There’s Trade Wars’a Brewing

Every once in a while I get asked what I studied in university. I
reply, somewhat sheepishly that I studied the “Political Economy of
Globalization”, which usually elicits blinks and incomprehension. What
does that mean? Here’s how university warped my mind:

There has been talk that the 2002 steel tariffs have
on Bush. Any sophomore econ student could have predicted
the economic ramifications. Any sophomore polisci student could have
predicted the WTO ruling. But things are spiraling out of control.
Numbers in bold parentheses are electoral

In 2002 The
Philadelphia Inquirer
evaluated Bush’s announcement of protectionist
steel tariffs (HREF=”
as an astute political move designed to seduce union voters in
Pennsylvania (21), West Virginia (5) and Ohio (20).
The tariff “could be bad news for Democrats”, the line went, as Bush was
attempting “to repeat the formula that worked for Richard Nixon (1972) and
Ronald Reagan (1984) in their reelection efforts: Swipe enough union
voters from the Democrats to ensure a landslide GOP victory.”

Bush’s promises to protect steel workers during the 2000 campaign are
credited with his success in West Virginia and Ohio. The tariffs might
help him win Pennsylvania this time around (he lost it last time). Fine.
So Bush wanted to buy some votes in some critical states. He pissed off
some libertarian/conservatives like Congressman Ron
, but they’d stick with him anyway. (Or so the logic goes.)

The steel consuming industries, of course, would get smacked by the ~40%
price shock. In February, the Consuming

Industries Trade Action Coalition

(CITAC) estimated that 200,000 jobs
had been lost by downstream manufacturers since the tariffs. California
led the field in job losses. Kicking Ass
posted this on Sept 23rd:

Small business tip of the day: Don’t
invite President Bush to speak at your small business.

Back in April, Bush visited Timken Co. in Canton, Ohio, to promote his
“Jobs and Growth” plan.
Milbank reports
in today’s Washington Post (scroll down to the section
that starts “BAD EXAMPLE”)… Timken, which manufactures steel bearings,
is lowering earnings forecasts and cutting 900 jobs.

Steel producers, for their part, say that the tariffs (and new investment)
resurrected 30,000 jobs. So says the HREF=”
. Its sources admit that the numbers are probably inflated on all
sides (only 15,000 to 20,000 steel consumer jobs lost) but…

The tariffs “didn’t win the [United Steelworkers of America] over, and he
sure as hell didn’t win the users over, and there are a hell of lot more
of us.” (Jim Zawacki, G.R. Spring & Stamping, Inc of MI) In fact, the
tariffs have played out very poorly in politically strategic states like
Michigan (17), Tennessee (11), Illinois (21).
(California, I think we can assume, was always a lost cause.) This comes
from the HREF=”
which also gives us this GOP-operative gem: “The only reason they
won’t do it is if they’re unwilling to admit they made a mistake.”

Of course, in the Age of Globalization no nation works in a vacuum. Few
countries can raise tariffs without being dragged to the global trade
court: the WTO. The court
has ruled, and it bitchslapped The President to the tune of more than $2.2
billion and gave him until December to make amends. So says the Wall
Street Journal. (kudos

Suppose the President was savvy enough to international institutions
(which he is known for defying) to expect the WTO to rule against the
tariffs (as suggested by some of DeLong’s commentors). That’s great, and I
celebrate it as a deft political move. How’s he going to explain that he’s
changing policy because one of the vilified international institutions has
ordered him to? Nevermind that, we’re talking about global ramifications

The countries involved in the complaint included the European Union,
Japan, South Korea, China, Switzerland, Norway, New Zealand and Brazil.

There are a number of reports from the UK that politically
targeted sanctions
are pending against the United States. Stephen
Byers, a inner-circle Blair supporter, has been pushing the EU’s top trade
negotiator, Pascal Lamy, to impose tariffs against:

  • Citrus products
    [Florida (27)]
  • Apples and paper [Wisconsin
  • Chemicals [Tennessee (11)]
  • Agricultural
    equipment [Iowa (7)
  • Textiles [southern states (?)]

So that’s the Atlantic: politically targeted retaliatory tariffs.

In South America, Brazil is the powerhouse needed on board before the
FTAA. Forget about it. CAFTA? Please.

China? China will be slow to move, in my opinion, because the tariffs
appear to be increasing the investment in steel consumer industries (as US
steel users move to China in search of cheap steel). I’m doubtful the
Chinese are democratically savvy enough to pull a move like the EU.
Besides, The Administration has given an even broader opportunity by
deciding to impose quotas on Chinese textiles. (the NY Times HREF=”

China’s new to this WTO thing (this was their first complaint), but they
can see it as easily as we can: If the EU raises tariffs on US textiles
then Chinese textiles can swallow up US export markets. Don’t. Touch.

If you were China, what industry would you want to protect with higher
prices? Electronics? Agriculture? I dunno, but I suspect if they can
protect their currency policies, they will.

You know, this is all really poor performance for a “Free Trade”

Oh yeah. Here’s a big “Thank You”, Mr. Blair:

The Bush administration has instructed American multinational companies to

up shop in Britain
and to relocate jobs to America. This
Is London
reports that the Confederation of British Industry’s
director-general, Digby Jones, told members at this year’s annual
conference that “Three chief executives of American companies investing in
Britain have told me to my face that they have been told to close down,
bring their stuff home and make it in the US.” In Brad DeLong’s words,
“even [the Administration] wouldn’t do something as stupid and
counterproductive as this. Would they?” (kudos HREF=”

I dunno, Brad. They did think the steel tariff was a good idea…