The G20 meeting in Pittsburgh has ended with a grandiose promotion of the event and its future relevance. The participants declared the meeting from now on to be the world's principal economic gathering. But designation alone is not enough. The real question is how the impact of the meeting will change.
Time was when the host of an international summit could use the meeting to not only discuss pertinent issues but also initiate policy action. Such potential was also there for the Pittsburgh meeting. For example, as US President Barack Obama raised a global trade vision for economic recovery, job creation, and environmental sustainability, he could have demonstrated a commitment to these principles through the announcement of promising policies.
Yet, the Obama administration's decision to invoke safeguards and impose tariffs on Chinese tire imports dealt a major blow to such a vision. Many US trading partners were hoping that "Buy America" provisions of the economic stimulus legislation and the US failure to live up to its NAFTA obligations on Mexican trucking were products of an increasingly trade-phobic Congress. Widespread expectations that the administration could keep legislators on a leash were far from met. The recent decision against tire imports from China was Obama's own, driven by union pressure. It reveals more precisely and loudly than any trade policy speech ever could, the details of the direction of US policy.
It says that the US now views the rules-based global trading system, which successive administrations - both Republican and Democrat -placed at the center of US global economic policy, as outdated and expendable. This takes place despite the fact that rules are in large measure responsible for the postwar global economic success.
It says that the US has now created a subclass of economic interests. Manufacturers of auto parts, exporters of poultry, producers of aircraft are now at constant risk of international retribution. For example, in retaliation of the tire decision the Chinese are now threatening not to buy US goods which are in demand and competitive. Motivated workers in successful industries will now have their legitimate interests subrogated to the trade agenda of the major US unions.
It says that the US had its fingers crossed when signing on to the anti-protectionist pledge, and raises real doubts about future adherence.
It says that the "Yes we can" administration has lost confidence in the American model of competitiveness.
China is absolutely right to choose this ground to challenge the US on protectionism because, while trade lawyers can argue the letter of the WTO commitment - it is absolutely clear that the spirit of the Safeguards Agreement has been violated in this case.
Unquestionably, there are numerous issues on which the US can challenge China's approach to trade-including subsidies, disregard for intellectual property rights and denial of equal treatment. But a safeguard action addresses none of these. It doesn't identify any fault with the Chinese-only with the ability of US workers to compete. When faced with competition from Chinese tire producers, the US could not point to dumping or government supports, so the administration went to the "no we can't" option.
Larry Summers has said that the long-term formula for US economic recovery will be to become an export-oriented economy. To do that, we will have to compete aggressively and successfully with other countries for world markets and convince our trading partners to open up their markets to our products.
And, most importantly, we will have to reverse the deepening slide into protectionism heralded by the tire decision and challenge America's labor unions to participate in a trade agenda that can get America working - and leading - again.
— Professor Michael Czinkota currently teaches international business at Georgetown University McDonough School of Business and University of Birmingham, UK. He can be contacted at: [email protected]