 W's walking a steel tightrope
UNITED NATIONS — President George W. Bush is walking a steel tightrope between his instincts on free trade and the need for a short-term "quick fix" for the American economy. The Administration's move to slap tariffs on some foreign steel imports while going against the grain of proper economic common sense, does place a needed political tourniquet on a strategic and hemorrhaging American industry. While protectionism is generally a wrong economic perscription, it naturally holds political seduction for any Administration. Happily since tariffs and protectionism are no longer the first instinct among policy makers they sometimes can be held as the last resort. Given that underpriced foreign steel has been pouring into the USA from the People's Republic of China and a long list of other producers, something had to be done to rescue a vital industry in Ohio, Indiania, Pennsylvania, and West Virginia. I find it deliciously amusing that the French for example, lambasted Bush for slapping a tariff on steel. For a country who wrote the book on tarrifs and protectionism and still often plays a pretty heavy handed game with foreign imports and controls, is almost laughable to criticise President Bush. Doing it with a stratight face puts one in the running for an Oscar. While the Western Europeans are complaining about the tariffs, I remind them that their own industries have been largely falling prey too — Britain and Germany face the same malaise. Those in the USA slamming Bush are hardly free market disciples but look to W's move as another way to slap the President for something which may well need to be done in the short term. Or, as US Trade Representative Robert Zoellick said, "that will give the US steel indsutry the opportunity to get back on its feet." Of thirty million tons of steel imports in 2001, about twenty-one percent comes from Asia and twenty percent from the European Union. The President's plan will slap up to 30 percent tariffs on imports from Mainland China, Japan, South Korea and the European Union. Canada and Mexico holding twenty-five percent of the market will not be affected. Though a longtime time disciple of laissez-faire myself, there comes a time when one must readjust the medicine to fit the symptoms — massive industry closings, job losses, and a strategic void for an industry. While steel is the focus, this also applies to American machine tools, ship building, and the shrinking Merchant Marine. There's a time when national security becomes part of the mix too. Looking at this economic challenge purely in a logical free market theoretical view may blur the security benefits which may come from the short term tariffs. Indeed much of the American apparel and shoe industry has gone overseas — just look at the "Made in" labels. Something like steel with its bedrock foundation to the economy for construction, bridge building technology, and vehicle production can't be allowed to slip away without more fundamental economic ramifications. Many free market gurus hit Bush on both the grounds of doing a flip flop on trade and creating other problems for the American consumer down the road. There's an element of truth in this. Perhaps some prices will rise but that is one of the many prices of protectionism. The same would be true if shoes and toys were again made in America as they once were. While all will yammer about loss of these industries, the stark facts are that except for the high-end and top quality, they are gone with the wind. The consumer has "won" but notice I put this in quotes. Yet with steel, aircraft, and high-end computer electronics, we are speaking of items vital to the nation's economic health and security. Of course there's the Administration's political calculus in supporting workers in key American states. There's another part to the debate. Keeping these jobs in America will take far more than building a tariff moat round our frontiers. A short-term tariff fix will not save the jobs long-term unless the workers cooperate with management to keep their jobs in the USA. Putting it bluntly, the Bush move is a reprive not a long-term solution for America's 160,000 steelworkers. The genuine long-term answer means making an American product attractive in both quality and price. Already, non-union American steel mini-mills hold half the market with $350 per ton steel. But the overall industry still produces a far pricer product than overseas mills. Naturally given the war on terror, Washington needs to curry political favor with as many allies and partners as possible. Eurocrat types have hinted that given such tariffs, there may be less support for an operation against Iraq. Somehow I feel that slapping short-term tariffs on steel won't make the Euros any more or less anxious to militarily slap Saddam. The Economist of London opines, "The linkage now being advanced in Europe between, on one side, America's need for allies, and on the other its protectionist affront to these friends, is also largely bogus. There is a long tradition in transatlantic relations of allowing mutually burdensome trade illiteracy to flourish in its own separate domain." President Bush is right to give American steel a chance for survival; it's now up to the steelworkers to prove that the President's reprive was doing the right thing.
John J. Metzler is a U.N. correspondent covering diplomatic and defense issues. He writes weekly for World Tribune.com.
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