The World Trade Organization’s ruling on U.S. tariffs on steel imports was, to put it politely, “not unexpected.”
That is another way of saying that anyone familiar with rules embodied in treaties our country voluntarily signed knew from the outset that these tariffs would not stand legal scrutiny.
The tariffs reportedly were imposed against the advice of President Bush’s own Treasury secretary, Commerce secretary and trade representative, who knew what a WTO panel’s ruling eventually would contain. Domestic politics overrode prudent legal advice and sound economics.
In early 2002, Karl Rove and other White House political advisers feared losing key Congressional races in the fall election. They deemed that winning key races in West Virginia, Pennsylvania and Ohio was more important than any harm to relations with trading partners that a spurious tariff imposition might cause.
Now the question is what the administration will do in response to the WTO ruling. It can comply and remove the tariffs, or delay in the hope of getting past the 2004 election before complying. Or it can defy the WTO and absorb the political and economic impacts of retaliation the European Union may now impose on U.S. exports.
What course Bush will take is not certain. It is clear, however, that electoral politics may once dominate any eventual decision.
The EU knows that and is unlikely to accept stalling. Clearly, governments in power in most EU countries would prefer to see someone other than George W. Bush in the White House for a wide range of reasons. They are not likely to give him time to delay on steel. Moreover, they will ensure that any retaliatory measures they impose will have their greatest impacts in U.S. Congressional districts important to the Republicans.
Some news stories on the announcement emphasized the threatened targeting of eventual countermeasures as evidence of new diabolical perfidy on the part of the EU. No one should get excited. Such targeting to inflict maximum political pain is an old tactic. Whenever the United States gets a favorable WTO ruling against EU measures, we choose retaliatory measures calculated to hurt the French. This is simply how the game is played.
The economics are clear. These tariffs hurt the U.S. economy as a whole and made us poorer. To economists, the benefits of trade are lower cost products to consumers and more efficient use of resources as a whole – not jobs. Elected officials and the news media, however, focus on jobs supposedly gained versus those supposedly lost.
Even by these criteria, the Bush tariffs hurt us. Jobs lost in steel using industries –autos, construction, farm machinery, locomotives, barge building and small manufacturing – clearly outweighed jobs maintained in the steel industry itself.
Representatives of steel firms, unions and politicians from affected districts once again are singing the song that the WTO is somehow uniquely biased against the United States. Don’t buy this line for a minute.
The United States played a disproportionate role in the 55-year process that created the General Agreement on Tariffs and Trade, which subsequently became the WTO. We repeatedly used our weight to ensure that these agreements favored our interests. We continue to use – and abuse – WTO rules and resolution mechanisms as often as other nations.
Trade broadly benefits U.S. society as a whole. We would be substantially poorer if the growth of world trade that occurred over the last five decades under the aegis of the GATT and WTO, had not taken place. Bush should place the good of the nation above short-term political considerations and remove these tariffs.
© 2003 Edward Lotterman
Chanarambie Consulting, Inc.