September 13 2009
Early in the administration of George W. Bush, the former president applied provisions of US trade law to levy new tariffs on imports of steel. The move, ultimately struck down as illegal by the World Trade Organisation, was a calculated and somewhat cynical effort to convince organised labour to be less opposing of the president’s market-opening trade agenda. However, labour groups, notably steelworkers, were not appeased by the move, and fought each new trade deal with abandon.
During his presidential campaign, Barack Obama talked tough on trade, notably with China, and promised to stand up for American workers against other countries’ unfair trade practices. Meanwhile, his campaign quietly reassured other countries of the candidate’s appreciation for open markets and liberalised trade. “He’s a free trader,” said his economic advisors in hushed tones. “Don’t worry.”
So what are we to make of the president’s decision to impose new tariffs on tyres imported from China ?
The tough rhetoric of the campaign has largely vanished during the first eight months of the presidency, replaced by soothing assurances about the importance of fighting protectionism in the midst of the economic crisis. The president periodically perfumes the rotting corpse of the Doha round by committing to its successful conclusion in multilateral statements. Occasional rhetorical orchids are tossed towards pending free-trade deals with Panama, Colombia and Korea. Despite the change in tone, however, the trade agenda is mired in stasis; largely hostage to campaign obligations to Mr Obama’s labour allies and other political priorities.
This is unfortunate. Commitment to multilateralism and an engaging humility has done much to convince other countries the president wants to reforge American leadership. Yet the world is still looking for tangible evidence that the US is genuinely committed to global economic recovery. Although the rhetoric has provided some comfort, the world (and particularly the developing world) is primarily scrutinising the president’s actions (and inaction) on trade.
As the first major White House decision on trade, therefore, the levying of new tariffs on imports of Chinese tyres is not particularly heartening. To be sure, China is no angel in international trade matters. As everywhere, China’s domestic politics complicate Beijing’s economic policies and bedevil efforts of international negotiators to ensure a level playing field in cross-border trade. But this particular White House decision, taken through a process that is widely despised in China as uniquely discriminatory against that country, is no mere slap on the wrist for run-of-the-mill Chinese perfidies. This decision provides fodder for nationalist interests in China that will not just push for tit-for-tat retaliation against US economic interests, but play into a broader trend within China to roll back market-opening reforms. That could result in a back-and-forth battle of retaliatory trade measures which, given the importance of US-China trade relations to global commerce, will provide cheer to only the most parochial of interests worldwide.
Charitable, pro-trade voices might argue that the president had no political choice. Given the stalemate on trade policy in the US, the president had to give labour groups an early victory. It is certainly difficult to find an economic rationale for the decision. The domestic tyre industry has multiple alternative markets to China from which to import tyres that are more competitive than the US, absent a dramatic restructuring of our industrial base. We may import fewer tyres from China, but this decision is not going to jumpstart moribund domestic tyre production. This is protectionism without the protection. Pure appeasement politics: calculated and cynical.
But labour will not be so easily appeased. The president may hope that the tyre decision affords him some political space to move forward on a positive trade agenda. He may find instead that he has bought himself more domestic difficulty by awakening the protectionist fantasies of a legion of other industries; and dashed hopes among the developing world that his administration is not simply a retread of other, politically myopic US administrations of years past.
The writer holds the Freeman Chair in China Studies at the Center for Strategic and International Studies in Washington,DC. He is a former assistant US trade representative for China affairs