With World Trade Organization member states poised to enact retaliatory tariffs, President George W. Bush has little time left to decide whether to continue his tariffs on foreign-produced steel. Although the consequences of Bush’s impending decision might be severe, the Bush administration didn’t need the extra time provided by the 10-day retaliatory sanction delay the WTO just granted.
The European Union alone is set to punish us up to $2.2 billion, which includes tariffs on paper products, of which Wisconsin is the number one producing state and Minnesota the eighth. Regardless of WTO member state retaliation, the steel tariffs are bad for the economy, both here and abroad. Foreign retaliation would only further damage U.S. industries and our economy. The sour effect of the administration’s protectionism was already felt at home within months of the steel tariffs’ enactment in March 2002.
The negative consequences of U.S. steel industry protectionism came fast and were clearly evident, which is why the tariffs have had so many critics. Although tariffs might help steel-makers, they hurt the much larger population of manufacturers who use steel to make their products.
Instead of allowing the failing and inefficient steel industry to be forced to improve or get out of the market, the tariffs artificially prop them up. Steel producers have a record of presidential administrations trying to help them out. It obviously has never worked. Although the industry is comparatively small for such assistance, the Bush administration apparently thought sacrificing the interests of others for the steel producers would earn Republicans some brownie points in key states.
Imposed tariffs are increasing the price of what used to be cheaper, foreign-made steel, thereby causing U.S. manufacturers that use steel for their products to suffer. According to Erick Ajax of E.J. Ajax & Sons, the tariffs cost 200,000 jobs in 18 months in the steel-using industry. His company, in Fridley, Minn., laid off half of its workers in the past year and a half. As of Oct. 1, a quarter of U.S. manufacturers that use steel reported losing customers to foreign competitors who can buy cheaper steel. About 40 percent say they could hire more people if the tariffs are removed. Automakers say the steel tariffs have caused them to lay off thousands of workers.
Of course, the United Steelworkers of America disagree with these complaints. Their spokesman, Gary Hubbard, says tariffs are important because American companies pay better wages than those do in other countries.
Many people buy into the logic used by people such as Hubbard. Unfortunately, opposition to protectionism is usually not as prevalent as it is with these steel tariffs. This is because the secondary effects of protectionism are often delayed. Our society believes that buying “Made in the USA” products protects U.S. workers and puts our country’s interests first. Although this logic appeals to the populace and stems from well-intentioned patriotism, it is an age-old lie that hurts foreign relations and the economy in our country and others.
Our nation used to have more factories and sweatshop-type industries. Now we get most of the products that used to be made here from companies located abroad. This move has not hurt us. It only makes sense for our country to make products, produce technology and provide services that we can do cheaper, or better, here than can be done in other places. Why waste our resources doing things others can do more efficiently? This is based on a principle called comparative advantage, which we use in our daily lives. Instead of me trying to change my car’s oil, which would take a while, my brother does it for me in 20 minutes flat. Likewise, if he needs a button sewn on his shirt, it makes more sense for me to do it for him.
U.S. wealth shows why comparative advantage works and protectionism doesn’t. Although there are factors such as different tax codes, overall our 50 states allow their citizens to freely trade products and labor with each other. If protectionism worked, Minnesota would employ it against its neighbors.
We apply comparative advantage in our personal relationships and within our own borders. Why shouldn’t we use it in our trade relations with other countries?
Using an “us against them” mentality will only hurt everyone in the end. If anything, learning this lesson is one – although probably the only – good result of Bush’s steel tariffs.
Shannon Fiecke is editor of the opinions and editorials pages. She welcomes comments at [email protected]
