The Coming Crude Calamity (Due Solely to Government)

Today Reuters published a new oped of mine on crude oil export restrictions.  The whole thing is (obviously) worth your time, but here's a taste:

The American “shale boom” is poised to revolutionize global energy markets. It could transform the nation from a longtime net oil importer into an export powerhouse. Consider that the 2012 increase in U.S. crude oil production, announced last week, was the largest not just in U.S. history but the world.

To help this transformation, a bipartisan swath of federal and state officials is pressing for new infrastructure, like the Keystone XL pipeline, to move a glut of domestic oil from the center of North America to Gulf ports. This is a crucial step, but unless Congress reforms archaic restrictions on crude oil exports, all that black gold’s going nowhere....

[B]y curtailing exports and subjecting license approvals to the whims of bureaucrats, the current system slows domestic production, breeds economic distortions, discourages investment and destabilizes energy markets.

U.S. oil producers, for example, lose an estimated $10 billion a year due to their inability to sell crude in foreign markets. They’ve also spent hundreds of millions of dollars building “mini-refineries” in the Midwest and Gulf region to circumvent the current restrictions and export a slightly processed, cheaper product — leaving another $1.7 billion in potential profit on the table.

As Rube-Goldbergian as this sounds, producers have few alternatives, given that U.S. oil consumption has collapsed in recent years and building new refinery capacity is virtually impossible in many “environmentally friendly” states. These problems prompted the head of the International Energy Agency to warn recently that U.S. export restrictions put the “American oil boom” at risk.

Like I said, be sure to read the whole thing, but before you click over to Reuters, let me pick up on some of the points above for a second.  The Wall Street Journal just this week wrote a fantastic piece explaining the impending calamity facing US oil and gas producers - and the US energy market more broadly - if we don't reform the current ban on crude exports (emphasis mine):

New pipelines are beginning to carry a glut of domestic crude from the middle of the country to Texas' Gulf Coast, boosting the fortunes of the area's big refineries and further fueling a decline in oil imports.

Magellan Midstream Partners' Longhorn pipeline began shipping oil from West Texas to Houston in April—the first of at least seven pipeline projects that could send as much as two million barrels a day from oil-saturated choke points in Oklahoma and the interior of Texas to the largest concentration of refineries in the country. But domestic oil production is at such a high level that the Gulf Coast refineries won't be able to process all of the crude....

Refiners on the Texas Gulf Coast, which process about a quarter of U.S. gasoline, are poised to be the beneficiaries of the new pipelines. They have been largely stuck paying for more-expensive imported crude, or paying extra transport costs to have the cheaper, stranded U.S. crude brought in on rail cars, which are generally more costly than pipelines. Valero Energy Corp., Phillips 66 and Marathon Petroleum Corp., as well as Exxon Mobil Corp., which runs a major refinery in Baytown, Texas, all stand to gain....

However, Texas refiners won't be able to take full advantage of the influx of U.S. oil, most of which is of the variety known as light sweet. That is because many of those refineries were modified years ago to also deal with heavier crudes from Mexico, Venezuela and Saudi Arabia, preventing significant portions of their plants from refining light crude.

"It's rare to find a refinery down there that can take the majority of its crude" from the U.S. supply of light, sweet oil, said Cowen Securities analyst Sam Margolin.

Some industry experts think the pipelines will simply ease the oil glut in Cushing and create one in the Houston area as U.S. crude pours into the area faster than refiners can process it.

Trying to sell the crude abroad instead won't provide refiners a relief valve: U.S. law prohibits most crude exports, although refined products can be shipped overseas.

In short, we're producing tons of oil (and related jobs) and have the seemingly-infinite potential to produce even more.  New pipelines will be able move this oil from places like North Dakota, Oklahoma and Texas to Gulf-state and other refineries, but for various reasons we simply won't have the domestic refining capacity to handle all of it.  When we hit the point at which production officially outstrips refinery capacity, we'll have only two choices: lift the current, decades-old export ban or leave the excess oil in the ground (and sacrifice the jobs and growth associated with such activity).

So given the glacial pace of natural gas export license approvals (under a much more permissive legal system, by the way), the general proclivities of the current occupant of the White House, and the complete dysfunction of our beloved Congress what do you think's gonna happen here?

Yeah, I'm not holding my breath either.

Giving Obama's Free Trade Legacy Some Much Needed Perspective

Over the last several weeks, Americans have been treated to a pretty constant stream of news stories applauding President Obama's new found affection for free trade.  The impetus for this fawning coverage is obvious: since the end of 2012, the Obama administration has repeatedly thrust trade - in particular the inclusion of Japan in the ongoing Trans-Pacific Partnership talks and the launch of FTA negotiations with the EU - into the spotlight.  The administration does deserve some credit for finally, after four years of depressing inaction, putting the United States back in the free trade game (a game we not only used to dominate, but also kinda, you know, invented), but the media reaction to these announcements - i.e., assuming the FTAs' timely completion and all-but-anointing President Obama to be the greatest free trade president in the history of anything ever - has been utterly ridiculous.  Fortunately, Cato's Dan Ikenson has finally had enough and today does his best Winston Wolfe impression by throwing some much-needed cold water on the media's coronation party.  First, he quickly recites the administration's actual record on trade so far:

[B]efore anyone awards the president the Nobel Trade Prize for a job yet done, consider this: in four-plus years, this administration has concluded zero trade agreements, while launching 13 WTO cases against various trade partners. For 50 months, enforcement and domestic protectionism—not liberalization—have dominated the trade agenda....

Yep.  Next, Ikenson mentions another, ahem, minor hurdle to completing ambitious trade agreements in a rapid fashion - our totally unnecessary lack of a lead trade negotiator:

For starters, wouldn’t the president have delegated someone capable and experienced to take ownership of the trade agenda if he were really committed to leaving a trade policy legacy? U.S. trade representative Ron Kirk announced more than one year ago that he would be leaving his post early in a second Obama administration. Yet there is nobody vetted and ready to take the reins of trade policy. Kirk’s official resignation came at the end of last month—though he has been hanging around to help out on account of … “sequestration.”

The most prominent name floated for U.S. Trade Representative has been the OMB’s Jeff Zients, the person most closely associated with President Obama’s proposal to subsume the USTR under the enforcement-centric Commerce Department—again, not exactly the substance of trade legacy-building. Members from both parties in Congress have demanded a better candidate if the president expects his trade agenda to be taken seriously.

I'd be remiss not to note that the Obama administration also had a really tough time finding Kirk back in 2008-09 because at least one candidate (rightly, in retrospect) saw that trade policy would be a low priority in the Obama White House and thus turned the job down.  But I digress...

