Editorial»
Politics, key factor in steel tariffs
NOV 13 - In the next few weeks, George W.Bush will have to decide what kind of a trade president he wants to be. After coming to office vowing to aggressively press for new free-trade agreements - and surpass the Clinton record - the Bush administration is now sparring against growing complaints that some of its policies look as much like those of a protectionist as a free trader.
The White House faces the prospect of a trade war with Europe, which has threatened to impose more than $2 billion in sanctions on U.S. imports if Bush fails to lift the 30 percent tariffs on steel imported to America that were ruled illegal on Monday by the World Trade Organisation. Bush’s staunchest allies are already complaining about other measures designed to protect U.S. industry. Australia, which has stood by Bush on a number of thorny political issues, has grumbled that the farm bill he signed into law last year is an impediment to new global trade agreements.
In his defense, Bush faces this trade dilemma at a moment when the consensus in favor of free trade is unraveling here. The definition of advantageous trade is up for grabs in the rest of the world, as well, with developing nations coming together to demand the end of farm subsidies and unions and environmentalists saying their needs should be addressed as seriously as those of the corporate world. Politics will play an important role as Bush mulls whether to lift the steel tariffs before their three-year expiration date - just as it did when the administration decided to impose the steel tariffs and accept the farm subsidies as the price that had to be paid for the authority to negotiate free-trade agreements with minimal interference from Congress. The steel tariffs went a long way to winning votes on trade-authority legislation from lawmakers representing manufacturing states. The farm states, led by former Representative Larry Combest, a Republican of Texas, made clear that their support for Bush depended on his backing of the farm bill.
Now the bargain struck for trade promotion authority is threatening to backfire. On the most pressing issue - the steel tariffs - the White House remains divided.
The White House economic team - led by Stephen Friedman, director of the National Economic Council and N. Gregory Mankiw, chairman of the Council of Economic Advisers - are in favor of ending the steel tariffs. The measure has never been popular among economists, who generally oppose trade barriers of most types. Bush’s political advisors, however, are looking at next year’s election and the role that steel producers in Pennsylvania and Ohio will play in helping win these important battlegrounds.
Yet those and other big industrial states are home to big steel consumers, such as car manufacturers and their suppliers, which have been hit with higher steel prices.
White House officials say they do not need to make a decision on the steel tariffs right away. The European Union must wait for the WTO to officially approve the appellate ruling sometime between Nov. 21 and Dec. 10. And they say there are potential compromises that might allay the Europeans without abandoning all the so-called safeguards.
But all that seems like unnecessary delaying tactics to lawmakers, who are worried that the mood is moving too quickly against free trade. Senator Lamar Alexander, Republican of Tennessee, said Tuesday that the time had come to end the steel tariff.
Siding with industries that use steel and complain that the tariffs raise their cost of doing business, Alexander blamed the tariffs for already destroying jobs in the American automobile industry. Now, he said, sanctions following the WTO ruling would do more damage.
The obvious question is whether the trade promotion was worth it.
So far Robert Zoellick, the United States trade representative, has finished free-trade agreements with Chile and Singapore that were begun by the Clinton administration.
He succeeded in starting a new global trade round two years ago. But those talks broke up spectacularly at Cancún in September, in large part because of divisions over American and European farm subsidies.Posted on: 2003-11-12 09:43
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