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Posts tagged with “Free Trade”

An Open Letter to Lou Dobbs

Those of you who know me, know I’m a pretty big backer of Free Trade and find most protectionist trade arguments to be either 1) economically ignorant and 2) union-backed puffery.

One of the biggest media mouth-pieces for “Fair Trade” in the media is Lou Dobbs; formerly of CNN.  It’s not been a pretty thing to watch as Dobbs has become a crazed hack for multiple cranks, conspiracies, and other entities over the past few years. (If memory serves, he’s still a firm believer that the “North American Union” is going to happen.)

Occasionally, Dobbs will sit down for an actual debate or two on the subject of trade and globalization with Cafe Hayek’s Don Boudreaux, Chairman of the Economics Department at George Mason University.  One such debate will be on Fox Business Network in a few weeks.

After they were done, Boudreaux wrote a letter to Dobbs on his blog which is quite amusing if you understand both of their stances on the issue of global trade.

Dear Mr. Dobbs:

During our recent debate on John Stossel’s show (to air in a few weeks on Fox Business), you insisted that free trade exists only – and trade is mutually beneficial only – when both parties to a trade are equally willing to purchase each other’s outputs.

A few years ago I bought your book Exporting America.  Have you bought my book, Globalization?  If not (and the evidence is that you, indeed, haven’t bought my book), was I made worse off by my purchase?  Were you the only party to gain from that trade?  Should I be concerned about the trade deficit that I now have with you?  Were you practicing “unfair” trade?  Was I “exporting” a part of myself – a part never to be regained unless and until you buy my book?

Judging from your analysis of Americans’ trade with the Chinese – and believing you to be a man whose intellect despises inconsistencies – I’m sure that you’ll answer ‘yes’ to each of the above questions.  So I’ll be happy to return your book for a full refund from you, or to sell you my book – autographed, of course.

Donald J. Boudreaux

I don’t think the check from Dobbs is in the mail.

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A Trade Agreement We Didn’t Have to Do

Meant to post on this last week.

The U.S. and Canada, its largest trading partner, reached a preliminary deal to settle what had become an acrimonious dispute over “Buy American” provisions in the U.S. stimulus package.

The deal, if approved, will give companies on both sides of the border access to government procurement contracts at the state and local levels. U.S. Trade Representative Ron Kirk said the increased access for U.S. firms in Canada would be worth billions of dollars in contracts.

Last year’s U.S. stimulus package requires that manufactured products used in projects paid for with federal stimulus funds be made in the U.S. While the restrictions were meant to exempt countries like Canada that have existing trade treaties with the U.S. and have signed on to the World Trade Organization’s government procurement pact, the Canadian government in the 1990s excluded its provinces and towns from those rules.

That hitch had frustrated companies on both sides of the border and provoked threats of retaliatory “Buy Canada” action from some Canadian municipalities.

Rep. Kevin Brady (R., Texas) said the deal is “helpful but doesn’t fix the problem,” predicting the Obama administration will remain on the defensive with other countries over Buy American provisions. Administration officials hailed the agreement.

“This administration made clear to Canada from the outset that any agreement to provide Canada with expanded access to U.S. procurement absolutely must provide guaranteed reciprocal access for U.S. exporters to supply goods and services to Canada through provincial and territorial procurement contracts,” Mr. Kirk said.

Resolution of the percolating trade spat comes as the Obama administration aims to double U.S. exports in the next five years—a plan many experts agree will be a reach without a global economic recovery and the conclusion of new trade agreements the White House has so far been reluctant to push. Free trade is deeply unpopular with many core Democratic constituencies.

Canadian Minister of International Trade Peter Van Loan said his government “stood up for Canadian businesses and workers in resolving this issue with our U.S. partners.”

Pardon me, but this is that one time in free trade deals where I don’t feel like celebrating.

If anything should be celebrated, it should be the colossal stupidity of Wisconsin’s own Dave Obey (D) and other writers of last year’s stimulus package.  By their “progressive, forward-thinking ways” at the behest of their union buddies in the government contractor set, we were able to piss off our largest trading partner, willing violate two — count ’em two — two trade agreements our nation is signatories to, and now setting up a system where only those with side agreements like this are allowed to have what they did pre-2009.