Back to the current situation.  Ikenson then points out the myriad landmines in the TPP and EU deals themselves:

Accomplishments, not rhetorical intentions, should serve as the basis for our judgments. Anyone can announce initiatives. President Obama is quite proficient at reciting litanies of initiatives. But it remains to be seen how he handles the situation when the deals require his confronting allied interests and dismantling their protectionist perches. In fairness, the administration’s trade negotiators have been working hard toward a Trans-Pacific Partnership agreement with 10 Pacific-rim nations. But let’s see where this goes before we start writing history. There’s still a lot of ham left on that bone.

The administration has verbally committed to completing the TPP negotiations by the end of this year and the just-announced Transatlantic Trade and Investment Partnership negotiations with Europe by the end of next year—both virtual impossibilities given where things stand in those negotiations and between the White House and Congress. So we already have a credibility problem.

Both sets of agreements are likely to include provisions that penetrate deeper than usual into the domestic regulatory space of all countries involved. Understandably, this is generating resistance—particularly to U.S. demands for extra investor and intellectual property protections. Some of the groups that were instrumental in defeating SOPA and PIPA legislation last Congress are beginning to mobilize in response to concerns that the TTIF could be a backdoor to IP-based restrictions that affect internet use and data sharing, among other issues. U.S. negotiators are making serious demands on matters they claim to be central to 21st century trade, yet they appear unwilling to give ground on the 18th century protectionism still afforded U.S. textile and footwear producers.

I bring attention to these details not to pick a fight about Obama’s trade record, but to emphasize that facts matter. So do characterizations. Readers should know about growing resistance to U.S. demands that threaten to prolong or derail the TPP and TTIP negotiations. Readers should know that if the talks break down or produce less ambitious outcomes, that there is probably more to the story than the official U.S. account, which will pin the blame on foreign intransigence. Readers should know that the U.S. government engages in all sorts of protectionist policies and then relies on media to characterize trade as a zero-sum contest between U.S. producers and foreign producers. Under this rubric, U.S. protectionism is presented as a necessary response and it becomes patriotic to support our own trade barriers—the very protectionism that hurts us the most....

Furthermore, the administration has barely begun to do anything substantive with respect to securing Fast Track negotiating authority from the Congress, which it will need to get any trade agreements approved by the legislature. Congress is largely in the dark about what the administration has been negotiating in the TPP. The administration’s cavalier attitude toward this potentially arduous process betrays either a lack of understanding or concern that Congress, if it grants that authority, will attach all sorts of conditions that may render moot the past couple years of negotiations on the TPP....

AEI's Claude Barfield also deftly details the many serious hurdles facing the TPP and the TTIP - definitely worth a read. (Conclusion: "The administration is misguided in bowing to the EU’s frantic plea for a crash, two-year timetable for FTA negotiations. Such a course will fail — and of much greater significance, it may well imperil a successful conclusion of the strategically and economically vital TPP negotiations."  Ouch.)

Finally, Ikenson explains what's really driving President Obama's new embrace of trade, and it's hardly flattering:

Alas, President Obama has not found religion on trade after all. He’s merely run out of options. The TPP was motivated from the outset as a means to regain some of the influence—on policy and institution-building in the Asia-Pacific—presumed to have been lost to China, as America toiled in Iraq and Afghanistan. Persistently high unemployment, despite four years of stimulus, subsidies, and bloated federal spending, had finally led the administration to its last resort: trade liberalization.

So there you have it. A president who has settled on trade agreements as a last resort to spur investment and create jobs shouldn’t inspire too much confidence that he’s in it for the long haul and that he’ll be willing to make the tough political decisions ahead, particularly if the economy starts to improve and his affection for trade agreements proves fleeting.

Oof.  I'd say that Ikenson's bitter assessment is pretty much a pitch-perfect review of President Obama's real free trade legacy (so far, at least), and it's either telling or sad that the media can't seem to grasp these easily Google-able facts.  Indeed, foreign media reports of the administration's pre-negotiations with Japan regarding its entry into the TPP hardly inspire confidence in the President's resurgent free trade bona fides:

Japan plans to agree to let the United States maintain its automobile tariffs for a certain period during preparatory talks for joining the Trans-Pacific Partnership free-trade negotiations, sources said Tuesday.

As the United States fears a possible surge in Japanese auto exports to the U.S. market under the TPP, Japan is set to agree that the United States will be allowed time to eliminate the tariffs in an attempt to extract a U.S. concession over Japan’s agricultural tariffs once it enters the TPP negotiations, the sources said.

Japan’s participation in the TPP negotiations has been opposed by the U.S. auto industry, as well as by Japanese farming groups fearful of cheaper agricultural imports. Japan currently imposes high tariffs on farm products such as rice and wheat to protect domestic farmers.

The United States currently imposes tariffs of 25 percent on trucks and 2.5 percent on cars.

To summarize: the United States is demanding the maintenance of high tariffs on imported trucks (and lower ones on cars) as the "price" of Japan's entry into free trade negotiations, and in return, Japan will get to keep high tariffs on farm products like rice and wheat.  Such a deal is sadly illiberal but it really shouldn't shock anyone: it's quite similar to the one that the administration worked out for the US-Korea FTA re-negotiation back in late 2010.  But, still, since when does vigorously protecting protectionism permit fawning reports of a president's commitment to free trade?

Seriously, man. What the...?

Thus, all the breathless media coverage of the president's free trade renaissance places the responsible journalists into one of three categories: (i) ignorant dupes fooled by savvy USTR and White House press shops; (ii) hopeless, overly-optimistic Obamaphiles blinded by their love for The One; or (iii) complicit hacks acting as the administration's unofficial PR wing.  None of these is very flattering, but - after comparing the media's Pollyannaish reports with the realities presented by Ikenson, Barfield and other trade experts - there really isn't any other option.

Fortunately, there's always foreign media.

So What Now? (Global Competitiveness Edition) [UPDATED]

In the coming weeks, I'm going to look ahead to the next few years of US international economic policy and examine (i) what the United States should emphasize; and (ii) whether I think the Obama administration will do so.  This series will cover a wide range of subjects, including things like trade agreements; unilateral trade liberalization; regulatory protectionism; energy; and subsidies policy.  Tonight's first installment, however, will focus on something I briefly discussed last week: how federal policies, particularly those related to business taxes and regulations, affect US companies' global competitiveness.  This subject seems particularly timely, given that US tax policy is dominating the current "fiscal cliff" negotiations in Washington, and that the future of the struggling US economy will depend, at least in part, on whether American businesses can compete in the global economy.  (And, as I've repeatedly explained here, outsourcing and protectionism would be far less common political themes if US companies became more globally-competitive due to lighter government tax and regulatory burdens.)

Unfortunately, in terms of business-friendly policies and global competitiveness, things aren't too good for the United States right now:

As I detailed in July, the United States has declined - in some cases significantly - in every independent study of global economic strength and competitiveness since President Obama took office.  These studies reflect a failure by the Obama administration to implement tax, trade and regulatory policies that could help US businesses and workers compete and prosper in the global economy.  Since July, the World Economic Forum's latest Global Competitiveness Index has dropped the United States another two places (now 7th, from 2nd in 2009, 4th in 2010 and 5th last year); respondents' top three problems with the US economy are inefficient government bureaucracy, tax rates and tax regulations - all things that the Obama administration could've addressed (especially when Democrats had total control of the US government in 2009-2010) but instead completely ignored.  The United States also has dropped from 10th to 12th in the Legatum Institute's Prosperity Index, with the US economy a mediocre 20th overall.  This is not good at all.

