The cause of free trade is crumbling in the hands of President George W. Bush. He promised Latin American leaders recently that he would try his darndest to expand the North American Free Trade Agreement (NAFTA) to their hemisphere.
At the same time, his administration imposed a 30 percent duty on Canadian lumber -- in violation of NAFTA.
This could be forgiven if it were an isolated anti-trade decision on the part of this administration. But it is not: It comes on the heels of massive tariff-hikes against foreign steel, something that is bringing the world to the brink of an ugly trade war as European countries contemplate retaliatory tariffs against American products. And the administration also recently denied Pakistan's request for more lenient textile quotas. The administration maintains that it was forced to take the step against Canadian lumber because Canada refused to stop subsidizing its lumber exports or dumping wood below cost in the U.S. market. But an administration that just agreed to expand subsidies to boost its own country's agricultural exports is in no position to demand economic purity from its trading partners. The ridiculously low fee that the Canadian government charges for logging on its vast land holdings distorts the global lumber market.
But this is a distortion that works to the advantage of the U.S. economy: It makes cheaper lumber available to the construction industry, whose robust performance is widely believed to be spearheading America's economic recovery. And it protects America's forests from logging pressures.
The administration's actions, however, will damage not just the U.S. economy, but also U.S. credibility. As a member of the World Trade Organization, the administration was bound by treaty to take its trade dispute to this body. By imposing unilateral sanctions, it has not only given Canadians cause for complaint, but it has also signaled that it does not take its treaty obligations seriously.
Given his emergence as a protectionist, it will be difficult for Bush to convince other countries to sign more trade agreements with the United States, even if he does manage to persuade Congress to hand him fast-track trade promotion authority.
The Detroit News