In short, we set up a new trade barrier to all nations, and have given one nation, that being Canada, a return to the previous status they had.  One wonders when Australia, Mexico, and the legions of other nations will ask for their own.

And now the punchline: Congress, which hasn’t given the thumbs up to a trade agreement since 2007, may still have to vote on this thing!

Former CATO Institute scholar and now practicing DC Trade Attorney Scott Lincicome wrote something similar over the weekend at his blog.

So basically, the United States erected a massive trade barrier last year and now is patting itself on the back for: (i) exempting a single country from that barrier’s obviously nasty provisions, while keeping the protectionism in place for more than 100 other trading partners; and (ii) using Buy American as a club to force Canada into opening its own procurement market, thus reinforcing the outdated and dangerous idea that reciprocity should be the goal of all trade negotiations.  And it only took them a year to do it!

Please pardon me if I don’t applaud this exciting breakthrough.

I’m not applauding it either.  I’m not applauding it either.

Just stop this kabuki theater and end the damn “Buy American” Provisions already.

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China Considering Challenging US Auto Subsidies

Truth be told, I saw this coming when the World Trade Organization recently ruled in Boeing’s favor against the European Union’s long history of subsidizing Airbus (Airbus has rarely — if ever — made a profit without British, French, and German taxpayers forking the bill.).  Eventually, some country would look at the various auto bailouts, tax subsidies, corporate welfare packages states have given them, etc., etc., and come with a case against the US’s recent subsidizing of the auto industry and bring it before the WTO over the same reasons Boeing took on Airbus.

I just never expected it’d be the Chinese to launch the challenge.

China has told the United States it is launching a trade investigation that could lead to new import duties on autos and sports utility vehicles made by Chrysler, Ford and General Motors, a U.S. industry official said on Wednesday.


“The documents containing the charges were presented by China to the U.S. government this week, but have not yet been translated. Therefore we are not in a position to comment on the matter at this time,” Steve Collins, president of the American Automotive Policy Council, told Reuters.

He estimated the traditional Big Three U.S. automakers export about 9,000 vehicles to China.

Total U.S. passenger car exports to China — which would also include those made by manufacturers such as BMW and Nissan — were $1.1 billion in 2008.

As a likely-end consumer of American cars, the Chinese government has a very legit beef with the auto bailouts and even the “Cash for Clunkers” programs.  Without them, the excess inventories might have made their way to China; at a discount, and sold there.  With the programs and subsidies, the Chinese are paying full price was last year’s models.

We’re quickly seeing the other side of the coin about having the Chinese as full-fledged World Trade Organization members.  Though we can now sue them with a governing body to enforce the rulings found against them; they can sue back.

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Tire Tariffs: 1 Job Saved Equals 20 Jobs Lost

Studies like this make me wonder why they call it “‘protectionism” in the first place.  I mean, what exactly is being protected, when most of the time, a hell of a lot is lost elsewhere.

The tariff will cut the U.S.’s intake of Chinese tires by two thirds, according to research conducted by Thomas J. Prusa, an economics professor at Rutgers University. To fill the void, manufacturers will look to other developing economies. Prusa estimates such a move will take 12 to 18 months, which could leave tires in short supply.

Although the tariff was designed to save U.S. jobs, Prusa’s research suggests that the opposite will occur. For every U.S. tire job saved by the tariff, 20 jobs downstream in related tire industries will be lost, he says. Not only will there likely be a shortage of tires over the next 12 months, but many tire sellers will raise prices to help pay for the tariff. “We will see about 20 million fewer tires sold in the next 12 months,” Prusa says.

Many dealers fear a drop-off in demand. “People have been putting off the purchase of tires anyway,” says Bill Trimarco, the CEO of Hercules Tire & Rubber, a private-label tire supply company in Findlay, Ohio. “When the price of tires goes up, [fewer] tires will be sold.”