Not good, indeed.  Unmentioned in my note above is the World Bank's latest Doing Business survey which came out a few weeks ago and measures a wide range of regulatory policies in order to determine which countries are the best places to - unsurprisingly - do business.  While the United States remains fourth overall in the report, a closer look at the World Bank rankings shows a decline in seven of ten categories and no change in the other three:

TOPIC RANKINGS	DB 2013 Rank	DB 2012 Rank	Change in Rank
Starting a Business	13	12	-1
Dealing with Construction Permits	17	16	-1
Getting Electricity	19	19	No change
Registering Property	25	15	-10
Getting Credit	4	4	No change
Protecting Investors	6	6	No change
Paying Taxes	69	65	-4
Trading Across Borders	22	21	-1
Enforcing Contracts	6	4	-2
Resolving Insolvency	16	15	-1

As you can see, by far the worst area for the United States is tax policy, where the United States ranks a depressing 69th overall, down four spots from last year.  A breakdown of this ranking shows that the United States struggles not only with respect to total corporate tax rate (46.7%, well above the OECD average), but also in terms of tax complexity (taking a mind-boggling 175 hours - over four workweeks! - for the average New York business to prepare and file its taxes).

Adding fuel to this fire is AEI's Jim Pethokoukis, who today notes a new report from Ernst & Young on US business tax policy, including taxes on corporate income and investment (i.e., dividends and capital gains).  And things are gonna get much, much worse next year if the fiscal cliff talks fail:

- Taking into account both the corporate and investor level taxes on corporate profits and state level taxes, the United States has among the highest integrated tax rates among developed countries and these integrated tax rates will rise sharply in 2013:

- The current top US integrated dividend tax rate of 50.8 percent will rise to 68.6 percent in 2013, significantly higher than in all other OECD and BRIC countries.

- The current top US integrated capital gains tax rate of 50.8 percent will rise to 56.7 percent in 2013, the second highest among OECD and BRIC countries.

Pethokoukis next clips the section of the E&Y report which explains why these taxes are such a bad thing for economic growth and business competitiveness (and why most countries keep them relatively low):

Most developed countries provide relief from the double tax on corporate profits because it distorts important economic decisions that waste economic resources and adversely affect economic performance:

– It discourages capital investment, particularly in the corporate sector, reducing capital formation and, ultimately, living standards.

– It favors debt over equity financing, which may result in greater reliance on debt financing and leave certain sectors and companies more at risk during periods of economic weakness.

– A tax policy that discourages the payment of dividends can impact corporate governance as investors’ decisions about how to allocate capital are disrupted by the absence of signals dividend payments would normally provide.

Given these facts, it's really no surprise that tax policy remains one of the biggest areas of concern American business owners and managers who are struggling to compete against companies that reside in more accommodating countries (e.g., the 68 countries that rank better in the World Bank's "paying taxes" list and all of those to the left of the United States in the E&Y charts above).  And it all begs the question: what does President Obama intend to do about this problem?

Well, as you may recall, the President did release a tax reform plan last February that would lower the statutory federal corporate tax rate from 35 percent to 28 percent (32% with state taxes included), but that plan has gone nowhere and, beyond a glancing debate reference or two, hasn't been discussed in months.  And as I mention above, Obama didn't touch the issue during his first three years, even in 2009-10 when he and his party had total control of the US government.  So it's really anyone's guess as to whether the President intends to pursue corporate tax reform now that the election's over and he no longer needs the talking point.

Moreover, simply lowering the statutory rate a few points wouldn't really solve the tax problem that American companies now face.  First, as Cato's Dan Mitchell explains, 28 percent is still well above the rates of most industrialized countries in the world, and Obama's plan actually increases the tax burden on certain types of common corporate activity.

Second, as Pethokoukis notes, the plan also--

would leave the integrated capital gains rate more or less unchanged and the dividend rate sharply higher. As E&Y point out, a) the top federal income tax rate on dividends will increase from its current level of 15 percent to 39.6 percent in 2013; b ) the top federal income tax rate on long-term capital gains will rise from its current level of 15 percent to 20 percent in 2013; c) For many taxpayers, both dividends and capital gains will also become subject to the additional 3.8 percent Medicare tax in 2013 due to changes under the Affordable Care Act of 2010.

Finally, I'd add that it's highly unlikely that the President would significantly reform the tax code's troubling complexity by, for example, eliminating the hundreds of tax breaks (aka "subsidies") for certain types of manufacturing and green energy production.  Indeed, Obama's "old" corporate tax plan celebrates and expands these types of subsidies (more on that here).

(There's also the little problem of the fact that the vast majority of American businesses pay under the individual rates, which the President wants to raise.  But since we're talking corporate tax reform, we'll leave that little issue for another time.)

Add all of this up, and it seems highly unlikely that the United States will be surging in the global competitiveness rankings anytime soon due to serious reforms of our corporate/investment tax system or any other business regulations.  I'd be thrilled to be proven wrong next year, but I'm certainly not holding my breath.

UPDATE:  This just in:

President Barack Obama will begin budget negotiations with congressional leaders Friday by calling for $1.6 trillion in additional tax revenue over the next decade, far more than Republicans are likely to accept and double the $800 billion discussed in talks with GOP leaders during the summer of 2011.

Mr. Obama, in a meeting Tuesday with union leaders and other liberal activists, also pledged to hang tough in seeking tax increases on wealthy Americans....

The president's opening gambit, based on his 2013 budget proposal, signals Mr. Obama's intent to press his advantage on the heels of his re-election last week.

In case you're wondering, the President's 2013 Budget paid lip-service to corporate tax reform (at p. 38) but provided no actual details.

The Last Four Years and the Next

With the election only two(!) days away and with every "pundit" with an internet connection offering his/her views on President Obama's first term, there's no better time than now to provide my opinion on the United States' trade and related policies in the Obama years.  Unfortunately, there's simply no way to sugarcoat it: the President's international economic policies have fallen short on almost every level.

This conclusion will likely come as no surprise to readers of this blog, and I'm not going to spend all night reiterating the many criticisms that I've explored here since mid-2009.  Instead, I'd like to keep this (relatively) short, so if you want more support for anything said below, feel free click the hyperlinks below at your leisure.

