tire tariff decision, the White House has glommed on to the “logic” that free trade first requires enforcement of trade agreements. Scott Lincicome exposes the absurdity of that defense here. But with that fallacy serving to undergird what sounds like a pre-justification for more trade cases and more trade restrictions, let me remind the reader that we already have 299 active antidumping and countervailing duty measures in the United States, resticting or prohibiting imports from 43 different countries. We have all sorts of restrictions on imported textiles, clothing, footwear, food products, agricultural commodities, lumber, steel, pickup trucks, tobacco, and many, many more products, including tires. But despite all of this enforcement–of rules that are hard to justify, as they penalize most members of society for the benefit of a connected few–we still don’t have free trade in the United States. In other words, we’ve had the enforcement, where’s the free trade?
And if the holier-than-thou U.S. government is going to focus on enforcement of rules, then by all means do unto others. The United States remains baldly and defiantly in violation of its NAFTA commitments to open U.S. roads to Mexican trucks by the year 2000. The United States remains defiantly in protest of WTO Dispute Settlement Body decisions impugning U.S. cotton subsidies, U.S. prohibitions on gambling services offered by providers in Antigua, the antidumping calculation methodology known as “zeroing,” and the Byrd Amendment. Trade partners in some of these cases are either retaliating or have been authorized to do so.
The argument that more rigid enforcement leads to freer trade will be tested. But don’t let the inevitable slew of new 421 cases and related restictions in the name of enforcement fool you. After the restrictions, the retaliation, and the adoption of similar measures in other countries, free trade will be right around the corner. The next corner. Keep looking…
Filed under: International Economics and Development; Law and Civil Liberties; Trade and Immigration
Obama’s Tire Tariff Could Raise Prices by 20 to 30 Percent
President Obama’s decision to impose a 35 percent tariff on imported tires from China was not an act of statesmanship. The White House admitted as much by announcing its decision at 10 p.m. on Friday evening in order to minimize news coverage.
A few union leaders are cheering, but in just about every other way our country is worse off. Among the biggest losers will be low-income American families. The tariffs apply to lower-end tires that sell for $50 or $60 each, compared to $200 for higher-end tires. As The Wall Street Journal reported this morning:
The low end of the market will feel the impact of the tariff most, as U.S. manufacturers, who joined the Chinese in opposing the tariffs, have said it isn’t profitable to produce inexpensive tires in domestic plants.
“I think within the next 60 days you’ll see some pretty significant price increases,” said Jim Mayfield, president of Del-Nat Tire Corp. of Memphis, Tenn., a large importer and distributor of Chinese tires. He estimates prices for “entry-level” tires could increase 20% to 30%.
The anti-poor bias of U.S. tariffs is one of the themes of my new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization. With his decision Friday, President Obama has revealed himself to be a friend of the status quo.
Filed under: International Economics and Development; Trade and Immigration
Obama to Impose Tariff on Chinese Tires
From the quiet shadows of the White House, at around 10 pm on Friday night, came word that President Obama will impose prohibitive duties of 35% on imports of Chinese tires.
Well, we at Cato and elsewhere have warned repeatedly of the dangerous consequences of this outcome (June 18, July 24, August 13, September 9, September 11). Former Cato colleague and coauthor Scott Lincicome has an excellent analysis on the ramifications right here.
The good news is that we now have clarity about where the president stands on trade. The bad news is that his stance reflects his isolationist primary election campaign rhetoric and not the post-election messages of avoiding protectionism and repairing the damage done to America’s international credibility by unilateralist Bush administration policies. Short of armed hostilities or political subversion, no state action is more provocative than banning another’s products from entering your market. I guess this paper was too audaciously hopeful. We’re chastened.
Technically, the Chinese are not legally entitled to retaliate because the United States has legal recourse to restrictions under this so-called “China safeguard” law until 2013. But plenty of American exporting interests have been worried enough to write numerous letters to Obama urging restraint–but to no avail.
Restrictions have never been imposed under this law because in all previous cases — all during the previous administration — President Bush exercised his discretion to reject the recommended duties because of the likely cost of those restrictions on the broader economy. Thus, the Chinese know the decision is a matter of presidential discretion, unlike the antidumping and countervailing duty laws, which are on statutory autopilot and don’t require the president’s attention. Accordingly, the tire restrictions are the edict of the American president, and thus carries more profound meaning for the Chinese.
One of the more thrilling spectacles in all of this, if politicians were capable of humility, would be watching President Obama explain his decision to impose tire duties on China at the G-20 meeting he is hosting in Pittsburgh in 12 days. Recall the president’s pledge (along with the other G-20 leaders) at the last G-20 meeting in London to avoid new protectionist measures.
American credibility on trade is spent. And maybe Obama will find comfort in that fact because he won’t be burdened with that historic responsibility, as he signs off on the slew of new requests for trade restrictions (which are undoubtedly coming soon) under this law from other U.S. industries seeking handouts.
Strap on your armor; the die has been cast.
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