China tariffs pose needless risk...
Or so I argue in this new column for National Journal [link expires in two weeks].
The fact that the China tariffs may be legal does not refute the charge of protectionism. One of the main setbacks to liberal trade since the economic crisis began has been governments' willingness to resort to WTO-conforming trade restrictions. For instance, a country may have tariffs that are lower than the rates they have committed themselves to at the WTO -- their so-called bound tariffs. So governments often have scope to raise their tariffs for the usual bad protectionist reasons, without actually cheating...
So protectionism is sometimes legal. That does not make it good policy -- still less, as the administration pretends, an effort to uphold the ideal of "free and fair trade." Of course, the Obama White House is aware of all this. In the China tires case, it knows how safeguards are supposed to work. In reality it is making a cynical political calculation. Dressing the action up as an effort to get tough on trade cheats delights the unions -- which seem to regard most imports as unfair by definition -- and thrills Democrats, who can use a little protectionist meat thrown their way at the moment, to take their minds off the administration's equivocation on health care reform and the public option. The tire tariffs have nothing to do with upholding high standards in trade policy.
But note this excellent piece by Alan Beattie. It takes a quite different line:
The conventional wisdom in Washington is that this is a straight trade-off. Placate the labour unions on trade and get them to support Mr Obama on healthcare. Whisper it quietly, and be prepared for accusations of heresy to rain down on your head, but that might be a deal worth making.
Whether or not any such exchange is possible is unclear to anyone below grandmaster level in the perpetual three-dimensional chess game of acquiring, retaining and expending political capital that goes on in Rahm Emanuel's head. (White House officials deny a trade-off, but then they would, wouldn't they?) Yet if that is the political calculation, and if it works - two very large ifs, to be sure - it might end up being good for Americans and good for globalisation.
Actually I partly agree with Alan. If things played out this way, it would be a very good deal. Universal health care is an enormous prize and in itself the China tyres issue is small beer. I also agree with the important insight elsewhere in the column that universal health care in the US would have done more for globalisation than Nafta. Yes, absolutely. The problem is the linkage. How plausible is this trade-off in the present case?
It's true that the unions are unhappy with the healthcare compromise that Obama is signalling he might accept. I see the connection, and refer to it myself in my piece. Still I cannot believe that they will oppose healthcare reform in the end. It is odd, surely, to say that the unions have to be bribed to accept a much stronger economy-wide safety net (even if the strengthening falls a little short of what they want).
The main question when you are thinking about the trade-off Alan describes is whether you feed or suppress the appetite for protectionism by giving way now and then. I think you are more likely to feed it--especially if you rationalise your capitulations in ways that invite new demands. As I argue in the NJ column, Obama's biggest mistake over the China tariffs was in the way he defended them.