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Obama's G-20 Trade War
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China's president decried protectionism at the world leaders' summit—taking a shot at the U.S. Mark McKinnon on the Obama sop to big labor that’s launched a costly battle with Beijing.
It’s pretty embarrassing when a Chinese president lectures an American president about free trade on his home turf. In a direct shot at his U.S. counterpart, President Hu Jintao Friday at the G-20 Summit in Pittsburgh called on his fellow leaders to "resolutely oppose and reject protectionism in all forms.” Because President Obama hasn’t.
If Barack Obama can’t stand up to labor unions, it’s not a good sign of things to come. Presidents have to have the independence and backbone to make tough decisions. And Obama just got rolled.
As history has repeatedly proven, one trade tariff begets another, then another—until you’ve got a full-blown trade war. No one ever wins, and consumers always get screwed.
I am a rabid centrist who falls just enough to the right of the line to call myself a progressive Republican. I prefer for government to err toward less regulation, lower taxation, and free markets. And I’m a radical free trader. Each party has its fringe elements and special interests that exert disproportionate influence. But the interest that bothers and worries me most consistently is organized labor.
One of things that worried me most about President Obama during the campaign was his protectionist message, leanings, and body language. Since his election, Obama has dealt labor unions a number of concessions, but, smartly in my opinion, has shown no real enthusiasm for their No. 1 issue, the odious and Orwellian sounding Employee Free Choice Act—proposed legislation that is nothing but a labor bailout bill that would have a devastating impact on businesses and the economy.
Unfortunately, Obama is not showing the same sort of judgment on the issue of trade protection. He is folding inexplicably and dangerously in an obvious sop to labor. At the urging of the United Steel Workers, who are upset at the loss of 5,000 jobs from free and fair competition, he has imposed a three-year tariff on Chinese-made tire imports. The first year the tariff will be 35 percent, the second year it will be 30 percent and the third year it will be 25 percent.
The idea is that tariffs will lead American manufacturers to invest in their American plants. But tire manufacturers have already moved production of low-cost tires out of the country. They lose money at the low end of the market and have conceded it to the Chinese. Domestic tire makers did not even support the tariff application. So now, consumers with wallets already pinched will forego buying new tires because they can’t buy cheap Chinese products, which means they will drive on unsafe tires, leading to accidents, injuries, and deaths.
And those who do buy tires will have to pay more. Rutgers University economist Thomas J. Prusa testified before the International Trade Commission that the tariffs could cost 25,000 jobs and cost consumers $600 million-to-$700 million more a year for higher-priced tires. Opponents from within the American tire industry argue that Chinese tires do not even directly compete with the mostly premium tires produced in the U.S.
In addition to the U.S. tire-production industry, the American Coalition for Free Trade in Tires (Dunlap & Kyle Co., Del-Nat Tire Corp, American Omni Trading Co., Hercules Tire & Rubber Co., Orteck Global Supply & Distribution Co., GITI Tire (USA) Ltd. and Foreign Tire Sales Inc.), a pro-business organization also criticized Obama’s decision.
On Sept. 3, Tyson, Austin, Hormel, and the National Pork Producers Council were among the food and agricultural organizations to write a letter to the administration requesting that it refrain from tariffs on Chinese tire imports. They are also concerned that China’s response to these measures could end in negative action against U.S. food and agricultural products and could also affect U.S. farmers, food companies, and ranchers.
Obama’s plans have received criticism abroad as well. The potential reality: This decision has international implications as the U.S. has reneged on the commitment made last April at the G-20 summit to avoid protectionism in response to the international economic crisis. Obama’s administration has created a tit-for-tat situation with China that will likely leak over and affect other industries.
- China announced on Sept. 14 that it would investigate the prices of U.S. poultry imports and American car products companies.
- China responded Sept. 14 by announcing they would file a WTO complaint against the U.S., and China is likely to win its case if it is proven that they did not “surge” the U.S. tire market.
On Sept. 22, the Financial Times reported that China had begun supplying roughly around one-third of Iran’s petrol imports. Last month, Iran imported between 433,000-466,000 barrels of gasoline. This could have serious impact on Iranian sanction talks slated to begin on Oct. 1. Until now, China had not seemed to pose a threat to U.S. sanction plans against Iran.