Still, after getting socked with a $325,000 bill per the new tariff earlier this week, Trimarco says the company was forced to raise prices 10% to 15% on Chinese tires. “This is an anti-small business policy. A company like Goodyear won’t get hit, but a lot of small businesses will be hard hit,” he says.

So in short, the newly announced tire tariffs on tariffs from China will do the following: cause tire prices to increase, lead to a shorter inventory of tires because the Chinese will take their business else where, lead to increased accidents on the roads because people are riding their current tires longer, small, local tire shops will suffer, and people will be out of work as the economic dominoes fall into place.

I sure feel protected, don’t you?

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Canada-U.S. Reach “Buy American” Exemption Agreement

This is wonderful news!

(Of course, it would have been better if Congress and the White House never put those lame-brained, idiotic, economically-ignorant, and did I mention job-killing “Buy American” provisions in the stimulus to begin with.)

A deal may be imminent that will exempt Canada from the controversial Buy American provision included in the U.S. stimulus package, CBC News has learned.

According to Canadian government sources, Ottawa expects that the White House will use its discretionary power to exempt Canada from the clause very soon. In return, Canada would simultaneously announce that its provincial and municipal doors are now wide open to U.S. companies.

Sources say the announcement could be made when the two trade negotiators, Ottawa’s Don Stephenson and Washington’s Everett Eissenstat hold their first formal meeting.

The provision gives priority to U.S. iron, steel and other manufactured goods for use in state-level and municipal public works and building projects funded with taxpayer stimulus money. Canadian governments and businesses have railed against the policy.

During Prime Minister Stephen Harper’s visit with U.S. President Barack Obama last week, Harper again made a pitch for an exclusion for Canada from “Buy American” provisions.

Harper and Obama said the two sides were looking into ways of addressing the issue, including the possibility of including the provinces in a multilateral deal.

Obama has said the clause conforms with all World Trade Organization and NAFTA regulations because it deals with what’s called sub-national governments — such as states and municipalities — which aren’t included in trade treaties.

Last week, Obama suggested that Canada’s provinces must open their local markets to American companies. Canadian officials say the White House first stated its terms last spring, after Obama’s visit to Ottawa.

One worried trade partner seemingly satisfied, Lord only knows how many more will now come knocking on the door for their exemption as well.

I’ve said it before, and I’ll say it again: Congress and the White House need to revoke that provision in the stimulus bill.

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DOT Blames Health Care Debate for No Resolution to Mexican Trucks

Funny, I didn’t know logistics was connected to health care.

Talk about your lame excuses; just admit you’ve handed the Teamsters a victory for the low, low price of $2.6 Billion and a few thousand jobs.

The Obama administration is not expected to resolve the cross-border trucking dispute with Mexico this year, the Department of Transportation’s the undersecretary for policy said this week.

According to an article in Inside U.S. Trade, Roy Kienitz made the comments during a meeting with the Alliance to Keep U.S. Jobs last week.

Kienitz told the group that the issue was out of the DOT’s hands and would have to be resolved by White House officials, who are occupied with Obama’s health care reform.

The dispute involves allowing Mexican trucks to haul cargo beyond the U.S. border’s 20-mile commercial restriction zone.

The Bush Administration’s year-long pilot project was axed by Congress after intense lobbying by U.S. labor unions, owner-operator and citizen advocacy groups who feared loss of U.S. jobs to Mexican drivers and argue that Mexican trucks will not be safe.

Mexico retaliated by imposing penalty duties on $2.3 billion in imports from 89 products from the U.S.

The president promised to restore the cross border project in some form earlier this year.

Many groups, including the Alliance to Keep U.S. Jobs, are urging the government to resolve the situation, as a result of these retaliatory tariffs.

A new study by the U.S. Chamber of Commerce says that by canceling the pilot program, the government caused $2.2 billion in higher costs for U.S. families and companies, $2.6 billion in lost U.S. exports, and more than 25,000 lost jobs for American workers.

