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Obama's Trade Trouble

The only way to make America competitive is to adopt policies that are anathema to congressional Democrats.

12:00 AM, Mar 13, 2010 • By IRWIN M. STELZER
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Now we know. Two million of the “good jobs” America needs to create in the next five years are to come from doubling American exports. So President Obama promised Thursday. We are to have a “National Export Initiative,” an “export promotion cabinet” consisting of representatives of several federal agencies, a private sector advisory committee on international trade, and promotion of exports by a president who will get tough with our trading partners who “have not played by the same set of rules” as we have. Push exports, and make it more difficult for our trading partners to send stuff to us, unless they conform to our notions of proper labor and environmental standards.

Obama's Trade Trouble

This approach is consistent with the administration’s philosophy that the best way to solve a problem is to erect still another government apparatus. In this case the President might be on to something -- government action is needed if America’s exporters are to expand and create new jobs. Unfortunately, we need something more from government than the sort of action the President has in mind.

Obama is right to promise to get tough with some of our trading partners. First on his list might be China (February exports up 46%), which continues to disregard intellectual property rights of U.S. firms, and to peg an undervalued yuan to the dollar. Earlier this week Zhou Xiaochuan, governor of the People’s Bank of China, floated a trial balloon, suggesting that the currency peg is a temporary measure to see China through the worldwide financial crisis, and “sooner or later will be withdrawn.” Chen Deming, a key trade official, and Premier Wen Jiabao punctured that balloon before it gained much altitude. The dollar peg stays, with perhaps a minor adjustment some day.

Unfortunately, President Obama has until now shown no taste for combat with China’s leaders, witness his supine performance on his visit to China. We will know next month whether his recent pledge to “get much tougher with China” is more than rhetoric when, as required by the Omnibus Trade and Competitiveness Act of 1988, the President has to decide whether to label China a “currency manipulator.”   

The president also claims that by subsidizing green energy sources he will create technologies that will dominate world markets, creating millions of export-based jobs. Unfortunately, the wind machines on which he is lavishing subsidies are made in China, not here, and the jobs that might be created by developing America’s indigenous energy sources are not to be -- the environmental wing of his party remains opposed to drilling for natural gas and oil, and to the construction of new coal plants. One ray of hope: the president has decided to encourage the construction of new nuclear plants. As my colleague at the Hudson Institute, Diana Furchtgott-Roth points out, the unions that will benefit from the new construction jobs have woefully under-funded pension plans and desperately need new dues-paying members. In effect, the president has decided to favor his union supporters over the green lobby, at least on this issue, although he has not gone so far as to press Senate majority leader Reid to end his opposition to the activation of the Yucca Mountain waste storage facility in Nevada.      

If the president is serious about using exports to spur growth he will have to do a lot more than set up inter-agency task forces and advisory committees. First, he will have to get Congress to approve several trade deals that are before it, and which promise new jobs, although not necessarily for trade union members. So the unions are saying “no,” and Democratic congressmen, with an election now only eight months away, need the unions to provide campaign funds and doorstep campaigners. Obama won’t find many free-trade advocates among his congressional allies.   

Second, he will have to settle several trade disputes, especially one with Mexico, a market that absorbed $129 billion in U.S. exports last year. In response to trade union pressure, Congress cancelled a pilot program, developed under the North American Free Trade Agreement (NAFTA), that allowed Mexican trucks to travel more freely into the U.S. In retaliation, Mexico imposed $2.4 billion in tariffs on a variety of U.S. goods, resulting in the loss of $2.6 billion in exports and 25,000 jobs, according to business groups that are urging the president to pressure congress to ignore the Teamsters’ union and again allow Mexican trucks freer cross-border access.   

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