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Bush bent, but not broken, over
steel
By Emad Mekay
WASHINGTON - US President George W Bush has
announced the lifting of controversial tariffs imposed
on steel imports well before schedule because of
international pressure. Instead, Washington will
maintain steel import licensing and monitoring programs
that could allow the US to halt future surges of steel
imports that could damage its own steel industry.
The decision helps subvert a trade war between
the world's biggest trade blocs: the US and the European
Union (EU). While some economists saluted the decision
as finally demonstrating that Washington is willing to
abide by its own free-trade rhetoric, others said that
the US surrendered its sovereignty to a global trade
body hoping other countries will follow suit, in which
case US exports would find more open markets.
After Bush slapped tariffs on steel imports in
March 2002, the EU said the move broke international
trade rules, and lodged a complaint with the World Trade
Organization (WTO). The duties ranged from 8 percent to
30 percent.
A host of other countries also
protested the tariffs - including Japan, Brazil,
Australia and South Korea - imposed by Bush to protect
US companies and steelworkers, many of whom had lost
their jobs before because of cheap imports. Bush
narrowly won the election of 2000 after winning two
states, Ohio and West Virginia, where the steel industry
has a large presence.
In November, a
three-member WTO panel made a final ruling against a US
appeal, finding that the duties breached trade rules.
Japan, South Korea and the EU immediately asked the US
to scrap its "safeguards" on imported steel or face the
possibility of retaliatory measures that could cost
Washington billions of dollars. China, too, said at the
time it was considering punitive action if Washington
did not comply.
Such moves by those nations
would have meant that some US imports would be
effectively priced out of their markets. US goods like
cigarettes, frozen vegetables and paper products are
made in other politically crucial states and a drop in
exports could affect Bush's hopes for re-election in
2004. The steel tariffs were scheduled to remain in
place until March 2005, giving the ailing US industry a
three-year window to consolidate and gain a stronger,
competitive place in the global marketplace.
Bush says that he has reversed course now
because he had already fulfilled his promise to grant
the industry time to adjust. He also argued that the US
is committed to a higher trade principle - competing
freely with the rest of the world. "America's consumers,
the American economy, is better off with a world that
trades freely and a world that trades fairly," he said
at the White House. "I acted to give the steel industry
time to adjust. I acted in time for us to say to the
world that we will trade, but we want to trade in a fair
way."
Later, Bush said in a statement that he
had succeeded to "give relief to the workers and
communities that depend on steel for their jobs and
livelihoods". US steel workers have been lobbying the
administration stridently to maintain the tariffs. As
Bush visited the steel industry capital Pittsburgh last
week, dozens of workers demonstrated, carrying banners
warning the president that he could lose the 2004
elections if he rescinded the tariffs. Some industry
lobby groups, keen to buy cheaper steel, say the
safeguards actually resulted in higher prices and a net
loss to US businesses of some US$680 million in
decreased returns on capital. The Consuming Industries
Trade Action Coalition Steel Task Force says that the
tariffs resulted in more jobs lost to overseas
competition than they saved at home.
Some
economists greeted the step as a benefit to the world's
so-called free trade architecture. "They [tariffs] were
- as all safeguards actions are - an exception and
departure from the rules of the game on trade," said
Sherman Katz, Scholl chair in international business at
the Center for Strategic and International Studies in
Washington. Katz argued that Bush did the right thing
for the international trade system by recognizing the
authority of the Geneva-based WTO. "After all, we are
the most open economy in the world, and we benefit by
other countries obeying those rules more than any other
country, given all our [large] exports. So to support
the system by obeying the rules is the right thing to
do," he said.
Others gave qualified approval,
adding that some damage has already been done. "Better
late than never," said Dan Ikenson, a trade policy
expert at the conservative Cato Institute in Washington.
"While the decision to revoke these measures was the
right one both economically and politically, a great
deal of damage has already been done - to US steel-using
businesses and to American credibility on trade issues,"
he said. "The tariffs were a terrible, short-sighted,
politically motivated decision that backfired, plain and
simple."
Many economists and groups have argued
that the measures discredited Washington's free economy
rhetoric by exposing US calls for open markets abroad to
charges of hypocrisy, and that they demonstrated a
shallow US commitment to its trade agreements. The
situation was further compounded when the administration
took weeks to decide whether to follow the WTO ruling
after the initial decision came out in September.
"The steel tariffs certainly energized
protection-seeking constituencies in the US and around
the world ... this is hardly a recipe for encouraging
other countries to remain steadfast to their own WTO
obligations," Ikenson said.
But Lori M Wallach,
director of global trade watch at the consumer and
advocacy group Public Citizen, which has campaigned
against the Western-dictated global trade rules, said
the decision indicates how the White House is willing to
surrender US sovereignty over local trade policies to a
foreign body to encourage other countries to do the
same.
"After the WTO ruled that US trade law
violated WTO rules, President Bush had an opportunity to
stand up for the superiority of US law over WTO
dictates," she said, pointing out that the EU refused to
implement an earlier WTO ruling that its countries
accept imports of beef grown with artificial hormones.
"But unlike the EU, the White House bowed to the power
of the WTO," she added.
(Inter Press Service)
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