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Investor’s Business Daily
Editorial – Issues & Insights section
April 3, 2009www.investors.com

G-20: Improving on his previous statements, President Obama joined a global consensus against protectionism Wednesday in London. Sounds good, but it’ll be meaningful only if he hits protectionists at home.

Unfortunately, the Group of 20 industrial and emerging economies has proved itself a forum where nations say one thing and do another.
Last November, the group pledged to hold off on new trade barriers until 2010. But that wasn’t the hated Bush administration’s idea, it was the global consensus. It underlines that leadership is needed, and from the world’s main economic superpower, the U.S.
Meeting this week, the G-20 now says it will foster the opening of markets, kick-start the Doha global trade agreement talks and increase trade finance.
Happy to hear it. But that doesn’t cover up the fact that 17 out of 20 G-20 members didn’t wait until 2010 to put in place protectionist barriers, contrary to earlier promises. And one of them is the U.S.
Global trade, according to the World Trade Organization, will shrink 9% in 2009, the sharpest decline since World War II. Yet as Obama himself noted at the summit, trade is one of the real ways the U.S. and world economies can recover.
But that doesn’t look sincere coming from the U.S., which broke its NAFTA treaty with Mexico by not letting Mexican trucks carry goods into the U.S. It also inserted a “Buy American” provision on goods and services purchased in the trillion-dollar stimulus package. Obama signed off on both.
The U.S. is hardly alone in the trade chicanery. According to the World Bank, 78 new measures to restrict trade were proposed globally and 47 were implemented just since last November.
Yet there is a global consensus that trade is critical for economic recovery. All reputable economists agree on it. Judging by Obama’s words now compared to his protectionist campaign rhetoric, it’s possible even Obama is starting to get it.
“History tells us that turning inward can help turn a downturn into a depression,” Obama told a press conference in London. “And this cooperation between the world’s leading economies signals our support for open markets, as does our multilateral commitment to trade finance that will grow our exports and create new jobs. That’s all on the growth front.”
Even more amazingly, Obama brought up job losses at Caterpillar, the American earth-moving equipment maker that recently let 20,000 workers and contractors go, in part because Congress refuses to allow a vote on the free trade pact with Colombia.
Caterpillar faces a $100,000 tariff on each piece of equipment it sells to one of the world’s best markets for mining and infrastructure companies — something its Japanese, Chinese, Korean, Indian and Brazilian competitors don’t face. We attended this week’s Inter American Development Bank summit in Medellin, Colombia, and we were struck by how aggressively other nations are pursuing that country’s burgeoning market opportunities. The U.S. has cut itself out.
Let’s not beat around the bush. Obama needs to act, not just talk. If he really believes what he says, he’ll have to confront the protectionists in his own party in Congress. Is he tough enough to break that roadblock? Or does he still mentally live in Congress and take orders from Sen. Harry Reid?
Will he confront the distortions, shifting goal posts and outright lies about Colombia that Big Labor uses to keep a free trade treaty at bay? Or is the AFL-CIO’s campaign largess too big to ignore?
It doesn’t take much to say nice things about trade in a global consensus. But to show leadership, he’ll have to confront protectionists right here at home. That will incur political costs. Is Obama willing?
“Promises to fight protectionism in all its forms are more than welcome, but the key now is to make certain that governments follow up on their good intentions not to raise trade and investment barriers,” as International Chamber of Commerce Chairman Victor K. Fung put it.
If Obama can do that, he can come back to the next G-20 summit with U.S. credibility strong and America in the global lead. If not, it will be yet another summit of empty words.