Showing posts with label protectionism. Show all posts
Showing posts with label protectionism. Show all posts

Thursday, August 6, 2009

A new database tracks emerging threats to trade

Protectionism Exposed. By CHAD P. BOWN
A new database tracks emerging threats to trade.
WSJ, Aug 06, 2009

In May, the United States slapped new tariffs on steel pipe imports from China. In June, China imposed new barriers on U.S. and European Union exports of adipic acid, an industrial chemical used to make nylon and polyester resin. In July, the EU also decided to restrict imports of steel pipe from China.

The important question now is, do these events foreshadow spiraling protectionism and tit-for-tat retaliation that threaten a global trade war? Or is trade policy always like this, and we’re just noticing more now, given the global slowdown and heightened fears of Smoot-Hawley-style protectionism?

A new set of data on protectionism can help answer that question. The World Bank’s newly updated Global Antidumping Database, which I help organize, displays in almost real time emerging trends in this form of protectionism in more than 20 of the largest economies in the World Trade Organization. Some of the numbers are worrying.

The count of newly imposed protectionist policies like antidumping duties and other “safeguard” measures increased by 31% in the first half of 2009 relative to the same period one year ago, which itself is not an alarming number. But many governments take more than a year to make final decisions on such policies after receiving the initial request for protection from a domestic industry. The fact that industry requests for new import restrictions were 34% higher in 2008 relative to 2007 is a worrying trend even though 2007 saw a historical low in such requests. And with the recession continuing, requests for new import restrictions were 19% higher in the first half of 2009 relative to 2008.

This suggests a wave of new protectionist measures may be on the way. While leaders of the Group of 20 large economies unanimously pledged not to resort to protectionism at a Washington summit last November and reaffirmed this in London in April, virtually all of them have slipped at least a little bit.

Nor is it just the U.S., EU and China: Since the beginning of 2008, Indian companies alone are responsible for roughly 25% of all requests for new trade barriers, attacking a range of imports that include steel, DVDs, yarn, tires and a variety of industrial chemicals. While it is too early to know the final resolution of these new investigations, Indian policy makers have imposed at least preliminary barriers on more than 20 different products being investigated.

The burden of this protectionism is not uniformly distributed among exporting countries. In the first half of this year, China’s exporters were specifically named in more than 75% of these economies’ newly initiated investigations. In the second quarter, China’s exporters were targeted in all 17 of the cases in which new trade barriers were imposed around the world.

Despite all this bad news, there is a silver lining. The fact that countries may be resorting to antidumping actions and safeguards in lieu of other protectionist policies, such as across-the-board tariff increases or a proliferation of “Buy-America”-type provisions in national stimulus packages, is a partial sign of the strength and resilience of the rules-based WTO system. It is important to have a reliable trading system that allows for the transparency necessary to clearly see the new trade barriers, because industry demands for protectionism are somewhat inevitable in a recession.

That’s encouraging because “little” acts of protectionism could add up to a big problem. Having accurate data on the extent of the problem is important, but the only solution is for policy makers to recognize the dangers of the path they’re headed down.

Mr. Bown, an economics professor at Brandeis University and fellow at the Brookings Institution, is author of “Self-Enforcing Trade: Developing Countries and WTO Dispute Settlement” (Brookings Press, 2009).

Monday, April 27, 2009

Strengthen U.S.-China Trade Ties

Strengthen U.S.-China Trade Ties. By Chen Deming
Now is no time for protectionism.
WSJ, Apr 27, 2009

Economic links have always been an important basis for the China-U.S. relationship, and the growth in trade between the two countries has been robust since the establishment of normal diplomatic relations. Today, China and the U.S. are each other's second-largest trading partner; the value of the two-way trade in goods exceeds $300 billion.

U.S. businesses have benefited greatly. In the past five years, American exports to China have doubled. The U.S. trade surplus with China in services has grown 36% every year, and the overall value of U.S. export services to China exceeded $16 billion last year. U.S. businesses have invested more than $60 billion in 57,000 projects in China. In 2007, American-funded companies in China enjoyed a 17% increase of profit, while domestically the profit of U.S. businesses dropped by 3% on average.

