Obama's Protectionist Policies Hurting Low-Income Americans

by Daniel Griswold

Daniel Griswold directs the Center for Trade Policy Studies at the Cato Institute and author of a new book, Mad about Trade: Why Main Street America Should Embrace Globalization (Cato Institute, 2009).

September 29, 2009

President Obama and the other Group of 20 leaders delivered their obligatory warning against protectionism at last week's summit in Pittsburgh. But at home the U.S. president continues to conduct his own trade war, not only against imports from China and other developing countries, but against the most vulnerable of American consumers.

America's highest remaining trade barriers are aimed at products mostly grown and made by poor people abroad and disproportionately consumed by poor people at home. While industrial goods and luxury products typically enter under low or zero tariffs, the U.S. government imposes duties of 30 percent or more on food and lower-end clothing and shoes - staple goods that loom large in the budgets of poor families.

To win favor with organized labor and other opponents of trade liberalization, Mr. Obama has either defended or actually raised barriers on precisely those products of most interest to poor households.

The tariff the president imposed on Chinese tires earlier this month was heavily biased against low-income American families. The affected tires typically cost $50 to $60 each, as compared with the unaffected tires that sell for $200 each. The result of the tariff will be an increase in lower-end tire prices of 20 percent to 30 percent. Low-income families struggling to keep their cars on the road will be forced to postpone replacing old and worn tires, putting their families at greater risk.

The "cash for clunkers" program the president championed, while not a trade measure, betrays the same indifference to markets that serve the poor. The program forced the disposal of the 700,000 cars and light trucks that were traded in, reducing supply and raising prices of used vehicles for families that cannot afford to buy new. Because of this president's policies, low-income drivers will find it more difficult to buy a car and to keep it running safely. The president's policy appears to be to let the rich drive their new, subsidized hybrid cars while the poor walk or take a bus.

Mr. Obama also displays no concern for the anti-poor nature of tariffs on food and clothing. As a senator and presidential candidate, he embraced the 2008 farm bill, which subsidizes farmers whose average incomes and wealth are higher than the typical non-farm family. The farm bill imposes anti-competitive tariffs and quotas on imported sugar, milk and cheese - a food tax that falls disproportionately hard on the poor, who spend a larger share of their budgets on food.

This summer, a group of sugar-using industries asked the Obama administration to relax quotas on imported sugar to avoid potential domestic shortages in the face of globally high prices. The administration refused, not only placing jobs at risk in the confectionery and food-processing sectors, but also forcing working families to continue paying higher prices than they should for candy, breakfast cereals, bakery goods and other sugar-containing products.

When he was running for president, Mr. Obama explicitly endorsed higher prices for T-shirts for every American family to save jobs in the small and declining apparel sector. At a debate before union members in Chicago in August 2007, he said, "People don't want a cheaper T-shirt if they're losing a job in the process. They would rather have the job and pay a little bit more for a T-shirt."

The future president ignored the fact that every poor family must buy those shirts to keep themselves clothed, yet only one-third of 1 percent of American workers make clothing or textiles of any kind. A wealthy politician or TV commentator need not care about the price of a T-shirt or other everyday consumer items, but millions of poor and middle-class American families do care.

A few liberal Democrats still care, too. Edward Gresser of the Democratic Leadership Council has done more than anyone to expose the unfair, anti-poor bias of the U.S. tariff code.

In his 2007 book Freedom From Want: American Liberalism and the Global Economy, he calculated that a single mother earning $15,000 a year as a maid in a hotel will forfeit about a week's worth of her annual pay to the U.S. tariff system, while the hotel's $100,000-a-year manager will give up only two or three hours of pay.

The $25 billion in revenue raised each year from import duties represent by far the most regressive tax the federal government imposes. Yet the Obama administration and the Democratic Congress have refused to move forward with trade agreements that would lower trade taxes that fall most heavily on the poor. By supporting the farm bill, but not new trade agreements, the president has embraced the status quo rather than change.

This is the status quo that so many "progressives" in America, from Public Citizen to the AFL-CIO, are expending millions of dollars to defend. They reflexively oppose any trade agreements that would reduce those regressive tariffs. In contrast to what he says on the public stage, Mr. Obama so far has taken their side in the trade debate at the expense of poor American families struggling to keep their cars on the road, shirts in the closet and food on the table.

This article appeared in the Washington Times on September 29, 2009.