March 5, 2002

4:12 PM

Trade WarsBush imposes import tariffs on steel, something I didn't really expect coming from the administration. Dangerous precedent or useful bulwark against laissez-faire globalization?
posted by kliuless (46 comments total)

oh and a political angle coming from the wsj: Tin mill steel received one of the stiffest tariffs and is the type produced by Weirton Steel, one of the biggest employers in West Virginia. Mr. Bush won the state in an upset victory over Vice President Al Gore in 2000 largely on his promise to protect the steel industry.
posted by kliuless at 4:15 PM on March 5, 2002

The american steel industry is in shambles. This tariff is going to hurt the economy more than it helps. Plus all the international problems that will result.....
posted by Darke at 4:20 PM on March 5, 2002

Dangerous precedent or useful bulwark? Ask the WTO... they seem to have the power to overrule the President and have this tariff effectively reversed. Is it time to put national sovereignty on the endangered species list?
posted by Zbobo at 4:22 PM on March 5, 2002

I'm sorry, did I read you right there? Are you suggesting Bush is against globalisation? Oh come on.

Anyway, Bush is banking on the American public giving him votes for Protecting American Industry, and hope they don't blame him for the resultant trade war. Still, he can always blame that on those pesky Europeans eh? Bunch of weak willed lefties, couldn't even invade the United Republic of Upper Bunga Banga....

Seriously, this'll hurt American industry as it currently needs more steel than America can produce, and it's only other source is now 25% more expensive. I'm sure the motor industry will love it.

Daft
posted by iain at 4:30 PM on March 5, 2002

This is really, really, really going to hurt the $450 million dollar steel industry sold by Australia to American each year. It's fucked them over royally.

We're happy to march into war with you, shoulder to shoulder, and in return you're happy to kidney punch us. Thanks.
posted by Neale at 5:18 PM on March 5, 2002

Good point, iain. Tom Walsh of the Detroit Free Press has written on precisely that topic.
posted by Bixby23 at 5:26 PM on March 5, 2002

Instead of imposing a tariff, why doesn't he subsidize purchases of American steel? Why suck in more money for the bloated (according to him) government, hurting American industry, when he could give the steel industry the same boost without damning everyone else?
posted by Ptrin at 5:34 PM on March 5, 2002

Why suck in more money for the bloated (according to him) government, hurting American industry, when he could give the steel industry the same boost without damning everyone else?

Uh, correct me if I'm wrong, but wouldn't tariffs raise revenue for the US govt.? While subsidies would spend money that it doesn't have? And necessarily he's not damning anyone else. Part of the reason steel is so cheap abroad is that foreign steel manufacturers are subsidized by their own govts.
posted by BlueTrain at 5:56 PM on March 5, 2002

Part of the reason steel is so cheap abroad is that foreign steel manufacturers are subsidized by their own govts.

Then why not impose trade sanctions on selected countries? This is simply protectionism in order to garner votes. It is hypocritical for the US, who have been advocating free trade for decades, to institute trade barriers solely to protect industry.
posted by phatboy at 6:04 PM on March 5, 2002

But he's essentially taxing the steel-using industries of America. He's killing a whole bunch of major industrial players by taxing imports instead of subsidizing locals. I'd think that his sponsors would be livid over this.

Which kind of brings up another point: why is he doing this when it will piss off GM, Ford, etc. ? Certainly, they are responsible for more voters in more crucial states than steel production is. What does he know that we don't that allows him to discount them like this?
posted by Ptrin at 6:07 PM on March 5, 2002

[Then why not impose trade sanctions on selected countries? ]

That is exactly what he did! It's not across the board.
posted by revbrian at 6:08 PM on March 5, 2002

He's killing a whole bunch of major industrial players by taxing imports instead of subsidizing locals.

Again, subsidies won't work (at this time) for economic reasons. Namely, our surplus has turned into deficit spending. He's doing this now because the steel industry is on the verge of collapse.
posted by BlueTrain at 6:12 PM on March 5, 2002

Revbrian,

I know, but the countries left out of the tariffs only escaped due to preexisting free trade agreements. Production subsidies do not appear to be taken into account. If subsidies were the case, Washington would make sure you knew about it. Bush used special "escape clause legislation" to implement the tariffs.

No one seems to be arguing that this is in response to foreign subsidy. It is just to protect the US steel industry. If this isn't protectionism, than what is?

