5. Protectionist escalation increases miscalculations in global trade and results in war â€“ boosting exports solve
Hufbauer et al., Peterson Institute senior fellow, 2010, (Gary, â€œUS Protectionist Impulses in the Wake of the Great Recessionâ€, March, http://www.iie.com/publications/papers/hufbauer201003.pdf, DOA: 7-12-13)
The U.S. unemployment rate more than doubled between the onset of the Great Recession in¶ December 2007 and December 2009, and is now hovering just below 10 percent (figure 1).¶ 1¶ Considering that this discouraging figure likely understates broader deterioration in the U.S.¶ labor market,¶ 2¶ the absence of sustained Congressional pressure for largeâ€scale protectionist¶ measures, beyond â€œBuy Americanâ€ provisions and several smaller companions (all examined in¶ this report), is in some ways surprising.¶ 3¶ At least part of the explanation for the restrained political response is the simultaneous large¶ improvement in the U.S. trade balance during 2008 and early 2009. Figure 1 illustrates how the¶ total U.S. deficit in goods and services trade was nearly cut in half during this period, creating a¶ political obstacle to kneejerk protectionism. As we will elaborate in section IV, during recessions¶ an improving external balance (from imports falling faster than exports) often acts an¶ â€œautomatic international economic stabilizer,â€ which temporarily fulfills an equivalent¶ economic function to a Keynesian government stimulus package. The â€œexternal sectorâ€ of the¶ U.S. economy during the early quarters of the Great Recession provided an â€œautomatic offsetâ€¶ to sliding U.S. economic activity. This probably caused policymakers to think twice about¶ succumbing to shortâ€term protectionist instincts.¶ However, figure 1 also shows how the improvement in the U.S. trade balance has been only¶ temporary and indeed began to reverse as the U.S. economy exited the Great Recession during¶ the second half of 2009. Crucial for the political threat of protectionism, economic forecasts indicate that the U.S. unemployment rate will probably remain at very high levels over the medium term, despite President Obamaâ€™s emphasis on â€œjobs, jobs, jobsâ€ in his State of the Union Address delivered on January 27th 2010. ¶ A time lag of at least 12 to 18 months probably separates the point at which the U.S. trade¶ balance showed maximum improvement (spring 2009) and the expected drop in measured¶ unemployment well below 10 percent (fall 2010). Absent the â€œfeel goodâ€ factor of an improving¶ trade balance, but facing continuing high unemployment levels, protectionist sentiment in the¶ U.S. Congress may increase in the coming months, especially as the November 2010 midterm¶ election draws near.¶ This is particularly so, as current economic forecasts suggest a more robust U.S. economic¶ recovery in the coming years, relative to other industrial trading partners (table 1). A large and¶ growing deficit in the U.S. external balances will likely persist for some time, while the external¶ balances of other major trading partners could hold steady or even improve. If the United¶ States thus returns to its â€œpreâ€crisis role as the worldâ€™s importer/consumer of last resort,â€¶ protectionist impulses in the U.S. Congress are destined to escalate.¶ 5¶ ¶ Fresh U.S. protectionist initiatives, at a time when the U.S. economy is growing at a decent pace,¶ will likely invite inâ€kind retaliation by Americaâ€™s trading partners, despite the relatively muted¶ reaction to the original â€œBuy Americanâ€ provisions in early 2009 and other protectionist measures implemented since then. No longer facing a newlyâ€elected U.S. president, who¶ entered office with considerable global appeal in the midst of an unprecedented economic¶ crisis, foreign leaders are unlikely to give the U.S. an easy pass on future new instances of U.S.¶ protectionism.