Steel Tariffs Weaken Bush's Global Hand
The New York Times
March 6, 2002
NEWS ANALYSIS
By RICHARD W. STEVENSON
nytimes.com
The following is an excerpt from the above article:
Industries that are big users of steel, however, said the
tariffs were in essence taxes on their raw materials that
would increase their costs and the prices paid by
consumers for cars, appliances and other goods, slowing
the recovery from the recession.
Robert W. Crandall, an economist at the Brookings
Institution who has studied the issue for a coalition of
steel-using industries, called Mr. Bush's plan "a damaging
economic blow that could delay the U.S. economy's
recovery by increasing the cost of steel-made products like
automobiles, cutting the demand for them and setting a
dangerous precedent that could cause tens of thousands
of layoffs in steel-using firms."
Even as he was trying to buy time for steel makers, Mr.
Bush was also effectively trying to corral votes in the
House and the Senate for approval of trade promotion
authority, which would give him wide latitude to negotiate
trade deals.
Obtaining such authority would be vital to Mr. Bush's
hopes of negotiating a trade deal with South American
nations much like the Nafta agreement with Mexico and
Canada. The legislation faces close votes this year in both
the Senate, which is likely to take it up soon, and the
House, which narrowly passed the measure late last year
and will have to take it up again after the Senate acts.
Analysts said that by acting to protect the steel
companies, the administration might have provided
political cover to a handful of members of Congress who
might otherwise have felt obliged to vote against giving the
president negotiating authority.
Mr. Zoellick said the administration had not struck any
deals for votes on the issue. But critics of the
administration's tariff plan - especially conservatives who
said they were uncomfortable with Mr. Bush's wobbling
commitment to free trade - said the real problem was
that even if the measure passed, the United States had
now ceded the high ground in any trade talks that did
take place.
"You're not guaranteed to get trade promotion authority
by what they've done here," said Bruce Bartlett, a
conservative economist and commentator. "The other thing
is, you've undermined your ability to get something useful out of it anyway if
you've lost your virginity, so to speak, by appearing to cave in to domestic
protectionist pressures."
After noisy, emotional starts, trade fights have a way of being quietly settled over
many years of patient negotiations. But at a time when the United States is
working hard to maintain international cohesion in the fight against terrorism, any
fraying of ties could create problems far broader than differences over hot-rolled
steel sheet.
There is no question that the administration's plan was drawn with a sharp eye on
domestic politics. Weirton Steel (news/quote) in West Virginia - a traditionally
Democratic state that Mr. Bush wrested into his column in 2000 in part by
promising help to steel workers - would benefit from a tariff that starts at 30
percent on one of its main products, known as tin mill.
But many Democrats assailed the administration for not doing more. Ed O'Brien, a
steel union official who is the Democratic candidate for a Congressional seat that
includes Allentown, Pa., said the president's plan "sends a signal to the rest of the
world that the U.S. is really afraid to stand up and defend its industries, and that
we can be bullied."
Moreover, some of the harshest criticism of Mr. Bush's plan came from his own
ideological home on the right, where his action was widely seen as a triumph of
political opportunism over principle. Only a few weeks ago, Mr. Zoellick stated flatly
that tariffs "are nothing more than taxes that hurt low- and moderate- income
people," a position he had trouble squaring with today's action.
Gerald O'Driscoll, director of the center for international trade and economics at
the Heritage Foundation, the conservative research organization, said: "Sometimes
politics dominates good economic decision-making in the best of administrations.
This is purely a political decision. There is no economic justification for it."
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