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Rising Tide of Protectionism

29/03/2009

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Mark Landler writes at the NY Times on various aspects of the rising tide of protectionism.

This article covers some interesting ground, Landler begins:-

After repeated pledges by world leaders to avoid erecting trade barriers, protectionism is on the march, provoking nasty trade disputes and undermining efforts to plot a coordinated response to the deepest global economic downturn since World War II.

The last G20 meeting pledged to combat protectionism. Yet what did they all do, sanction protectionist steps. Amongst the worst offenders the US with the appalling Pelosi stimulus bill, which Obama stood by and failed to provide any executive guidance or leadership over. Some maintain he did stand against it. Adam disagrees.

“No sooner was the G-20 statement issued than it was breached,” said Daniel M. Price, an official in the Bush administration who helped negotiate the agreement. “Instead of just talking about trade liberalization, countries need to take immediate steps to show they mean it.”

Far from heeding their pledge not to erect new barriers for 12 months, many countries have raised import duties or passed stimulus measures with trade-distorting subsidies. The World Bank, in a report last week, said that since the Washington meeting, 17 members of the Group of 20 had adopted 47 measures aimed at restricting trade.

That is really helpful. Then:-

The most vivid example of that policy is the “Buy America” provision in the stimulus package, intended to ensure that only American manufacturers benefited from public-spending projects. The Obama administration persuaded Congress to water it down, and Mr. Obama has taken up Mr. Bush’s warnings about the dangers of protectionism.

Adam believes Obama has come, if at all to any true understanding of the issue only lately and with reluctance. This belief is underpinned by the following.

But pressures are building on other fronts. Last week, the energy secretary, Steven Chu, said he favored tariffs on Chinese goods if China did not sign on to mandatory reductions in greenhouse gas emissions — underscoring how the “green economy” could be the next trade battleground.

Adam has posted before on how many nations including the French and the EU will use ‘green’ to provide cover for old-fashioned naked protectionism. Just consider, for example the following:-

Mr. Obama signed a $40 billion spending bill that scrapped a program enabling Mexican trucks to haul cargo over long distances on American roads. Mexico retaliated by imposing duties on $2.4 billion worth of American goods — everything from pencils to toilet paper. The trucking dispute has its roots in the North American Free Trade Agreement, or Nafta, which guaranteed Mexico, Canada and the United States access to one another’s highways for cargo transport by 2000.

While resistance in Congress to Mexican trucks is long-running, based in part on safety and environmental concerns, American officials worry it will cause broader frictions with Mexico.

“It’s very worrisome to the Mexicans because it’s seen as protectionism,” said Thomas A. Shannon Jr., the assistant secretary of state for Western Hemisphere affairs, who is working with other officials to devise a new pilot program for trucks that will satisfy critics in Congress.

Landler concludes:-

Given Mr. Obama’s ambiguous positions on trade during the campaign — he favored renegotiating Nafta — economists praise him for holding the fort against protectionism so far. But as stimulus programs begin to take hold, they could encourage consumers to buy more imported goods, further fanning antitrade sentiment.

“The U.S. is in such great danger of backing away from free trade,” said Kenneth S. Rogoff, a professor of economics at Harvard. “The next two years could be a disaster for free trade.”

Adam suggests that greening will be the key way protectionists seek to impose their benighted and ignorant agendas upon the world. Smoot Hawley would be so very proud of the green protectionists. The rest of us will pay the consequences of this Luddite tendency and the the president with training wheels.

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