Protectionism: Romney and Obama trying to outdo each other

Is this really what we’ve come to in this campaign? In Ohio, we’ve been treated to a recent as from the Romney campaign in which the Mittster sounds more like Ross Perot, Dick Gephardt, or Dennis Kucinich than a pro-growth Reagan Republican. My wife saw the ad before me and wondered if Romney was channeling John Kerry from 2004. A valid question. The Wall Street Journal took the Mittster to task for this nonsense today:

Protectionism of the kind Mr. Romney is now selling often scores well in the polls, which we assume is one reason the Republican is now pitching it. Especially when times are tough, it’s easy to blame foreigners for American troubles. Yet a bona fide protectionist hasn’t won the White House since the 1920s. The reason is because voters instinctively want a President who knows how to make America more competitive, not one who campaigns as if other countries are more formidable.

This China-bashing is especially odd for Mr. Romney, who professes elsewhere that he wants to expand trade because it will create jobs. So trade is good for America except when it is conducted by “cheaters” who happen to sell more of some goods and services to us than we sell to them. This is called mercantilism, not free trade.

This is also not the way to make the case for reducing trade barriers. It sounds all too similar to President George W. Bush’s too-clever-by-half scheme in 2001 to impose steel tariffs as a way to get trade promotion authority from Congress to negotiate and pass the Doha trade round. Trade authority passed, but Doha died—in part because the rest of the world resented the steel tariffs and Mr. Bush’s 2002 protectionist farm bill.

As a former businessman, Mr. Romney surely knows that cheaper Chinese imports create jobs in the U.S. up and down the merchandise and services value chain. On Tuesday, a Heritage Foundation study suggested those imports support nearly 600,000 American jobs in the apparel and toy industries alone.

I could go on and on about the false promise of protectionism, but there aren’t enough hours in the day. Suffice it to say I don’t need any advice from John Kerry, Mitt Romney, or any government official on what I can or can’t buy, from whom I can buy it, or how much I should be coerced by the government to pay for it. If the Chinese want lower living standards in their country, that’s their choice. Romney, who professes to be a great economic guru, should know better than this. This is Economics 101, folks. Read your Adam Smith and David Ricardo.

Obama, on the other hand, with zero knowledge of how markets work, probably never read Adam Smith (no doubt preferring Marx and Engels), and colossal ignorance about free markets can be expected. Today is a case in point. Our brilliant President filed a complaint at the WTO in which he charged the Chinese with subsidizing their auto parts makers to the tune of hundreds of millions of dollars:

The United States and China filed dueling complaints at the World Trade Organization on Monday, sharpening what has become a steady trade skirmish even as the nations’ leaders pledge to expand economic cooperation between the world’s two largest economies.

U.S. officials accuse China of giving hundreds of millions of dollars a year in subsidies to its auto parts makers in order to boost its own exports.

“Export subsidies are prohibited under WTO rules because they are unfair and severely distort international trade,” U.S. Trade Representative Ron Kirk said in a statement on Monday. The subsidies to auto parts makers were provided through “dozens of Chinese legal instruments,” including cash grants and preferential terms on loans.

Let’s think about this for a moment. Even if the Chinese are guilty of providing “hundreds of millions of dollars” of support to China’s auto industry, how much taxpayer “support” has Obama provided ours? We know that Obama spent in the neighborhood of $80 billion in his initial bailout of the GM and Chrysler, most of which was used to pay off his union buddies at the expense of the secured bondholders. We also know that each and every Chevy Volt produced costs taxpayers about $250,000. Hilariously, on the same day Obama is filing his complaint at the WTO, his administration is refusing to grant GM’s request for the government to sell the shares they acquired in the bailout. David Harsanyi discusses the sheer hypocrisy of all this:

The Wall Street Journal reports today that General Motors executives have asked the Treasury Department to sell its stake in the giant automaker. The administration has refused.

Oddly enough, today we also learned that the Obama administration is launching a complaint at the World Trade Organization over China’s allegedly unfair subsidizing of its auto industry. The United States will charge the Chinese government with subsidizing auto and auto parts producers from 2009 and 2011 to the tune of $1 billion. (Protectionism, it seems, always becomes a vital component of economic policy when a candidate is campaigning in Ohio.)


So why won’t the Treasury Department sell the remaining shares? Well … November.

If the Treasury sold its stake, it would have to admit, despite all its big talk of  success , that the venture cost taxpayers a bunch of money.

As I write GM’s shares stand at around $24. If the U.S. sold it shares today it would lose another $15 billion on the bailout. GM stock would need to reach $53 a share for the U.S. to break even. The Wall Street Journal reported that the Treasury Department will start thinking about unloading shares when it hits the $30s. Well, G.M.’s 52-week high is $27.68 and its value has been halved in the past two years.

And for those who believe that the Treasury Department is really waiting for a more favorable stock price; you’re probably going to be waiting a long time.  With demand in Europe and China weakening, Moody’s Investors Service recently lowered its growth forecast for global auto sales next year.

Moreover, the Treasury Department itself estimates that government will lose more than $25 billion — 15 percent higher than its previous forecast. So why wouldn’t it move now?

In other words, nothing Obama is doing makes any sense unless viewed through the prism of his re-election campaign. In an effort to win Ohio, he’s trying to outdo Romney’s protectionism by suing the Chinese for subsidizing their auto industry after subsidizing ours by about 80 times as much (and counting). What, do you think, are Obama’s odds of prevailing? This is all kabuki theater, of course, and if Obama wins re-election the complaint will be quietly withdrawn before the WTO, which moves at a glacial pace in the best of times, even takes it up. Why Mitt Romney is attempting to compete with Democrats in the sinkhole of protectionism is anyone’s guess. Which ever one of his handlers told him he can out demagogue Democrats on this “issue” is dead wrong.

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