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Politics : The Donkey's Inn -- Ignore unavailable to you. Want to Upgrade?

To: Mephisto who wrote (3185)	3/8/2002 3:01:02 PM
From: Mephisto	Respond to of 15516

Testing His Metal The New York Times March 8, 2002 By PAUL KRUGMAN Just a few days ago, some supporters of George W. Bush hoped that he would show his mettle by standing up to steel industry demands for tariff protection. Instead he capitulated, with a cravenness that surprised even his critics. It's quite a contrast with Bill Clinton, who - like Mr. Bush - declared his belief in the benefits of free trade, but - unlike Mr. Bush - was willing to spend a lot of political capital in support of that belief. Many Democrats are protectionists, so Mr. Clinton reached out for Republican support to pass both the North American Free Trade Agreement and the treaty creating the World Trade Organization. He defied intense bipartisan opposition to rescue Mexico from its 1995 financial crisis, which might have destroyed Nafta, and resisted pressure to limit imports, including steel imports, during the Asian financial crisis of 1997-1998. It's possible that Mr. Clinton's determination to do what he believed was right on international trade cost the Democrats the White House - not just because West Virginia's electoral votes provided Mr. Bush with his winning margin, but because Mr. Clinton's free-trade policies fueled Ralph Nader's spoiler campaign. Now we know for sure what some of us already suspected: that the Bush administration is all hat and no cattle when it comes to free trade, and probably free markets in general. Never mind Mr. Bush's claim that his decision to impose high tariffs on imported steel was simply a matter of enforcing the law. Nothing in U.S. law obliged him to impose tariffs - and it's pretty clear that the tariffs violate our international trade treaties. We can also dismiss the claim that this was "temporary relief so that the industry could restructure itself." Traditional steel producers are in long-term decline, the result less of imports than of competition from so-called mini-mills, exacerbated by the fact that an increasingly service-oriented economy uses far less steel per dollar of G.D.P. than it used to. A temporary import tariff won't turn this trend around. True, the steel industry does have a special problem: "legacy costs," the benefits steel companies promised to retired workers in happier days. These costs mean that the failure of major companies would cause disproportionate hardship; they also make it hard for the industry to reorganize itself, because no investor wants to buy a company burdened with huge liabilities. But economists long ago concluded that import restrictions are the wrong way to deal with domestic problems. Such problems should, instead, be dealt with at the source - in this case, by having the government take over at least some of those liabilities. Trying to mitigate the problem with tariffs will be far less effective, and will impose a lot of collateral damage. As one harsh critic of the administration's action declared, tariffs "are nothing more than taxes that hurt low- and moderate-income people." Oh, sorry - that wasn't an administration critic. That's What Robert Zoellick, Mr. Bush's trade representative, said a few weeks before his master decided that protectionism in the pursuit of political advantage is no vice. If Mr. Bush really felt he had to do something for the steel industry, why not address the legacy costs? His excuse - that such action is up to Congress, not the White House - was, like the claim that he was just upholding the law, a weak (and characteristic) effort to shift the blame. (Am I the only one who thinks of this as the 'Johnny did it!' administration?) The real reason, presumably, was that direct help to the industry would be an explicit budget item, while the costs of protectionism - though far larger - are mostly hidden. In addition to being bad economics, the steel tariffs are terrible diplomacy. Our staunchest allies are outraged: Britain's prime minister, Tony Blair, pronounced the move "unwarranted, unacceptable and wrong." Even before the steel verdict, the United States was developing a reputation for hypocrisy - ready and willing to criticize others for failing to live up to their responsibilities, but unwilling to live up to its own. Now that our free-trade rhetoric has proved empty, who will listen to our preaching? Let's be clear: Many Democrats were on the wrong side of the steel issue. But it was up to Mr. Bush to show leadership, to demonstrate that he really cares about the principles he espouses. I guess not. nytimes.com

To: Mephisto who wrote (3185)	3/8/2002 3:07:06 PM
From: Mephisto	Read Replies (2) \| Respond to of 15516

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." nytimes.com