Obama’s actions could very well open doors for other industries to request similar relief on imports that they find disruptive to the market. Washington correspondent James Morrissey reported that “while the case will directly benefit manufacturers of tire cord, textile industry officials are heartened by what they see as a possibility of using the same procedure to get relief from other imports of textiles that they believe are disrupting the market. U.S. textile manufacturers welcomed the decision, importers of textiles and apparel blasted it, and the Chinese government threatened retaliation.”
As history has repeatedly proven, one trade tariff begets another, then another—until you’ve got a full-blown trade war. And, in the end, no one ever wins and consumers always get screwed.
As vice chairman of Public Strategies and president of Maverick Media, Mark McKinnon has helped meet strategic challenges for candidates, corporations and causes, including George W. Bush, John McCain, Governor Ann Richards, Charlie Wilson, Lance Armstrong, and Bono.
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We need fair trade not free trade. People like Mark McKinnon don't care if American workers are competing against Chinese laborers who make ten cents an hour. Jeez, I wonder why we have a jobless recovery going on right now. We used to make things in this country but that sector has been replaced by shady banking. Try importing an american car into China....it sure as hell is "Free". And as far as being called a protectionist, I'm fine with that too. We're one of the few countries that doesn't protect their economy and look where that has gotten us.
Because now we consume everything, but don't manufacture much anymore. And if you don't have the money to consume like the rest, you run up the credit card.
McKinnon doesn't sound all that "progressive" to me, talking about free trade and free markets. He sounds like Reagan, Clinton, and Bush--at least until Wall Street and corporate America required a big corporate bailout.
That Second Gilded Age of the last 30 years is over; it ended in a crash and depression, and now we have to go in a different direction. More development AT HOME; more production and consumption at home, and investment in our own industry, infrastructure and technology instead of this Wall Street idea of cheap imports from Asia and letting them do all our manufacturing for us.
Sorry, but that's no good for the working class and middle class in THIS country.
"China's president decried protectionism "
Hilarious.
Protectionism from what ?
All the American based factories and jobs
that have moved there in the last twenty years ?
speaking specifics may help to clear up what is going on. I heard that President Obama directed that tariffs on certain tires from China
were to be raised. This is in response - so I heard - to the "dumping" of tires on the US market. Now, Dumping is good for the
"consumer" because you get a cheaper tire. Of course if that "consumer" just lost his job because he makes tires here in the US and his
company just can't compete with the "Dumped" tire price and is about to go under - well he is no longer a consumer and the dumped tires
don't do him any good.
I don't know about these organizations that have spoken up but I ask you - who pays their salaries? These days just about any company
big enough to have an organization is "global" and doesn't really care about Americans. What they really care about is profits and if
you assume that profits for the global corporation are paramount at the expense of a viable economy and jobs here in the US then of
course they will argue againt this tire tariff. I think they have the wrong priorities for Americans and really we should think twice
about taking their advice.
So what was Obama doing? He was trying to save jobs here in the US for Americans that support the American economy and vote for American
Politicians. Check your facts, listen to what he says about this.
It's hard to argue with trying to keep/create more jobs when unemployment is at 9 percent. Unless, of course, you have no sympathy for
any of those 9 % and the dislocation they have to suffer when their source of income changes or dissappears and the amount/month drops
dramatically. From Wikipedia: Unemployment occurs when a person is available to work and seeking work but currently without work. We
are talking about Americans that know how to work and have had their jobs terminated or sent overseas, or have been replaced by a foreign
national imported to the US.
Maybe protectionism isn't the right way to go but the deregulation and detaxification of business here in the US over the last 40 to 50
years doesn't seem to have worked either.
I think it's time we stopped dumping on the American Worker. Tariffs to encourage a fair price for goods might be one way to do that -
it certainly got China's attention. If the Author has something constructive to offer - then is a good time to write an article like
this.
I think that engorging the "global economy" at the expense of an American Economy must be controlled and regulated such that there is a
standard of living increase for ALL - not just the rich and richer.
to be more specific - I think that China, India, Brazil and other emerging countries have to adopt labor health and protection
regulations for their industries that are at least on a par with ours and maybe even better. If we have to use Tariffs to bring home
this message - so be it. If we have to suffer no more "Dumping" - so be it. If we have to suffer a stable job market - so be it.
The only thing worse than a neo-conservative ideologue is a neo-liberal ideologue. The most rational position on trade and the economy in general comes form Richard Posner in the current New Republic.
Random, not thought-out comment: One thing that troubles me with the whole Keynesian thing is America's ability to be satisfied. If we control demand (higher tax/interest rates rather than nothing to buy) to pop a bubble, how would people feel? If it had been done early with the housing issue, the people who got in a mess wouldn't have been able to buy in the first place. But that was a civil rights issue to some and the American Dream to others. It wasn't about economics.
