Aid workers, not industry

Since Asia’s economic collapse in the late 1990s, the situation for America’s already declining steel industry has been terrible. Lower-priced foreign steel, produced in countries around the world with neither the workplace regulations nor the taxes facing U.S. steel companies, presents an irresistible buy for domestic manufacturers such as the auto, appliance and construction industries. As a result, more than 30 domestic steel mills have shut down, affecting places such as the Iron Range most directly. Last year, LTV Steel Mining closed permanently – taking approximately 1,400 Minnesota jobs with it – and five of the remaining six Minnesota mining companies either laid off workers or shut down temporarily.

The tragedy here is not the steel industry itself but the problems facing those who work for it. In fact, fervent debate on federal intervention began with retired steelworkers whose pensions disappeared along with the companies that paid them. So it makes little sense to focus aid – especially in the form of an ill-conceived and inconsistent protectionist policy, like the series of tariffs President George W. Bush levied Tuesday – on the industry as a whole and hope that the aid eventually trickles down to the workers who need it most. When the roof is leaking, waterproofing the floor isn’t the answer.

Originally, steel industry lobbyists asked Bush for a 40 percent across-the-board tariff on all steel imports and a $10 billion pension bailout package for retired workers. Obviously, a more modest approach was in order. However, it should have involved the workers rather than the industry.

Bush denied the bailout request entirely and lowered the tariff to between 8 percent and 30 percent on imports from most nations outside North America, which has incensed and alienated most of Europe, Asia and Australia. Also, the tariffs only take effect after U.S. industries import an amount of steel roughly equal to current import levels. So in exchange for a negligible positive impact, the policy provides the United States with a slew of angry nations, most of whom it needs to fight the war on terrorism.

Moreover, switching policies from open-market to protectionist is not something a nation can selectively do with industries as large as steel. Steel influences so much of the market that artificially influencing it one way or another will have effects beyond anything analysts can predict. And with most of the rest of the U.S. and world economies based roughly on a free-market system, the steel industry will rebound eventually anyway. In the meantime, federal intervention should have served as a stopgap for the working people, not the industry for which they work.

An effective, meaningful plan would be much more expensive than Bush’s plan, which will cost the government virtually nothing. But, as needy steelworkers will soon find out, you get what you pay for.