Trading Blows
Chicken feet, rubber tires, and the rule of law in international trade
"The trade decision was the president's first down payment on his promise to more effectively enforce trade laws, and it's very much appreciated," AFL-CIO chief economist Thea Lee said of the Obama administration's Friday decision to slap a 35 percent tariff on tires from China.
Lee's comments are the polite economist equivalent of a mafioso thanking one of his "clients" for the first payment on a mob loan. That's all very well and good, but the recipient of the loan has quite a few more payments to go before his kneecaps are in the clear. Such is the rough and tumble rhetoric that flies between Democratic officials and their union supporters. American politicians have recently developed a habit of treating unions with contempt'"throwing them a bone every now and then, but consistently failing to offer any big concessions to protectionism. The unions know it, so they play hardball whenever they can.
So along with her not-so-veiled political threats designed to keep Obama in line, Lee is also trying to invoke the idea that protectionism isn't just something union folks happen to want for their own purposes'"it's the law.
But the sad fact is that the timing and magnitude of trade squabbles have little to do with international law, and much to do with domestic electoral politics and geopolitical one-upsmanship. The tire trade action was filed by the United Steelworkers, a group which includes tire makers. This is the fourth time they have tried to win sanctions. Nothing has changed in international trade law to make the case against Chinese tires more compelling this time around. In fact, the recession has been particularly rough on international trade, so tariffs are probably a worse idea now than they were the first time the trade action was filed.
Instead, here's how things actually work: A small, conveniently-timed opening presents itself'"a judgement from the World Trade Organization (WTO) that other nations are treating the U.S. unfairly, or the release of new figures about the trade deficit'"and poof! there's a new quota or tariff on imports of bras from China, cheese from France, or truck drivers from Mexico. When they do toss unions (or industry) a handful of scraps, politicians borrow the language of international law as well. The legal justifications, often traced back to rule-setting or adjudication by the World Trade Organization, turn on arcane, complicated layers of international agreements, riven with loopholes and clauses open to subjective interpretation. For example, Forbes reported, straightfaced, about a 2003 fight with China: "The bra and bathrobe quotas are specifically permitted by U.S. trade agreements with China, made as a condition for admission to the World Trade Organization in 2001, the [Bush] administration says."
Protectionist presidential gestures to unions are the political equivalent of a husband bringing flowers home to his wife after sleeping with his secretary. Elected officials, Democrats in particular, are wedded to the union machine, and renew their vows each election'"remember all that NAFTA bashing in 2008? But elaborate protestations of love and fidelity do not guarantee that they will hang in there when the going gets rough. And, like a marriage law at the moment of divorce, international law may occasionally force concessions, but it won't keep either party from bailing.
In fact, politically-motivated decisions to back off protectionist policies are justified using the same legal language. Unions expected this sort of thing from President George W. Bush, who was never very fond of unions to begin with, and vice versa. Those steel tariffs sounded good at first, but they were nixed by just the kind of international trade showdown we may be gearing up for right now. But unions hoped for more from Obama. It remains to be seen whether they will get it.
In a non-response response to the U.S. tire tariff announcement, China happens to have made an announcement this week about plans for tariffs on U.S. chicken and auto parts coming into China. "Chickens are a longstanding issue in Sino-American trade relations," The New York Times reported, employing what was likely the best sentence in Monday's paper. (Fun fact: Apparently, the massive bulk of white-meat heavy American chickens means that they have particularly large and succulent feet'"a culinary favorite in China.)
Trade fights are frequently less like the dignified and procedural activity typical of a courtroom, and more like the primitive (and often petty) eye-for-an-eye code of justice that characterizes playground fights. On his way out the door, Bush did pick one final trade fight, raising the spectre of a massive 300 percent tax increase on uniquely European goods like Roquefort cheese, mineral water, and foie gras. It was a symbolic gesture in reply to the E.U.'s ban on beef. After all, what's more American than beef? In 1999, Bill Clinton pulled a similar maneuver, slapping taxes on Italian pecorino cheese, cashmere sweaters, and Waterford crystal, all in the name of bananas grown in the Central American "dollar zone."
Bush's explanation for the snack sanctions relied on an appeal to the complex transactional law of international trade: WTO had sided with the U.S. on health concerns about the genetically modified corn fed to American cows, and thus the French were not allowed to ban U.S. beef. This meant the U.S. was allowed to impose $116.8 million in sanctions on the E.U. The language of the law loomed over the deal, but just like with Obama's tire tariffs, the choice of products was classic playground style tit-for-tat retaliation, with a nanny-nanny-boo-boo feel that's hard to shake.
Katherine Mangu-Ward is a senior editor at Reason magazine.