I don't really see why the president has this power. Isn't this congress’s job?
posted by phatboy at 6:16 PM on March 5, 2002

A good quote from the Slate piece:

"Bush invoked an infrequently used U.S. law known as "Section 201" (named after the relevant portion of the 1974 trade act) that's designed to protect U.S. industries from an onslaught of fair trade. The law, which is an accepted part of international trade agreements, allows the United States to protect a domestic industry that's suffering from the competition caused by a wave of fairly traded foreign imports."
posted by phatboy at 6:19 PM on March 5, 2002

Not to mention this is really gonna piss off our allies. Japan, most of the EU, Russia, Brazil, etc. Wait a sec.....weren't we at war?

Uh, correct me if I'm wrong, but wouldn't tariffs raise revenue for the US govt.?
=and=
Namely, our surplus has turned into deficit spending.

Hmmm. Anyone else smell something? Maybe it's a no edged sword. The steel industry gets protected, which garners more votes. And, the Fed Govt gets money in a time when they are running up huge defecits. Too bad no one considered thinking past entry-level macroeconomics.
posted by Ufez Jones at 6:36 PM on March 5, 2002

You find the term "steel dumping" tossed around frequently in U.S. news articles dating back several years. China and Japan are most fequently mentioned (though Russia and Germany also appear). While many cry foul both from within and without the U.S. -- as evidenced on this thread -- there are plenty in the industry who would argue that imposing selective tariffs is simply a very effective way of enforcing fair trade practices on countries that would otherwise sell their product at less than fair market value -- a fair practice in legal terms, but, over the long haul, an effective means of crushing domestic industries. Is it protectionism? You bet. But although it has a very negative connotation, protectionism is not, by definition, necessarily unfair. The American Iron and Steel Institute refers to the current situation as a "steel crisis," pointing to the fact that 16 U.S. steel firms have gone belly-up in the last three years alone despite more than $60 billion in modernization efforts over the last 20 years.

Now, before all the rotten tomatoes start flying in my direction, let me just acknowledge that the AISI is, most likely, the fourth wheel on the axis of evil -- just check out their index of "steelgrams" to the U.S. House of Reps & the Senate. I just don't think it's fair for everyone to read the article and assume that Goober W. Bush is at it again (acting unilaterally to pit U.S. against the world) without considering the flip side of the issue, which is how many of these posts sound to me. My apologies if I'm mistaken.
posted by Bixby23 at 6:54 PM on March 5, 2002

Come on, you conservatives – Aaron, Rich, Settle, Keen, Evaniser et al - here's a hard Free Trade case for you to argue. Why impose tarriffs when you believe in free trade for every one else, no matter how painful the results? (Forgive me if I've classified you unfairly, I'm doing this from memory)

- john.
posted by dash_slot- at 7:08 PM on March 5, 2002

[Sidenote: Kliuless, please don't link to articles that are PAID subscription only. Things like the New York Times are okay because registration is free, and posters often note the metafilter-specific login and password you can use if you don't want to register. With the WSJ, we can't do that. We either have to ante up for the full $60/yr subscription, or else we cannot see the page at all. And without the context, we can't debate the claim properly.]

dash_slot: Baldfaced baiting is not kosher around here. You have no right to demand that I or any of the other people you named come in here and defend somebody else's posts and arguments. I was just starting to read this thread, but seeing your taunt has guaranteed I'm not going to waste my time participating. The tariff is imposed. You don't like it? Tough.
posted by aaron at 7:19 PM on March 5, 2002

I don't understand MeFi. I don't. Even when Bush commits to a centrist, if leftist, idea, he's still wrong because he isn't following conservative ideals. WTF does Bush have to do to garner respect here, aside from quitting?

I may have misunderstood this tariff. If I have, may the mightiest flamer knock me to hell. But here's what I surmise: Steel industry tanking. Govt. involved with deficit spending. Bush imposes tariff to revive steel industry, thus protecting jobs and a livelihood. Tariffs, in turn, help fund govt. spending. What am I missing? Other than, other countries will be mad. Wah! You think this is the first time the US has been self-interested? You think it will be the last? And according to the Slate article, it was completely legal. What am I misunderstanding?
posted by BlueTrain at 7:29 PM on March 5, 2002

Iain: Sorry for responding to your question so late. I'll rewrite the stuff from above:

ME: "Dangerous precedent or useful bulwark? Ask the WTO... they seem to have the power to overrule the President and have this tariff effectively reversed. Is it time to put national sovereignty on the endangered species list?"

Iain: "I'm sorry, did I read you right there? Are you suggesting Bush is against globalisation? Oh come on."