But before I start kvetching, let me quickly note the "good" things that the Obama administration has done since they took over US trade policy in 2009:

• First, and most importantly, they have avoided serious backsliding into protectionism, particularly with China.  As I explained the other night, the President and his team have resisted the strong calls from their Democrat allies in Congress to label China a currency manipulator or to impose duties on Chinese imports on the basis of alleged currency manipulation.  Each of these policies is economically, legally and strategically wrongheaded, so it's good that the administration ignored them.  Moreover, they have avoided the imposition of broad-based protectionism, although they have implemented (or failed to stop Congress from implementing) many discrete anti-trade policies (discussed below).  However, as I've repeatedly explained, there is a big difference between pushing good trade policies and not destroying the economy (and US diplomatic relations) through protectionism.  In other words, "Obama 2012: Not Totally Horrible" is hardly a good campaign slogan.  We deserve - and really need - better.

• Second, I think the administration has done a reasonably good job of using WTO dispute settlement to advance US and broader free trade interests.  They are on pretty solid ground to brag about the number of cases that they've initiated to end other WTO Members' anti-trade practices.  Dispute settlement is a legitimate and effective way to curtail foreign protectionism, and it's good that, instead of imposing unilateral measures, the administration went to the impartial WTO.  However, it's important to note that (1) three of those disputes (challenging Chinese trade remedies actions against US chicken, automobile and steel exports) are the direct result of US protectionism (China retaliated after President Obama imposed tariffs on Chinese tires); (2) the administration didn't have much of a choice: dispute settlement is what WTO Members are supposed to do when faced with foreign protectionism, and most unilateral alternatives violate global trade rules; and (3) as discussed below, the administration's stubborn non-compliance with adverse WTO rulings and continued imposition of WTO-inconsistent trade and subsidy policies has undermined the moral force of the United States' anti-protectionism efforts at the WTO.  So the disputes are good, but bad policy prevents them from being much, much better.

Unfortunately, these reasonably-good things are significantly outweighed by the following policy failings:

• A dramatic decline in global competitiveness.  As I detailed in July, the United States has declined - in some cases significantly - in every independent study of global economic strength and competitiveness since President Obama took office.  These studies reflect a failure by the Obama administration to implement tax, trade and regulatory policies that could help US businesses and workers compete and prosper in the global economy.  Since July, the World Economic Forum's latest Global Competitiveness Index has dropped the United States another two places (now 7th, from 2nd in 2009, 4th in 2010 and 5th last year); respondents' top three problems with the US economy are inefficient government bureaucracy, tax rates and tax regulations - all things that the Obama administration could've addressed (especially when Democrats had total control of the US government in 2009-2010) but instead completely ignored.  The United States also has dropped from 10th to 12th in the Legatum Institute's Prosperity Index, with the US economy a mediocre 20th overall.  This is not good at all.

• A dramatic decline in economic freedom.  The United States' drop in global competitiveness has - perhaps not surprisingly - coincided with a decline in economic freedom.  According to the Heritage Foundation's Index of Economic Freedom, the United States now ranks a depressing 10th in the world overall (down from 6th in 2009) and an even-more-depressing 37th in trade freedom.   The Fraser Institute's 2012 Economic Freedom of the World Report shows a similar decline, ranking the United States only the 18th(!) freest economy in the world, down from 8th in 2005.  I won't debate here whether economic freedom means economic prosperity (despite strong correlations among the two), but you can draw your own conclusions.

• Trade policy stagnation.  As I explained last week, US trade policy has slowed to a crawl during the Obama years, and American leadership - a staple of the global trading system since the 1940s - has all but disappeared.  There is no better indicator of this stagnation than US involvement in free trade negotiations.  The President spent the first three years of his term letting the WTO's Doha Round of multilateral trade talks die on the vine and working up the "courage" to  face down his own party and submit implementing legislation for FTAs with Colombia, Panama and South Korea that had been completed and signed by President Bush in 2006-07.  And when Obama finally did get around to these deals, he made the most economically-significant one - the Korea free trade agreement - less free by raising or extending tariffs on automobiles in both the United States and Korea, and he refused to send them to Congress unless he received a billion dollar extension of the problematic Trade Adjustment Assistance worker subsidy.  (For details on the FTA debacle, go here.)  Furthermore, the only new trade negotiations that the Obama administration has formally initiated are those for the Trans-Pacific Partnership - talks that were actually started by the Bush administration, have moved interminably slowly due to US recalcitrance on various issues, and, because most TPP members are already US FTA partners, will only produce significant economic gains if other countries - like Japan or China - end up joining down the road.  Meanwhile, other countries are liberalizing at a breakneck pace (for example Canada, which has concluded nine FTAs since mid-2007 and is currently negotiating four more).

• Rampant proliferation of trade-distorting subsidies.  Starting with the Stimulus* bill in 2009 and snowballing ever since, the dramatic expansion of federal subsidies on President Obama's watch has hurt the US economy, bred cronyism, distorted trade and investment patterns, undermined US efforts to push needed trade reforms in other areas, and raised diplomatic tensions.  Need proof?  Just read my paper or related blog posts (or take a look at Solyndra).  'Nuff said.

• Trade remedies malfeasance.  Just as the United States has cranked-up the subsidies and screamed about Chinese subsidization, it has also employed trade remedies - particularly anti-subsidy (countervailing duty) measures - against foreign imports.  As I explain in my new paper and elsewhere, the application of CVDs can, in theory, help curtail foreign and domestic subsidies, but the administration's current anti-subsidy policies - particularly those related to China - reflect capture by domestic industries and unions, often violating US law and WTO rules and leading to taxes on US businesses and consumers that are far in excess of that needed to remedy foreign subsidization.  Meanwhile, the administration has also proposed numerous changes to US anti-dumping policies, again targeting China, that also will likely lead to more and higher duties.  And let's not forget the utter debacle that was the President's decision to impose tariffs on Chinese tires pursuant to the "special safeguard mechanism" (Section 421) of US trade law.  Thus, while support for trade remedy-based protectionism is undoubtedly a bi-partisan affliction, President Obama has proven himself to be especially ill over the last few years.

• Discrete protectionism.  The administration hasn't totally avoided protectionism over the last few years.  Beyond the tire tariffs, we saw, among other things, bans on Chinese chicken and Mexican trucks, as well as the proliferation of "Buy American" policies.  We also saw significant increases in "regulatory protectionism," including through the Lacey Act and Dodd-Frank's conflict minerals provisions.  Most of these anti-trade actions (and many others) were the result of the administration's consistent view that trade policy is a political tool to buy votes or to secure other, more important policies, regardless of the harms imposed on US businesses and consumers.  All of these actions are deserving of scorn.

• WTO non-compliance.  The Obama administration also has failed to comply with various adverse WTO rulings against, for example, US aircraft and cotton subsidies and several AD/CVD measures on Chinese imports.  You may remember that the cotton case is particularly galling, as the administration has agreed to pay $130 million per year to Brazilian - yes, Brazilian - cotton farmers in order to avoid formal retaliation from Brazil.  The federal government is also still paying out money - and facing retaliatory tariffs - under the Byrd Amendment, which was ruled WTO-inconsistent in 2003(!).  And we still haven't fully resolved the ongoing mess of zeroing in anti-dumping investigations.  (All that campaign bragging about WTO disputes doesn't look so hot now, eh?)

