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Monday, October 19, 2009

 5:25 AM  Wisconsin's economy benefits from free trade, so let's guard against protectionism


By Tom Still
Organized labor cheered a month ago when President Obama imposed three years' worth of 30 percent tariffs on low-cost tires imported from China. Unions blamed the loss of more than 5,000 production workers in five years on Chinese imports, so they rolled out the praise when Obama decided to make inexpensive tires cost nearly a third more.

It's hard to see what will be gained by the tire tariffs. They represent the folly of imposing nation-to-nation trade sanctions in a world where production, distribution and sales channels cross many borders.

No new jobs are likely because U.S. tire producers, who didn't support the tariffs, won't rush to compete with the Chinese imports. American tire-makers decided years ago to focus on high-end tires. And just because the Chinese tires will suddenly cost more, don't expect low-cost imports will stop showing up in American stores. Another supplier, also from outside the United States, will fill the orders. The next round of low-cost tires may come from Vietnam, Indonesia or India. What about American consumers? Well, they'll pay a bit more for new tread for their vehicles.

In the meantime, the Chinese will look for ways to slap tariffs on American goods, a retaliatory act that could lead to other tit-for-tat actions.

If a trade war breaks out, Wisconsin should be among the first states to duck for cover. Wisconsin is a state dependent on trade, in large part because so much of what the state produces -- farm goods, manufactured goods and even technology -- is consumed elsewhere.

"Trade is vitally important to the Wisconsin economy," said James Haney, president of Wisconsin Manufacturers & Commerce, in an interview with "WisBusiness: The Show." Haney noted each $1 billion in exports produces about 20,000 jobs in Wisconsin, which means more than 410,000 Wisconsin jobs are tied to trade based on the state's 2008 export total of $20.55 billion. That total is up nearly $8 billion since 2004.

When the 2009 figures come in, however, it will likely show that Wisconsin's recent exports surge has slowed or even receded. That wouldn't be surprising, given estimates that global trade will decline by 9 percent overall this year. The economy is the main culprit, of course, but protectionism remains a dangerous sidekick.

Earlier this year, the Global Monitoring Report by the World Bank noted "a pattern is beginning to emerge of increases in import licensing, import tariffs and surcharges, and trade remedies to support industries facing difficulties" brought on by the recession. The tire tariffs are but one example.

Wisconsin members of Congress can oppose protectionist legislation, of course, but state policymakers have no real jurisdiction over the issue -- other than to support free trade when they get the chance.

That means resisting the urge to score political points by criticizing state trade missions, such as the recent China-Japan trip. A $61,000 mission to churn up business with two leading trade partners (more than $1.8 billion in 2008) is an investment, not a junket.

It also means reaching fostering relations when there's a chance. A memorandum of understanding was signed last week by the premier of Manitoba and Wisconsin Gov. Jim Doyle to foster cooperation in agri-business, alternative fuels, renewable energy, biotechnology and more. Canada is easily Wisconsin's largest trade partner at nearly $6.5 billion in 2008, and Manitoba's relative proximity to Wisconsin means it imports more than its share. A similar agreement already exists between Minnesota and Manitoba.

Trade is a powerful force for good in the world, for political as well as economic reasons. In Wisconsin, it's also a matter of survival for many state businesses and workers.

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.

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