President Obama: Basically AWOL In the Fight Against Protectionism

President Obama and his administration have been saying they can not only fix the financial system and get the economy going but also reform education, redo health care and restructure our energy system.

Which made me a little surprised to read about the trade war that may be starting with Mexico. For years the United States has been dragging its feet on implementing a provision in NAFTA that would allow Mexican trucks to bring goods from Mexico and deliver them in the United States (instead of having to unload at the border and put the goods on US trucks). The program was scheduled to start in 2000 but was delayed again and again. The Mexican trucks are fully inspected and a demonstration program showed their safety is as good as, and in some cases better than, U.S. drivers. But the Teamsters hate the program.

A bigger pilot program, which would have allowed about 100 Mexican trucks into the United States, was finally supposed to start this year, but the omnibus spending bill included a provision canceling it. ("Mexico Strikes Back in Trade Spat," Wall Street Journal, March 17, 2009) When Mexico protested, the Obama administration said they were working on it and the program was just being refined. The Mexican government figured out what the administration was really saying, so they have released a list of products that will be subject to retaliatory tariffs.* As Nina Easton of Fortune said, "[t]hat sounds pretty close to the kind of trade war President Obama has insisted he’s eager to avoid."

Then there was the statement the President made last week on possible trade deals with other countries: "It may be difficult for us to finalize a whole host of trade deals in the midst of an economic crisis like this one."

That is 180 degrees wrong. It is precisely because we are in the midst of a world-wide economic crisis that we need to work on new trade deals. When President Obama met with the president of Brazil recently, President Obama said, "Trade is an important engine for economic growth." If that is true (and it is), and if growth is down (and it is), then we need to work on ways to increase trade so we can increase growth.

But the presdient, who thinks his administration has enough time to fix education, energy, and health care, in addition to the financial system and economy, says they don’t have time to do it.

This is especially distressing since trade deals are important not only because they will help the economy grow, but also because they will help counteract the tendency of countries, when faced with a recession or other economic hardship, to turn to protectionism.

We are already seeing a growing trend toward protectionism, including in our Democratic Congress: Breaching our obligation under NAFTA to allow certain Mexican trucks into the U.S.; the Buy American provisions in the stimulus bill; the restrictions on employment of H-1B visa holders also in the stimulus bill.

And the White House is doing too little to stand up against this trend. President Obama claims to be against protectionism, but his actions indicate he doesn’t seem to care very much. The Buy American provisions in the original stimulus bill may have been weakened, but they remained in the bill as a symbol of our lack of commitment in the fight against protectionism.** The Administration’s response to our breach of NAFTA was weak, at best. President Obama says that trade is an engine of growth, but he and his administration don’t have the time to work on new trade deals.

We need a president and an administration that will fight protectionism to prevent beggar-thy-neighbor policies and retaliation from turning our world-wide recession into something worse. It has happened before. We need to make sure it doesn’t happen again.

But the Obama Administration is AWOL in this fight. I don’t know why. Maybe they don’t think there really is a danger. Maybe President Obama doesn’t understand the risk and his advisers who do understand it can’t convince him how important it is. Maybe the president cares more about the changes he wants to make in the United States than the risks of a surge of protectionism all around the world in the midst of a global recession. Or maybe the Democrats are just so tied in with the unions that they can’t do anything else.

Actually, it doesn’t matter why. We are not doing what we need to be doing, and what we are doing is dangerous, for ourselves and for the world. It is disappointing and scary.

------------
* Since our cancellation of the program was a breach of our obligations under NAFTA, the retaliatory Mexican tariffs are legal and proper.

** The provisions were changed to provide that the government could favor US-made goods but had to comply with our international obligations in doing so.