• Trade rhetoric and advocacy.  Finally, the Obama administration has promulgated some of the most problematic rhetoric on trade and international economics of any presidential administration of the last 30 years.  Yes, President Obama and his staff occasionally speak well of free trade (typically in theory or outside of DC), and every administration unfortunately advocates "fair trade" and overemphasizes exports.  But this President and his staff have been pretty darn awful, particularly during election years, as they have vocally pushed mercantilism, attacked outsourcing, treated our trading partners as adversaries, and routinely decried foreign "cheating."  As I've repeatedly explained, the Executive Branch is politically and legally positioned to be the US government's foremost advocate for trade liberalization, and when the President shirks this duty, it can have serious repercussions at home and abroad.  And here we are.

These points make clear that "Not Totally Horrible" really is the best thing you can say about US international economic policy in the Obama years.  This is hardly a ringing endorsement, and as I noted the other night, I see very little chance that the President and his team will ditch their political cynicism and dramatically improve US trade and related policies during a second Obama term.  And since there's no chance that Gary Johnson will be the next President of the United States, that leaves Mitt Romney, who - as I explained previously - is much more likely than the current President to actively pursue trade liberalization and reassert US leadership in the global trading system.  It's by no means guaranteed, but - considering just how far US trade policy has fallen over the last few years - it simply can't get any worse.

Indeed, the President's record goes beyond the discrete trade, tax and regulatory policies outlined above; it's indicative of his administration's political worldview and why I think Obama's not deserving of another four years.  As I have repeatedly explained, a politician's - particularly the President's - views on trade and protectionism speak volumes about his or her broader political principles:

A candidate's stance on trade is predictive of whether he, once elected, will put facts and principle before politics and self-interest. Politicians who reject protectionism turn down eager corporate and union campaign donations from unseemly rent-seekers trying to thwart international competition at the expense of American families and companies.

They ignore demagogic attacks on their patriotism. And they openly support policies which, despite their overwhelming economic and historical support, are met with public hostility or disinterest and an unethical opposition willing to take full advantage thereof.

On the other hand, politicians who peddle protectionism are either ignorant of history and economics or are willing to discard their... ideals and prey on voter fears for short-term political advantage.

Viewed through this lens, the aforementioned trade policy failings look even worse, wouldn't you say?

Of course, it didn't have to be this way.  Until the middle of the last decade, American trade and global economic policy wasn't really a partisan issue - just look at Bill Clinton, who not only championed NAFTA and the WTO but also forcefully pushed for China's entry into the World Trade Organization.  And for a few fleeting moments in 2009, President Obama and his team looked to be following in Clinton's free trade footsteps.  Heck, Cato's Dan Ikenson and I even gave them a pretty detailed road map on how they could do it.  But then Obamacare happened, and Chinese tires, and Dodd-Frank, and green subsidies/protectionism, and Mexican Trucks, and "Make It in America," and Bain Capital and so on and so on.  For political gain, they willfully turned away from decades of bipartisan, pro-trade consensus; they made their choice.

And on Tuesday we get to make ours.


P.S. I honestly have no idea what will happen in this week's election; my gut says narrow - 15 electoral votes or so - Romney win, but I could easily see it going the other way.  I sincerely hope that, regardless of who wins, the next four years of international economic policy are better than the last.  This economy, and global trade policy, can use all the help they can get.

Leading from Behind on Trade

Last night, I lamented the last four years of politics-driven US trade policy stagnation and the United States' abdication of its traditional role as the world's global trade leader.  My longwinded essay was admittedly light on links and examples, but did happen to finger Canada as one of several countries that have left the United States in the trade liberalization/leadership dust over the last few years.  Tonight comes a great example of just what I meant:

The Honourable Ed Fast, Minister of International Trade and Minister for the Asia-Pacific Gateway, today announced that Canada will soon begin the first full round of trade negotiations with Japan, the world’s third-largest economy and Canada’s fourth-largest merchandise export market....

Known as the Canada-Japan Economic Partnership Agreement, the first full round of official talks, which will begin on November 26 in Tokyo, will build on the recently released joint study that found a trade agreement between Canada and Japan could translate into gains of up to $3.8 billion a year in Canadian gross domestic product. The study also found that Canadian exports to Japan could increase by as much as 67 percent and lead to gains for Canadian exporters of goods and services, as well as enhanced investment opportunities. That is equivalent to the creation of more than 26,000 new jobs, and expected to bring strengthened bilateral trade opportunities in a variety of areas, including in Canadian agri-food products and natural resources....

In less than six years, the Harper government has concluded free trade agreements with nine countries: Colombia, Honduras, Jordan, Panama, Peru and the European Free Trade Association member states of Iceland, Liechtenstein, Norway and Switzerland. In addition to ongoing negotiations with the European Union and India, Canada recently joined the Trans-Pacific Partnership.

Nine FTAs concluded and three - now four - major agreements under negotiation.  Very impressive.  By contrast, since mid-2007, the United States has concluded precisely zero trade agreements, and is currently negotiating exactly one deal, the TPP.  I've repeatedly criticized the Obama administration for not getting Japan into the TPP when it had the chance, and it was great to see that Governor Romney's team announce that, as President, he'd welcome the country - one of our closest allies and largest trading partners - into the only trade negotiations that the United States is now pursuing.

But, hey, maybe if President Obama gets re-elected, we can just count on the Harper Government to push for Japan's inclusion.

Talk about leading from behind.

How Politics Crippled US Trade Policy (and Why That Matters Right Now) [UPDATED]

On Monday night, I had the privilege of speaking to a great group in Sarasota, Florida as part of the National Committee for US-China Relations' annual China Town Hall 2012.  My kind NCUSCR hosts recorded my presentation (on "Three Myths About the US-China Trade and Economic Relationship"), and I'll be sure to post that video here when I get it.  In the meantime, I'd like to comment on what was, in my humble opinion, one of the most interesting aspects of the Town Hall: how the unscripted remarks of US Ambassador to China (and former Secretary of Commerce) Gary Locke revealed the political cynicism that has driven the last four years of American trade policy and hobbled US leadership in the global trading system.

Locke's opening speech (via live webcast) was uneventful - a basic, scripted recitation of Obama campaign talking points about ensuring a stable US-China relationship, while focusing on "leveling the playing field," increasing US exports, and lauding the administration's trade "enforcement" actions against "unfair" Chinese trade, particularly through the WTO.  However, Locke veered from these talking points in the impromptu Q&A, and in doing so revealed surprisingly deep, nuanced and - dare I say - impressive views of US-China trade policy.  Most notably, Locke lauded the benefits of not only US exports, but also Chinese imports and investment, and he discussed the complementary, rather than antagonistic, aspects of bilateral trade relationship.  It was by no means perfect: the campaign talking points did creep into Locke's responses (especially on "leveling the playing field" and the administration's hypocritical subsidy finger-pointing) and, like any diplomat, he avoided some of the touchier foreign policy questions.  But after those points were exhausted, Locke repeatedly spoke of US-China trade and investment in terms that revealed a strong understanding of how the global economy actually works and why both nations must work to expand bilateral (and global) trade and avoid mutually-destructive protectionism.

