Monday, October 26, 2009

Rodrik on trade and protectionism

Rodrik tries to debunk the overly hyped protectionism debate during the economic crisis:

What about the recent tariffs imposed by the United States on Chinese tires? President Barack Obama’s decision to introduce steep duties (set at 35% in the first year) in response to a US International Trade Commission ruling (sought by US labor unions) has been widely criticized as stoking the protectionist fires.

But it is easy to overstate the significance of this case, too. The tariff is fully consistent with a special arrangement negotiated at the time of China’s accession to the WTO, which allows the US to impose temporary protection when its markets are “disrupted” by Chinese exports. The tariffs that Obama imposed were considerably below what the USITC had recommended. And, in any case, the measure affects less than 0.3% of China’s exports to the US.

The reality is that the international trade regime has passed its greatest test since the Great Depression with flying colors. Trade economists who complain about minor instances of protectionism sound like a child whining about a damaged toy in the wake of an earthquake that killed thousands.

The welfare state is the flip side of the open economy. If the world has not fallen off the protectionist precipice during the crisis, as it did during the 1930’s, much of the credit must go the social programs that conservatives and market fundamentalists would like to see scrapped.