Conservative Principles Now

In a retaliatory response to the U.S. government’s unwillingness to eliminate domestic cotton subsidies, Brazil has announced higher tariffs on over 100 American goods ranging from cars to ketchup.

Trade issues are central to the bilateral relationship between Brazil and the United States. Brazil is an attractive export destination for U.S. manufacturing, parts and capital equipment sectors. The United States has been the largest source of Brazil’s imports in these sectors, with the U.S. producers responsible for about a 15 percent share. The already thriving Brazilian market for U.S. exports has great potential to be even stronger, and could provide a blueprint for future U.S. trade with the region and the world. Indeed, the Brazilian market, with consumer spending growing rapidly, should be a poster child for President Obama’s National Export Initiative, a plan unveiled in the 2010 State of the Union address that promised to double U.S. exports over the next five years and support 2 million new American jobs.

However, the trade-distorting U.S. cotton subsidy programs, which violate the WTO’s Agreement on Subsidies and Countervailing Measures and the Agreement on Agriculture, run great risk of undermining the whole effort.. Retaliatory tariffs against U.S. exports, triggered by the U.S. subsidy programs, will severely hamper America’s competitiveness in Brazil, effectively shutting off markets for many American products that would otherwise be competitive.

Brazil was hoping for a sign from Secretary of State Clinton during her visit last week that the Obama Administration was willing to seriously address the cotton subsidy problem. No such sign was forth-coming, and international hopes for a renewal of the United States’ traditional commitment to trade liberalization were dashed yet again.

As pointed out in Heritage Trade Analyst Daniella Markheim’s recent Web memo:

America’s refusal to comply with adverse WTO rulings erodes U.S. credibility and influence in the debate shaping globalization and undermines the multilateral trading system. America can afford neither trade retaliation nor the loss of its leadership position in international economic issues, and the WTO is already weakened by nations’ inability to conclude Doha Round trade negotiations. The U.S. should not only change its cotton program this year, but it should also take a hard look at other needed reforms if its national export initiative is to be part of a legitimate trade policy.

If we’re seeing the beginnings of a trade war between the United States and Brazil, and the United States fired the first shot.

Russian Prime Minister Vladimir Putin’s recent rant regarding missile defense and arms control shows that U.S. and Russian negotiators failed to meet the December 5th deadline to sign a new arms control treaty to replace the now-expired START Treaty, not because of technical difficulties, but because of a fundamental question: what both sides see as necessary to “reset” U.S.-Russian relations.

The START follow-on negotiations were to result in a treaty reducing strategic nuclear arms that also would serve as the cornerstone of the new bilateral relationship. Putin has made it clear that he, and presumably the Russian government, oppose U.S. missile defense systems because he views Russia’s preferred relationship with the U.S. as one based on its ability to threaten the U.S. with nuclear annihilation. He would include a provision in the new treaty that effectively prohibits an undefined set of missile defense options for the U.S. Putin’s statement clearly places the ball in the Obama Administration’s court in the arms control negotiations.

The Obama Administration will have to make a decision whether Putin’s view of U.S.-Russian relations is the right one and that the U.S. deserves to be threatened by Russian nuclear forces or whether he will use the negotiations to convince Putin and the Russian government that the appropriate basis for improved U.S. and Russia relations is for both sides to adopt more defensive strategic postures. Opting for the former will improve the near-term prospects for signing the START follow-on treaty, but at the expense of missile defense. The latter will require lengthy diplomacy, but will preserve missile defense options for both the U.S. and Russia and establish a clearly more appropriate foundation for improved U.S.-Russian relations.

That President Obama would not reject the Putin vision out of hand speaks volumes about his lack of confidence in the moral standing of the United States.