Tag Archives: protectionism

More protectionism from the government

In yet another move seemingly designed to harm free trade, alienate us from our trading partners, and hurt the global economy, the government front corporation of Sallie Mae is firing foreigners are making those jobs “American”:

Sallie Mae to shift 2,000 jobs to U.S. from overseas | Reuters
NEW YORK Reuters – Student loan company Sallie Mae plans to move its overseas operations back to the United States, creating 2,000 domestic jobs, in what analysts called an attempt to curry favor with the Obama administration.

SLM Corp, as the company is legally known, said on Monday it plans to add staff over the next 18 months in call centers, information technology and operations support across the United States. A spokeswoman said the company will pull jobs from India, Mexico and the Philippines.

Stabbing our trading partners in the back harms the ability of countries to work together, because every other country will naturally assume that America would rather have a bigger slice of a smaller pie tomorrow, than help grow the global economy for everyone.

If the world’s economy goes from a recession into a depression, Obama’s “Buy American” policies will be to blame.

Obama v. NAFTA

Obama, fresh from signing two buy-American laws and quoting from the Book of Revelations, tried to put a rest to the confusion in the West Wing by giving our trade and diplomatic program a clear direction: protectionism and unilateralism:

Mexico Imposes Tariffs on U.S. Amid Trucking Dispute (Update1) – Bloomberg.com

March 17 (Bloomberg) — Mexico set the stage for the first trade war of President Barack Obama’s administration by slapping import tariffs on $2.4 billion of U.S. goods in retaliation for a ban of its trucks from American roads.

The tariffs, on about 90 items from 40 states, were imposed by Economy Minister Gerardo Ruiz Mateos yesterday after the U.S. suspended a program to allow Mexican 18-wheelers to deliver goods across the border. U.S. Republican lawmakers said Mexico, which didn’t provide details, would impose tariffs on farm goods such as rice, beef, wheat and beans.

Long-time readers of this blog know that fear of the latin boogey-man is an animating force in Democratic Party politics, and so should not be surprised.

While George Bush spent his last days in office trying to sign a trade deal with Colombia, Obama spends his force by rolling back one with Mexico.

Obama’s Distracting Fear-based Unilateralism

Protectionism may be Obama’s Iraq War, a huge, costly, error-prone, distracting, program that generates enemies and just might work.

The enemies are all over, including the generally pro-Obama CNBC

Just as Bush’s foreign policy was consumed by the Iraq War, there are signs that Obama’s economic plans may consume his foreign policy.

On Obama’s visit to our largest trade partner:

US President Barack Obama said he had assured Canadian Prime Minister Stephen Harper on Thursday that a “Buy American” clause in his new economic stimulus law would not harm trade between the two allies.
Obama was asked about the language in the package, which he signed into law on Tuesday, during a press appearance with Canadian Prime Minister Stephen Harper here

On Secretary of State Clinton’s visit to Japan:

TOKYO, Feb 5 (Reuters) – Japan has sent a letter to the United States expressing concern about protectionism stemming from a “Buy American” plan in Washington’s mammoth stimulus package, the top government spokesman said on Thursday.

The letter, sent on Wednesday to top aides of U.S. President Barack Obama and the Senate’s majority and minority leaders, echoes concerns by other U.S. trading partners, including Canada and the European Union. [ID:nN03517537]

“The common responsibility shared by the two countries, which are the world’s No.1 and No.2 economies, is to resist protectionism together,” Chief Cabinet Secretary Takeo Kawamura told a news conference.

On Secretary of State Clinton’s visit to China:

Secretary of State Hillary Clinton travels to Beijing, where Chinese leaders’ are concerned about the “Buy American” clause in the stimulus package. Steve Chiotakis talks to Marketplace’s Scott Tong about why China and the U.S. are both worried.

“Old Europe” piles on:

BRUSSELS (Reuters) – The European Commission will monitor closely a “Buy American” requirement in a $787 billion U.S. economic stimulus package, the EU executive said in its first response since the bill came into force on Tuesday.

“Following the concerns expressed both in the U.S. and internationally, President (Barack) Obama’s administration has assured its partners that it will adhere to its international commitments,” the Commission said in a statement to Reuters.