This, of course, is a far cry from the angry campaign rhetoric spouted by President Obama and his surrogates, as well as the mercantilist trade and subsidy policies that they have pursued over the last few years.  And the contrast between this depressing rhetoric/policy and Locke's "improved" China understanding makes two things very clear: (1) the Obama administration isn't ignorant about China trade or free trade more broadly - they know the "truth"; but (2) politics has severely limited their willingness - or ability - to push good trade rhetoric and policy inside our borders.

This serious limitation, of course, is not confined to China trade: over the last 40-something months, the Obama administration has viewed trade policy through an almost-entirely political lens and has consistently put cheap politics before good policy.  This started in early 2009 when the President shelved his surprising pro-trade rhetoric and the pending FTAs with Korea, Colombia and Panama in order to shore-up partisan support for Obamacare and then Dodd-Frank.  And this approach continued for the next several years, leading to less-than-surprising results:

The WTO's Doha Round is dead, despite a pretty good opportunity to force the issue back in late 2010.  The Obama administration took three years to implement already-dusty FTAs with Korea, Panama and Colombia and actually insisted on watering the deals down with new protectionist provisions in order to finally agree to move them.  And while countries around the world are signing new trade agreements left and right, we've signed exactly zero and have eschewed important new participants and demanded absurd domestic protectionism in the one agreement that we are negotiating (the TPP).  Meanwhile, on the home front the President has publicly championed mercantilism, as his minions quietly pursued myriad efforts to restrict import competition and consumer freedom, embraced competitive devaluation and maintained WTO-illegal policies (while publicly denouncing protectionism, of course).

Amazingly enough, the Obama administration's China trade policy is probably the brightest spot of the last few years, as the President has for the most part ignored the increasingly-large protectionist wing of his party (e.g., avoiding labeling China a currency manipulator or lobbying for currency-based countervailing duties on Chinese imports) and pursued much of his China-related enforcement through the impartial WTO dispute settlement system.  And although his China trade remedies policies - particularly countervailing duties on green energy and non-market economy imports - have stunk, support for these economically- and legally-dubious taxes on US consumers is a bipartisan affliction.

Nevertheless, it's quite telling that the President's most impressive trade policy achievement has very likely been the avoidance of an economy-crippling trade war with China, one of the United States' largest trading partners.  (No, implementing three moldy Bush-era FTAs after making them worse and attaching a costly, union-appeasing worker subsidy is not a trade policy achievement.  It just isn't.)  Indeed, aside from the instances of protectionism mentioned above (and a few others), the last few years more aptly reflect not a devolution into Smoot-Hawley-style protectionism, but instead a complete lack of trade liberalization here - no unilateral reduction of domestic trade barriers, no new FTAs, no completed WTO negotiations, etc etc.  As I've often discussed here, this stagnation (and discrete regression) is almost entirely due to the Obama administration's political decision that it is unable or unwilling to take on its base of unions, environmentalists and other anti-trade groups.

So, yes, the United States hasn't become an overtly protectionist country during the Obama years, but stagnation and "not totally destroying the economy" is hardly a good US trade policy.  It's also not harmless: not only is the United States hurting its consumers and exporters by failing to keep up with rapidly trade-liberalizing countries like Canada, but our politics-driven stagnation also has led to a depressing lack of American leadership in the global economy.  This latter point has serious implications for the multilateral trading system - something that I've often lamented here and that Bloomberg discusses in a new editorial on US-China trade:

The global trading system suffers from a lack of leadership. The U.S.’s narrow focus on China’s bad behavior and its own agenda of preferential trade deals underscores the point. Although the multilateral system has survived the global economic slump better than many expected, it’s no thanks to the efforts of governments to strengthen it.

The U.S., as the architect of the WTO system, should reaffirm its commitment to the larger idea. So should China. Theirs is already the most important bilateral relationship in the world. They can benefit themselves and everybody else by forming a partnership to strengthen the multilateral trading system. More goodwill and a lot more ambition on both sides will be needed to make it happen.

Bloomberg's proposal is a good one, I think - US trade leadership at the WTO and elsewhere is desperately needed - and it brings me back to Ambassador Locke.  As noted above, his unscripted statements away from Washington reveal an Obama administration that fully understands the major problems facing the global economy and US trade policy, yet willingly ignores them for political gain.  In other words, there is simply no chance that the President and his underlings will just wake up in a few months and think "Gee, we were, like, totally wrong about free trade; we have to ditch the mercantilism and kick-start the global trading system ASAP!"  They instead would have to voluntarily change a cynical political calculus that has secured Obamacare, Dodd-Frank and, of course, the President's re-election.  Given these facts, ask yourself this: what are the chances that an Obama White House will restart America's trade leadership and lower US trade barriers in 2013?

Unless you think that the President's team will abandon their consistent and long-held political strategy upon re-election, or that the Democratic Party's base will suddenly embrace broad-based trade liberalization (stop laughing), this doesn't seem very likely, does it?

On the other hand, I think Mitt Romney's politics actually give him, if elected, a decent chance to reassert the United States' global leadership on trade.  It's no secret that I seriously dislike Romney's aggressive China trade policy - an economically and legally-ignorant position that, like President Obama's actual policies, seems entirely driven by political cynicism.  Yet Romney's previous actions and statements have, like Ambassador Locke's, revealed that he does actually understand free trade and the global economy, and he, unlike President Obama, would have almost none of the President's political impediments to pursuing "big" free trade policies.  In short, he won't be kowtowing to the unions/greens or the Michaud/Brown anti-trade coalition in Congress, but could still be looking to (supposedly) trade-skeptical Ohio for 2016.

Thus, while I think that Romney's China bashing politics could hinder his ability as President to quickly pursue freer bilateral trade with China, I'm confident that he'd have an easier time than President Obama advocating policies that could put the United States back at the forefront of the global economy: WTO and FTA negotiations (even with China, eventually), unilateral liberalization, subsidy reforms, etc.  No, I don't think that outcome is guaranteed - Romney's closest advisers clearly share some of the Obama administration's political cynicism on trade.  However, the contrast between Locke's free trade statements and the last several years of problematic trade protectionism and stagnation make clear that things can't get much worse and probably won't get any better during Obama's second term.

Romney at least has a shot at making US trade policy better, and, unfortunately, I think that's just about the best we can hope for these days.

UPDATE: Steve Craven adds an excellent point via Facebook that I totally forgot about:

I had pretty much the same reaction, Scott, listening to Locke in Honolulu. And Obama has already answered your question about how likely he is to pursue trade liberalization in a second term - by not asking Congress for trade promotion authority. TPA, curiously, is in the Republican platform, but no Democrat is pushing for it. That tells me Obama isn't even serious about the TPP negotiation.