One of the funding members of “Alliance to Keep U.S. Jobs” is Appleton Paper.  Their leadership has said in the past without a resolution to the Mexican Trucking pilot program and the tariffs being revoked, they may have to layoff more employees in Northeast Wisconsin.

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Time to Get “Mad About Trade”

Thanks to my friend Chris Moody at the CATO Institute who was kind enough to arrange for me to get a free copy of Daniel Griswold’s new book, “Mad About Trade: Why Middle America Should Embrace Globalization,” which is supposed to hit bookstores this Friday, September 25th.

Now of course, the ‘cost’ of this free book is that I will have to write about the book here on the blog.  This is something I have no problems or issues about since I love books about free trade.  One of my favorite ones is the latest from Jagdish Bhagwati, “Termites in the Trading System,” which is a free trade argument against more bilateral trade agreements.  Bhagwati instead urges for more multilateral agreements along the line of globally-encompassing World Trade Organization agreements like Uruguay and Doha.

Mad About Trade

In the meantime, here’s an online interview of the author on Fox News Online webshow “Freedom’s Watch,” hosted by Judge Andrew Napolitano.

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Rockefeller: Bad Time to Be Protectionist

(H/T Daniel Griswold of the CATO Institute)

Great op-ed in yesterday’s New York Times by David Rockefeller (Yes, that David Rockefeller) where he talks about how the Obama White House is very much on the same path as the Hoover Administration when it comes to international trade (and finance).  He points out many of the same items I have on this blog in the past about the creeping protectionism in legislation from Congress and actions from the White House which contradict the “We stand by open trade” comments of the President.

Now, it’s easy for you to say, “Oh Rockefeller’s a Billionaire, of course he’s going to be for free trade.”  That may be true, but the Standard Oil heir has a more interesting take than most about the Great Depression and Trade Wars past; he’s lived through them before.

He was 14 when the stock market crashed in 1929 and was still in his teens when Smoot-Hawley was enacted into law.

President Obama should resist the desire to accommodate the forces of protectionism from unions, environmentalists and cable television pundits alike. Giving in to their demands may be politically astute, but it would send the wrong message to our trading partners and, more important, inflict damage on the already weakened American economy. Despite the recent rally in the stock market, the next two or three years could still be very painful.

I lived through the stock market crash of 1929 and the Great Depression that followed it, and I saw that there was no direct cause and effect relationship. Rather, there were specific governmental actions and equally important failures to act, often driven by political expediency, that brought on the Depression and determined its severity and longevity.

One critical mistake was America’s retreat from international trade. This not only helped to turn the 1929 stock market decline into a depression, it also chipped away at trust between nations, paving the way for World War II.

In late 1929, intense protectionist pressure from farm, labor and business groups prodded the Republican-dominated Congress to pass the disastrous Smoot-Hawley Tariff Act, which increased rates on imported goods to historically high levels. President Herbert Hoover signed it into law in June 1930, and in doing so raised the prices of more than 20,000 items produced abroad.

The results were devastating. Our trading partners retaliated by raising their own tariffs on American goods. From 1929 to 1933, imports from Europe into the United States declined by almost two-thirds and our exports were more than halved. From 1929 to 1934, overall world trade declined by some 66 percent. The tariffs took a toll on the domestic economy as well. When trading partners reciprocated with tariffs of their own, American importers found their goods priced too high to sell, while exporters experienced depressed demand. In both cases, American workers lost jobs. The unemployment rate rose from around 9 percent in 1930 (a bit lower than it is today) to close to 16 percent a year later and a staggering 25 percent in 1933, when Franklin D. Roosevelt took office. We could be at a similar crossroad today.

The 94 year-old Rockefeller ends his piece with a plea for trade policy sanity from the Administration and Congress.  That they should use this week’s G-20 meeting in Pittsburgh as more than just face-time with world leaders and hamper out a sound economic policy based on trusting our trade partners for the benefit of the world’s economic well-being; not one based on sound bites while secretly aiding the self-interests of domestic political allies.

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A Trade War, on the Cheap

This story took me for a loop this morning.

