It had begun to look like the worst of the recession was over, but here comes Barack Obama with a Herbert Hoover trick, a tariff increase that could help ignite a widespread trade war, cost us jobs, increase some prices, defeat recovery and keep us in economic misery for a long, long time.
Why would he do such a thing? Because there was a special interest to appease, a powerful, rich, vote-producing, hugely helpful friend of Democrats, a union known as the United Steelworkers, and when it filed a grievance about China tire imports, the Obama crowd said sure, that’s the ticket.
The administration was allowed to hike the tire tariff under a trade agreement with China, it no doubt hoped some sweet talk would avoid retaliation and there were favors to repay to labor and support needed for future elections.
But it’s not sweet talk or kicks in the shin that have worked to get China to start gradually toning down its own protectionism. As a Wall Street Journal editorial observes, the greatest influence has been the example of the United States keeping its own tariff structure in bounds and learning the good that comes from reduced trade barriers.
Chinese leaders obviously have to know that while U.S. law permits the administration’s action, it does not require it, and they are no doubt snickering over President Obama saying the U.S. must enforce its trade agreements when our country is at this very moment cheating Mexico by refusing to comply with a NAFTA provision.
To hit back, the Chinese are already threatening to raise tariffs on poultry and auto parts, and things could get worse, according to a professor of trade economics at Cornell as quoted in a British newspaper story.
“These (U.S.) protectionist measures, some of which amount to domestic political posturing rather than substantive restraints on trade, could easily ratchet up into a flow-blown trade war and inflict serious economic damage on both countries,” said Eswar Prasad.
History has a lesson here, namely the Smoot-Hawley tariff that Hoover signed during the Depression, making things many times worse because other nations then enacted their tariff increases, we could not sell as much abroad and we lost still more jobs, as did other nations. The China decision alone may seem unlikely to cause something as severe, but the administration is playing still other anti-trade games that pose big risks and are cited in a recent study by the U.S. Chamber of Commerce.
Says the Chamber, the United States could lose 380,000 jobs and $40 billion in exports if it does not move ahead on trade agreements with South Korea and Columbia. It could lose 170,000 jobs if other nations enact their own protectionist policies in response to the “Buy American” stipulations in the economic stimulus package. It has already lost $2.6 billion in exports and 25,000 jobs — and is spending $2.2 billion more — because of refusing to follow through on a pledge letting Mexican trucks cross the U.S. border.
Protectionism does not work for a country even if it momentarily benefits some one small group or the other. In the case of Chinese tires, it is conceivable that there will be temporary benefits for U.S. tire companies that have lost 5,000 jobs in recent years as Chinese imports have gone up. But then there are the losers, such as exporters of poultry and auto parts to China, the U.S. companies now making tires in China and, of course, consumers, who will have to pay more for those tires.
Meanwhile, there’s speculation in one news account that the tire importers will obtain their products from other countries besides China and that consumers will postpone getting rid of old, worn-out tires, maybe leading to mishaps on the highway.
The negatives of the Chinese move are many and the prospective advantages are few, except for the political advantage of pleasing a union with members who work in tire factories.
(Jay Ambrose, formerly Washington director of editorial policy for Scripps Howard newspapers and the editor of dailies in El Paso, Texas, and Denver, is a columnist living in Colorado. He can be reached at SpeaktoJay(at)aol.com.)