A Blowout on the Road to Free Trade

Remember back in September, when the United States — at about the same time President Barack Obama was lecturing the G-20 summit in Pittsburgh about not resorting to protectionism — slapped a hefty 35 percent tariff on certain low-cost automobile tires made in China? It may not have seemed like a big deal, this payoff to the United Steelworkers (who represent some U.S. rubber workers), since it applied to only about 1 percent of the total annual trade volume between the two countries. But it has set off a number of reprisals, counter-reprisals and counter-counter-reprisals. It is hardly a full-fledged trade war, but it's a little like cross-border guerrilla activity.

Two days after the U.S. imposed the tire tariff, China — which has just overtaken Germany as the world's top exporting country — accused the United States of predatory "dumping" of chicken products and auto parts into the Chinese market and warned it might counter with some tariffs of its own. China made good on the threat in October by imposing a 36 percent duty on certain nylon exports.

In November, the U.S. returned to the offensive with "anti-dumping" duties on Chinese-made steel pipe and the announcement of two more probes into imports from China — glossy magazine paper and several types of salts. A day later, China accused the U.S. of evading vehicle import duties by shipping parts into China for assembly.

A week or so later it announced tariffs ranging from 5 percent to 35 percent on an industrial acid used to make nylon and medicine. And Dec. 10 China claimed the U.S. was dumping a type of steel used for power generation and ordered importers to pay a penalty pending the outcome of an investigation. At the end of December, the U.S. imposed stiff new permanent tariffs on steel pipe from China.

To be sure, these petty tit-for-tat bits of trade nastiness are small potatoes compared with the overall trade between the U.S. and China, which hit $409 billion in 2008, according to the U.S.-China Business Council. And given that China has subsidized the U.S. federal government deficit by buying U.S. Treasury bonds, making the two countries economic co-dependents, it is unlikely that they will let the mutual nastiness escalate into a full-fledged trade war. But the trade skirmishes will cost consumers in both countries, damage relations between the U.S. and China, and put at least a bit of a damper on economic recovery.

To be fair, the U.S. and China are hardly the only countries flirting with shortsighted protectionism during the global recession. As of September, the World Trade Organization reported 130 new protectionist measures worldwide, an increase from the year before, though the WTO didn't provide exact numbers. It also notes 437 anti-dumping disputes in 2009, double the number in 2008, in which countries accuse businesses in other countries of selling products below cost.

Foreign trade is essential to U.S. prosperity. When it comes to trade wars, the best policy is unilateral disarmament.

REPRINTED FROM THE ORANGE COUNTY REGISTER.

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