Bush's Trade Policies Seen As Protectionist, Tied To 2004 Election

The Bush administration's decision this week to limit imports of some textiles and apparel from China heightened the world's perception of growing protectionism in the U.S.

The move comes just a week after the World Trade Organization ruled U.S. steel tariffs imposed last year are illegal. The European Union is threatening retaliation. Europe also says it'll impose $4 billion in punitive duties on U.S. goods if Congress doesn't repeal tax breaks for exporters ? also struck down by the WTO.

All this follows the failure of world trade talks over the summer in which U.S. and European farm subsidies were the main points of contention.

"The administration has a credibility problem to which this decision adds," Cato Institute trade policy analyst Dan Ikenson said of apparel quotas. "For three years, it has been preaching the value of free trade, but it can't seem to lead by example."

No trade issue has generated more heat in the past year than the soaring bilateral deficit with China and its impact on U.S. factories, which have shed nearly 3 million jobs since 2000.

The quotas, which impact just 5% of Chinese textile imports, are narrowly focused ? and much weaker than the protectionist measures being pushed by members of Congress and Democratic presidential candidates.

Some see the administration's limited response as a reasonable way of shielding an embattled industry and a way of bringing China to the bargaining table. Others believe the measures will do more harm than good. But few doubt that politics are playing a key role in a trade policy that appears increasingly protectionist.

"All of these moves are political," said John Silvia, chief economist at Wachovia. "What the administration has to show is that they do understand there are industry and regional differences."

Until now, he said, the administration focused "too much (on) macroeconomics and not enough (on) industry economics."

The quotas would limit growth in Chinese imports of knit fabric, brassieres and dressing gowns to 7.5% over the next year.

"They are not meant to solve the industry's problems," Silvia said. "I think they're really meant to buy time, to let workers gradually move into something else. Inexpensive commodity apparel producers are naturally going to gravitate" to low-wage countries.

The textile and apparel industries are among six industries in the U.S. that have lost at least 25% of their work forces the past 2 1/2 years, says Bob Gay, global head of fixed income research at Commerzbank Securities and a former Federal Reserve economist.

"One can rationalize these sorts of temporary quotas on the idea that the transfer of jobs abroad in some key industries is proceeding so quickly as to make the transition difficult," he said. "But it begs the question: Why aren't we doing more to retrain workers to find new jobs in new industries rather than postponing the inevitable by raising protectionist barriers to trade in an election year?"

Officially, President Bush didn't make the call to impose quotas on Chinese textiles and apparel. A Commerce Department panel voted 3 to 1 for the quotas after U.S. textile makers brought a case, says Cato's Ikenson.

The State Department was the lone holdout, he notes, a reminder that a trade dispute could impact the U.S. relationship with China, a key partner in diplomacy with North Korea, in more ways than just economically.

On Wednesday, China delayed trips to the U.S. by delegations to buy soybeans and wheat, part of China's "Buy American" response to criticism over the mounting bilateral trade deficit, which could hit $130 billion this year.

"Is it worth lighting this match when U.S. exporters are going to bear the brunt of the decision?" Ikenson asked.

The quotas "are not going to save any jobs," Ikenson said, since production will just move from China to other low-wage neighbors.

Silvia sees the quotas as "an opening salvo" to bring China to the negotiating table. But, he acknowledges, the policy isn't cost free. "It means there are going to be higher apparel prices," he said. And the relationship with China may hit a bump.

Another impact could be a falling dollar. The euro surged to a record high Tuesday after the U.S. said it would set Chinese textile quotas.

Bush trade policy "is likely to weigh on foreign sentiment toward the U.S. and U.S. assets," wrote Rebecca Patterson, currency strategist at J.P. Morgan Chase. "Without those capital inflows to finance the United States' growing current account deficit, the dollar will stay under pressure."

If the administration rolls back the steel tariffs soon, that could be a step toward "regaining some credibility on free trade," Ikenson said. But, he notes, even if more apparel quotas are imposed, Bush will likely remain the free trader in the 2004 presidential election.

What we have with China and India is not free trade. They have unlimited access to our markerts, we do not have near the same open access to theirs. If we are to have free trade then no barriers on either side, but as long as they impose tariffs and restrictions then I say let us do the same. Match theirs line for line. Impose the exact same restrictions, tariffs, inspections, what have you on them. Let see how they like it.

I totally agree. I am sick to death of watching this grain market on a daily basis (I work at an grain elevator and my family farms) and watching how that country can totally manipulate us. They can tank the market, then come in and buy which makes it go up, then they say something or rumor somthing and tank it again. My concern is getting this re-election over with first. He has enough issues with Iraq and everything else to also have the farm vote mad at him. After the re-election, then lets tighten the screws - hehehe!

>Now that's the American spirit. /sarc

One can reasonably talk about free trade among the 50 states of the US. But there has been and is nothing free about trade among nations.

What is being promoted now is a kind of labor arbitrage for the benefit of certain economic interests but to the detriment of others. There is nothing free in this current arrangement. It is a political and policy calculation. There can be other policies. To call what we have now free and the imposition of a textiles tariff unfree is silly.

What a lot of free traitors do not understand is that these job are the first rung on the latter to the middle class. The middle class is the consumer class, they buy the majority of the goods and services. The larger the middle class the healthier the economy is over all. My Famil itself started three generations ago on a modest farm, moved to an oil refinery job that afforded them to send their children to college, making my generation the first to be white collar instead of blue. This gradual economic progression up the ladder is the American drean in a nutshell. I will do everything I can to defend that dream and to make sure that as many as possible have a chance at it.

