Trade Off: Pres. Obama's Mixed Record on Trade


Posted by Paul Petrick on Friday, January 27th, 2012, 9:27 AM PERMALINK

Last Tuesday, President Obama dedicated a portion of his annual State of the Union address to detail his administration’s record on trade.  While the president deserves credit for belatedly opening new markets to American products, his overall body of work leaves much to be desired.  Here is the good, the bad, and the ugly of the Obama Administration’s trade policy.

The Good:

“Two years ago, I set a goal of doubling U.S. exports over five years. With the bipartisan trade agreements I signed into law, we are on track to meet that goal - ahead of schedule. Soon, there will be millions of new customers for American goods in Panama, Colombia, and South Korea. Soon, there will be new cars on the streets of Seoul imported from Detroit, and Toledo, and Chicago.”

—Pres. Obama, January 24, 2012

In October, President Obama signed into law Free Trade Agreements (FTA) with Colombia, Panama, and South Korea.  This was a desperately needed boost to the struggling U.S. economy.  According to the U.S. International Trade Commission, these FTAs would yield $13 billion worth of increased exports and a quarter of a million new jobs.  Unfortunately for American workers, President Obama waited three years to submit these agreements to Congress where they passed with bipartisan support.  President Obama’s goal of doubling exports in five years is laudatory and we are pleased to find the economy ahead of schedule.  However, the economy would be even further along the road to progress if President Obama had decided to take action much sooner.

The Bad:

“From now on, every multinational company should have to pay a basic minimum tax. And every penny should go towards lowering taxes for companies that choose to stay here and hire here.”

—President Obama, January 24, 2012

Raising taxes on capital movement is an open and shut case of protectionism.  Every American benefits from free trade through lower prices, more jobs, and increased competitiveness.  Naturally, every American would be hurt if this policy were to take effect.  Besides, the U.S. currently has the highest corporate tax rate in the developed world.  Taxes need to go in the opposite direction.

“We've brought trade cases against China at nearly twice the rate as the last administration - and it's made a difference. Over a thousand Americans are working today because we stopped a surge in Chinese tires.”

—President Obama, January 24, 2012

President Obama should take an economics course because one of the first chapters of his textbook would detail gains from trade.  Raising tariffs is simply raising taxes on goods.  Thanks to President Obama’s 35% tariff in 2009, consumers were forced to pay 20-30% more for their tires.  The impact of such policies is especially detrimental to low-income Americans.

The Ugly:

“Tonight, I'm announcing the creation of a Trade Enforcement Unit that will be charged with investigating unfair trade practices in countries like China.”

—President Obama, January 24, 2012

Recently, President Obama announced plans to consolidate the federal trade bureaucracy.  While government retrenchment is always a good thing, President Obama offset his recent step forward by taking a big step backwards.  While specifics on the proposed “Trade Enforcement Unit” have yet to be determined, it is important to prevent the creation of a new tariff-hiking agency.  Regardless of the purpose, a further expansion of government bureaucracy is not what U.S. economy needs.

 

 

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