But the commercial ties between our two nations are affected by the global financial crisis. Chinese statistics show bilateral trade dropped 6.8%, and U.S. investment in China slumped 19.4%, on a year-on-year basis in the fourth quarter of last year and the first quarter of this year.

History tells us that the more serious a crisis becomes, the more committed we must be to openness and cooperation. Regrettably, however, trade measures by the U.S. against China are on the rise. Recently, American industries have petitioned the U.S. government for antidumping investigations, and for investigations under the World Trade Organization's "special safeguard provision," which could restrict imports of Chinese products. This will seriously test China-U.S. economic and trade relations.

Despite these challenges, the need to foster positive Sino-American ties has never been greater. We need to recognize the existing differences between us in social systems and economic development, and constantly enhance mutual understanding and trust. Both countries should step up cooperation on trade and investment issues, and explore and establish new possibilities for cooperation in such areas as agriculture, new and high technology, finance, energy and the environment. Dialogue and communication also need to be intensified concerning multilateral and regional trade and economic affairs. To that end, I would like to put forth four proposals:

- First, seize the opportunity for cooperation, and work together to tackle the crisis. At present, both governments have rolled out economic stimulus packages on a massive scale, which in turn are expected to become new growth areas for our trade and investment cooperation. For example, China's demand for infrastructure, machinery and equipment, and environmental protection is huge. It is hoped that both countries would turn these opportunities into tangible outcomes.

- Second, mutually open markets to expand trade and investment. The Chinese government does not pursue a trade surplus with the U.S. We will continue to encourage Chinese companies to import more from the U.S., and we will also welcome U.S. companies and trade-promotion agencies to be more active in China.

Since foreign direct investment is a basic element of China's opening-up policy, we welcome American companies that want to increase their investment in China. Meanwhile, we also encourage capable Chinese companies to invest in the U.S. We hope that the U.S. government will welcome Chinese investments and create an open and transparent investment environment.

- Third, strengthen bilateral dialogue and resolve differences properly. As trading partners with broad and close ties, both countries should not allow differences on some issues to affect their cooperation in areas of common interests. We need to use the U.S.-China Strategic and Economic Dialogue and the U.S.-China Joint Commission on Commerce and Trade to boost strategic mutual trust, expand dialogue and cooperation, and establish a high-level and stable regime of bilateral trade and investment facilitation.

- Fourth, safeguard the environment for trade and advance the Doha Round. The U.S. and China, as the largest and the third-largest trading countries in the world, respectively, should take the lead in following up the consensus reached at the G-20 Summit in London and refrain from formulating any new trade protection policies before the end of 2010. We should also exercise caution, avoid arbitrary use of the trade remedies allowed by the World Trade Organization, and honor our commitment to fight protectionism. The two countries should also work together to advance the Doha Round, strictly follow the mandates of the Doha Development Agenda, lock in what has already been agreed to in past negotiations, avoid reopening negotiations or adding new subjects, and seek the success of this round.

A positive, cooperative and comprehensive Sino-American relationship will surely bring new prosperity and development to both economies. I hope and believe that bilateral trade will rise to a new high and exceed $500 billion in the coming five years, growing in a more balanced way.

Mr. Chen is minister of commerce for the People's Republic of China.

Monday, March 30, 2009

WSJ Editorial Page: Cap and Trade War

Cap and Trade War. WSJ Editorial
Team Obama floats a carbon tariff.
WSJ, Mar 30, 2009

One of President Obama's applause lines is that his climate tax policies will create new green jobs "that can't be outsourced." But if that's true, why is his main energy adviser floating a new carbon tariff on imports? Welcome to the coming cap and trade war.

Energy Secretary Steven Chu made the protectionist point during an underreported House hearing this month, when he said tariffs and other trade barriers could be used as a "weapon" to force countries like China and India into cutting their own CO2 emissions. "If other countries don't impose a cost on carbon, then we will be at a disadvantage," he said. So a cap-and-trade policy won't be cost-free after all. Apparently Mr. Chu did not get the White House memo about obfuscating the impact of the Administration's anticarbon policies.

