A New Protectionism: Dashed Hopes and Perhaps Worse for US Trade Policy

Article excerpt

Over the next 14 months, culminating in US elections in November 2008, the world will learn whether America's budding protectionism reaches full bloom or is just a passing fancy. The global economy can shake off a failed Doha Round of multilateral trade negotiations without missing two beats. But if the United States turns inward as well, the consequences could be profound and far-reaching.

Some would argue that US protectionism is already beyond the budding stage. There has been an explosion in the use of trade remedies in 2007, including the first US antidumping case initiated against Australia in 15 years (involving the electrolytic manganese dioxide industry).

Earlier this year, the United States launched three high-profile complaints against China in the World Trade Organization, and reversed its 23-year-old policy of not applying the countervailing duty (or anti-subsidy) law to so-called non-market economies, when it initiated a case against Chinese paper manufacturers in April. And there has been a lot of sabre-rattling in Congress over a host of allegedly unfair Chinese trade practices.

But, by and large, the United States has yet to cross the precipice. Bringing antidumping and countervailing duty cases and launching WTO complaints are all permitted within the global trade rules. Those actions are not necessarily cause for alarm-at least relative to what could be in store in the months ahead.

The Democratic Party, which has grown increasingly hostile towards trade over the past decade, controls the legislature, and dius the policy agenda, for the first time in 12 years.

President George W. Bush's authority to negotiate trade agreements and present them to Congress for an up-or-down vote (the so-called Fast Track or Trade Promotion Authority) expired in June, and will not be renewed. Completed bilateral trade agreements with South Korea, Colombia, Peru and Panama have been shunted aside to consider, instead, trade legislation that is antagonistic, if not expressly protectionist. Although a few of those bills were crafted mostly for political effect, it is a good bet diat some of die nearly two dozen pieces of provocative trade legislation will at least make it to the floors of both chambers of Congress for official votes before the 2008 elections.

As Congress reconvenes in Washington, it is likely to begin moving some of those bills, which include, among other things, provisions that:

* make enforcement of trade agreements systematic and mandatory;

* lower the current evidentiary thresholds for imposing antidumping, anti-subsidy, and China-specific safeguard duties;

* establish a panel of retired federal judges to review adverse WTO decisions and advise Congress on the propriety of those decisions before any steps toward compliance are undertaken;

* forbid the United States from entering into any new trade agreements;

* revoke China's 'normal trade relations' status;

* define and treat currency manipulation as a countervailable subsidy;

* require the President to pursue concrete measures to achieve greater trade balance with countries that have persistent trade surpluses with the United States; and,

* expand trade adjustment assistance programmes to cover people who have lost jobs in the services sectors due to outsourcing.

Implicit in this legislation: trade liberalisation is bad, US trade partners cheat, and the folly of America's embrace of globalisation is evidenced by its massive human toll.

The primary target of most provocative legislation is China. But that shouldn't prompt sighs of relief in other countries. Thwarting Chinese imports into the United States is an indirect assault on other countries, particularly those in the Asia-Pacific region. What the US Congress fails to grasp is that many products imported from China comprise value-added materials and labour services provided mostly in other countries. …