Obama has signed two “Buy American” laws: one to keep out foreign workers, and another to keep out foreign goods. Obama’s first moves have President have been to cave in to fear, turn his back on allies, and go-it-alone on the most important foreign policy issue we have.

What is Obama thinking?

Granted, it’s not a spy plane, but it’s not April 2001, either

Beijing – China’s central bank rejected allegations by a senior US official that China is manipulating the exchange rates of its currency, state-run media reported Sunday.

   Su Ning, vice governor of the People’s Bank of China, said the allegation could sidetrack efforts to track the real cause of the financial crisis, Xinhua news agency reported.

   ‘Also, we should avoid any excuse that might lead to the revitalization of trade protectionism. Because it will do no good to the fight against the crisis, nor will it help the healthy and stable development of the global economy,’ Su said.

US Treasury Secretary-designate Timothy Geithner made the charge to the Senate Finance Committee last week. ‘President Obama, backed by the conclusions of a broad range of economists, believes that China is manipulating its currency,’ he wrote, in documents released Thursday.

   Yi Xianrong, a researcher with the financial research center of the CASS, told Xinhua on Friday if the US labeled China a ‘currency manipulator’, it would hurt the concerted action of fighting the global financial crisis.

via China rejects US charges of currency manipulation .

The Economist has joined the army of critics noting that such saber-rattling is insane.  It’s certainly a dangerously unilateral action designed to alienate allies while pandering to the know-nothing wings of Obama’s base.

Now, I realize that Obama promised this sort of thing:

I was just hoping that Obama knew better than to follow-through with it.

Update: James Fallows, deeply in the tank when it comes to Obama elsewhere, adds to the criticism.

The Smoot-Hawley Bailout

The Smoot-Hawley Tarrif Act was a bill designed to prevent American jobs from going overseas, that helped turn the Great Recession into the Great Depression. It created a “beggar-thy-neighbor” policy, as every country tried to limit the damage by restricting even more trade. The global economy went into a death spiral.

And not surprisingly, Washington wants to do it again. If you thought the Bush-Pelosi Financial Industry Bailout was bad, wait until the Smoot-Hawley Auto Bailout becomes an international incident:

News Analysis – Washington Takes Risks With Its Auto Bailout Plans – NYTimes.com
And the third risk — one barely discussed so far — is that in trying to save the nation’s carmakers, the United States is violating at least the spirit of what it has preached around the world for two decades. The United States has demanded that nations treat American companies on their soil the same way they treat their home-grown industries, a concept called “national treatment.”

Yet so far, there is no talk of offering aid to Toyota, Honda, BMW or the other foreign automakers that have built factories on American soil, employed American workers and managed to make a profit doing so.

“If Japan was doing this, we’d be threatening billions of dollars in retaliation,” said Jeffrey Garten, a professor at the Yale School of Management, who as under secretary of commerce in the 1990s was one of many government officials who tried in vain to get Detroit prepared for a world of international competition. “In fact, when they did something a lot more subtle, we threatened exactly that,” referring to calls for import restrictions.

A Detroit bailout will expand protectionism and limit research and development work in the United States. Saving shareholders and union men from their own mistake is not worth damage to the global economy.

And if the Detroit Bailout passes, and we damage the global economy, what is our reward? Yet Another Detroit Bailout.

Update: If we begin a subsidy trade war, Germany is preparing to respond. Hat-tip to Economist’s View.

Kathleen Sebelius, Barack Obama’s Prairie Demagogue

This morning I saw Kansas Governor Kathleen Sebelius on Meet the Press with Tom Brokaw. She was supporting Barack Obama, obviously hoping for the Vice Presidential slot that was denied Jim Webb.

She is a great example of the pseudo-populism that characterizes much of the Obama campaign. Obama pretends to embrace stupid ideas while quietly supporting the status quo. This has the drawbacks of making politics more deceitful, making the public less informed, and making it harder for those who wish to be open about the benefits of growth (such as John McCain) to do their job.

Governor Sebelius criticized American CEOs for being paid more than Japanese CEOs. She said that under Obama’s plan, this would end.

Tom Brokaw was skeptical. In a free market system, there is no maximum wage. Was Obama now proposing one?

