Abstract

Elite Protectionists

The U.S. multinational establishment, having successfully championed free-trade orthodoxy for decades, may now be flirting with protectionist heresy--a stiff tariff against China to stanch America's trade deficits. Fred Bergsten, the multinationals' leading economic authority and director of the Institute for International Economics, is lobbying elite circles to demand decisive action by the George W. Bush Administration--an "import surcharge" as high as 50 percent on all Chinese imports--to avert financial crisis. Meantime, a bipartisan group of senators has introduced Senate Bill 295, which targets China with a 27.5 percent tariff. The co-sponsors include Democratic minority leader Harry Reid and, more surprising, Hillary Clinton, a longtime free trader close to financial leaders like former Treasury Secretary Robert Rubin, now an executive at Citigroup. Bergsten's strategy--threatening tariffs--is meant to bluff China and other Asian nations into letting their currencies appreciate and allowing the dollar to fall much further so the U.S. trade deficits will shrink, at least enough to avert a financial crisis.