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| Trade gap |
| James Pethokoukis / Mar 11, 2010, 00:38 IST |
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Protectionism: Protectionist actions seem to be multiplying around the world. Brazil’s threat of tariff retaliation over US cotton subsidies and European Union warnings surrounding a US Air Force contract are the latest. President Barack Obama isn’t doing much to quell protectionist sentiment in America either. The omission could prove costly.
Not long ago, Obama sounded pro-trade. In his State of the Union address to Congress last January, he announced an ambitious goal to double US exports by 2015. But the president’s economic advisers can’t drive trade policy when the politics are so messy. To pass healthcare reform, Obama needs unions. A push for new trade agreements risks alienating this important constituency.
That has left Congress and the president to push long-stalled treaties with Colombia, Korea and Panama down the list of priorities. In their place have been preliminary duties slapped on tires from China and bricks from Mexico. The Doha trade talks also have languished, spurring Brazil to litigate through the World Trade Organisation. Protectionism is rising in China too, evident in steel tariffs and encouraging governments to buy locally.
The actions aren’t surprising. High unemployment tends to inspire trade restrictions and U.S. lawmakers have followed the playbook.
A bipartisan group in the House of Representatives just introduced legislation to withdraw the United States from the North American Free Trade Agreement, originally championed by George HW Bush and ultimately signed by Bill Clinton. And Democrats and Republicans in the Senate are uniting to push for action against China for keeping its currency weak.
Absent a free-trade champion, protectionism remains a serious threat. The financial crisis hit the international movement of goods hard. The 12 percent decline in world trade last year was the steepest fall in more than 60 years. The global economy needs a trade cheerleader, and the United States has traditionally played the part. That makes moving beyond healthcare reform as quickly as possible all the more important — so the US Congress and President Obama can step into the void.
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