The cost of preparing, filing and arguing the complaint the United Steelworkers union filed against China is relatively inexpensive, according to experts in the field.

Legal fees for most cases will run well under $1 million, according to a K Street source with experience on the filings. The safeguard case could cost as little as $750,000.

To put that in perspective, it’s less than half the estimated cost of filing legal papers and then arguing an antidumping or countervailing duty case. Those cases typically involve more legal work and cost between $1.25 million and $1.75 million. Expenses can run as high as $2 million for complex cases.

Those are good prices to know if a trade war really does break out.

This is why many trade experts are often weary of “Section 421” cases.  They’re not just known for their incredibly easy burden of proof requirements, but the last court of appeal is the President of the United States himself, who can decree how they can be enforced under the broad heading of “national economic interest.”

So far, the only interest being served is the United Steel Workers and the AFL-CIO’s.  Of course, after this statement by U.S. Trade Representative Russell Kirk today in Brazil, you wonder who the heck is actually winning out on this decision.

A spat over US tariffs on Chinese tires need not trigger a trade war between Washington and Beijing, US Trade Representative Ron Kirk said Wednesday.

“I don’t believe it should or need spark any trade war,” Kirk said during a visit to Brazil.

“In the short-term it could mean that we buy a lot more tires from Brazil,” he added to a conference of Brazilian businesspeople.

The United States last week imposed punitive tariffs of 35 percent on Chinese-made tire imports — a move that prompted Beijing to lodge a complaint this week at the World Trade Organization.

WTO chief Pascal Lamy said Wednesday that Washington’s move was a “matter of concern” that could increase the risk of a “tit-for-tat spillover.”

Beijing charges that Washington’s move violates WTO rules but US President Barack Obama has denied that it amounted to protectionism.

Ok, so we’ve replaced cheap Chinese tires with cheap Brazilian tires.  Weren’t the USW telling us cheap imports were killing their jobs?

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China Mulls Trade Retaliation

What’s worse, nationalistic sentiment on Chinese websites and forums could lead to a harsher penalty than even many Chinese trade experts believe would be warranted.

The big fear here is escalation from both sides which will only worsen an already weakened global economy.  Hang onto your hats and what’s left of your savings.

China unexpectedly increased pressure Sunday on the United States in a widening trade dispute, taking the first steps toward imposing tariffs on American exports of automotive products and chicken meat in retaliation for President Obama’s decision late Friday to levy tariffs on tires from China.

The Chinese government’s strong countermove followed a weekend of nationalistic vitriol against the United States on Chinese Web sites in response to the tire tariff. “The U.S. is shameless!” said one posting, while another called on the Chinese government to sell all of its huge holdings of Treasury bonds.

The impact of the dispute extends well beyond tires, chickens and cars. Both governments are facing domestic pressure to take a tougher stand against the other on economic issues. But the trade battle increases political tensions between the two nations even as they try to work together to revive the global economy and combat mutual security threats, like the nuclear ambitions of Iran and North Korea.

Mr. Obama’s decision to impose a tariff of up to 35 percent on Chinese tires is a signal that he plans to deliver on his promise to labor unions that he would more strictly enforce trade laws, especially against China, which has become the world’s factory while the United States has lost millions of manufacturing jobs. The trade deficit with China was a record $268 billion in 2008.

China had initially issued a fairly formulaic criticism of the tire dispute Saturday. But rising nationalism in China is making it harder for Chinese officials to gloss over American criticism.

“All kinds of policymaking, not just trade policy, is increasingly reactive to Internet opinion,” said Victor Shih, a Northwestern University specialist in economic policy formulation.

Eswar Prasad, a former China division chief at the International Monetary Fund, said that rising trade tensions between the United States and China could become hard to control. They could cloud the Group of 20 meeting of leaders of industrialized and fast-growing emerging nations in Pittsburgh on Sept. 24 and 25, and perhaps affect Mr. Obama’s visit to Beijing in November.

“This spat about tires and chickens could turn ugly very quickly,” Mr. Prasad said.

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