Sunday, November 8, 2009

President Obama’s Accidental War on America’s Exporters

(Ed. note: this op-ed couldn't find a home, so I'm just publishing it here.)

President Obama and his friends in Congress have levied billions of dollars in new taxes to secure passage of their domestic agenda. This you probably already know. But you might not know that the folks paying the taxes are American exporters, that they’ve been doing it for months now, and that US labor unions and foreign governments, not the Treasury Department, are the ones collecting.

Such is the truth behind the President’s accidental war on America’s exporters.

I say “accidental war” because the administration’s public statements, and basic economics, belie overt bellicosity. This summer, the White House announced a new effort to help US exporters by expanding foreign markets, and the President routinely speaks of exports’ critical role in the long-term stability of the US economy. This, of course, is smart policy: with 95 percent of the world’s consumers living outside America’s borders, foreign markets are vital for US farmers, manufacturers and service providers, and developing economies provide fertile ground for the seeds of US business. That American exporters typically pay higher wages than their domestically-focused counterparts is icing on the economic cake.

Yet despite the cheery posturing and its sound reasoning, the White House and congressional Democrats have routinely made choices that end up closing markets, rather than opening them. Such choices result from a basic political decision to secure domestic priorities no matter the price, but all too often American exporters are left footing the bill.

Exhibit A is the President’s mid-September decision to impose, at the request of the United Steelworkers union, prohibitive tariffs on Chinese tires under “Section 421” of US trade law. Contrary to Obama’s excuses, the law gave him absolute discretion to impose the tariffs – discretion he used as a bargaining chip to solidify USW support for his fall health care push. But while the President’s protectionism ensured union adulation, it also resulted in China’s initiation of anti-dumping and anti-subsidy investigations of US chicken and automobile exports. The chicken retaliation – hinted by China weeks before Obama’s decision was announced – now threatens a growing market that purchased $722 million in American poultry last year alone. And while the autos case is small, an affirmative decision could foreclose the Chinese market to US car exports for years.

China also has used the tires decision as an excuse to abandon World Trade Organization negotiations to eliminate tariffs on chemicals and other products - so-called "sectoral agreements" that are part of the Doha Round negotiations on industrial market access. Because these side agreements contain "critical mass" exceptions that prevent them from taking effect unless almost all major exporters participate, China’s rejection essentially ruins the tariff elimination party for everyone else – including many large US exporters like Dow and Dupont that view the sectorals as key to their long-term global competitiveness.

The tires case is not an isolated incident. The Democrats’ refusal to ratify pending bilateral Free Trade Agreements has cost American exporters billions and is rooted in a cowardly decision to avoid “controversy” until health care and cap-and-trade legislation are secured. For example, Commerce Secretary Locke recently confirmed that the administration would not seek congressional passage of the US-Colombia FTA in 2009 because of these domestic priorities. Yet according to Locke’s own Commerce Department, American companies pay about $1.9 million per day in Colombian tariffs they wouldn't owe if the FTA were in force. Given that the agreement was signed in November 2006, this political stalling has resulted in a pointless tax on American exporters of around $2 billion and counting. Trade agreements with South Korea and Panama have been similarly shelved, and considering the US-Korea FTA is the largest since NAFTA, the price of its delay likely dwarfs Colombia’s billions.

Exporters are also under attack because the White House has refused to re-open US roads to Mexican trucks (a direct NAFTA violation) in order to curry favor with the Teamsters. Part of the 2009 Omnibus Appropriations Act, the trucking ban provoked $2.4 billion in additional Mexican tariffs on 89 American products. After signing the legislation with full knowledge of its NAFTA-illegality, President Obama promised the businesses injured by Mexico’s retaliation that his administration would quickly resolve the dispute. Six months later, the Transportation Department has crafted a solution but says the White House is sitting on the fix because it needs Teamster support for ObamaCare. So exporters will keep paying.

From these examples, the result of the White House’s political strategy is clear: American farmers and manufacturers are being forced to pay billions of dollars to foreign governments – and to lose new markets and customers – so President Obama can achieve his domestic policy goals. The President is literally buying off American labor unions with US exporters’ money, and in the process is waging an immoral war on an integral part of the American economy and thousands of innocent workers.

Accidental or not, this war’s damage is very real, and it’s time the President demanded a ceasefire.

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