Me again: No, I'm saying that on a general level, the WTO seems to have the power to effectively overrule any member country's decisions if the WTO decides it is against policy. One could say that this gives WTO undue influence over a government's ability to govern. In my opinion, this is the anti-globalization movement's most reasonable argument, but I still can't make up my mind. Any other ideas?
posted by Zbobo at 7:31 PM on March 5, 2002

This is a mistake on Bush's part. The steelworkers unions drove the American steel industry out of business, and now want the rest of the country to bail them out.

Far bigger chunks of American industry would benefit from cheaper steel, but those unions voted for Gore while the steelworkers voted for Bush. Now the steelworkers want something in return, and Bush gave it to them. With any luck, the WTO will rule this improper and overturn it.

Happy now, dash_slot?
posted by jaek at 7:36 PM on March 5, 2002

sorry, it was actually an AP article reprinted by the journal!

btw, take your pick :)
posted by kliuless at 7:36 PM on March 5, 2002

Dangerous precedent or useful bulwark against laissez-faire globalization?

Please. The American administrations of both Clinton and now Bush are only in favour of globlisation when it favours American business. They're just doing with the steel industry what they've been doing with the softwood industry for years.
posted by lupus_yonderboy at 7:41 PM on March 5, 2002

yeah, or like with corn syrup and ethanol. i was just thinking it might give carte blanche or whatever to other nations to impose their own tariffs, quotas, trade restrictions, what have you. like that's what i meant by precedent.

and it just seemed like an unusual position to take by the administration even if it was a political favor because it seems like the backlash, whether international, domestic, from within the party or out of the party wouldn't be worth it, esp. when your platform is ostensibly given to free trade.
posted by kliuless at 7:53 PM on March 5, 2002

The Economic Reporting Review at TomPaine.com comments on a Washington Post article:

Bush Faces Tough Choices on Steel Imports
Steven Pearlstein and Mike Allen
The Washington Post, February 26, 2002, Page A4

This article gives an assessment of the issues facing the Bush administration in its decision on imposing restrictions on steel imports. The article never mentions the over-valuation of the dollar. The fact that the dollar is 20 to 30 percent above its sustainable level effectively subsidizes foreign imports by 20 to 30 percent relative to domestically produced steel.

..wish I understood economics...
posted by IpxODIE at 8:05 PM on March 5, 2002

For the record, this is a completely moronic decision and inconsistent with everything Bush says he supports. I'm totally against it. There, I’ve said it.
posted by nobody_knose at 8:08 PM on March 5, 2002

I don't care if another nation subsidizes their steel industry and then ships cheap steel to the U.S., because in that case, the U.S. consumer benefits by getting the cheapest product, and at the expense of the other nation. With our strong exchange rate IpxODIE, that makes foreign steel practically free (I think that's what the article is saying). It's like going to Russia and being able to eat at the nicest restaurant in town, for what, after the exchange rate, is probably $10 U.S.

This is a typical example of a special interest group manipulating national politics. Same old story, different faces. Corporate welfare is such a massive part of American politics, with companies voting themselves government money. This has probably already been said before.

Tariffs are bad, and subsidies are bad, because they both encourage American corporations to be lazy, stagnant, and uninterested in the customer's needs. Why try to improve when it won't affect your outcome, which has been secured by the state? When you subsidize unprofitablity(welfare), you are almost guaranteed to get the minimum effort and the lowest levels of performance.
posted by insomnyuk at 8:12 PM on March 5, 2002

I'm no economics expert, but won't these tarriffs just mean that everything made from steel (like cars) are just going to cost more? It's not industry that's going to have to foot the bill for these tarriffs, it's the American consumer...?
posted by crunchland at 8:14 PM on March 5, 2002

This article gives an assessment of the issues facing the Bush administration in its decision on imposing restrictions on steel imports. The article never mentions the over-valuation of the dollar. The fact that the dollar is 20 to 30 percent above its sustainable level effectively subsidizes foreign imports by 20 to 30 percent relative to domestically produced steel.

If I am deducing this correctly, the over-valuation of the dollar makes it better for consumers to buy foreign steel than to purchase steel from the US. Again, correct me if I'm wrong but:

Since the dollar is overvalued, exchange rates favor foreign currency. Meaning, the US pays you $30 million for some steel. You take that cash home and convert to your own currency and end up with more cash than an American who has $30 million because of the over-valuation. Then, you spend that extra cash on producing more steel and selling it back to the US at a cheaper price than domestic producers can offer; thus flooding the market with cheap steel.

