HELP US AUSTAN GOOLSBEE, YOU'RE OUR ONLY HOPE:

Reading the Tea Leaves on Trade: The early signs are not good. (Philip I. Levy, 12/22/08, National Review)

For the last year, U.S. economic growth would have been substantially lower than it was if not for exports outpacing imports. In each of the past four quarters, the contribution of the external sector to growth matched or exceeded government spending as a counterweight to plummeting investment and consumption.

World leaders are well aware of trade’s importance. They appear to be reading the same tea leaves for U.S. trade policy and are acting alarmed by what they see. Amidst otherwise futile efforts to take action against the spreading global financial crisis last month, both the G20 meeting in Washington and the APEC meeting in Peru issued explicit calls to resist the temptation of protectionism. Witness also the rush (if a vain one) to try to lock in progress in the troubled Doha trade talks under the World Trade Organization before the new American administration takes power.

The challenge for the Obama administration will be to back away from its campaign promises and rein in the protectionist urges that naturally rise up as an economy turns down. The recovery of the global economy and U.S. leadership will likely depend on the new administration’s ability to do so.