CATO INSTITUTE BLOG ON PRESIDENT OBAMA AND TRADE -- RIGHT ON!

HERE’S A BLOG ISSUED BY THE CATO INSTITUTE LAST WEEK ON THE PRESIDENT’S STATE OF THE UNION ADDRESS.

WE COULDN’T HAVE WRITTEN IT BETTER –

President Obama Offers Free Trade as Reluctantly as Possible

By K. WILLIAM WATSON SHARE

President Obama has proven once again that he is his own worst enemy on trade policy. Despite expectations that he would make a strong push for trade promotion authority (TPA), President Obama offered only quick mention of trade in this week’s State of the Union address. 

Although he did ask Congress to pass TPA to help him complete free trade agreements, the president backed up that request with some of the weakest arguments possible. I’ll give you the entire two paragraphs here:

21st century businesses, including small businesses, need to sell more American products overseas. Today, our businesses export more than ever, and exporters tend to pay their workers higher wages. But as we speak, China wants to write the rules for the world’s fastest-growing region. That would put our workers and businesses at a disadvantage. Why would we let that happen? We should write those rules. We should level the playing field. That’s why I’m asking both parties to give me trade promotion authority to protect American workers, with strong new trade deals from Asia to Europe that aren’t just free, but fair.

“Look, I’m the first one to admit that past trade deals haven’t always lived up to the hype, and that’s why we’ve gone after countries that break the rules at our expense. But 95 percent of the world’s customers live outside our borders, and we can’t close ourselves off from those opportunities. More than half of manufacturing executives have said they’re actively looking at bringing jobs back from China. Let’s give them one more reason to get it done.

This is essentially a protectionist argument in favor of trade agreements. According to the president, the trade agreements his administration is negotiating will protect American workers from (1) China, (2) unfair competition, and (3) outsourcing. They’ll level the playing field and bring back jobs to America.”

Isn’t that what tariffs and subsidies are for?!

Free trade and free trade agreements are meant to open up the U.S. economy to foreign competition and opportunity. The result is economic growth, innovation, better quality of life, more jobs, higher wages, and international peace. President Obama could have based his argument on any one of those rationales. He instead chose to talk about who makes the rules. I suppose it shouldn’t surprise anyone that this president thinks economic success comes from government writing the best rules.

At the core of this focus on rules is the call for enforcement. The president says “we’ve gone after countries that break the rules at our expense.” He may be referring to bringing cases at the World Trade Organization, where the United States has won nine cases, mostly against China, since Obama took office. During that same period the United States lost 15 cases brought by other members—we are a notorious trade scofflaw, even when we write the rules. Ironically, the most common way the United States breaks the rules is through abusive antidumping measures, which technically count as part of Obama’s “enforcement” efforts. Sometimes, though, breaking the rules simply means selling lots of goods at low prices. For example, in a past address President Obama touted actions taken to protect the U.S. tire industry from mundane Chinese competition.

This enforcement rhetoric appeals to the ranks of trade-skeptic Democrats who routinely use foreign rule-breaking as an excuse for protectionism and a reason to oppose trade agreements. 

To Obama’s credit, perhaps knowing that the president is also a protectionist will convince some of those Democrats to support his trade agenda.

I doubt our negotiating partners overseas find the president’s “pitch” at all reassuring. Calling our trade partners cheaters who need to be reined in with new rules that benefit American companies and keep jobs in America is what protectionists do when arguing against free trade. It is a sad and cynical way to promote free trade agreements.