The exact opposite occurred right after WWI. Countries DE-valued their currency to promote exports. Here, if this article is correct and my logic as well, the over-valuation promotes importing goods.
posted by BlueTrain at 8:18 PM on March 5, 2002

the trade-weighted dollar is at levels not seen since the plaza accord and it is hurting US exporters relative to foreign competition, but i think the argument is the same from a free trade perspective because according to the market "over-valuation" is relative concept! (although i may want to check the economist's big mac index for purchasing power parity, if i have my economics right :)
posted by kliuless at 8:20 PM on March 5, 2002

I'm no economics expert, but won't these tarriffs just mean that everything made from steel (like cars) are just going to cost more? It's not industry that's going to have to foot the bill for these tarriffs, it's the American consumer...?

Exactly. Sometimes, interesting situations are created. When Archer Daniel Midland was supporting limits on sugar imports, it was Coca Cola who opposed them, because it would raise the cost of their product(this was just in Michigan). So you have to powerful special interests duking it out in the legislature. ADM won.
posted by insomnyuk at 8:24 PM on March 5, 2002

I don't care if another nation subsidizes their steel industry and then ships cheap steel to the U.S., because in that case, the U.S. consumer benefits by getting the cheapest product, and at the expense of the other nation.

At the expense of OUR industry as well as their nation. I think that you're forgetting that cheap imports put Americans out of business and unemployed. So, we either put up TEMPORARY tariffs to allow for US steel to recover, or we pay for the welfare and unemployment of all the current steel manufacturers.

Tariffs are bad, and subsidies are bad, because they both encourage American corporations to be lazy, stagnant, and uninterested in the customer's needs.

In theory, you are correct. However, when we engage in free trade, the long term effects of an entire industry collapsing because of cheaper foreign goods, our citizens are hurt. It puts an undue burden on the govt. to support those who were impacted.

The more I think and converse about this tariff, the more I agree with it.
posted by BlueTrain at 8:26 PM on March 5, 2002

cheers, insomnyuk & jaek: well reasoned, consistent and calm.

aaron: Feeling a little sensitive? :) If you re-read what i wrote, you'll see that no 'demands' were made, i like to think what i said was a 'prompt' to defend the conservative position, certainly not a case of "Baldfaced baiting". "The tariff is imposed. You don't like it? Tough." - Aaron.
Ok, but i am still allowed to dissent, right? And politely ask for the pro's and cons?
posted by dash_slot- at 8:27 PM on March 5, 2002

"...a very effective way of enforcing fair trade practices on countries that would otherwise sell their product at less than fair market value..."

Er, how is 'fair market value' determined? Seems to me that if Steel Producer ForeignX is willing to let his steel go for a penny-a-pound, and the American Steel Consumer LocalY are willing to pay that amount, it's the fair market value, regardless whether Steel Producer LocalUSA is able to meet that low price...
posted by five fresh fish at 8:31 PM on March 5, 2002

Er, how is 'fair market value' determined? Seems to me that if Steel Producer ForeignX is willing to let his steel go for a penny-a-pound, and the American Steel Consumer LocalY are willing to pay that amount, it's the fair market value, regardless whether Steel Producer LocalUSA is able to meet that low price...

Unless Steel Producer ForeignX is willing to let his steel go for a penny a pound because 1) he vastly overproduced, and wants to dump steel on the US market but keep prices firm elsewhere, or 2) his government has subsidized him for the sake of keeping popular support by keeping jobs in his country, or 3) any one of a half dozen other reason like that - which are quite common, and are the reasons for anti-dumping sections of most trade agreements in the first place.
posted by MidasMulligan at 8:51 PM on March 5, 2002

Here is an article from The Economist. Though I don't agree with it, it may prove helpful.
posted by BlueTrain at 8:53 PM on March 5, 2002

the WTO is gonna spank the US for this.
posted by panopticon at 9:06 PM on March 5, 2002

Midas, you left off 4) he doesn't have crushing pension obligations and 5) his workers are more productive with regards to what they get paid. There are segments of the American steel industry that are competitive and they all share one thing: the absence of the USWA.

The USWA killed the goose that laid the golden eggs. They demanded salary and benefit increases, got them, and then failed to increase their productivity to match. As a result, American integrated steel mills are hosed.

Tariffs will only delay the inevitable, at the expense of everyone in America who isn't a steel worker.
posted by jaek at 9:32 PM on March 5, 2002

I found the coverages in Washington Post and a January story in Business Week on this subject, pretty good.