The Chinese certainly heard Mr. Chu, with Xie Zhenhua, a top economic minister, immediately responding that such a policy would be a "disaster" and "an excuse to impose trade restrictions." Beijing's reaction shows that as a means of coercing international cooperation, climate tariffs are worse than pointless. China and India are never going to endanger their own economic growth -- and the chance to lift hundreds of millions out of poverty -- merely to placate the climate neuroses of affluent Americans in Silicon Valley or Cambridge, Massachusetts. And they certainly won't do it under the threat of a tariff ultimatum.

But give Mr. Chu credit for candor. He had previously told the New York Times that "The concern about cap and trade in today's economic climate is that a lot of money might flow to developing countries in a way that might not be completely politically sellable." He is admitting that one byproduct of cap and trade is "leakage," by which investment and jobs are driven to nations that have looser or nonexistent climate regimes and therefore lower costs. At greatest risk are carbon-heavy industries such as steel, aluminum, paper, cement and chemicals that are sensitive to trade and where business is won and lost on the basis of pennies per unit of product. But the damage could strike almost any industry when energy prices "necessarily skyrocket," as Mr. Obama put it last year.

So in addition to all the other economic harm, a cap-and-trade tax will make foreign companies more competitive while eroding market share for U.S. businesses. The most harm will accrue to the very U.S. manufacturing and heavy-industry jobs that Democrats and unions claim to want to keep inside the U.S. A cap-and-tax plan would be the greatest outsourcing boon in history. And it may even increase CO2 emissions overall, because the developing nations where businesses are likely to relocate -- if they don't simply close -- tend to use energy less efficiently than does the U.S.

Meanwhile, carbon trade barriers would almost certainly violate U.S. obligations in the World Trade Organization. Since carbon energy cuts across so many industries, a tariff would presumably have to hit tens of thousands of products. Any restriction the U.S. imposes on imports can also just as easily be turned around and imposed on U.S. exports, whatever their carbon content.

Run-of-the-mill protectionism is already adopting a deeper shade of green. In January, the president of the European Commission said he may slap tariffs on goods from the U.S. and other non-Kyoto Protocol nations to protect European business. After Mr. Chu's comments, the U.S. steel lobby began calling for sanctions against Chinese steelmakers if Beijing doesn't commit to its own carbon limits, knowing full well that it won't. Look for more businesses to claim green virtue to justify special-interest pleading, a la the 54-cent U.S. tariff on foreign ethanol.

Democrats are already careless about trade -- i.e., the Mexican trucking spat, the "Buy America" provisions in the stimulus, and blocking the Colombia and South Korea free-trade pacts. Now cap and nontrade may lead to a retreat from the open global markets that have done so much to boost economic growth and innovation. The closer we get to the cap-and-trade dreams of Mr. Obama and Congress, the more dangerous they look.

Thursday, March 26, 2009

Libertarian: Don't Provoke a Cap-and-Trade War

Don't Provoke a Cap-and-Trade War. By Will Wilkinson
Marketplace, March 25, 2009.

Last week, Energy Secretary Steven Chu said the U.S. should be open to slapping tariffs on imports from countries that fail to implement their own carbon reduction policies. Meanwhile, China has threatened trade war if faced with carbon duties, which it says are illegal under World Trade Organization agreements.

Trade restrictions tend to leave all involved poor, making trade war a frightening prospect during an already immiserating recession. So how did we come to have the Energy Secretary provoking threats of mutually destructive trade sanctions?

Here's how. Either all the big, carbon-intensive economies reduce their emissions, or there's little chance of reducing warming. If the climate modelers are right, we'll all be better off if everyone pitches in. But each has an incentive to hold out, since countries that don't pitch in will enjoy lower energy costs and a competitive advantage in international markets.

Chu rightly points out that Obama's proposed cap and-trade scheme will put American manufacturers at a relative disadvantage. So how do we avoid this, and make sure countries like China don't get a leg up?

In short, we can't. There is no mechanism, no global government, to compel compliance. And it is dangerously naive to think that China, who is the world's largest owner of dollar-denominated assets, is in a weaker bargaining position than the U.S. We poke the dragon at our peril.

