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Tag Archives: depression

More upsetting news about trade battles between China and the US. Last time it was tires, now it is steel pipe. The International Trade Commission gave approval for an import tariff of 10 to 16% on Chinese steel pipe.

Maybe not that much to be afraid of. The International Trade Commission is not international at all, but an independent federal agency that only gives advice to congress and the white house. They themselves have no legislative power, so the news is not that bad, though the commerce department has approved the tariff.

The United Steelworkers union, which was the driving force behind the tires case, joined with the Maverick Tube Corporation, the United States Steel Corporation and other American manufacturers in asking for import duties on Chinese-made pipe.

No surprise of course that American steel and pipe manufacturers are pushing for the tariffs. What I don’t understand is where are the American oil companies? The oil companies and their customers will be the ones paying the higher prices that result from the tariff.

The real fear is that the US is going to go even further with protectionist policy, and many countries will follow in retaliation. Like during the Great Depression, protectionism gets politically easier during hard times, and you can not get any more counterproductive.

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beverly-hillbilliesA good editorial here about monetary policy, focused on the Federal Reserve and how it has dealt with the recession. Some valid criticisms here–rewards for the “imprudent financial firms at the expense of their more prudent rivals,” and a recent policy reversal that is poorly timed.

Then the amusing bit, critiqueing Bernanke’s claim that the recession was nearly over.

One doesn’t usually turn to old TV shows for economic insights. Yet the best way to put the Fed’s role in the recent crisis in perspective is by recalling an episode of “The Beverly Hillbillies” – the one in which Granny convinces everyone that a spoonful of her medicine can cure the common cold. Sure enough, it can: It just takes between a week and 10 days.

I like the mataphor. The message–of course–is that recessions are self-curing too, and Bernanke and money policy do not deserve credit for a recovery.

shakeAs I was writing my last post–G20 and free trade–The Christian Science Monitor was publishing an article on virtually the same topic. Theirs though is focused on Obama and his protectionist leanings so far.

… Obama has so far equivocated on free trade, which only sets an example for other nations to resort to protectionism. He did little to keep Congress from putting a “buy American” provision in the giant stimulus bill. And he signed onto a measure that violates NAFTA by barring Mexican trucks in the US.

The article also makes the case that protectionism helped postpone recovery from the Great Depression.

The world has looked to the US for leadership in opening markets since 1945, when American officials cited protectionism as helping prolong the Depression and as a cause for World War II.

It looks like maintaining free trade was a real focus of the G20 summit. Let’s hope Obama is convinced.

From the “Letters to the Editor” section of the Christian Science Monitor, some frightening arguments that the US should turn away from free trade and globalization. A closed economy–or partially closed one–is one thing that kept the Great Depression around for so long. Many people know this–but the arguments are so easy to buy into–blaming other countries for the US’s own problems.

And I have some British friends who are happily blaming the US for their problems.

It is true that much of the developed world has seen the loss of traditional industries and many people have had to train for new kinds of work, exactly what free trade brings about. It is also true that free trade should be thanked for many years of prosperity for some, and ending extreme poverty for many others.

I have some sympathy for arguments that we do not need to increase production and income levels, only redistribute what we already have. Seems to me that free trade is doing a pretty good job of exactly that–creating manufacturing jobs and income for people who need it most.

The most frightening arguments for closing markets seem to come from nationalistic perspectives–a simplistic bravado.