• Free Trade Watch

      Earlier this summer, I noted that Obama faced a key test on his trade policies. Would he follow the protectionist rhetoric of his campaign, or govern more like President Clinton, who helped usher in NAFTA?

      One such test is coming up, according to the Washington Post:

      By Sept. 17, Obama must decide whether to slap a 55 percent tariff on tires imported from China, as recommended by a federal trade panel, or leave the matter alone, as a phalanx of lobbyists representing manufacturers in China and U.S. companies that import from them are urging.

      I love how the Post frames the issue: A "federal trade panel" recommends a protectionist measure, while only a "phalanx of lobbyists" supports free trade. Of course, the tariff is also supported by a different "phalanx of lobbyists", the United Steelworkers union, but the Post doesn't give them the sinister treatment.

      The rest of the article profiles some workers laid off from a Cooper Tire plant in Georgia:

      "They would have these meetings and say we're up against the Chinese," said Larry Burkes, 29, who worked at the plant, which rises on the city's outskirts just beyond a mobile-home park. "We'd hear it all the time: 'They work for less.' There was pressure." Now the plant that employed 2,100 people in this small south Georgia city is being shut down, and the troubles afflicting the U.S. tire industry are at the core of what many consider to be one of President Obama's first major decisions on trade policy.

      It's no comfort to the workers laid off in Georgia, but the jobs they just lost only existed in the first place because of free trade...within the United States. Cooper Tire is based in Findlay, Ohio, part of the Midwestern "rust belt". For decades, rust belt manufacturing companies like Cooper Tire opened new plants in southern states like Georgia, rather than just in their home states, because labor was cheaper down south. If free trade between Ohio and Georgia is good, it’s also good between Georgia and China.

      Free trade brings consumers better products at lower prices, which makes everyone wealthier, and creates new jobs. The downside is that some workers lose jobs when their profession no longer enjoys a comparative advantage in the global market. But the answer isn't to harm almost everyone by fighting this natural process; the answer is to reduce barriers that block the transition to new professions that are in demand.

      In the end, the "phalanx of lobbyists", as the Post calls them, have it right:

      [The phalanx of lobbyists] argue that the ability to import the cheapest tires from overseas enables U.S. manufacturers to focus on producing more expensive tires, which have a larger profit margin. Most major U.S. tire manufacturers have tire plants in China or import from there.

      "When you are one of the guys who loses a job in the process, I know that's cold comfort -- but it's also a reality," said Marguerite Trossevin, who represents a coalition of U.S. tire companies that import Chinese tires to sell under their brands.

      Pre-October 2009