Global Economy

" Hello and welcome afraid -- watch your daily dose of raw liberty streaming online at foxnews.com. I'm your host judge -- nano. Here defending freedom. Defending your natural rights and defending your right to have a government that stays within the confines of the constitution. Leaders from the world's twenty largest industrialized nations the G-20. Are gathering this week in Pittsburgh. Trying to figure -- how to get the global economy back on track. As they do so they face many obstacles including how we got into the present financial disaster. How to get out of it and how to prevent it from happening again. As they meet. The United States and China are in a trade war Iran is seriously threatening the stability of the Middle East from which much oil problems. And the dollar is being challenged as a reliable benchmark. For about global currency and America's leading lender America's biggest lender the Chinese Government. Just sent its president here to New York to complain to President Obama. So. What is it complaining about and what's on the G-8 wanting agenda. Joining me now to discuss all this is -- director of Kato's center for trade policy. So damage each when he is meeting in Pittsburgh a lot of those same people that were here at the UN earlier this week just flew from New York. To Pittsburgh what's on the agenda what are the hot issues and and who doesn't wanna talk to home at the same table."

" Well I find these kinds of summits to be glamour -- sort of the equivalent of Oscar night in Hollywood. I don't think a whole lot is going to be accomplished. And I think that's a good thing. I think when world leaders get together and tried to articulate world problems and worse. Solutions to those problems then we're we're in for more government and and the lack of resolution. To problems a lot of the the issues they -- address we've heard about. -- climate changes there of course. Financial regulation harmonization which is something that we should worry about. But to me than them the most important issue is is is protectionism. At the last G-20 meeting in Pittsburgh in April. All of the G-20 ministers pledged -- the last G-20 meeting in London in April right -- all of -- leaders got together and pledged to avoid new protectionist measures through 30. But lo and behold President Obama just two weeks ago announced the imposition of tariffs on imports from China of of consumer tires. And this is a big deal some people are trying to. Two took to marginalize -- but the fact is this is the first time in history that the US president himself. -- impose trade restrictions on China you're normally it happens sort of under the radar."

" Right you know it's unfortunate in my view that the US president has this kind of authority -- the congress which has no respect for the constitution. And the president and I'm critical congresses and presidents of both parties as you know. Was even less respect for the constitution. Thinks that that that they can give the president the power to tinker with the economy like this don't they recognize. That that this will start a trade war and that the minute he imposed the tariffs on tires and and correct me from wrong. These are tires for the bottom end of cars these are cars that lower middle class folks -- now. Have to pay more money to buy but the minute he imposes tariffs like this they retaliate so we buy fewer tires we sell let's check it."

" This. This statute is a special statute China agreed to allow the United States to have recourse to what's called a China specific safeguard. When it succeeded to the WTO in 2001. Under President Bush it's six times cases were filed under this law four times the US international trade commission recommended. To the President Bush to actually impose duties. And in each of those occasions the president's. It's not and our national economic interest to do so the -- outweigh the benefits. Well the cost always outweigh the benefits when you impose the trade restraints. President Obama is benefiting really nobody by imposing these duties except perhaps himself politically for the short run. You win some mileage perhaps with -- with with the united steelworkers union who brought the case. But they're going to be more cases now that are going to be brought and that is what I think is that worries me about inflaming this this whole. Trade protectionism tit for tat escalation. China is not entitled to retaliate officially. But they can still harass. US exporters and -- a terrible message to the G-20 ministers when the United States which had assumed such an important leadership role. On trade liberalization for the past several decades when the United States advocates that that that leadership role and imposes duties -- a lot easier for everybody else to indulge. Their own protection if pressures at -- do you think."

" That it it is more likely than not that President Obama said to the the president of China. Look I I know you're gonna retaliate and I want you -- know that I want our people to be able to buy as many of your tires as possible. But I have domestic political pressures just like you have domestic political pressures. Let me get away with this one -- do they engage in. In in conversation. Of that intimacy or is this all posturing and for show."

