Friday, May 8, 2009

Economic crisis is driving call for more aggressive US trade policy

by M. Ulric Killion 
us-chinatradecomparison-2 Graphic/WallStats/Visualizing the US/China Trade Relationship, April 30, 2009. 

“Like it or not, the US and China have a trading relationship that has global repercussions. The plastic US flags that say Made in China don’t tell the whole story. No, not everything is made in China. In fact the US manufactures and exports almost as much as China but it consumes a great deal more. Hence, the trade imbalance;” Visualizing the US/China Trade Relationship. 

In terms of the world multilateral trade system, the onset of the global economic crisis may eventually cause a shift in US trade policy, which is a shift toward a more aggressive US trade policy (i.e., aggressive trade policies and trade barriers). An announced shift in trade policies and barriers that the Obama administration attempted to soften by the re-characterization of this policy shift, as Anthony Faiola of the Washington Times explained, as simply the move “to more strongly emphasize domestic and social issues, from the displacement of American workers to climate change.”

Despite the contagion effect of the economic crisis that has affected all countries and economies, both developed and developing countries and economics, and both western and non-western countries and economies, in the halls of Washington US policymakers appear ready to pursue a more aggressive trade regime, including aggressive trade policies and barriers.  For instance, as Faiola observed, the US “will seek new benchmarks before supporting already-written trade agreements with Colombia and South Korea and is suggesting that it will dig in its heels on global trade talks, demanding that other countries make broader concessions first.”

The shifting focus of world multilateral trade, at least from the perceptive of US policymakers, appears to emphasis the interests of constituents and special interest groups, which do not necessarily reflect the greater societal interests in the long run, and pursuit of the greater aspirations lying at the heart of world multilateral trade system (i.e., the Bretton Woods Institutions, WTO, etc.).

Faiolo wrties, “Even before the global economy went code red late last year, talks aimed at expanding global trade stalled as Western countries warred with emerging giants like China and India over how to further open markets. “

However, in terms of the larger picture, what US policymakers seemingly fail to understand is the real reality that within twenty-five years the combined GDP of China and India will exceed that of the G7 nations.  From 2030 to 2040, China will emerge as the world’s larger economy.  Moreover, by 2050, China’s current two trillion US dollar GDP is set to balloon to 48.6 trillion, while India’s GDP, now weighing in under a trillion dollars, will hit about 27 trillion. 

Nonetheless, as Faiolo writes, “Those divides appear to be more unbreachable than ever as world leaders move to protect their domestic industries from the ravages of the financial crisis, embracing new trade barriers aimed at imported goods and other measures meant to restrict the flow of capital outside their borders. In the United States, more Americans are blaming cheap imports for job losses at home and congressional leaders pressed successfully to include a "buy American" provision in the $787 billion stimulus program to give an edge to U.S.-made products.”  Our consensus to advance international trade is frayed, Sen. Max Baucus (D-Mont.) said at Kirk’s hearing yesterday. “Our faith in the international trading system is badly shaken.” 

Notwithstanding historical debate on whether to link world multilateral trade with social (welfare) programs, in the end, the actions of US policymakers focused on achieving short-term rather long-term goals and objectives may well be creating greater potential problems for the future that come with attendant greater social costs.

Anthony Faiola, U.S. to Toughen Its Stance On Trade, Washington Post, March 10, 2009, A01. 
M. Ulric Killion, Regional Economic Integration, Aug. 2008.
Copyright © Protected - All Rights Reserved M. Ulric Killion, 2009.

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