Opinion	E-mail PagePrint Version

Talk about dumb.
 
In what can only be interpreted as an act of desperation, the Bush Administration imposed quotas on three products from China in response to a petition filed in July by trade associations representing textile producers.
 
The action would limit the growth in imports of knit fabric, dressing gowns and brassieres made in China to 7.5% a year.

It's hard to find much support (and certainly no uplift!) for the president's latest misstep on trade.

''This Administration has free trade principles that it has articulated in an eloquent fashion,'' says Dan Griswold, associate director for the Center for Trade Studies at Washington's Cato Institute. ''Whenever those principles collide with political pressures, the political pressures prevail.''

The farm bill, steel tariffs, anti-dumping duties on Canadian softwood lumber and quotas on textiles from China are all examples of principles waived to garner votes.
 
While Bush's right hand was roiling the currency market by threatening to ignite a trade war, his left hand was pointing out the futility of the administration's ploy. Research from the president's own Council of Economic Advisers upends the idea that China is the US's problem and trade sanctions the way to fix it.
 
The research, contained in a CEA memo, found the following - increased trade with China is not a major determinant of the US trade deficit; much of the increase in imports from China reflects a decrease in imports of the same goods from other low-cost countries; restrictions on Chinese imports are unlikely to increase US jobs; and the US manufacturing industries that have experienced the most severe job losses (computers and electronic equipment, transportation equipment, machinery, fabricated metal products and apparel) are those in which imports from China are small.
 
Based on detailed statistical analysis, the CEA found ''no significant relationship between changes in employment and the growth in imports from China.''
 
President Bush may not get his information from reading the newspapers, but he should heed the conclusions of his own top economists. Otherwise, he may dig himself into an economic quagmire just when growth is translating into job creation.
 
Textiles aren't exactly a booming industry in the US  (When was the last time you wore something that was Made in America?) The peak in textile workers came in 1942, according to the Bureau of Labor Statistics.

Protecting the few at the expense of the many is always a bad idea, whether it's steel producers, textile workers or loggers.

China's global presence is manifesting itself in its appetite for raw materials and manufactured goods from the rest of the world as much as in its exports.
 
In the first 10 months of the year, China's imports rose faster (up 40%) than its exports (up 33%). China's goods imports ''are roughly 24% of its gross domestic product, well above the share of the US and Japan'' and an indication of the openness of its economy, the CEA says.

China was the seventh-largest US export market last year, according to the CEA. In the first nine months of this year, US exports to China rose 18.5% - not as much as imports, which jumped 21.5%.
 
The US trade deficit with China hit a record $12.7 billion in September and was 22% higher in the first nine months of the year compared with the same period last year.
 
The idea that quotas on China's imports will spark a domestic revival in undergarment manufacturing is misplaced. China is taking market share from other low-cost producers, who stand to benefit from quotas.

For example, imports from China were up 20% in September from a year earlier while imports from the Pacific Rim rose 5.6%. China gained market share at the expense of Hong Kong; Hong Kong may regain lost market share.

''It's not a question of made in China or made in the US,'' Griswold says. ''It's made in China or made in some other developing country.''

The latest Bush gaffe on trade comes at a time when other trade issues are unresolved.

 Earlier this month, the World Trade Organization ruled that the tariffs on steel imports, imposed in March 2002 and set to expire in 2005, were illegal. The tariffs, ostensibly designed to give domestic producers some breathing room to reorganize and become more efficient, were designed to court votes in the key steel-producing states of Ohio, West Virginia and Pennsylvania.

The administration's logic - using protectionist tariffs to win trade promotion authority - was as bollixed up as the action itself.

"Clearly the Bush Administration isn't concerned about starting a trade war," says Kevin Hassett, director of economic policy studies at the American Enterprise Institute in Washington.
 
Also pending is another WTO ruling against the US on something called the foreign sales corporation/extra-territorial income tax break, a subsidy on US exports.

''The WTO ruled that the export subsidy was illegal,'' Hassett says. ''Unless we get rid of it, Europe can put steep tariffs on our exports.''
 
Trade sanctions raise the prices of goods to consumers.

Apparel prices, which have been falling on a year-over-year basis consistently since 1998, have turned up in the past five months. Applying the equivalent of another hidden tax to an already highly protected industry will only exacerbate the trend.
 
Policy for the few comes with a cost. Ultimately it's consumers who bear the burden of higher prices and reduced choice.

And they're the ones who go to the polls.
 
When the full figures come in on the cost of Bush's protectionism, voters may decide the president needs a dressing down.

Go back, or read the latest opinions:

''On the Waterfront – Still''

John Fund, Wall Street Journal, 09/17/06