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Obama Announces Trade Enforcement Unit to Inquire on Illegal Chinese Trade Practices

Outside of the horrendous gambit of announcing a fraud investigation that appears designed to fail, Obama gave a decent enough speech last night. I liked the specificity on the Buffett rule – a minimum effective tax rate of 30% for millionaires – and the alternative minimum tax for corporations (a nice counterpoint to the far-right idea that everyone should pay “some” tax). The section on Senate reform – “I ask the Senate to pass a simple rule that all judicial and public service nominations receive a simple up or down vote within 90 days.” – at least highlights the problem. And in general, this was a speech in tandem with the Owasatomie speech, focused on achieving an economy that works for everyone and not just the 1%.

I don’t expect much of the laundry list to get accomplished, but there were some areas that provided hope. I thought the wrapping of the speech, with the Navy SEAL raid on bin Laden, and the intimation that we should all be as industrious and effective as people carrying out extra-judicial assassinations in night raids in Pakistan, was a little weird, to say the least.

But one intriguing item that Obama announced – and I believe by executive order without the need for Congress – was on a Trade Enforcement Unit:

US President Barack Obama has announced a new body to investigate unfair trade practices in countries such as China.

”I will not stand by when our competitors don’t play by the rules,” he said.

He was speaking in his third State of the Union address on Tuesday night in Washington DC.

During his presidency, he added, the US had ”brought trade cases against China at nearly twice the rate” of the previous administration.

As you can see from my comments on the financial fraud unit, I can find reason to be cynical about these enforcement agencies. But if you follow the facts, the President is correct that his Administration has been solid on bringing trade cases against China, on tires, on steel, on solar products, on rare earth minerals. And he’s gotten results. That may obviate the need for a Trade Enforcement Unit, but if it levels the playing field on trade with China, all the better.

Matthew Yglesias, neoliberal consensus purveyor that he is, found this part muddled and contradictory. He seems more annoyed that the economic message front-loaded manufacturing (“mercantilism” in his words). But he doesn’t much like the anti-globalization message:

Blocking an influx of cheap Chinese tires does, indeed, preserve jobs for tire-makers. But tire-buyers pay higher prices and presumably curtail their purchases of some other goods or services in exchange. Meanwhile, Chinese tire-makers have lost jobs and are now less likely to buy American soybeans or DVDs of our movies.

There’s no doubt that globalization has inflicted massive harms on individual American families and even whole communities. The reality that Chinese economic growth—in many ways the greatest success story of our time—has been painful for many should be a great teachable moment for a progressive president to make the case for a generous social safety net. The conservative article of faith that hard work and determination guarantee economic security is a now a cruel lie. People lose jobs because of shifts in global trade patterns, because of new technologies, and because of macroeconomic currents beyond their control. This is the nature of a dynamic capitalist economy, and to acknowledge it and the need for government countermeasures is in no way to repudiate the considerable virtues of the system.

I don’t really want to re-litigate NAFTA and China’s entry into the WTO. In truth, both sides miss the point that the best option for stateside economic growth with respect to China would be ending the artificially low value of the renminbi, so that their prices reflect reality and rise relative to ours to make US exports competitive.

But is this really an argument that you can’t have export-driven growth in a developed country anymore, so America should give up? That’s basically the argument my textile industry-working dad heard in the 1970s. Modern-day Germany would have a lot to say about such an argument. Yes, as Yglesias notes, they have a service sector. Most people purchase services. But a country of service providers selling things to one another looks, well it looks like the current United States. That’s not a particularly healthy economic outlook going forward.

Implicit in this response is that we should ignore unfair and illegal trade practices, because Wal-Mart needs to sell those cheap socks to people. I don’t subscribe to the view that we need to just give up on the workforce that built the middle class, as well as international trade law, and focus on making, I don’t know, iPhone apps.

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David Dayen

David Dayen