Bush’s Support of Free Trade Questionable

President Bush is a huge fan of markets. Rather than take meaningful action toward surging oil prices, he’ll simply let the market correct itself. With the Chinese currency pegged to the U.S. dollar, the Administration is pressuring China to let it float. Let the markets determine currency values, not governments.

I think that’s a great position actually. Markets do work, so we may as well let them. When it comes to free trade then, it’s no surprise that Bush says he supports global free trade. After all, the global economy is a perfect example of a enormous market for goods and services at work. And it does work, very well in fact.

So it’s no wonder that when the Bush Administration imposed steel tariffs in 2002, many of his supporters were irrate. The tariffs were imposed to stop cheap steel imports from flooding the U.S. market, hurting U.S. steel producers by increasing competition and lowering prices.

Dozens of U.S. steel companies had filed for Chapter 11 bankruptcy protection since the last 1990’s due to an inability to compete effectively in the global market for steel. The tariffs were lifted in 2003 after the World Trade Organization pressured the U.S. and threatened to strike them down. Bush attempted to claim that the tariffs had served their purpose for a year, and now it was time to eliminate them, but everybody knew that it was simply a huge mistake, and fortunately there was enough pressure overseas that they were overturned.

However, the Bush Administration once again is attempting to close down the U.S. to free trade. The U.S. has reimposed quotas on Chinese textile imports such as cotton patnts, shirts, and underwear. How does reinstating quotas support the notion of free trade?

U.S. retailers have been urging Bush to not to reimpose the quotas. The reason is simple, prices for the U.S. consumer will go up as a result. Inflationary pressures are the sole reason the Fed has been raising interest rates. Quotas and tarriffs will only serve to increase prices, which will result in higher interest rates and lower economic growth, here and abroad.

Economic policies like these will only hurt the U.S. economy, and as a result, prevent a new bull market from getting underway anytime soon.