Your indifference to American workers in export industries is troubling.

They also are shackled by the federal government's bureaucratic and litigatory environmental and safety/health restrictions. That is why the Trade Deficit continues to expand as even our export industries are undermined. They too would benefit from implementation of a relatively low (10~15%), flate-rate "revenue tariff" placed on ALL imported goods. The proceeds from such a tariff could be used to finance further reduction of other forms of domestic taxation, benefitting ALL domestic industries, including export!!!

It sure as hell ain't surrendering to communist China which seems to be official republican and demoRat policy!

How about this: FREE AND UNFETTERED access to Red China's, Mexico's, India's and the friggen EU's markets?

That would be the first thing!

We don't have free trade with any of these countries. We are being raped and pillaged by foreign countries with the permission of the federal government in a trade war that America is losing badly.

Of course the deck is stacked against us from jump street thanks to the free traitors who are running the show in Washington DC.

Can you provide some info on those retraining programs?

Admittedly, I know nothing about these programs or if they even exist. I am not sure what the opportunites are and if there are any in what quantity.

I was just being sarcastic. I find it humorous that our president is trying to convince me that someone who has been content sewing together fannie packs for the last ten years is going to suddenly switch gears and enter one of the more challenging majors offered to ready for a career in science. But hey, stranger things have happened, I suppose.

I find it humorous that our president is trying to convince me that someone who has been content sewing together fannie packs for the last ten years is going to suddenly switch gears and enter one of the more challenging majors offered to ready for a career in science.

I find it humorous as well if not downright scary to think the people running the show actually believe this kind of fantasyland HS!

The proceeds from such a tariff could be used to finance further reduction of other forms of domestic taxation, benefitting ALL domestic industries, including export!!!

And to pay for the retraining (which is reduced/eliminated by the Bush administration).

Holy Crap!
This "free traitor" agrees with Willie Green on something. With you on the federal restrictions. As long as there WAS a concurrent reduction in all other forms of taxation that would ensure that there was no overall additional tax burden on our economy, I could support that. Ideally, I would start with a national sales tax as the primary form of revenue generation, with the flat tariff on all goods as you suggest with a fixed, permanent limit of no more than 10-15%.

But, he acknowledges, the policy isn't cost free. "It means there are going to be higher apparel prices," he said. ...

I don't think so. At least not significantly higher. Last time I was out shopping for clothing I checked both make and price. The foreign-made item was on the rack for $27.79, the equivalent domestic-made unit (which looked and felt better, so I bought it) was $28.99. Sure, it was a dollar or so different, but for the quality and wearability I'd pay the extra dollar. It wasn't going to break the bank.

What probably is different is how much of the sale price went into the company's bottom line. Maybe the foreign-made item cost $2 to make, while the domestic-made item cost $7. So the corporation doesn't pocket the extra $5. I'd find it hard to believe that the company would go out of business because it made $5 less profit. Sure, the shareholders might get $1 per share dividend instead of $1.01, and maybe the CEO and Vice Presidents get a $10 million bonus that year instead of $15 million, but all that means is that they only buy three yachts this year instead of four. Like I said, BFD.

It is becoming obvious that there are poplicy changes in the offing to protect the United States from losing any more jobs. The realization that we have lost enough tax base that we cannot sustain the spending that Washington has obligated us for is finally soaking in.

It is inevitable that it is going to take a genuine crisis to limit the excesses of our government and get the priorities straightened out. The corruption in our financial markets is only matched by the corruption in our political system. The trade situation is just starting to expose the cronyism and manipulation in the name of free trade.

...and China backs off on purchasing soybeans from us, he will LOSE all the farm vote.

Not exactly. Just for the soybean producers...maybe, but even for them it won't be all that clear cut.

China is extremely protectionist regarding soybeans, and have been so for a long time. If they stop buying it won't be out of the ordinary of the established pattern.

Secondly, corn and other ag products are hurt by China's trade practices.

China's undervalued currency isn't just undervalued vs the USD. I can go into detail if you want, but the jist is, Chinese subsidies undercuts US marketshare in Korea, Japan, and other areas around Asia. Those are our real markets in Asia. China is a smidgin.

Corn or any other ag commodity producers should be jumping up and down cheering and cheerleading the call for China to float its currency.

There are more reasons than that too...

If Chinese currency appreciates then soybean sales to China become just that much more profitable, as well as volume will increase. Along with everything else I might add.

Its not NEARLY that GW will lose the farm vote... but rather the opposite.

or any other ag commodity producers should be jumping up and down cheering and cheerleading the call for China to float its currency.

Not only that, but they should most definately be THE force behind having China's butt live up to what its mouth agreed to in joining the WTO.

I understand that and I think they would be the first in line, however, the farm economy is just finally starting to recover from about five years or poor markets (it was only a year and a half ago that beans were trading around 4.00 per bushel, now they are over 7.00) and the farmers are starting to perk up. If anything happens to totally tank that market and we lose them as a trading partner,no matter how bad they are to deal with, the farmers will blame the President. Remember, that we only have a small window of opportunity to sell our product until South America's production will be coming out of the field and then Asia can turn to them. The other thing I think we need to do is turn the heat up on Europe and get them to open up the markets to our farm commodities as well, then we won't have to rely on China. I think we need to do that FIRST, so if China does stop buying, we still have outlets for our ag commodities. Once again, we need to enforce free trade rules, but we had better do it very carefully! BTW - I lived in Hawaii with my husband when he was in the Navy! Absolutely loved it! Can't wait to come back!

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