Cap-and-trade is sure to raise costs for struggling American consumers. But it won't much reduce warming unless countries like China and India fall in line. Yet neither the U.S. nor Europe can just force this to happen. If we try by imposing carbon duties, we'll hurt consumers even more by raising the cost of imports, and possibly start a trade war no one will win.

Chu's remarks highlight the fact that cap-and-trade is a costly, risky gambit. But now's not the time. Suffering workers and consumers can't afford to lose again.

Wednesday, March 25, 2009

Erecting Trade Barriers: The Return of Smoot-Hawley

Erecting Trade Barriers: The Return of Smoot-Hawley
IER, March 24, 2009

Free trade is one of the greatest forces for positive change the world has ever seen. It opens new economic frontiers for American good and services, allows America access to the best the world has to offer, and promotes peace between nations. But free trade is coming under increasing assault as some in Washington, including the Obama administration, promote restricting free trade in the name of limiting carbon dioxide emissions. Secretary of Energy Steven Chu recently advocated using tariff duties as a “weapon” to restrict free trade, and some policymakers have also advocated increasing tariffs to “protect” some politically connected U.S. businesses.

These attacks are a serious threat to free trade and, if enacted, would deepen the recession. At the start of the Great Depression, Herbert Hoover made some bad economic decisions, and it appears President Obama is now considering following Hoover’s example.

In the early 1930s, in an effort to stem the economic downturn, President Hoover implemented massive deficit spending and tax hikes. This wrecked an already crippled economy. One of the worst episodes occurred when Hoover signed the infamous Smoot-Hawley tariff bill in 1930, which crippled international trade in the midst of the Depression. The Obama administration is considering a similar mistake in the form of “carbon tariffs” to prevent U.S. businesses from outsourcing to other countries after a cap-and-trade regulation makes it too economically difficult to do business in the United States. Just as in the 1930s, this Smoot-Hawley redux would punish American consumers at the worst possible time.

The Original Smoot-Hawley

Contrary to popular belief, Herbert Hoover was no fan of the free market or small government. After the stock market crashed in 1929, Hoover engaged in unprecedented peacetime deficit spending and other measures that increased the role of the federal government in the economy. Arguably, the most detrimental of his actions was the Smoot-Hawley Tariff Act of 1930, which sharply hiked taxes on thousands of imports.

Even conventional American history textbooks assign partial blame for the severity of the Depression to Hoover’s blow against international trade. In response to the legislation, European countries levied their own retaliatory tariffs and even repudiated their debts from World War I because (they claimed) the U.S. government was making it impossible for them to export goods to earn the dollars to pay back Uncle Sam’s loans.

Even without retaliation, a unilateral tariff increase makes Americans poorer. The gains to the workers in the “protected” domestic industry are more than offset by the loss to consumers who have to pay higher prices. A tariff is a tax on American consumers; the government says to its own citizens, “If you want to buy a product from a foreign producer, you have to make a side payment to the U.S. Treasury.” You don’t make a country richer by jacking up taxes on its own consumers.

International trade allows countries to specialize in their “comparative advantage,” or their areas of relative expertise. It would be catastrophic if everyone had to grow his own food, sew his own clothes, and drill his own cavities. We all benefit tremendously from the ability to specialize in occupations at which we are better than our peers, and then trade with each other.

The same principle applies to entire countries, which are simply aggregates of the individuals living in them. Because of differences in resource endowments, industrial infrastructure, weather, and the skills of the workforce, it is much more efficient for certain regions of the world to concentrate on a few key items and export them to other regions. When the government raises tax barriers, it interferes with this process and makes everyone poorer on average.

Ironically, when Herbert Hoover raised U.S. tariffs, he didn’t simply hurt American consumers, but he also crippled American exporters. Ultimately, other nations pay for their imports through their own exports. If Uncle Sam makes it more difficult for foreigners to sell their goods to Americans, then those same foreigners will not have the ability to buy goods produced by Americans. Indeed, total U.S. exports dropped from $7.2 billion in 1929 to $2.5 billion in 1932,[i] although some of this fall was no doubt due to the general price decline and the sharp drop in economic activity.