Indeed.  (Now if only I can figure out how to do trade work from Hawaii.)

No, the President Will Not Extend His Favorite Protectionist Tariffs This Week (Thank Goodness)

A couple weeks ago, I openly asked why, considering how much President Obama just loves the tariffs on Chinese tires that he imposed in 2009 under "Section 421" of US trade law, they were going to expire at the end of this month.  This morning, however, the Huffington Post's Jon Ward had some pretty reasonable-sounding speculation that Obama will, in fact, extend the tariffs before they expire this Wednesday, September 26th:

President Obama plans to travel to Ohio for campaign events on Wednesday, the same day that a three-year tariff on the import of Chinese tires is set to expire.

It's not likely that Obama will let that happen, especially on a day when he is in a major tire manufacturing state, a state that is key to victory in the fall election and where many voters blame China for a long list of economic ills...

On Monday, the Obama campaign again showed its sensitivity to any attacks on the president's record on China and responded immediately with a memo from national spokesman Ben LaBolt, who pointed to the multiple investments by Romney's fund managers in Chinese companies and to the number of trade complaints brought by the administration at the WTO.

But LaBolt also mentioned the tire tariff, calling it "aggressive action against China on behalf of American tire workers."

"When he visits Toledo this week, those tire workers will welcome Romney to remind him that when it mattered most, President Obama stood up for them and he turned his back on them," LaBolt wrote.

The Huffington Post asked LaBolt last week about the tire tariff's pending expiration, but the normally responsive spokesman did not have anything to say about it. A White House spokeswoman on Monday morning also did not return an email requesting comment...

[W]ith the president headed to Ohio and the tire tariff now a gambit in the campaign, as each candidate bills himself as the most committed to "stand up to China," as the Romney campaign puts it, it seems likely that Obama is planning to announce an extension of the tariff at his campaign events in Bowling Green and Kent.

When I read Ward's blog post this morning and then saw this new Obama Campaign ad bragging about the tire tariffs (and bashing Romney's wise opposition to them), I admit that I was pretty concerned that my previous analysis of the legal basis for extending the tire tariffs was wrong.  However, after re-reading that analysis a few times and reassuring myself that the President had absolutely no legal authority to extend the tariffs at this late stage, I then became concerned that the White House was simply preparing to ignore the law's plain text.  (It wouldn't be the first time they've ignored the law on a China-related matter, and what journalist is knowledgeable enough - or willing - to call them on it?)  It turns out, however, that my concerns were misguided.  Shortly after noon today, Ward updated his earlier blog post with the following news from the White House and others:

UPDATE: 12:36 p.m. -- A White House official said Monday that the tire tariff will in fact expire, because the United Steelworkers felt that the provision had had the intended effect.

LaBolt, Obama's campaign spokesman, said in an email that "the President's action achieved its goals of saving 1,000 jobs and protecting American businesses against a surge of Chinese tires."

UPDATE: 1:30 p.m. -- A senior Romney adviser, asked Monday whether the tariff should be allowed to expire or not, did not directly answer....

The tariff's expiration on the day that Obama arrives in Ohio may sound an off-note; but if the tariff's primary beneficiary, USW -- which has not requested an extension, according to the White House -- is on board, criticism of the president is likely to be minimal.

UPDATE: 1:47 p.m. -- United Steelworkers President Leo Gerard said in an emailed statement that the organization informed the administration in March that it would not request an extension of the tariff.

"Since [Obama's] decision, by every measure, success has been achieved: jobs have been retained and created, production has rebounded, investments in plant and equipment have been made and many companies have returned to profitability. That’s why the law was enacted, and it worked," said Gerard.

The USW added that "under an unacceptable, but existing provision of international trade law, compensation for a fourth year of relief might have had to be paid to China."

"We refused to pursue an option that could potentially reward China for their actions," Gerard said.

The Wall Street Journal reported in January, however, that the impact of the tariff was negligible because low cost tires started coming into the U.S. from other foreign countries.

And, of course, the tariffs cost at least $900k/per union job allegedly saved - but hey, that's "mission accomplished" according to Leo Gerard.  Nice work, dude.  Way to go.

But I digress.

So, as I originally reported, it looks like we'll finally be rid of the tire tariffs this week after all.  That's certainly great news for American businesses and consumers, huge protectionist costs notwithstanding.  However, I now am left wondering what President Obama has up his sleeve when he visits Ohio on the day that the tariffs expire.  Another WTO case maybe?  Something else?  Shudder to think.

We'll know soon enough, I guess.

Chutzpah Alert: Huge Fan of Auto Subsidies Attacks Chinese Auto Subsides

I'm traveling right now and don't have much time to get in the weeds regarding President Obama's announcement today that the US has filed a WTO dispute against China for the latter's subsidization of its domestic automobile and auto parts producers.  Fortunately, the audacity of such a move is presciently covered in my forthcoming Cato paper on the failures of US subsidy and anti-subsidy policy.  Given ample news reports on rampant Chinese subsidization, the U.S. might just have a good legal case against China here, but its political case is abysmal for at least two reasons.

First, we just so happen to subsidize the heck out of our own auto industry - something that President "GM/Chrysler Shareholder" Obama certainly knows.  From the paper:

The United States also has a long, bipartisan history of subsidizing the domestic auto industry. Most notably, the 2008–09 bailouts of General Motors and Chrysler are projected to cost U.S. taxpayers over $25 billion in direct losses (at current stock prices), another $20-plus billion in indirect losses (e.g., preferential tax treatment for carryforward of next operating losses), and many experts predict that GM is once again headed for bankruptcy. The bailouts, however, are only the latest example federal support for Detroit. For example, the Clinton administration in 1993 provided U.S. automakers with $1.2 billion over eight years to develop hybrid cars as part of its Partnership for a New Generation of Vehicles. The Bush administration’s follow-up initiative, FreedomCar, focused on hydrogen-powered cars and cost taxpayers about $2 billion.

The federal government has also doled out extensive consumer subsidies for the purchase of certain vehicles. For example, the 2009 “Cash for Clunkers” program provided government rebates of up to $4,500 for car buyers who traded in their current vehicles for new, more fuel-efficient upgrades, at a total program cost of about $2.8 billion. The Energy Policy Act of 2005 (P.L. 109-58) established tax credits for the purchase of new alternative fuel and advanced technology vehicles. Tax credits under this program, expanded by the Emergency Economic Stabilization Act (EESA, P.L. 110-343), are as high as $7,500 for light-duty vehicles and $15,000 for heavy-duty vehicles. GM’s Chevy Volt qualifies for the maximum $7,500 tax credit—which the Congressional Research Service has said is “critical to GM marketing plans for the Volt,” given the car’s high selling price. The Joint Committee on Taxation estimates that these vehicle subsidies cost $500 million between 2004 and 2008, $1.3 billion from 2009 to 2013 (est.) and another $1 billion in 2014–2015. Many other state programs provide similar consumer subsidies. 

