EmailEmail
PrintPrint
Protectionist practices can hurt global and regional economy
Tuesday, September 22, 2009

With the global economy still very much a pressing concern before world leaders, international trade issues probably won't be at the forefront of the G-20 summit. But that's not to say there's no potential for fireworks.

Simmering anger over Buy American policies in the federal stimulus package, a dispute with China over imported tires and a lack of progress in the Doha round of negotiations to lower trade barriers around the world could create waves at the Pittsburgh summit.

Of all the issues, protectionism -- or agreements to prevent it -- is the most likely one to surface at the Group of 20 meeting because it has the potential to affect efforts to stabilize the world economy in the face of a severe recession.

At the G-20 summit in London in spring, leaders of the world's largest economies, in their closing communique, vowed to "promote global trade and investment and reject protectionism, to underpin prosperity."

The lofty sentiments came after the United States faced criticism last winter for the Buy American provisions in the stimulus bill, chiefly relating to steel, iron and other manufactured goods. The United States responded by saying a number of other countries, including India and Russia, had "faltered" in commitments made at a G-20 meeting in November 2008 not to adopt protectionist measures.

The proliferation of "buy local" policies prompted World Trade Organization Director-General Pascal Lamy to say at one point that governments were unfairly blocking trade in response to the global economic downturn.

And the 21-member Asia-Pacific Economic Cooperation group, which includes G-20 countries China, Japan, Russia and the United States, said after its meeting in July that rising protectionism threatens the global economic recovery.

Steven Husted, professor of economics at the University of Pittsburgh, expects G-20 leaders to address the issue again this week.

"An element of the London summit included a directive that government should refrain from using the recession as justification for protectionism," he said. "I would be shocked if that sentiment wasn't reinforced coming out of this meeting."

Protectionist practices not only have the potential to affect the global economy but could impact the region, which has seen exports grow over the past few years.

"In the narrow sense, [buy local policies] may sound desirable," said Harold Miller, a consultant and an adjunct professor at Carnegie Mellon University's Heinz School of Public Policy and Management. "But guess what? Maybe some Pittsburgh companies are selling products to Germany. If Germany has a 'buy German' policy, then some companies here lose out."

The summit also will take place against the backdrop of an escalating trade dispute between the United States and China involving the import of cheap tires into the American market.

This month, President Barack Obama announced that he would impose a 35 percent duty on automobile and light-truck tires imported from China, based on a recommendation from the U.S. International Trade Commission.

While the decision was a major victory for the United Steelworkers union, which claimed the imports have cost 4,000 to 5,000 tire manufacturing jobs since 2004, it prompted China to retaliate by saying it would launch an investigation into U.S. auto parts and chicken products coming into its country.

China maintained those parts and products were entering its markets "via dumping, subsidies and other unfair trade means."

Despite the heightened tensions, neither Mr. Husted nor Dennis Unkovic, a partner in the Meyer Unkovic & Scott law firm who has extensive experience dealing with international trade issues, see the tire dispute becoming a major issue at the summit itself.

Mr. Husted said the dispute is not large enough in terms of jobs or economic impact to rise to that level. "This is sort of the tit-for-tat kind of thing you see happening all the time in international trade disputes," he said. "This is not the kind of thing that's going to take attention away from the fact that we're in a worldwide recession and we're slowly moving to get away from it."

Like Mr. Husted, Mr. Unkovic sees the world economy taking center stage. He also expects another round of vows on the evils of protectionism.

One area he would like to see addressed by world leaders is the theft of technology, or intellectual property. He believes that is becoming a growing issue for U.S. companies as they do work in other countries. "We can't have a world system where you can steal technology and American companies can't stay competitive," he said. "I expect [G-20 leaders] to say something about that and, if not, it will be a lost opportunity."

Another potential topic that could affect the region involves global warming, said Roger Cranville, president of GlobalPittsburgh, which promotes the city internationally. "Energy and the environment are such major parts of our economy in southwestern Pennsylvania. The decisions made on energy, energy efficiency, environmental protection and global warming [at the summit] could potentially be very beneficial for Pittsburgh," he said.

Locally, international trade is not just the province of academics and attorneys. It is becoming an increasingly important component of the region's economy.

According to the U.S. Department of Commerce, the region's export value increased from $8.3 billion in 2006 to $9.75 billion in 2007 and was on pace to hit more than $10 billion in 2008.

Mr. Miller said the increases reflect the growing diversity of the region's economy as well as an increase in the number of internationally owned companies with headquarters or major operations in Pittsburgh.

"The world is becoming more global all the time. I think inherently exports will be growing everywhere. Hopefully, we will be growing," he said.

Canada and Mexico remain the region's largest trading partners. But exports to Asia and Africa also have been growing steadily. Cranberry-based Westinghouse, for instance, is building four nuclear power plants in China.

Nonetheless, the summit's greatest value for the region, at least in terms of trade, might not be in tangible agreements but in its potential to help Pittsburgh shed its smoky steel town image once and for all. "We have an older image around the world. This is a great opportunity for us to portray the new image of Pittsburgh with a clean, green, vibrant economy," Mr. Cranville said.

"Pittsburgh's role now is to make sure we send the right messages to business leaders around the world who potentially could do business here or invest here."

"A lot of people see Pittsburgh as a city that stopped existing 30 years ago. We couldn't have bought this kind of publicity for $1 billion," Mr. Unkovic added. "A lot of people still see Pittsburgh as the hell it used to be. I could live anywhere in the world but I live in Pittsburgh because I love it."

Mark Belko can be reached at mbelko@post-gazette.com or 412-263-1262.
First published on September 22, 2009 at 12:00 am