Obama On Trade: One Tiny Step Forward, Two Steps Back

The Obama administration is taking one tiny step forward on trade and two steps back. Arthor Brice writing for CNN in "U.S. loosens restrictions regarding Cuba," (March 11, 2009) reports that the Congress passed and President Obama signed a $410 billion budget bill that liberalizes travel restrictions and trade with Cuba. On travel restrictions, Brice writes,

Under the new provisions, relatives will be able to go once a year and stay for an unlimited time. In addition, the definition of relatives has been broadened to include uncles, aunts, nephews and nieces. The new measures also increase the amount of money visitors can spend.

According to the AFP ("Despite bill, Cuba trade rules mostly unchanged: Geithner," March 11, 2009), expands on trade changes. He writes that Secretary of Treasury Geithner assured that the changes in trade were small.

...Treasury Secretary Timothy Geithner stressed in a letter last week to US lawmakers that the practical impact of many of the changes will be negligible.

Geithner's March 5 letter to US senators Robert Menendez of New Jersey and Bill Nelson of Florida, a copy of which was obtained by AFP, stressed that "current financing rules" remain in place when Cuba pays for imports of US products...

The bill also eases some restrictions on food and medicine sales to Cuba -- but Geithner said it "will seek to ensure that only travel for credible sales of food and medical products is authorized."

It is unfortunate that the administration must ensure Senators that the loosening of restrictions on Cuba is "negligible" immediately before President Obama attends the Fifth Summit of the Americas to demonstrate our willingness to "change." The President appears to believe in a trickle-down theory of diplomacy rather than bottom up through trade. Is the relationship between (Raul) Castro in Havana and Obama in Washington more central to a thaw than thousands of relationships that trade would foster between businessmen and consumers across the breadth of both countries?

Other news on trade is bad. Anthony Faiola writing for the Washington Post ("U.S. to Toughen Its Stance On Trade," Washington Post, March 10, 2009.) reports,

The Obama administration is aggressively reworking U.S. trade policy to more strongly emphasize domestic and social issues, from the displacement of American workers to climate change...

The shift underscores the mounting pressures confronting any effort to expand trade during the economic crisis. Even before the global economy went code red late last year, talks aimed at expanding global trade stalled as Western countries warred with emerging giants like China and India over how to further open markets.

Those divides appear to be more unbreachable than ever as world leaders move to protect their domestic industries from the ravages of the financial crisis, embracing new trade barriers aimed at imported goods and other measures meant to restrict the flow of capital outside their borders. In the United States, more Americans are blaming cheap imports for job losses at home and congressional leaders pressed successfully to include a "buy American" provision in the $787 billion stimulus program to give an edge to U.S.-made products.

The administration does not seem to understand how comparative advantage works. He wants poor nations to be like us on issues like labor relations and climate change to establish a level playing field before trade can occur. I thought that the Obama administration wound no longer dictate to the rest of the world (Kligman, Aimee. "The New Diplomacy: listen and don't dictate - will it work in Pakistan?," examiner.com, January 27, 2009.), but maybe that change only applies to the Muslim world.

Even in the midst of the current recession, we have the most successful economy in the world; if any nation has an advantage in trade it is us. The desire of the administration to have other nations look like us robs them of their comparative advantages and all nations of many of the benefits of trade. It would be like Tiger Woods forceing other golfers to use his clubs and club selection as they played.

Rather than creating new reasons to limit trade, the Obama administration should remember history, specifically how President Hoover widened and deepened the Great Depression by signing the Smoot-Hawley Act in what is known as the beggar thy neighbor era.