New York Times | March 5, 2002
Many corporate chieftains around the country must be scratching their heads in amazement, wondering why they worked so hard to elect a market-loving, free-trading Republican administration. Democrats are supposed to be the ones who pander to labor unions. Yet it is President Bush who is considering the ill-advised move of slapping tariffs on steel imports, one that his Democratic predecessor responsibly resisted.
Any such tariffs, essentially a new tax on a broad array of manufactured goods, will hurt the American economy as it struggles to rebound. The move would cost far more jobs at companies that consume steel, such as auto parts makers, than those it might save at inefficient steel companies. Moreover, such brazen protectionism could plunge the world into a bruising trade war capable of derailing the administration's ostensible goal of lifting living standards at home and abroad by breaking down barriers through a series of new trade agreements.
America's International Trade Commission has ruled, at the administration's behest, that imports have financially hurt the nation's steel producers. It set tomorrow as a deadline for the president to decide on what steps, if any, he will take to protect the industry. On the merits, rejecting the protectionist impulse would seem easy, as the president's top economic advisers have reportedly argued.
They will probably be overruled, however, by politics. Some scoffed at the Bush campaign's efforts to woo steelworkers during the 2000 campaign, but Mr. Bush ultimately carried traditionally Democratic West Virginia. Without that upset Mr. Bush would still be in Austin, such was his razor-thin margin of victory. He would like to add the rich electoral prize of Pennsylvania to his win column in 2004, and help Republican Congressional candidates from steel-producing states this November.
Yet in trying to balance the nation's economic and foreign policy concerns against his political interests, Mr. Bush might still damage the former without advancing the latter. He is reportedly going to reject Big Steel's call for a 40 percent across-the-board tariff, settling for a mix of quotas and lower tariffs that vary according to the steel product. Some poorer nations, along with Mexico and Canada, might be exempted.
That may seem like a reasonable compromise to those involved in drafting it, but it is unlikely to satisfy Big Steel. In addition to the 40 percent tariff, the industry wants a $12 billion taxpayer bailout of its troubled companies' lavish retiree pension and health care benefits. The industry says this would free steelmakers to consolidate and become more efficient. Even an administration eager to cater to West Virginia cannot support such a fanciful end run around the nation's bankruptcy laws. The president's rejection of this plea, combined with his embrace of more modest tariffs, is likely to strike those wooed steelworkers as a betrayal.
In truth, steel imports have been drastically declining since the glut caused by the Asian financial crisis. International negotiations are making progress at cutting excess capacity worldwide, and American steel production capacity remains strong. Many steel companies have gone bankrupt in recent years, admittedly, but they are as much the victims of newer, more efficient domestic competitors as of foreign competitors.
A senseless rush to impose tariffs will reinforce suspicions around the world that the United States does not believe its own preaching about the paramount importance of embracing free trade, regardless of whatever transitional pain it inflicts on some economic sectors. European and Asian nations will surely retaliate.New York Times:
