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U.S. Trade Representative Ron Kirk, left, and International Trade Minister Ed Fast sign the Softwood Lumber Extension Agreement in Washington on Jan. 23, 2012. The deal limits Canadian duty-free exports to the U.S. market. (KEVIN LAMARQUE/KEVIN LAMARQUE/REUTERS)
U.S. Trade Representative Ron Kirk, left, and International Trade Minister Ed Fast sign the Softwood Lumber Extension Agreement in Washington on Jan. 23, 2012. The deal limits Canadian duty-free exports to the U.S. market. (KEVIN LAMARQUE/KEVIN LAMARQUE/REUTERS)

Economy Lab

Obama yearns for an economy long gone Add to ...

It’s hard not to get a little twitchy when the U.S. President Barack vows to repatriate factory jobs by waging war on his trade partners.



The election-bound Barack Obama vowed in Tuesday’s State of the Union address to mount a muscular trade crackdown, highlighted by the creation of a new trade enforcement SWAT team -- the Trade Enforcement Unit. He also pledged to overhaul corporate taxes to punish companies that export jobs.

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Mr. Obama’s main target seems to be China. But it’s not a stretch to imagine that any trade crackdown would inevitably sideswipe Canada -- the United States’ largest trading partner.



“I will not stand by when our competitors don't play by the rules,” Mr. Obama railed in his speech.



“We've brought trade cases against China at nearly twice the rate as the last administration -- and it's made a difference. Over a thousand Americans are working today because we stopped a surge in Chinese tires. But we need to do more. It's not right when another country lets our movies, music, and software be pirated. It's not fair when foreign manufacturers have a leg up on ours only because they're heavily subsidized.”



Swap in Canada for China, softwood lumber or potash for tires, and, suddenly, “Ottawa, we have a problem.”



One country’s subsidy is another country’s economic policy. And years of trade litigation seldom produces a clear determination.



Again, softwood lumber is a case in point. Canada and the U.S. agreed this week to extend the Softwood Lumber Agreement an extra two years to 2015. The deal makes a mockery of free trade by limiting Canadian duty-free exports to the U.S. market.



But for the Canadian industry it’s a whole lot better than fighting a stacked deck of U.S. law. and endless litigation.



Slate economics columnist Matthew Yglesias accuses Mr. Obama of “cheap and muddled economic nationalism” when the country needs a serious jobs plan.



Mr. Yglesias pointed out that Mr. Obama is chasing an economy that’s long gone, making him “the only person in America who didn’t read the New York Times story over the weekend about how Apple’s products are all built in Asia.”



The NYT highlighted how Apple has moved virtually all production of iPads, iPhones and iPods to contract manufacturers offshore. But the brains of the company -- the engineering, the R&D, the marketing and the industrial design -- remains in the U.S. And so do the heaps of cash Apple is generating.



And it’s worth noting that while factory jobs have disappeared in Canada and the U.S. at an alarming rate since the 1990s, the manufacturing sector actually produces more than it ever has, due to automation and productivity improvements. And no trade crackdown will change that.

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