" I think that there is this kind of discussion behind the scenes. In -- know people talk about how we don't enforce trade agreements but the fact is. That ministers and -- not in the United States and abroad are are constantly in conversation this is coming down the pike. President Obama has these political considerations to worry about. Tires aren't that big of -- deal please allow what's this without making such a big response and and and and blowing this out of proportion but the fact is. President who has the same political pressures at home as do leaders that throughout the world. There's a proposal that's been put forward by some economists in Australia for what's called domestic transparency. That they say it. Let's have independent agencies in countries. That can actually measure the cost of this proposed -- ideas and and and inform the public about these costs because the public is in the dark about it and as a result. It makes a lot easier for President Obama. To go ahead name in imposed the duties because it. Nobody really realizes. What what the cost which are dispersed what those costs really mean to -- to the pocketbooks you Hewlett you have an agency that it assesses that. And let's the public know this is what's at stake. It's it's much less likely the protectionism will will will result."

" You UN many of your colleagues -- Cato and I have been arguing for a long time. That the government forgets its first principles and among those first principles aside from from that staying within the confines. Of the constitution. Is as basic economics 101 is. Is the basic free market surely the president knows surely his advisers know. What happens when he starts a trade war. By imposing an import on something that is purchased by millions of people in the United States don't they know that that harms. The very people that they claim they want to help by raising the prices for all of us."

" I think I would expect -- that they would understand a little bit of economics 101. But is this this goes on but really for for political reasons -- we see this happening time and time again. Where we make pledges to each other where you know. Economists you know 90% of economists agree the free trade is as a policy that need not be debated any any further. But but politicians find it -- ways to. To extract their own political benefits because the costs as -- earlier are. Or dispersed and that consumers -- generally don't recognize that they're paying. -- ten point thirty dollars more for their tires or a thousand dollars more for their home because of duties on steel or cement or lumber. They don't know to attribute that to -- to protectionism. It's a big problem and it it has to be addressed -- that's the one constructive thing that could come out of the G-20. If you know we're we're all in this together that -- that's not our producers against their producers anymore you know the largest steel company in the United States. Is an Indian owned company ArcelorMittal with headquarters in Europe. The largest German steel company ThyssenKrupp is building the largest Greenfield investment -- United States and nearly four billion dollar production facility in Alabama. You know apple iPods are made in China with US engineers -- there's the supply chains. Traverse oceans and borders the factory Ford is no longer contained within four walls so. Imposing duties -- people in your own country more than anybody else."

" So it's that it's it's suicidal if -- is China going to reach a point where it will be reluctant. To loan us -- huge amounts of cash that it has been loaning us by the purchase of our bonds are they. Generally worried that they're going to be paid back by inflated dollars or maybe not paid back at all. I think that they are worried about that but at this point they continue to -- our debt because I think they were they reckon that it's. It's -- an optimal decision. I I've heard the argument that you know China has us over a barrel because there are banker and therefore we have to do what they say. I don't see it that way I I see this where were if there's an interdependence here. China needs to have continued to to prop up its investment here in US debt. So if it were to -- abandoned US treasuries and go somewhere else. The value of those treasuries would would diminish and I think would adversely affect their portfolio so. I don't think they're going anywhere now but they're certainly looking for alternatives before -- alternative it. Things are now before I let it go there and how much do we -- China today is it even --"

" You know I don't have that number up on a couple my head I did it at that way at one point. It's a lot of money and you know got into the trillions. Though it is but. The the problem here is. By lending us money. If you look at -- I'm happy that they've been able to lend us money that's that's the way things should go. But its its government -- legacy that has invited all this Chinese investment apps if we didn't have some of government debt the -- in the Chinese would be buying. It did you know direct investments productive assets and would be diversifying and other ways. We need to -- the federal budget to get under control. And before congress. Points the finger at China and blames them for our problems for lending us -- the lending us money to to to satisfy -- The profligate ways to and I Gibson thanks very much. My pleasure."