Bush obviously did this to keep the voters in W. Virginia happy and with an eye towards the election in PA. However, this isnt going to make anyone happy.

-The free traders would not like it much. There is a fair amount of dumping, subsidies by other countries. But the unionized workforce and the expensive way of manufacturing steel in integrated plants are equally to blame. The miniplants are apparently doing quite well.

- The steel industry wanted 40%. Also, they still want the government to bear the healthcare cost of the retired employees. With the ratio of retired employees to workers being as high as 10:1 in many steel cities, you are talking about a lot of votes there.

-The trading partners are going to be deeply unhappy. With another trade war looming, WTO may get sigificantly weakened even before it gets going in a big way.

I dont see how a sitting president could ignore the plight of an ailing industry that employs so many people. But the concensus appears to be that this measure is not going to save the industry. This'll just ensure some jobs for some more time and would pass on the cost to another section of the society (though the cost per individual doesnt appear to be significant).

Bush would probably have been better off taking the other ideas that BW mentioned:

-Waive antitrust laws to allow US steel to buy up many of the other bigger entities.The consolidation - if it is backed by a capable leadership, can create a much stronger competitive entity

-Pick up the steelmakers pension since most of them are guaranteed by PBGC, some government programs or other anyway. ie the government/the taxpayer will eventually have to pick up that tab.

The latter would have earned Bush a lot of credit, a lot of votes.The former would have been a serious attempt towards a solution. What steel industry has gotten instead is a half built house.
posted by justlooking at 12:17 AM on March 6, 2002

Yet another reason why Bush is a RINO. Week-kneed compromiser, just like his dad. How disappointing.
posted by dagny at 12:42 AM on March 6, 2002

"Weak", of course. Sorry about that.
posted by dagny at 12:42 AM on March 6, 2002

It's not just West Virginia that's affected by steel. Researchers from Cleveland and the PA state legislature asked a guy from Brookings what to do about the increasingly elderly populations in Pittsburgh and Cleveland, which are still shrinking somewhat. He said, inventory your situation, look at what cities like Lowell, MA did, and attempt to attract businesses. Solutions will be local.

Without some sort of basic productive task for these cities to do, what is the alternative- transfer payments, service jobs, medical/educational/government work? Two cities that gradually descend to the level of Youngstown, OH, because they can't attract tourists and yuppies with top-end consumable outdoor recreation within an hour's drive, perhaps?

Confronting the real life local implications of steel tariffs is a bit more complex than espousing a simple philosophical commitment to free trade. It also crosses my mind that in this changed situation, where we actually shut down the aviation grid, there may be a need to reconsider what industries are a part of critical infrastructure in times of crisis.
posted by sheauga at 7:39 AM on March 6, 2002

Read My Lips!
Tariffs = Taxes
posted by nofundy at 8:47 AM on March 6, 2002

George Will weighs in.

"Proving himself less principled than Bill Clinton regarding the free-trade principles that are indispensable to world prosperity and comity, President Bush has done what Clinton refused to do. In the name of providing "breathing space" for the U.S. steel industry, which has been on the respirator of protection for decades, Bush has cooked up an unpalatable confection of tariffs and import quotas that mock his free-trade rhetoric."
posted by homunculus at 10:38 AM on March 7, 2002

hey, i just read about another twist that steel buyers in the US could come across: because canada and mexico are exempted from the tariff, "dumping" could occur there and mexi-canadian firms could just reexport the steel to the US.

kind of like laundering steel or something. and it shows how easy it is to circumvent trade restrictions as loopholes inevitably arise, esp. with fungible products, when artificial barriers create an arbitrage opportunity.
posted by kliuless at 2:51 PM on March 7, 2002

Nice quote in today's telegraph opinion:

But among those stiffed by the President are pretty much everybody with troops on the ground fighting alongside the 10th Mountain Division and the 101st Airborne in Afghanistan - fellows like Australia, whose Prime Minister, John Howard, summed up his country's support for the US better than anyone else in the days after September 11: "This is no time to be an 80 per cent ally." No, indeed. Bush to Howard: You're now a 30 per cent ally.

It's a pretty obstreperous pice. Try this on for size:

Most Presidents get to pick their priorities. After September 11, Bush had no choice in his. But, six months on, it's increasingly clear that, on the non-war fronts the Bush presidency has died.

That is the impression we are getting over here.
posted by RichLyon at 2:19 AM on March 10, 2002