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[Trade] Protection Rolls On
The American ^ | Wednesday, December 15, 2010 | Philip I. Levy

Posted on 12/19/2010 7:19:23 AM PST by 1rudeboy

President Obama remains conflicted on trade. Consider this week’s ‘victory’ over China at the World Trade Organization.

U.S. Trade Representative Ron Kirk this week trumpeted the administration’s victory over China at the World Trade Organization (WTO). Describing a dispute settlement decision that upheld the legitimacy of U.S. tariffs on imported Chinese tires, Kirk said, “This is a major victory for the United States and particularly for American workers and businesses.”

The Wall Street Journal even joined in the triumphalism: “The World Trade Organization handed the U.S. a big victory in a fight with China over tire imports, bolstering the Obama administration's effort to show it is tough on enforcement.”

There is no disputing the legal victory, but it does little or nothing for American workers and businesses, and was not an enforcement action.

The U.S. government can use a number of different WTO-approved mechanisms to reduce or block imports from another country. If it finds that a country has been selling goods at “less than fair value,” it can pursue a dumping investigation. If it finds that a country has been illicitly subsidizing its exports, it can take up a countervailing duty case. Those are the two most common approaches, and each involves a two-stage investigation. First, the U.S. International Trade Commission (USITC) determines whether the domestic industry has been injured. Second, the Commerce Department assesses the extent of the exporting country’s violation—the dumping margin or the size of the subsidy. In the end, tariffs may be applied.

Those could reasonably be called enforcement actions and they have been pursued by Republican and Democratic administrations for decades. The process is not especially political, because Congress has removed the step in which the White House gets to decide whether or not the new protection is a good idea.

The tariffs against Chinese tire imports are entirely different. The authority comes from a special, temporary safeguard provision that the United States and China negotiated when China joined the WTO in 2001. That provision (Section 421) does not require any evidence of wrongdoing. It just requires evidence that imports have caused “market disruption.” The investigation is carried out by the same body that investigates injuries, the USITC, which may be part of the confusion.

China safeguard cases differ from enforcement cases not only because they require no violation of rules (to my knowledge, no one argued there was any violation in the tires case), but also because the president retains ultimate discretion over whether the protection is a good idea. In the Bush administration, multiple Section 421 cases cleared the low USITC hurdle, but were then rejected by the White House. The main reason—at least for those decisions in which I participated—was that protection would not have helped anyone.

It can be tempting to think of China and the United States, economic behemoths both, as the only two countries in the world. That’s wrong, of course, and the error matters. These China safeguards only impede Chinese exports, not exports from the rest of the world. In the Bush administration cases, there was evidence that protection would just leave U.S. consumers paying higher prices while production shifted to other countries.

The same arguments applied in the tires case (see here), which was brought by the United Steel Workers, not the domestic industry. President Obama, unlike his predecessor, decided to proceed anyway. The good folks at the Democratic Leadership Council recently offered this assessment of the tire tariffs one year later: “Altogether, then, the tariff seems to have shifted the sources of imports, with China shipping fewer tires and others more, but made little apparent change in total tire-trade or employment.”

So what does this week’s WTO tires decision really mean? That the Obama administration’s protective measure was not illegal, only unwise and ineffective. That’s not much to celebrate.

Since before he took office, President Obama has been conflicted on trade. The Chinese tire tariffs were part of the president’s “split the difference” trade approach, in which he tried to appeal equally to trade skeptics and enthusiasts within his party. He applied tariffs to Chinese tires, but at half the level the USITC recommended. He argued for exports with his National Export Initiative, but not for imports. He inveighed against the malign effects of trade, but resisted blatant protectionism. He would support new trade agreements in principle, but not back them in practice.

The recent decision to conclude the free trade agreement with Korea may have indicated a shift to a more fully pro-trade stance. Perhaps that stance will allow a new candor in discussing other trade actions, like the needless, but permissible, protection against Chinese tires.


TOPICS: Business/Economy; Editorial; Foreign Affairs; Government; Politics/Elections
KEYWORDS:

1 posted on 12/19/2010 7:19:24 AM PST by 1rudeboy
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To: 1rudeboy

Imagine how bad it would be if they stopped giving him blow jobs.


2 posted on 12/19/2010 7:22:28 AM PST by cripplecreek (Remember the River Raisin! (look it up))
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To: All

You know Free Trade Globalism is bad when Obama is acting less Communist than the Free Traders are

The Free Traders are so ignorant....they do not realize that this WTO challenge regarding the Commie Chinese tires was started by the Bush Admin years ago.

You do not make a claim to the WTO on a trade infraction without proposing a rememdy to it....ie “tariff”. You figure the Free Traders would know how their own statist friends at the WTO do things.

But, hey....you know how to keep a Free Trader off your porch? Tell them its “Made In America”


3 posted on 12/19/2010 7:28:18 AM PST by UCFRoadWarrior (Whenever something is "Global"...it means its bad for America)
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To: UCFRoadWarrior
The Free Traders are so ignorant....they do not realize that this WTO challenge regarding the Commie Chinese tires was started by the Bush Admin years ago.

Bush was in office in 2009? We learn something new from protectionist blowhards every day.

Hey, I have an idea, what if we starting using you to heat some of our empty factories?

4 posted on 12/19/2010 7:38:59 AM PST by 1rudeboy
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To: Toddsterpatriot; Mase; expat_panama
Bush today = hero
Bush yesterday = goat.
5 posted on 12/19/2010 7:40:34 AM PST by 1rudeboy
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To: 1rudeboy

Maybe you were mistaken the other day saying it was protectionist tears leaving the floor wet, I’m betting it’s drool.


6 posted on 12/19/2010 8:38:10 AM PST by expat_panama
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To: expat_panama

They make so many self-contradictory arguments so quickly it makes one’s head spin.


7 posted on 12/19/2010 8:41:22 AM PST by 1rudeboy
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To: UCFRoadWarrior

After all the stories about corrosive Chinese drywall, poisoned pet food, polluted fish and the rest, I don’t know why anyone would want to put Chinese tires on their cars. Don’t need Obama or the WTO to decide that. This sounds more like a victory for the unions, whose leaders have done so much to bring Obama’s socialism to the US. The free traders are communists and statists? Won’t try to unravel the thought process that led you to that upside down conclusion, but if you want to keep free traders off your porch (along with the postman, the FedEx guy, neighbors and everyone else), just flail your arms and rant away from your porch as you have.


8 posted on 12/19/2010 8:46:51 AM PST by TimSkalaBim
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