International Trade: Is Anybody Thinking About What They Are Doing?

The Washington Post reported on Monday that the World Bank has warned the world as a whole is falling into a recession for the first time since World War II. According to the article:

"The [World Bank] report predicted that the global economy will shrink this year for the first time since the 1940s, reducing earlier estimates that emerging markets would propel the world to positive growth even as the United States, Europe and Japan tanked. The dire prediction underscored what many are calling a mounting crisis within a crisis, as the downturn that started in the wealthy nations of the West washes over developing countries through a pullback in investment, trade and credit."

And what is the Obama Administration doing about this crisis? According to an article on the front page of Tuesday’s Washington Post:

"Even as world trade takes its steepest drop in 80 years amid the global economic crisis, the administration is preparing to take a harder line with America's trading partners. It will seek new benchmarks before supporting already-written trade agreements with Colombia and South Korea and is suggesting that it will dig in its heels on global trade talks, demanding that other countries make broader concessions first."

In other words, what is the Obama Administration doing about the first global recession since World War II? We’re probably going to make it worse.

The global economy is shrinking for the first time since World War II, and the United States is moving to a policy of less cooperation with foreign countries on matters of trade instead of more cooperation. At a time when we ought to be working to lower barriers to trade in an effort to help the world, including ourselves, get out of this recession, we are increasing them.

In the 1930s it was Smoot-Hawley.  This time it could be positions like the U.S. is taking here, when it demands that, before we will enter into free trade agreements with other countries, they have to adopt the kind of labor and environmental standards we think they ought to have.  Will anybody be surprised if those countries resent our attempts to tell them what kinds of laws they have to have? Or if other countries come up with excuses of their own to maintain barriers to trade or even impose new ones.  If we are lucky, maybe our position won't cause a lot of damage.  The problem is, once these things start, nobody can know for sure how they will end.  But it won't be good.

People knew better in the 1930s, but Smoot-Hawley passed anyway. The Obama Administration should know better this time, but it is unclear whether they are going to pay any more attention than our leaders did back then.