State of the Union address reveals contradictions in Obama’s trade stance

Stephanie Slade Project Director, The Winston Group
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In his State of the Union address Tuesday night, President Barack Obama took China to task for giving its manufacturers a “leg up” through government subsidies. The implication was that such trade practices are unfair and should be discouraged, or even legally prevented through the use of trade cases against offenders.

A casual observer might conclude that the president is a proponent of truly free trade — the type that occurs between producers and consumers, regardless of location, without intervention or direction by government agencies. His claim that “if the playing field is level, I promise you, America will always win” created the impression that Obama actually favors a level playing field.

If that part of the speech were heard in a vacuum, one could be forgiven for assuming the president was committing the U.S. to a policy of holding its foreign trade partners to the same standard by which we play — one of allowing the markets to decide winners and losers and not tolerating governments that try to rig the system for their own gain.

But free-market advocates should pause before celebrating this apparent development. In fact, the rest of the address reveals a president with no intention of holding his own country to such a standard even as he whacks other countries for failing to do so themselves.

Obama bookends his chastising of Chinese trade practices with sections on the need for government help for American manufacturers and the need for government help for American workers. This decision belies the coherence of his stance. When other countries take steps to make their industries more competitive, it’s cause for indignation. Yet Obama proposes an array of policies that would give special treatment to favored sectors here at home without any sense of irony.

His proposals include a double-size tax deduction for high-tech manufacturers and public financing for the building of plants and the purchase of new equipment. He calls for federal funding for job-training programs and wants Congress to step in to keep student loan interest rates artificially low.

“Ask yourselves what you can do to bring jobs back to your country,” Obama implored American business at one point, “and your country will do everything we can to help you succeed.” So much for that level playing field.

If you’re tempted to argue that these measures are different in kind from China’s policy of subsidizing exporters to help bring prices down, I would remind you that Obama opened his speech trumpeting a bailout of the American automobile industry that amounted to a direct transfer of money from taxpayers to failing American corporations to keep them afloat.

At best, Obama’s policies diverge only in degree from China’s. Industry bailouts or government subsidies, tax breaks or tariffs, easy money through suppressing interest rates or easy money through an undervalued currency — they all amount to government interference, and they all damage the integrity of free trade.

The real difference is that Obama pays lip service to free-market ideals while undercutting them for political gain.

Thus far, the president has not been asked to explain why the policies he’s proposing are any fairer than the practices he condemns. There are inconsistencies in his agenda, and it will be up to the American voters to press him on them. Unfortunately for Democrats, I suspect that circle is one that can’t be squared.

Stephanie Slade has been a project director at The Winston Group since 2011. Prior to that, she worked as a freelance political speechwriter and was the author of a weekly column for The Washington Post called “The Federal Buzz.”