Smoot-Hawley II

True to form, the Obama administration—under the guise of fighting climate change—is testing the waters with new restrictions on imports. Specifically, lawmakers on the House Energy and Commerce Committee are considering imposing “carbon tariffs” to prevent foreign nations from gaining a competitive advantage vis-à-vis U.S. producers who are burdened with a forthcoming cap-and-trade regime. The idea is that the U.S. government would slap a huge “compensatory” tax on imports that were produced in foreign nations that do not impose carbon legislation on their manufacturers.

This is a very disturbing trend. Regardless of whether the World Trade Organization deems such “carbon tariffs” to be an acceptable infringement on trade, U.S. and European carbon tariffs will spawn another destructive trade war, just as the world suffered in the early 1930s. (If the WTO rules against the carbon tariffs, then the besieged countries will have the right to levy their own retaliatory tariffs, and if the WTO signs off on them, other countries will then find some excuse for levying tariffs to compensate themselves for the “overconsumption” of the Western nations or some such sin against the environment.)

Even if the threat from man-made climate change is as serious as some scientists claim, this fact would not overturn the centuries of work done by economic scientists. We know from both theory and history that raising trade barriers in the middle of a severe worldwide recession is a terrible policy. We also know from theory and history that government central planning does not work. When the technocrats reorder the economy, deciding which firms will survive and which prices are too high or too low, the results are disastrous. It doesn’t matter whether the justification is “fighting the Depression” (as in the 1930s) or “fighting climate change” (as in today’s discussions). Either way, central planning will wreck the economy, and it won’t even achieve its ostensible goals.


It is encouraging that the politicians are finally taking seriously the effects that cap-and-trade would have on U.S. manufacturers. The fact that lawmakers are finally admitting that the new burden would force many American firms to lay off domestic workers and relocate abroad is a positive development in the highly emotional debate about carbon dioxide regulations. But instead of abandoning their plans for cap-and-trade, the proposed solution of levying a fresh round of new taxes on American consumers who are merely trying to buy the best products at the lowest prices just adds insult to injury.


[i] Burton Folsom, Jr., New Deal or Raw Deal? How FDR’s Legacy Has Damaged America (New York: Threshold Editions, 2008), p. 31.

Wednesday, March 11, 2009

It's a Terrible Time to Reject Skilled Workers

Turning Away Talent. WSJ Editorial
Another harmful 'stimulus' provision.
WSJ, Mar 11, 2009

Bank of America, citing a provision of the stimulus package that became law last month, is rescinding job offers to foreign-born students graduating from U.S. business schools this summer. Protectionists will applaud, no doubt. But denying companies access to talented workers born outside the U.S. will neither jump-start the economy nor serve the nation's long-term interests.

The stated purpose of the amendment, which was sponsored by Vermont Independent Bernie Sanders and Iowa Republican Chuck Grassley, is "to prohibit any recipient of TARP funding from hiring H-1B visa holders." Press reports have suggested that these visa holders are displacing U.S. workers.

Mr. Sanders cited an especially misleading Associated Press story, which said that the major banks requested visas for more than 21,800 foreign workers over the past six years. "Even as the economy collapsed last year and many financial workers found themselves unemployed," said AP, "the dozen U.S. banks now receiving the biggest rescue packages requested visas for tens of thousand of foreign workers to fill high-paying jobs."

What the story left out is that companies file multiple applications for each available slot to comply with Department of Labor wage rules for H-1B hires. By focusing on how many applications were filed rather than how many foreign workers were hired, the story exaggerates actual visa use. In fact, H-1B visa holders have been a negligible percentage of financial industry hires in recent years. In 2007, for instance, Citigroup hired 185 H-1B workers, which represented .04% of its 387,000 employees. Bank of America hired 66 H-1B workers, which represented .03% of its 210,000 employees.

The reality is that cumbersome labor regulations and fees make foreign professionals more expensive to hire than Americans, which undercuts the argument that the banks were looking for cheap labor and explains why H-1B applications tend to fall during economic downturns. But far from displacing U.S. workers, H-1B hires have been associated with an increase in total employment.

