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Obama and free trade: What's the deal?

When it comes to free markets, Obama's message is mixed. The G-20 summit is a chance to provide some clarity.

September 24, 2009

President Obama is in favor of free trade. Except when he isn't. Free trade creates jobs and lowers prices, as he freely acknowledges. But he also insists that American workers must be shielded from foreign labor practices that threaten job security. During the presidential campaign, Obama indicated that he was open to renegotiating the North American Free Trade Agreement, even as an advisor quietly reassured Canadian officials that he wouldn't tamper with free trade on the North American continent.

Nine months into his administration, Obama's trade policy is a pastiche of pro-trade rhetoric, violations of international agreements and protectionist bobbing and weaving. That's why the U.S. can expect rebukes from its economic allies when the Group of 20 meets in Pittsburgh today. Obama's recent decision to impose stiff tariffs on tires made in China is a clear violation of the vow made by all G-20 members not to raise barriers to trade, goods and investment.

Invoking a section of the Trade Enforcement Act meant to permit U.S. industry to adapt to competition from China, Obama raised tariffs for three years: by 35% the first, 30% the second and 25% the third. But restricting Chinese tires won't save American jobs; imports from Mexico and other countries will certainly fill the void. The president, of course, is aware of this probability, but he appears willing to bend on trade principles to achieve political objectives. The United Steelworkers union, which sought the tariffs, is on board with healthcare reform, and Obama's action helps secure its support. Moreover, it comes at low risk. A full-on trade war seems unlikely; China has taken the dispute to the World Trade Organization.

But the move further damages Obama's credibility and hampers his ability to halt creeping anti-trade sentiment. Earlier this month, the WTO listed 91 potentially protectionist measures taken by G-20 members between the April summit in London and the end of August, and Global Trade Alert, a trade watchdog group affiliated with the World Bank, puts the number at 121 since November.

Trade squabbles are to be expected. Even President George W. Bush placed a tariff on steel imports from Russia (which retaliated with one on chicken). But Bush's overall record was one of trade expansion; Obama's record, to date, is incoherent. Trade agreements with Colombia, South Korea and Panama languish in Congress, the U.S. still refuses to give Mexican trucks access to most U.S. roads, and much of the world is still angry over the "Buy American" provision in the $787-billion economic stimulus package. This week's G-20 summit offers the president an opportunity to clarify his approach to these issues and to assure allies and others that the U.S. is committed to open markets.

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