For someone who’s supposed to be so smart, President Obama certainly has a hard time learning from history. He never learned that Keynesianism doesn’t work. He obviously didn’t get the memo that protectionism doesn’t work, either.
Avoidance of trade talk would most especially suit the American delegation: when the leaders meet in Pittsburgh on September 24-25 the last thing President Obama wants is a discussion of his position on trade. He has so far managed to talk the talk of free trade while walking the protectionist walk that appeals to his trade union backers. He would like to keep it that way.
Unfortunately for him, he won’t be able to do that, having just come down on the side of the protectionists. The Obama team makes it a practice of releasing announcements of which they are not particularly proud on weekends, when they get buried under sports news and the commentariat are out of town. So they held off until late Friday announcing that the President has imposed a 35 percent tariff on low-grade car tires imported from China. The International Trade Commission (ITC) had responded to a complaint by the United Steelworkers Union (tire workers are members of that union) that Chinese imports have cost them 5,000 jobs by recommending tariffs of 55 percent. Significantly, U.S. tire manufacturers did not join in the complaint: they lose money at the low-end of the tire market, and most have simply abandoned it to the Chinese. Whether Obama will claim that 35 percent is so far below 55 percent that his free trade credentials remain intact is doubtful: even by his standards, that would be a brazen attempt to conceal his capitulation to the trade unions.
So picture this. Obama now has to play host to a very angry Chinese President Hu Jintao, among other world leaders, in Pittsburgh, to all of whom he promised not to repeat the beggar-thy-neighbor protectionist policies that extended the Great Depression. He needs the Chinese to continue buying the IOUs he is pouring onto the market to cover the deficits he is running up, and to allow their currency to appreciate relative to the sinking dollar. Hu needs export-based jobs. The Obama charm might just not be enough to send the Chinese president home in a generous mood, or disinclined to continue his ruminations on how to free the world of the dominance of the dollar.
Follow the link above to read Irwin Stelzer’s informative article. As usual, Obama’s putting politics above sound economic policy.
Update: Speaking of going back to the 30′s, read about how Washington, DC is now the new financial center of America. All I can say to my fellow New Yorkers is you get what you vote for.
Update 2: Obama started a trade war with China. They’ve already retaliated. Way to go, Obummer.
