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Reason Writers Around Town: Shikha Dalmia in Business Week on the Specter of Protectionism

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Reason Foundation Senior Policy Analyst Shikha Dalmia notes Treasury Secretary Tim Geithner's anti-China rhetoric during his confirmation hearings and writes in Business Week:

Protectionism is exactly the wrong remedy for a global economic slump—as the 1930 Smoot Hawley tariffs amply demonstrated. Historians widely credit the tariffs—and the global trade war they unleashed-for prolonging and deepening the Great Depression. But it is unclear to what extent [President Barack] Obama plans to heed that lesson, given the decidedly mixed messages he has sent on trade so far.

Obama wrote eloquently about the benefits of free trade and the futility of trying to stop the march toward globalization in The Audacity of Hope. "A tariff on imported steel may give temporary relief to U.S. steel producers," he explained, "but it will make every American manufacturer that uses steel in its products less competitive in the world market." Setting aside Geithner, Obama's economic team is decidedly pro free trade. Larry Summers, the head of the National Economic Council, was a staunch free trader during his years in the Clinton Administration, and former Dallas Mayor Ron Kirk, Obama's U.S. trade representative, has a record of strong NAFTA support….

But even though Obama seems to understand the case for free trade in theory, there are very few trade agreements that he has found acceptable in practice. During the campaign, he repeatedly threatened to renegotiate NAFTA to force Mexico and Canada to accept stronger labor and environmental protections. He voted against CAFTA (the Central American Free Trade Agreement) to register his opposition to Bush's trade policies-even though he stressed in The Audacity of Hope that the deal posed little danger to U.S. workers since the combined size of the economies it covered was no larger than that of New Haven, Conn. And he has vociferously opposed the trade deals with South Korea and Colombia.

Is a trade war a-brewing? Whole thing here.

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  1. Hallelujah! The jobs are all coming home.

  2. Paging LMNOP, paging MNG…

  3. I fear this blockade may provoke an invasion by the Trade Federation.

    I sense dark times ahead for the Republic.

  4. In other news, the sun is peeking through the clouds;

    must

    ski

    now.

    It’s that, or buy a wood chipper and throw myself in it.

  5. American protectionism? This is too good.

    Step 1: Beg China for trillions of our dollars back (plus interest) so we can subsidize our internal problems that amongst other things, has led to China having trillions of American dollars laying around.

    Step 2: Start a trade-war with China

    Yes we can!

  6. Paging LMNOP, paging MNG…

    LOL! I objected to the context, not the subject. Smoot-Hawley is absolutely appropriate to talk about in the context of trade policy.

  7. Whew. We finally got the nod from LMNOP. Now we can continue the discussion!

  8. Whew. We finally got the nod from LMNOP. Now we can continue the discussion!

    Real happenin’ discussion you’ve got going here. Glad I could help.

  9. I don’t think we have anything close to a ‘trade war’. We’re unlikely to have much more in the way of new free trade agreements, but I’ll bet we won’t see all that much regression either. A lot of jibber-jabber to please constiuencies on both sides of the debate, but little in the way of action in either direction.

  10. Not saying I agree with Obama’s economic philosophy, but I don’t see that it is inconsistent for him to believe in the benefits of free trade in goods but to demand standards for how our trade partners treat laborers and the environment. It’s not unreasonable to consider those matters as separable issues.

  11. Not saying I agree with Obama’s economic philosophy, but I don’t see that it is inconsistent for him to believe in the benefits of free trade in goods but to demand standards for how our trade partners treat laborers and the environment.

    When the mechanism for insisting on these standards is sanctions on their trade, then it is inconsistent.

  12. When the mechanism for insisting on these standards is sanctions on their trade, then it is inconsistent.

    How so? In his ethical view of the world, concern for the treatment of labor and environment trumps benefits of free trade. It may not be our view of the world, but most of us have a personal ethical model where certain values are more important than others.

  13. Is a trade war a-brewing? I sure hope not. Already there are global protests against the slumping economy (as though there’ anything anyone can do…)

    Apparently, at least according to Newsy.Com, India’s one of the few countries that’s hopeful to escape mostly unscathed. We’ll see how it all plays out, I guess.

  14. Americans only enriched the enemies.
    I never understood why my country, the second largest republican democracy in the world (we don’t have prime minister), was far from being a good commercial partner to US.

    I see that our Steel industry could wipe out entire sectors in the US, we are not innocent people, we wan’t money!

    But we have: environmental laws, very restrictive labour laws, etc. And we aren’t building nukes to menace americans.

    I believe that all of you should stop to trade with your enemies and utterly ask for FAIR CONDITIONS. It’s not against FREE TRADE, FREE TRADE IS GOOD FOR FREE COUNTRIES.

    There’s a lot of resistence about the brazilian ethanol, so be it, keep the steady money flow to Venezuela. Perhaps in the nearby future US soldiers will die by weapons bought by Chavez with your help.

    Countries have interests, not friends.
    Don’t get your self illuded by the Free Trade benefits, only the Chinese are getting 9% GDP expansion every year, not you.

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