Second, US auto subsidies - and the bailouts in particular - have actually exposed US exports to anti-subsidy (countervailing) duties in... wait for it... China.  Back to the paper:

In December 2011, the Chinese government imposed anti-dumping and countervailing duties on U.S. automobile imports. CVDs on imports of Chrysler and GM cars and SUVs were set at 6.2% and 12.9%, respectively, while all other investigated U.S. automakers received 0.0%. Among the U.S. subsidy programs alleged in the CVD petition were various elements of the 2009 auto bailouts (including the Automotive Industry Financing Program), the Advanced Technology Vehicles Manufacturing Loan Program, the Cash for Clunkers program, and several federal and Michigan state tax incentives for U.S. automobile manufacturers and consumers. China’s final determination found that Chrysler and GM—but not U.S.-based competitors like Ford, Honda, BMW and Mercedes—had received countervailable subsidies in the form of the auto bailouts (via grants, loans, and capital injections). Of particular note was China’s determination that the two companies were uncreditworthy at the time of receiving U.S. government loans at already-low rates. On July 5, the United States announced a WTO challenge to various procedural and methodological aspects of China AD/CVD determinations on U.S. automobile imports. However, the United States has not disputed the basis for the Chinese CVD measures—that is, China’s assessment that the auto bailout constitutes a countervailable subsidy.

In 2011, American automobile producers exported more than $3 billion of the targeted cars and SUVs to China, but U.S. exports of Chrysler and GM automobiles will remain at a significant price disadvantage until these countervailing duties are removed. Although both companies can avoid the duties by selling cars in China that are produced outside of the United States, these duties—imposed due to the auto bailouts—have ensured that their American-based workforce will not reap the benefits of exporting to the largest car market in the world. Such exports also remain vulnerable to similar CVD actions in other key markets.

Now President Obama wants to complain about Chinese automobile subsidies?  Really?

Like I said, chutzpah.

Meanwhile, China announced today its third WTO challenge to US application of its own anti-subsidy (countervailing duty) law.  The details of the new dispute aren't out yet, but I'll be sure to come back to them in a few days.

Regardless, today's events are further proof that, while global subsidy reform is an absolute necessity these days, the United States - and the Obama administration in particular - is in no place to lead the charge.

Where's the Love for the President's Signature Trade Enforcement Achievement?

As you may recall, President Obama has repeatedly lauded his 2009 decision to impose prohibitive tariffs on Chinese tires under Section 421 of US trade law as the poster child for his big trade enforcement initiative.  For example, in his 2012 State of the Union Address, Obama bragged about how the duties saved "over a thousand jobs" and were a shining example of how the he stands up for the American worker (or something).  And just last week the President reiterated this theme in his speech to the DNC when he spoke of how his administration "stood up to China on behalf of our workers."

Those super-awesome tire tariffs, however, expire in a few weeks, and, while I'm certainly thrilled to see them go, their expiry leaves me wondering one simple question:

If the President's tire tariffs were as awesome as he says they were, why hasn't anyone - in the industry, unions or the Obama administration - fought to have them extended?

Under US law (19 USC Sec. 2451), any import protection measures imposed under Section 421 will apply "to the extent and for such period as the President considers necessary to prevent or remedy the market disruption."  And President Obama's September 2009 proclamation announcing the tire tariffs established that they would apply for three years from the date they were first imposed (September 26, 2009):

4. Pursuant to section 421(a) of the Trade Act (19 U.S.C. 2451(a)), I have determined to provide import relief with respect to new pneumatic tires, of rubber, from China, of a kind used on motor cars (except racing cars) and on-the-highway light trucks, vans, and sport utility vehicles, provided for in subheadings 4011.10.10, 4011.10.50, 4011.20.10, and 4011.20.50 of the HTS.

5. Such import relief shall take the form of an additional duty on imports of the products described in paragraph 4, imposed for a period of 3 years. For the first year, the additional duty shall be in the amount of 35 percent ad valorem above the column 1 general rate of duty. For the second year, the additional duty shall be in the amount of 30 percent ad valorem above the column 1 general rate of duty, and in the third year, the additional duty shall be in the amount of 25 percent ad valorem above the column 1 general rate of duty.

However, US law also allows any Section 421 measures to be extended upon the request of the affected domestic industry (including the union members who filed the original complaint) or... yes... the President himself:

(o) Extension of action

(1) Upon request of the President, or upon petition on behalf of the industry concerned filed with the Commission not earlier than the date which is 9 months, and not later than the date which is 6 months, before the date any relief provided under subsection (k) of this section is to terminate, the Commission shall investigate to determine whether action under this section continues to be necessary to prevent or remedy market disruption.

(2) The Commission shall publish notice of the commencement of any proceeding under this subsection in the Federal Register and shall, within a reasonable time thereafter, hold a public hearing at which the Commission shall afford interested parties and consumers an opportunity to be present, to present evidence, and to respond to the presentations of other parties and consumers, and otherwise to be heard.

(3) The Commission shall transmit to the President a report on its investigation and determination under this subsection not later than 60 days before the action under subsection (m) of this section is to terminate.

(4) The President, after receiving an affirmative determination from the Commission under paragraph (3), may extend the effective period of any action under this section if the President determines that the action continues to be necessary to prevent or remedy the market disruption.

Yet neither the unions nor the President ever requested that the tire tariffs be extended, and the deadline for a petition (i.e., 6-9 months before September 25, 2012) has clearly passed.  Such silence is pretty surprising when you consider that the Section 421 case is the centerpiece of an Obama administration trade enforcement strategy that has taken center stage during the 2012 presidential campaign.

So what's going on here?  If those tariffs are as great as the President has repeatedly claimed and have saved so many American jobs, wouldn't he have fought tooth-and-nail to prevent them from expiring in a few weeks?  He clearly has the legal authority to do so, and, as we all know, once the duties expire, it's very likely that Chinese exporters will regain much of the market share that they lost to other imports during 2009-2012.  And, let's face it, it's not like the US economy is just humming along these days.  Moreover, the United States doesn't lose its right to impose import protection under Section 421 ("the China-specific safeguard") until  December 2013 (12 years after China acceded to the WTO), so the President could have extended those "job-saving" tariffs for another 15 months (at the very least).

The President's silence is thus quite notable, and perhaps some enterprising journalist can ask him about it the next time that he brags about "standing up to China" on the campaign trail.  Could it be that maybe those tariffs weren't nearly as great as the President has repeatedly claimed, and that several independent reports have shown that they imposed massive harms on the American economy for very, very little gain?  And does the President perhaps want to avoid a very-public spotlight on these inconvenient facts during an election season?

(Yes, all of those questions are sarcastic and rhetorical, but it would nevertheless be wonderful to see someone raise them with the Obama campaign.)