A 2008 study of the tech industry by the National Foundation for American Policy found that for every H-1B position requested, U.S. technology companies in the S&P 500 increase their employment by five workers. America must compete in a global economy, and if U.S. companies can't hire these skilled workers -- many of whom graduate from U.S. universities, by the way -- you can bet foreign competitors will

Monday, January 5, 2009

Common perception that trade is, at best, a mixed blessing

Imports as Inputs. By Doug Karmin
Progressive Policy Institute, January 5, 2009


With the U.S. economy in crisis, and the dollar weakening against most major currencies, trade has become the only bright spot in an otherwise bleak economic landscape. Indeed, exports have grown over 10 percent in 2008, while a decline in Americans' disposable incomes has caused imports to shrink for the first time in years -- bringing our trade deficit down with it.1

Yet while the net impact of trade on the U.S. economy is now at its most positive, helping prevent the current crisis from becoming even worse, there is still a common perception that trade is, at best, a mixed blessing.

After all, we like having expanded markets to sell our products and services, but we don't always like to accept that other countries will want to sell theirs to us. When it comes to trade, we just hope that the good somehow outweighs the bad.

This assumption that all imports are bad because they compete against U.S.-based companies is flawed, and needs to be examined. Normally, the best anyone can say for imports is that they allow consumers to buy things for less and therefore improve our standard of living. What is largely overlooked is that imported inputs -- the components used by U.S.-based companies to produce their finished goods -- are essential for our economy to remain competitive.

Imports in the Aggregate

It's surprising how little is mentioned about the linkage between foreign inputs and our competitiveness given how dependent U.S. producers have become on global supply chains.2 Census Bureau data for 2007 show that 47 percent of imports came from related-party companies, or cases when the U.S. importer was a subsidiary or parent company of the foreign exporter.3

In other words, almost half of all imported goods are not the traditional case of a foreign company selling directly to U.S. consumers, but rather are part of an intra-company global supply chain. Furthermore, almost 30 percent of all goods imported by U.S. affiliates of foreign companies were destined for further manufacturing within the United States.4 In cases such as these, where the importing company is using foreign inputs to build finished goods, restricting imports would directly affect U.S. production and employment.

Indeed, it's difficult to find any large U.S. manufacturer that doesn't depend on some foreign inputs. To name just a few examples:

  • When Ford originally set out to build a hybrid SUV in the United States, it found that key components like the battery pack had to be sourced from Japan and Europe because U.S. suppliers lacked the leading-edge capabilities. Ford's ability to compete effectively against Toyota and others in the nascent hybrid market was therefore dependent on its access to high-quality imports.5
  • Boeing is in the middle of a fierce battle with an Airbus joint venture to compete for a $35 billion Pentagon contract to build aerial refueling tankers. National allegiances have played a role in the competition, and while Boeing's bid would reportedly use more U.S. content than the Airbus bid, Boeing's own estimates say that about 15 percent of the tankers (including such high-value components as the fuselage and tail) would have to be imported to meet the Air Force's needs.6
  • Dell is one of the last companies that still assembles computers in the United States, and is famous for its custom-configuration sales model. What is less known is how dependent Dell's U.S.-based manufacturing sites are on foreign suppliers, to the point where Dell had to charter a dozen and a half 747s to move necessary components from Asia to keep its U.S. plants from shutting down when a dock strike closed 29 ports along the West Coast in 2002.7

Unintended Consequences of So-Called Safeguards

Perhaps the clearest way to illustrate how much our economy has become dependent on high-quality, low-cost inputs from abroad is to look at what happens when that supply is temporarily disrupted.

A very high-profile example of this occurred in 2002, when President Bush invoked a "safeguard" to protect U.S. steel producers. Tariffs ranging from 8 percent to 30 percent were increased on foreign steel in March 2002, with an original plan of holding them in place until 2005 so that U.S. steel companies could adjust to a surge in competition from low-cost imports.8
While U.S. steel companies undoubtedly benefited from this reduction in competition, what hadn't been fully anticipated was the negative impact on U.S.-based steel users. Manufacturers of steel-dependent goods like machine tools or auto parts suddenly saw their costs spike overnight.

