How ObamaCare is killing free trade

March 10, 2010

Brazil’s threat of tariff retaliation over U.S. cotton subsidies is only the latest eruption of rising protectionism around the world. President Barack Obama isn’t doing much to quell protectionist sentiment in the U.S., either. His passivity could prove costly.

Not that Obama has a problem with trade. In his State of the Union speech to Congress last January, he stated an ambitious goal of doubling U.S exports by 2015. It is trade policy that he seems uncomfortable with. That bold declaration in the speech was a direct result of lobbying from Obama’s economic advisers. But the wonks aren’t driving U.S trade policy in the Obama administration. The political team is. Its priority is passing healthcare reform. To pass healthcare reform, Obama needs his core union support. And a push for new trade agreements would alienate Big Labor.

So Obama has not nudged Congress to pass long-stalled treaties with Colombia, Korea and Panama. Instead, the emphasis has been on get-tough actions such as slapping preliminary duties on tires from China and bricks from Mexico. Nor has he tried to energize the Doha trade talks, pushing Brazil to first litigate via the World Trade Organization and now retaliate. And in the U.S., high unemployment has encouraged protectionist forces in Congress. A bipartisan House group just introduced a new bill to abandon the North American Free Trade Agreement, while one in the Senate is pushing for action against China because of its weak currency policy.

And the situation could worsen. To appease Congress and continue its recent populist tilt, the Obama administration will likely toughen language about China in the Treasury Department’s April report on currency policy. The next step would be to declare China a currency manipulator in the October report, right before the November mid-term elections.

If Obama really wants to rebuild America’s international stature and boost the global economy, trade is a perfect place to start. At the moment, world trade is projected to expand by just 4.3 percent in 2010 and by 6.2 percent in 2011, according to the World Bank. Not good enough, given a big drop in 2009. Once healthcare is either passed or defeated, Obama needs to get that trio of trade agreements passed. And he needs to defuse tensions with China. In short, Obama needs to lead.

16 comments

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Advancing free trade is a postive-sum game that promotes prosperity and freedom here in the U.S. and abroad. Allowing emerging economies to exploit comparative advantages provides poor nations to earn while U.S. consumers benefit from cheaper wares. I disappointed with Christina Romer and Austan Goolsbee, they should know this.

Posted by Vincent | Report as abusive

Free trade and globalization are losers for the middle class of developed countries.

The middle class sees their wages reduced and standard of living fall so that the economic elites can make even more money by arbitraging pollution, wages and public safety.

It is a bald faced lie to say that free trade is win-win.

Posted by Tom E. | Report as abusive

Too bad we’ve already seen what happens when Obama tries to lead.

Posted by luagha | Report as abusive

[...] JAMES PETHOKOUKIS: How ObamaCare Is Killing Free Trade. [...]

Can you say “incompetent ass” and Marxist ideologue. Unions are killing us, and Obama is the Leader of the Band.

Posted by jgreene | Report as abusive

Globalization benefits the big corporations involved in importing and exporting on the backs of American workers — union and not — who used to manufacture our products, and who cannot change overnight into “knowledge workers.” Those who do find jobs at far lower wages.

As I recall, the South Korean and Columbia free deals were opposed by unions and the Democratic left since the day George Bush negotiated them. Their opposition was based upon a variety of factors but predates ObamaCare. With the Obama Admin in the tank for unions, those deals are DOA and will never be submitted to the Senate under an Obama Administration.

Posted by richardb | Report as abusive

A note to Thomas E:

I trust you are sincerely unknowledgable and not merely pretending to be ignorant, when you attack free trade.

As a thought experiment, instead of worrying about China and India against the US, change your complaint to Alabama and Tennessee against your own home state.

How dare your neighbors buy poultry from Alabama and cars from Tennessee?

See how ridiculous that sounds? Or if it does not register with you, then see also http://www.adamsmith.org/adam-smith-quot es/

Posted by Robert Arvanitis | Report as abusive

Damn those elites “arbitraging pollution, wages and public safety.” so that I can buy the stuff I want at 50% of what the local gouger (That would be “The middle class [that] sees their wages reduced and standard of living fall.”)

I did not realize that there was a property right to gouge.

Posted by Fred Z | Report as abusive

It’s time to hit the reset button and return to a manufacturing-based economy here in the US. The service economy isn’t working, and neither is the global economy.

What is lost in this argument is the fact that we Americans need to make money first in order to power the rest of the worlds’ economies. Flipping burgers won’t quite do.

Step one is to vote for people in Washington who understand how our free market works and will pass legislation to promote it, not restrict it, as the current anti-Americans in power are doing.

Protectionism always assumes, in the face of all evidence to the contrary, that somehow we can erect all kinds of barriers to imports and no one can or will retaliate. In other words, tariff restrictions are an exclusive privilege of the iniator of the trade war. So far, thanks to the Congress’ inaction re Columbia, Caterpillar, which employs union labor in Ill., lost a large and lucrative job in Columbia to Kyocera of Japan, and a Canadian rival. This in the middle of a serious economic recession in which Union jobs also are on the line. Mexico’s retaliatory tariffs on US imports (caused by the Administration’s catering to the Teamsters Union) has cost 25,000 US jobs and 2.6 Billion dollars worth of exports to Mexico. How does lose-lose grab you?

