Recently in Trade Category

Obama has been walking back his rhetoric on trade protectionism. Specifically, the "Buy American" clause in the fiscal stimulus bill now under debate in the Senate.

Think about it. We're getting ready to borrow trillions of dollars that our children will need to repay some day. We're going to give it to the governors of the fifty states, to spend on teacher salaries, Medicare and Medicaid, condoms, candy and bubble gum, new paint and computers for government buildings, a vast array of left-wing spending priorities, and a small number of roads and bridges.

Doesn't it make sense to keep as much of that money here, and keep it from leaking out to other countries?

Well, the $650 million that Nancy Pelosi wanted to spend on condoms would just have to leak away. Condoms are made in China. But what about the steel and other building materials for the roads and bridges? Doesn't it make sense to reserve as much as that spending as possible for American companies?

Ask your average person on the street, or certain Democratic Senators, and the answer would be some hyper-vigorous form of YES.

In case you hadn't noticed, most of the world's business reporting this week is bylined out of Davos. This is the one week out of the year when all the reporters follow all the bigshots to Switzerland to drink hot chocolate and solve the world's problems.

Over the last few years, Davos has talked about how George Bush would destroy the world in a blaze of gamma rays. This year, the talk is about how Barack Obama will bury the world under an avalanche of trade protectionism.

This is a fascinating theme on several levels. You'd think the world's finance ministers and political leaders would be blaming us for all the overvalued mortgage assets we sold them until the bubble burst. They certainly do blame us for that, and they certainly blame us for the financial cleverness they all tried to emulate until a few months ago.

A global financial crisis featuring badly disordered capital and credit markets is easy enough for the world's political leaders to snipe at us about. But when this one abruptly morphed into a global economic crisis, featuring a collapse of trade, output and employment, it got a lot harder for them to be smug.

That's because our economic problems have turned into a prospective disaster for the rest of the world. Remember the beginning of the financial crisis, a year and a half ago, when everyone with respectable opinions was saying that the world had "decoupled," meaning that our problems wouldn't affect any other country?

Wrong. The global economy turns out to be more dependent on the American economy than ever before. And that's become glaringly obvious because of the one thing that's distinctively missing in the current downturn: consumer demand.

The global economy depends on demand from America like a rich teenager depends on the coupon payments from her trust fund.