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
Thursday Links
- Obama can twist words all he wants, but a government mandate to buy health insurance is still a tax. “Think of it this way: If the government took money directly from you, then turned around and gave it to an insurance company, everyone would agree that you’ve been taxed.” Nobody considers it a tax? Even his advisers call it a tax.
- More on the health care mandate: “Compulsory health insurance could require nearly 100 million Americans to switch to a more expensive health plan and would therefore violate President Barack Obama’s pledge to let people keep their current health insurance.”
- Why the U.S. slapped a trade tariff on Chinese tires: “President Obama’s decision was guided strictly by selfish, political considerations: He felt he owed American unions for their previous and continuing support, regardless of the economic and diplomatic fallout.”
- Vital data on climate change mysteriously disappear.
- Podcast: “Twenty Years Since the Fall of Communism” featuring Czech President Václav Klaus.
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
Rep. Flake’s Wise Counsel on the Tire Tariff
Earlier today, Congressman Jeff Flake, Arizona Republican, sent a letter to President Obama urging him to reconsider his decision to impose a 35 percent tariff on tires imported from China.
Rep. Flake makes all the right points in his letter, reminding the president that:
Your decision to impose duties on Chinese tires is likely to encourage other domestic industries to file their own petitions for relief under Section 421. The potential for an endless cycle of U.S. restrictions and subsequent retaliation from China is the last thing our economic recovery needs.
I wish there were more members of Congress like Rep. Flake. Our Trade Vote Records feature on our web site offers a searchable data base of all major trade votes going back to the mid-1990s. Our data base confirms that Rep. Flake is the most consistent supporter in all of Congress in opposing both subsidies and barriers to trade.
The president should heed Rep. Flake’s wise letter.
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