[...] oxygen, it takes someone like James Pethokoukis, the most informative Greek-American since Dimetrios Synodinos, to remind us that President Obama is neglecting (or purposefully ignoring) a hugely important [...]

It’s a fact in the U.S. that skilled labor and middle class workers outside the government sector have seen a severe decline in standard of living since globalization really got rolling and most of our manufacturing moved off shore in favor of lower wages and much less restrictive safety and environmental laws in 3rd world countries.

Both sides of this argument can cite statistics and studies to support their suppositions.

Lies, Damned Lies, and Statistics!

Most middle class Americans have figured it out despite supposed studies and propaganda.

I say bring the trade wars!

Raise the barriers!

Let the 3rd world countries retaliate. They don’t have anything we can’t produce here if the incentive is great enough and the government gets the Hell out of the way.

A global trade war will bring on full-scale depression here, but absolute ruin in the 3rd world.

So much of the 3rd world’s population is now dependent upon food produced by agribusiness in the U.S., Canada, and Australia that millions, or tens, or even hundreds of millions will starve during an ongoing trade war. The ones who aren’t starving will be scrabbling in a field raising enough to feed their families because we won’t be buying the inexpensive products they used to manufacture in order to propel themselves to middle class status in their entirely export driven economies.

Let the Arabs and Russians eat their oil. We won’t be buying any with our economic output cut in half. Not much money for the Ummah to spend on Zakat to fund Al Qaeda and other terrorists when oil sells for $18 / barrel. Won’t be many Chinese buying oil either once their economy craters, and what about the Chinese middle class, will they be content going back to subsistence farming? Will there be a new Chinese revolution, or will China invade Siberia to capture the resources they need to maintain their society at a severely reduced level of economic activity? Will the Russians and Chinese nuke each other out of existence when it becomes clear that the Chinese hold all the non-nuclear cards and can walk into Siberia whenever they want.

Bring it! Burn it all down!

When the ashes cool, we’ll be left astride the world, along with other large nations with adequate resources to maintain an advanced civilization. The enviro-wackos keep harping on the urgent need to reduce human populations. Here’s a great opportunity, through cataclysmic worldwide depression and global famine.

Just keep Obamassiah on his chosen straight and narrow path and let natural consequences do the rest.

Posted by Armageddon Rex | Report as abusive

I could never understand why Democrats opposed the free trade agreement with Colombia. That agreement did not make imports from Colombia to the United States freer. They already are free. Rather, it made exports from the United States to Colombia easier and cheaper for Colombian consumers.
This bothered unions only in a symbolic way; it involved nothing that could be harmful to them. It bothered those who hate the government of Colombia for being an ally of the United States. It is sad, but such ideologues seem to have captured the leadership of the unions and of the Democratic Party.

Posted by Daniel | Report as abusive

To all of those historically and economically ignorant souls spouting Union talking points. What was the effect of trade restrictions at start of the Depression ?

Do you even have a basic understanding of economics ? Are you so invested in getting everything from Uncle Sam that you have completely lost your ability to compete in the workplace ?

Get a job and if you don’t like what it pays get more skills. Otherwise st*u …

Posted by Jeff | Report as abusive

You make interesting links between President Obama’s legislative health care agenda, respect for the U.S. as a global agenda-setter, economic growth through international trade, and U.S. domestic union politicking, Mr. Pethokoukis.

“In short, Obama needs to lead.”-James Pethokoukis

He doesn’t feel the need.

Obama prefers to preside rather than lead. I saw the same fault in President George H.W. Bush. Leading is work, risks making one unpopular, and is difficult because no significant decision in the Oval Office affects Just One Thing.

Posted by Micha Elyi | Report as abusive

[...] Yet, President Obama pushes ahead with health care with a dizzying price tag that could potentially own or destroy our economy in as little as fifteen to twenty years because he says its important. Important to who Mr. [...]

Armageddon Rex: “Bring it! Burn it all down!”

I believe the name of your plan is “Reign in Hell,” right?

Posted by Jerry | Report as abusive

Jerry:

I believe the name of your plan is “Reign in Hell”, right?

HOOAH!!!

We’ve had our bit o’Hell!

Let’s let all those kleptocrats in the turd world and the U.N. General Assembly have theirs.

Let’s let most of the EUropansies defend themselves for a change.

Most of the rest of the world hates the U.S. even when we are risking U.S. lives and spending billions in U.S. money to help them after tidal waves, earth quakes, typhoons, invasions, local economic crisis, famines, etc.

Screw them all. No more blood or treasure to help anyone aside from allies we can really count on. Let’s put our own house in order first and just elliminate any likely threats in the quickest, cheapest, most effective manner possible

Viva Fortress America!

Posted by Armageddon Rex | Report as abusive