Protectionism, Hypocrisy, and the “Bush Doctrine”

When I see the decisions the U.S. Government, the European Union and others have recently taken with respect to international trade, I feel like the Claude Rains character in the classic film Casablanca, who says “I am shocked -  Shocked! – to find gambling going on in this establishment,” just as one of the casino employees hands him his cut of the evening’s take.

Days after President Obama imposed a 35% duty on low-end tires imported from China comes the news that the European Union has just hit imports of steel pipe from China with a 40% anti-dumping tariff. This was ground-breaking in its own way. Normally, companies need to demonstrate lost sales attributable to the alleged dumping before their governments will raise duties, but in the words of Georg Berrisch of Covington & Burling, the law firm representing the European steel pipe producers, “The case shows that industries must not necessarily wait for injury to occur…to take measures against an onslaught of dumped Chinese imports.” This sounds very much like George W. Bush’s justification for invading Iraq.

The timing could not be better, with the G20 meeting in Pittsburgh and recent reports indicating that global trade has rebounded sharply during the past few months, and it exposes the hypocrisy of the U.S., the E.U., and other G20 members, who just last November pledged not to introduce any new protectionist measures. The European move at least offers some consolation to the U.S., which until yesterday had reason to expect a tongue-lashing at the Pittsburgh meetings for having violated the pledge.

It turns out, though, that the U.S. and the E.U. are hardly alone in this. According to Simon Evenett, Professor of Trade and Economic Development at the University of St Gallen in Switzerland, since November, “On average a G20 member has broken the no-protectionism pledge once every three days.” It seems almost everyone is guilty. Indonesia, Ukraine, and India are among the biggest and most frequent offenders. China is, by far, the biggest target. The blatant protectionist practices, though, are dwarfed by trade-distorting subsidies, of which there have been twice as many, most of them with the potential to disrupt trade flows much more than simple tariffs.

Meanwhile, the worthies gathered at Pittsburgh frittered away the past two days discussing new restrictions on bankers’ pay. It’s nice they could find something to agree on, but it’s a bit like deciding what color to paint the living room while the house is on fire.