In early March, the Bush Administration adopted a policy that the steel industry as well as the United Steelworkers of America (USWA) have long been agitating for--tariffs on steel imports. The official reason is to give the industry some "breathing space," so it can restructure while shielded from foreign competition. It's more likely that Bush wants to carry some important industrial states in 2004.
Thanks to NAFTA, Canada and Mexico are exempted, as are some poorer countries. Imports from elsewhere will face initial duties ranging from 8 percent to 30 percent, though the levels will decline over the next three years as they are gradually phased out. This is less than what labor and management wanted, but it's still striking coming from a professed free-trader. The Clinton Administration never did anything remotely like it--and if it had, Wall Street, which was unfazed by the Bush announcement, would have panicked about the protectionist threat.
Loud complaints did come from abroad, though. Even British Prime Minister Tony Blair, usually found waving the Stars and Stripes with hysterical glee, denounced the move as "unacceptable and wrong." He urged the industry to restructure rather than hide behind trade barriers--exactly the prescription the United States usually gives other countries (with similar indifference to displaced workers). Blair was joined by politicians, businesspeople, unions and pundits around the world--and by Bush's own frequently indiscreet Treasury Secretary, Paul O'Neill, who told the Council on Foreign Relations that the tariffs would cost more jobs in steel-using industries than they could save in steel.
Indeed the industry is in dire shape. It's lost 35,000 jobs in the past two years. Sixteen producers are operating in bankruptcy. Steel employed 1.5 percent of US workers in 1950, 0.6 percent in 1980 and 0.2 percent in 2000, versus 0.1 percent today. It's hard to believe three years of protection can reverse that long slide.
Clearly the Administration structured its tariffs with an eye on the political map. The kinds of steel offered maximum protection happen to be produced in the electoral battlegrounds of Ohio, Pennsylvania and West Virginia. There's a political pattern to the victims too: Turkey, an important factor in the likely war on Iraq, was spared. Brazil, key to any future hemispheric free-trade agreement, got off relatively lightly, as did Russia, key to many things. The most affected producers are in South Korea, Japan, China, Taiwan and the European Union. Most have filed complaints with the World Trade Organization. The EU is also threatening to retaliate against US steel and textiles, which could limit Bush's political gain in steel country and alienate the textile-intensive South.
Defenders of the tariffs--from US Steel to the union-friendly Economic Policy Institute--argue that everyone subsidizes and protects its steel industry except us. As a result, the US steel industry is getting killed. So the tariffs are necessary to defend it.
Not everyone agrees with this picture of America as victimized innocent. According to the EU's count, the United States has imposed more than 150 measures over the years to protect steel. More than subsidized foreign competition, the US steel industry is suffering from the high value of the dollar, recession, global overcapacity and high pension and healthcare costs.
The United States could have filed a complaint with the WTO, but it would have had a hard time proving its case. Another multilateral route was available too--negotiations to reduce world steel capacity by some 12 percent are well under way. But the Administration and its supporters claim that having the tariffs will strengthen Washington's negotiating hand.
The USWA seems to have no idea of how offensive foreign workers find Bush's big stick policy. Most of the affected countries have higher unemployment rates than ours. The EU, Japan and Latin America haven't seen a boom in decades, and Asia is still recovering from its 1997 financial crisis. Gary Hubbard of the Steelworkers' Washington office conceded that the EU and Japanese unions were annoyed but wasn't sure whether the USWA had consulted at all with its counterparts abroad (no one had ever asked the question before). So much for solidarity.
It's nice to imagine another world, where we protect workers, not their jobs. If we had a good system of income support, retraining, job placement and job creation, we wouldn't have to disemploy foreign workers to fight what's probably a losing battle to save jobs here. Sweden has long had such an active labor market policy, as it's called. Workers wouldn't have to fear innovation if they knew they wouldn't end up on the sidewalk. But that's not the way the world works these days. It's all about market solutions--except when George W. Bush is cruising for votes.