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All Talk on Trade

September 17, 2009

Is President Obama a free trader? He has said so — many times. At the April Group of 20 summit in London, he announced that he and the other assembled leaders had “rejected the protectionism that could deepen this crisis. History tells us that turning inward can help turn a downturn into a depression.” From Wall Street on Monday, he declared that “this administration is committed to pursuing expanded trade and new trade agreements.” And in a CNBC interview later that day, he said it is in “our interest and the world’s interest to avoid protectionism.” He urged Congress to mute — though not eliminate — “Buy American” provisions in the stimulus bill.

Yet, for all that, the most significant action he has taken on trade was last weekend’s decision to slap a stiff tariff on Chinese tire imports for the next three years. In the name of protecting jobs in the U.S. tire industry, the president has effectively imposed a tax on tires for every American — and a particularly regressive tax at that, since the impact will fall most heavily on the cheap tires that China makes and that lower-income Americans buy.

This is not the second coming of the Smoot-Hawley bill, the notorious 1930 tariff act that exacerbated the Great Depression. Mr. Obama acted under authority China itself had acceded to as part of gaining U.S. agreement to its membership in the World Trade Organization. It affects a narrow range of traded goods. And China’s retaliation so far remains within the framework of international trade law. Mr. Obama says that this step will bolster free trade in the long run by showing that the United States intends to enforce trade agreements. That demonstration will, he implies, strengthen public trust in open markets.

The question is: Exactly what is he doing to advance additional market-opening agreements that are clearly in the U.S. interest, such as pending deals with Colombia, South Korea and Panama? Or the Doha talks on reducing global tariffs? So far, the answer is somewhere between not much and nothing. Just as the tariff against Chinese tires reflects the unilateral urging of the United Steelworkers of America — not U.S. tire companies — so does Mr. Obama’s broader trade policy seem pretty close to that of organized labor, which adamantly opposes all of the above-mentioned deals.

The damage done by the China tariff can probably be contained, albeit concentrated on those poorer Americans who will have to pay more to maintain their cars. But unless Mr. Obama not only declares but pursues a clear pro-trade policy, the U.S. economic recovery — which must depend in large part on exports — will suffer. On Sept. 24, the G-20 leaders assemble again in Pittsburgh. Through his actions on China and his inaction on everything else involving free trade, the summit host has given those leaders reason to question his commitment to open markets. Mr. Obama must reassure them. Words alone will not suffice.