Several studies have shown that more U.S. jobs were lost as a result of the tariffs than were saved, and even Bush allies like Sen. Lamar Alexander (R-Tenn.) concluded the tariffs had "shifted more steel-consuming jobs overseas than exist in the steel-producing industry in the United States."9

Eventually, the Bush administration caved in to pressure from steel users, as well as the threat of retaliation from the impacted foreign nations, and lifted the safeguard in December 2003, more than a year earlier than originally planned. The lesson was clear: the interdependence of U.S. producers with foreign suppliers has made it too complicated to easily protect one domestic industry without harming many others.


None of this is to say that imports don't affect U.S. jobs. We must recognize that some imports do replace domestic production -- and that, by doing so, they cost some Americans their livelihoods. For these reasons, it's critical that public policy be designed to both prepare workers for the demands of 21st century competition through efforts to improve worker productivity (including through training and education, as well as better infrastructure). We also need policies that will help cushion the blow for those who do lose their jobs. This should include effective unemployment and wage insurance, as well as universal and portable health coverage.

But the idea that jobs can be saved simply by raising barriers to imports is misguided, especially when those imports are inputs used for domestic production. As the steel example shows, even the best intentions to protect one set of U.S. companies will have costs and competitive effects on others, even ignoring the foreign retaliation that often hits unrelated U.S. industries.

Especially in this era of heightened globalization, in which technology can enable companies to move production and employment virtually anywhere in the world, it's imperative that U.S. companies and workers be as competitive as possible. One way of achieving this is to ensure that U.S.-based employers have access to the inputs they need, including those that arrive from overseas. Otherwise, we risk watching jobs cross the water -- in the opposite direction.


1. See Bureau of Economic Analysis, U.S. Department of Commerce, news release from September 26, 2008 for most current data on export and import growth. a discussion on the inverse relationship between import growth and unemployment, see "The Facts on Trade Deficits and Jobs," by Doug Karmin. Progressive Policy Institute, October 3, 2007.
2. For a less serious look at the impact of restricting inputs on competitiveness, see "GATT confusing? Canadian football provides some answers" by Doug Karmin in The Hill (November 30, 1994). It describes how the Canadian football league tilted the competitive balance against its own teams by restricting the number of foreign players allowed on Canadian teams while allowing U.S. teams to hire the best available talent.
3. Census Bureau, U.S. Department of Commerce, "U.S. Goods Trade: Imports & Exports by Related Parties 2007." May 9, 2008.
4. Bureau of Economic Analysis, U.S. Department of Commerce, Operations of Multinational Companies, Product Guide for Foreign Direct Investment in the U.S., 2002 Benchmark Survey, "U.S. Imports of Goods Shipped to Affiliates and Intended Use." Most recent data is for 2002, and it shows that U.S. affiliates imported $95 billion in goods destined for further manufacturing out of a total of $335 billion in imports (28.3%). Intended use of imports only exists for U.S. affiliates.
5. "Lack of Hybrids-Parts Suppliers Could Hurt U.S. Auto Makers," by Norihiko Shirouzu. The Wall Street Journal, August 16, 2004. The need for importing batteries for hybrid cars has continued since Ford's initial launch of their hybrid SUV. See "Hybrid Cars' Foreign Dependence," by Jim Ostroff. The Kiplinger Letter, September 9, 2008.
6. "Boeing, too, uses foreign parts," by Joelle Tessler. The Associated Press, March 7, 2008. It was also reported in September 2007 in China's "People's Daily Online" that Boeing's Vice President of China Operations stated that China had become one of Boeing's largest foreign suppliers with $2.5 billion in active contracts.
7. "Living in Dell Time," by Bill Breen. Fast, November 2004.
8. Remarks by Robert B. Zoellick, United States Trade Representative, on the decision by the president to terminate steel safeguards, December 4, 2003.
9. "Steel Tariffs Appear to Have Backfired on Bush," by Mike Allen and Jonathan Weisman. The Washington Post, September 19, 2003.