It appears President George W. Bush’s political gamble of placing tariffs on imported steel has backfired as expected. The World Trade Organization recently ruled the tariffs were a hindrance to free trade and gave steel exporters the green light to impose retaliatory tariffs – expected to cost U.S. industries billions of dollars. The president’s gamble could fail economically as well as politically.
The United States is set to face retaliatory tariffs of $2.2 billion from the most outspoken critic of the tariffs, the European Union. What’s more, the European Union plans to place tariffs on U.S. products, not necessarily to protect its own industries, but to make the issue a political nightmare for Bush. By taxing U.S. exports from certain states, the European Union hopes to influence the 2004 election. It wants to wound economic output from politically important states to make voters understand their plight is the indirect result of Bush’s policies.
Tariff supporters, mainly from the steel industry – well known as one of the most inefficient industries in the United States – claim the tariff will give them time to revamp their production process to a more competitive level. Yet, after the imposition of the tariff, investment in U.S. steel increased but was not directed entirely toward increasing competition in the international market. Instead, revitalization efforts were mostly aimed at production “levels.”
If the U.S. steel industry is going to develop efficient production practices, political assistance in the form of tariffs is not going to work. The industry must recognize its position in the international market and make the necessary changes. While this might include the loss of jobs, the lack of competitiveness will inevitably force plants and the workers who run them to shut down anyway. Thus, contrary to general opinion, the tariff was not meant to protect workers – as the move toward efficiency will remove jobs with or without tariffs – but to protect big business. Hopefully, Bush will either withdraw the tariff and move on, or voters will realize his economic policies are foolish and favorable to vested interests not concerned with the health of our nation’s economy.
