Magazine article Insight on the News

Steel Strikes a Blow against Free Trade. (Political Notebook)

Magazine article Insight on the News

Steel Strikes a Blow against Free Trade. (Political Notebook)

Article excerpt

President George W. Bush has for years extolled the virtues of free trade, and his administration has worked hard to shape international circumstances likely to lead to open markets and encourage trading accords. Arguably, Bush already has done more to further free trade than Bill Clinton did during the eight years in which he failed to live up to the open-markets rhetoric of his campaign for the North American Free Trade Agreement.

Despite the early defeatist advice of Charlene Barshefsky, Clinton's trade czar, the Bush administration has wrestled fast-track negotiating authority through the House and is being stymied only by the hold organized labor has on the Democratic leadership in the Senate. The Bush administration also had a successful summit in Quebec last year, marking the start of an effort to open the way for a Free Trade Zone of the Americas covering the whole of the western Hemisphere.

But domestic politics has a nasty habit of getting in the way of free trade. And on March 5 it did just that when Bush announced his decision to impose punitive tariffs and quotas on steel imports coming into the United States -- a move that most trade lawyers agree is in direct violation of world trade rules. The move risks provoking a nasty trade war with the European Union at a time when the strains in the international coalition against terrorism are beginning to tell.

Although the tariffs have not been set as high as U.S. steelmakers and American workers demanded, the move gives the industry the substance of what it wanted -- protection from overseas competitors, who they say are dumping cheap steel in the United States.

To lessen the dismay of the Europeans, Russians and Asians, the White House has emphasized that the new tariff regime will last only three years, giving the U.S. steel industry a breathing space to restructure itself so that in the future it too can be competitive. So far that line has not appeased overseas anger, and that's hardly surprising -- most industry observers suspect the opportunity being handed to U.S. steelmakers and their workers will be squandered.

The U.S. steel industry has done little in the last few years to transform itself from a lame duck to a lean, mean, manufacturing machine. Some industry analysts believe the three-year breathing space is likely to prolong the agony of an industry whose future prosperity lies in consolidation rather than artificial protection from competitive pressures to restructure.

The challenge the U.S. steel industry has faced is not one of too much competition from unfairly competing importers. Since 1998, imports have fallen by 27.5 percent. In economic terms, what has been at issue is the survival of about 30 bulk producers that are just too small to compete. …

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