Well said, Mark McKinnon. Policy needs to work the big picture instead of listening to particular selfish interests.
You cannot win this kind of war. It's no good decrying the low salaries in China. You HAVE to move upmarket as all other Western societies have recognised. China is now set to manufacture virtually EVERY American, European and Japanese car that sells, for example. That trend will rapidly escalate and there is NOTHING you will do to change it as the Chinese INTERNAL market changes gear. I live there and I see it happening. The roads in my current city are choked with NEW cars of all major marques.
the over/under on the number of policy wonks that "helped" the lightweight McKinnon write this piece is 9.
McKinnon it the one that needs to grow a pair Have you gone into a store to buy something lately? It's easier to ask, what's not made in China or Taiwan? This has to stop somewhere. All Republicans are anti-labor union. The president should be able to control the tongue of all foreign leaders. Should he be embarrased about Ghadigy's diatribe, or how about Ahmadenajad threats about negaive comments related to the newfound nuclear site?
McKinnon should just go back to helping Republicans lose elections, and I'll be happy.
McKinnon how nice it must be to be president. oh wait! your not... Ok then you are privy to all of the presidents information on trade with China... not not that either.. well then most assuredly you must all of the Chinese presidents inside information on trade with the U.S. no not that either. then, WTF! are you doing with a job at all.. because if all you have is an ignorant opinion then you are most assuredly wasting your time, little man... All you Europeans have screwed up the entire world and now that a man with some skills is trying to clean up your messes you got nothing but venom to spit at him. Spoiled children.. If I was Obama I would Quit the lousy job and AMerica all together. No one can teach "dumb dogs, new tricks..
All Obama has done is cave into the Unions, they run, own him and call all the shots. They got him elected and thats who he bows to. Remember the bail out of the car co's, the unions got saved, the employees got laid off,lost thier home,health care. But he works for the UNIONS. and Gov run health care/co op's is for the Unions. this will keep them from having to deal with the expense of it again, which is what killed them this time, along with building cars no one wanted, and always braking down.
We need a more balanced trading system in the world, and more internal social and economic development in the poor countries, so they don't have to rely too much on cheap labor and cheap exports.
It's time for everyone to start putting their own houses in order.
The cookie sheets I use cost $3 to $8 more if American made, and I have to go out of my way to purchase them. My impression is that China makes it for less, therefore it costs less. I don't think everyone is willing to spend more money to only buy US product. Is this the fault of Unions, our trade policy with China or both?
Obama, if you noticed everything he is doing is to benefit the unions. What he did to G.M. is a disgrace the unions came out on top, Cash for clunkers was a joke, a surge of selling cars, and now sales on cars have dropped. This is about political payback.
Too much greed, both at the top and bottom. CEO's want too much and the unions want too much. Labor unions were a good thing. The key word is "were".
And the scummiest union around is the SEIU.
God forbid that labor get organized, that Americans work for a living wage, get healthcare, have a secure retirement, not get ripped off by banks and insurance companies, that Americans produce items of daily use. Horrors! What will the workers want next? Food, water, clean air, a non-toxic environment? TREES?! SCHOOLS?!? PEACE??!! Somebody stop those goddamned unionized workers who are ruining our economy!
And BTW, Mark, it's also pretty embarrassing when the Chinese sell medications that kill people, toys with lead paint, poison pet food, and advanced weaponry to rouge states. But we wouldn't want to limit free trade, would we? You really need to get a job, by which I mean a real job. 'Course you'd probably have to stand in line for a long, long time given your thin work history.
This is a very inciteful account of the complexities of Trade Wars, Sanctions and Politics in general. While I agree that Mr. McKinnon is correct in seeing the directions these things take, there is also the complexity of 'yielding', as we customarily do, and which has also been a contributing factor to our present situation (see Ross Perot's 'great sucking sound').
The reality is that all Nations subsidize, including most prominently China, and to ignore that one critical component, as a measure of cost, is what has led us to our present declines in manufacturing and export muscle. If Obama can reverse this trend without opening the floodgates of Protectionism, that would be a benefit, but from all apearances it seems China is not willing to 'yield' this time around.
Holding the Conference in Pittsburgh was thoughtful, as it represents the one place in America where the greatest harms have been done by foreign imports against US Domestic Manufacturing and Production.
Thank you.
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