Trade skirmishes are one thing, full-blown trade wars quite another. Politicians, even the most fervent believers in the virtues of free trade, sometimes have to bend to constituents’ demands for protection. Ronald Reagan urged Japanese auto manufacturers to accept “voluntary quotas” on their exports to the U.S., and George W. Bush found merit in domestic manufacturers’ demand for steel tariffs. No lasting harm done to what remained basically a globalized free trading system, made freer at periodic intervals by multilateral deals cut under the aegis of the World Trade Organization (WTO). When those proved difficult, then-U.S. Trade Representative Bob Zoellick, now head of the World Bank, led the way in negotiating bilateral trade-opening agreements and pushing them through a sometimes reluctant Congress.
A worldwide recession changes things. President Obama professes fidelity to the teachings of Adam Smith, perhaps without realizing it, but is driven by domestic pressures to tilt towards protectionism. Banks availing themselves of bail-out funds were told not to hire foreign workers, even though some of the most talented financial analysts working in these international institutions are not American citizens. States receiving stimulus money are enjoined to “Buy American,” a congressional insistence that the president, to his credit, tried to get around by introducing language to provide suppliers and contractors with a large, but in the event ineffective, loophole. And when wearing his hat as CEO of General Motors, Obama forced the car maker to shift production of small vehicles from China to states that were important contributors to his election victory.
U.S., China and a Protectionist Vortex – Irwin Stelzer, The Weekly Standard
