THE global economic crisis has increased chances the United States will erect new barriers to trade but broad tariff increases, like those often blamed for causing the Great Depression, are unlikely, analysts said. President-elect Barack Obama’s criticism of China’s currency practices; the North American Free Trade Agreement and other trade deals have raised concern his inauguration on Tuesday could usher in an era of US protectionism. “I think President Obama is going to talk more about getting tough on trade than actually doing anything because I think he and his economic advisers realize it would be bad for the US economy to raise costs for US consumers and jeopardize US exports abroad,” said Dan Griswold, head of the free market Cato Institute’s trade policy shop. The US recession increases the temptation for politicians to shut out imports as unemployment rises. Last year, the United States lost more jobs than in any year since 1945, at the end of World War Two. That could lead to protectionism in a number of guises, even if the United States steers clears of anything like the 1930 Smoot-Hawley Tariff Act that prompted a series of retaliatory tariff hikes around the world. One of the worst things lawmakers could do is to include highly restrictive “Buy American” provisions in a proposed $825 billion economic stimulus package now taking shape in Congress, Griswold said. Lawmakers from steel-making states introduced legislation on Thursday that would require the Departments of Defense, Homeland Security and Transportation to buy US steel in any construction jobs they execute. Senior Democrats on the House of Representatives Ways and Means Committee also introduced a bill on Thursday to give the incoming Obama administration new tools to ensure that other countries play by the rules. But “enforcement” can easily become protectionism if the executive branch is allowed too much discretion to decide other countries are pursuing unfair trade practices that warrant US import curbs, said Gary Hufbauer, senior fellow at the Peterson Institute for International Economics
POSSIBLE STEPS
‘Buy American’ policies like the one mooted by steel companies.
Anti-dumping and countervailing duties on imports.
Restrictions under the guise of environmentalism, health.
Pressure on China to review its currency stance.
Curbs on companies outsourcing jobs to low-cost countries.
