For example, the Obama administration "slapped a 35 percent tariff on Chinese tires" and China responded this past weekend by threatening to retaliate against U.S. chickens and auto parts. That followed French President Nicolas Sarkozy's demand on Thursday that Europe impose a carbon tariff on imports from countries that don't follow its cap-and-trade diktats." (Wall Street Journal, September 15, 2009).
The U.S.-China skirmish is especially explosive, since the relationship is central to the functioning of the global economy. China stood silent for years as the U.S. imposed tariffs on various Chinese products, a passivity that lured Obama into his recent action. China's quick response sent a strong signal: enough is enough.
China's Commerce Secretary warned that the U.S. tariff "not only violates WTO rules, but also runs against U.S. pledges at the G-20 summits, constitutes an abuse of trade remedy measures, and sets an extremely bad precedent in the current backdrop of a world economy in crisis."
One aspect of this "bad precedent" is that the tariff could inspire other U.S. corporations to apply for China-specific protections, perhaps setting off an avalanche of tariffs that China will inevitably respond to. The Wall Street Journal confirms:
"Trade lawyers said the [U.S.] decision could invite a raft of similar petitions for temporary protection from Chinese imports. Such so-called safeguards." (September 14, 2009).
If the China-U.S. relationship sours, much of the global economy may spoil with it.
Another recent trade spat flared up between U.S.-based Boeing and Europe-housed Airbus. Years ago the U.S. filed a grievance at the World Trade Organization (WTO) claiming that Airbus received unfair subsidies from European governments (Europe's identical grievance against the U.S. is still pending). A preliminary decision finally announced that Europe is guilty of illegally subsidizing Airbus, with the full implications yet unknown.
An immediate outcome of the dispute is the demand from some U.S. congressmen that a multi-billion dollar U.S. military contract be awarded to Boeing instead of Airbus. Politicians are using the nationalistic "buy American" slogan to pressure the government to bless the mega-corporation Boeing with mountains of U.S. tax dollars instead of its European counterpart. If the U.S. government were to freeze Airbus out of the gargantuan U.S. military market, large-scale retaliatory measures would surely be expected. As it stands, the seeds for such a conflict are being planted. Business Week notes:
"On sheer politics, Boeing clearly has an edge over Airbus: The company has a big presence in such Democratic strongholds as Illinois, Connecticut, and the state of Washington and it can count on labor unions to work Congress on its behalf." (September 16, 2009).
So not only does Boeing's billions of dollars enable it to purchase politicians, which is out of the reach of Airbus, but misguided labor leaders are encouraging workers to fight alongside the corporate giant as it battles an international competitor. The same Boeing that threatened to leave the state of Washington for a union-free South has labor leaders singing its praises until the factory doors shut.
Workers should not lend their voices in defense of the corporate shareholders that squeeze profits from them; an independent position is needed -- less they're suckered into the corporate "partnerships" preached by CEO's, politicians, and defunct labor leaders.
One way to gain a worker's perspective on trade is to study history. A simple appraisal of the Great Depression proves an undeniable fact: protectionist measures taken by governments deepened the depression, led to a trade war, and helped fuel the national conflicts that ignited World War II.
With this conventional wisdom known by every world leader today, why are protectionist measures on the rise? Why does Obama speak against trade protectionism while at the same time imposing protectionist tariffs?
Although free trade is crucial to the functioning of a capitalist economy, the desire for short-term profits sometimes supersedes rational considerations, especially in a recession.
Large recessions create huge drops in corporate profit rates. To help maintain profits, corporations force politicians to use tariff walls to exclude foreign competitors. In an earlier article we wrote:
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