Well, Sebelius responded, the maximum wage would depend on share-holder approval.

In other words, Obama’s plan for lowering CEO pay is no plan at all. It’s not a real issue (CEO pay is a nearly insigificant corporate cost for large companies). And shareholders already have the write to set a maximum wage for their employees.

So Obama encourages the class-war tendencies of the political left, while not doing anything substantive to help the lives of those worried about executive pay in the first place.

She’s a phony populist. More on the phenomonon, from Salon:

To serve their interests, the old latifundist families and corporate elites hired “Dixie demagogues,” who were to genuine populists like William Jennings Bryan what a Disney pirate is to a pirate. All of them were entertaining. Some began as entertainers, like musician-slash-flour miller W. Lee “Pass the Biscuits, Pappy” O’Daniel, who went from hosting the “Hillbilly Flour” radio show to the Texas governor’s mansion in 1939. The “Dixie demagogues” denounced various supposed enemies of the white tribe, but with two exceptions — Huey Long and George Wallace — they never threatened the rule of the country clubs and courthouse gangs. Jesse Helms was one of these theatrical quasi-populists, an uncomplicated establishment conservative who parlayed a liberal-baiting radio show into a political career. Like other faux-homespun Southern conservatives, he employed rhetorical populism against blacks, homosexuals, liberals, professors, modern artists and “common-ists” in the service of his business backers, most noticeably North Carolina’s tobacco industry.

Barack Obama had an opportunity to have an honest debate about America’s role in the world, and so far he’s traded it in for CEO-baiting, race-baiting, China-baiting, and trade-baiting.

At a time when John McCain has ads out emphasizing the value of immigratns (globalization’s bete noir to many Republicans)

Obama joins in with the stupidest of the attacks on corporations (globalization’s bete noir to many Democrats).

However they will govern in the future, as of now John McCain is part of the solution. Barack Obama is part of the problem.

French-Style Protectionism Comes to America (and soon the world?)

A New Threat to America Inc.,” by Jeffrey Garten, Business Week, 25 July 2005, pg 114, http://businessweek.com/magazine/content/05_30/b3944123.htm.

France and the rest of “Old Europe” have rightly been criticized for trying to export burdens on the rising states of central Europe. From the old Iron Curtain to the borders of Russia herself, the central European states have lowered taxes, lightened regulations, and enjoyed strong growth. But this was not good news to the French and the Eurocrats, who saw a pro-growth economy as “unfair.” France’s solution has been to try to force New Europe to have higher taxes and more regulation. After all, if the French suffer because of bad French decisions, why shouldn’t everyone?

Former Clinton appointee and Yale Professor Jeff Garten believes America should act like the French

The rise of these new multinationals will force Corporate America to rethink strategies for Third World product development, marketing, and links with local companies. But growth of these new rivals should also compel Washington and other Western governments to revamp today’s inadequate hodgepodge of global commerce rules. The reason: Western companies could be disadvantaged by having to adhere to more stringent economic and social standards than the competition [sic — tdaxp], because of their tougher [he means “less competitive” — tdaxp] home-country laws and expectations.

There is a huge gap in the international framework for such standards. The World Trade Organization deals with governments but not with companies. The Paris-based Organization for Economic Cooperation & Development has established a code of conduct for multinationals, but compliance is voluntary and pertains only to its members — mostly from rich countries.

For example, all companies should be held to international accounting standards, including financial disclosure and transparency [so much for competition! — tdaxp]. There should be accepted corporate-governance rules, including protections for minority shareholders. The requirements for listing on major stock exchanges should be more rigorous and uniform. And all global companies — including those from the West — should disclose their labor conditions and the impact they have on the environment using a common, audited format. None of this has yet happened.

As long as American multinationals ruled the global roost, Washington resisted most formal rules for international business on the grounds they would constrain U.S. outfits such as IBM (IBM ) and Coca-Cola Co. (KO ) But the challenge from emerging-market companies signals that the dominance of big U.S. and European corporations is no longer assured . Uncle Sam should take the lead in efforts to build a new global commercial order — while the U.S. still has the clout.

In other words, Garten thinks America should export rules, not import freedom; government dictates, not peer-to-peer agreements.

The French would be proud.