President Barack Obama is neither a committed free-trader nor a hard-core protectionist. But his continuing failure to commit to a pro-trade agenda amounts to de facto protectionism and subverts his economic and foreign policy objectives.
Reacting recently to a provision in the climate change bill that would impose trade penalties against nations that do not limit carbon emissions enough, the president said, At a time when the economy worldwide is still deep in recession and we've seen a significant drop in global trade, I think we have to be very careful about sending any protectionist signals.
In that mild rebuke of protectionism lingers the essence of the administration's nascent trade policy: conditional, ambiguous and not particularly reassuring.
Earlier this year, the president suggested that Congress avoid language in the stimulus bill that could provoke a trade war. Congress responded by pruning the bill's most overtly protectionist provisions. But buy American fever has nonetheless permeated the government procurement market. Uncertainty surrounding the arcane rules has caused contractors to render their own judgments about what qualifies. Not only have eligible foreign companies been excluded from the market, but U.S. companies that use imported raw materials (including California's entire steel industry) also have been shut out.
Canadian municipalities have responded with don't buy American rules, while the Chinese and others have introduced their own buy-local provisions, all to the chagrin of U.S. exporters and the general economy.
One would expect the president to respond with dispatch, at the very least issuing clear implementing guidelines. Instead, the Obama administration has done nothing but seek comment. Our comment is this: The president's disregard for the matter is slowing economic recovery, tempting further escalation by our trade partners and cementing the United States' reputation as an international trade scofflaw.
Likewise, when Congress defunded a program that enabled Mexican trucks to operate on our roads - placing the U.S. in violation of the North American Free Trade Agreement, Obama offered assurances of a quick resolution. Five months later, there is no fix in sight. To hasten a resolution, the Mexican government imposed $2.4 billion in retaliatory duties on about 90 U.S. exports, and a Mexican trucking association filed a $6-billion lawsuit against the U.S. government.
The reduction in cross-border trade and investment cannot be the economic elixir the president had in mind, nor is the dispute his preferred launching point for diplomatic relations with Mexico. Yet the administration is content, after five months, to just study the problem. How much study is needed to conclude that blatant violation of our NAFTA obligations, plus potentially $8.4 billion in direct costs, plus higher transportation costs on the entire North American supply chain for the benefit of the Teamsters, is a bad idea?
Meanwhile, despite claims that the administration would work with Congress to pass long-pending trade agreements with Panama, Colombia and South Korea, those deals remain hostage to cynical politics.
DANIEL IKENSON is associate director of the Center for Trade Policy Studies at the Cato Institute, and SCOTT LINCICOME is an international trade attorney in Washington. They are the co-authors of the Cato Institute study, Audaciously Hopeful: How President Obama Can Help Restore the Pro-Trade Consensus.
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