Case Study: The Politics of Trade in Steel
Do you believe the Bush administration was correct in imposing tariffs in March 2002 on a wide range of steel imports? At the time President Bush decided to impose temporary tariffs on steel imports, 16 steel manufacturers were operating under bankruptcy and a total of 30 had declared bankruptcy over the prior few years. U.S. steel producers were losing market share to foreign steelmakers in large part due to subsidies and other trade issues. Bush and his Cabinet chose to implement the tariffs because of "the need to speed up negotiations to reduce the world's huge overcapacity in steel production" (Editors BW Online, 2002, para. 5).The tariffs were the largest trade-protection grant since President Regan had taken similar steps to shore up the steel industry. President Clinton had ordered a study that was done in 2000 with the resulting information "the U.S. [steel] industry was the victim of foreign subsidies and other unfair trade practices" (Editors BW Online, para.7) . Commerce Secretary Donald L. Evans noted that tariffs were needed in order to manage Europe, South Korea and Japan, who were the worst in regard to excess capacity. Conversely, White House Economic Adviser, Lawrence B. Lindley, cautioned that raising tariffs would only make U.S. manufacturers less competitive because it would raise prices, and Secretary of State Colin Powell noted that this move would alienate coalition partners of the war on terrorism. The EU retaliated on March 27, 2002, by imposing similar tariffs on steel imports to attempt to prevent a flood of steel imports into the EU. EU President Romano Prodi urged President Bush not to proceed with his "protectionist measures" (Editors CNN.com, 2002). Intended to last for three years, President Bush ended the tariffs on December 4, 2003, one month after the World Trade Organization's court declared the tariffs to be a violation of global trade laws. U.S. trade Representative, Robert Zoelleck declared the tariffs had accomplished their mission and President Bush noted that "Productivity is high, business investment is rising
the economic stimulus package
is working" (Lehrer, 2003, para. 7). Zoelleck noted that during the tariff period the steel industry was provided the time it needed to restructure operations so as to "make the industry more competitive" (Lehrer, para. 9). However, statistics show that during the tariff period of 21 months, both production and employment in the U.S. steel industry continued to decline. The American Iron and Steel Institute and the International Iron and Steel Institute reported that "U.S. production was down 6.7% between October 2002 and October 2003, despite the increased tariffs" (Ackman-1, 2003, para. 7). Despite the fact that steel imports were down, which was one of the goals of the tariffs, "In September 2003, U.S. Steel production was down
15% [from] September 2002" (Ackman-2, 2003, para. 4). Was President Bush correct in implementing the tariffs? I believe it was the only action he could have taken under the circumstances. He had to do something to give the U.S. steel industry the opportunity, however slim, to revive itself. Even though the move incensed the international market, Bush was primarily accountable to U.S. interests and steel had been a staple of the U.S. economy for many years. Unfortunately, I believe the respite was too little, too late and I personally attribute much of the problem to the actions and dominance of union control in the U.S. steel industry. As the WTO noted, "the decline in the U.S. steel industry is a decades-long phenomenon" (Ackman-2, 2003, para. 5). Who are the main beneficiaries of protective tariffs such as those imposed on steel imports? Who are the losers? As far back as the 1800s, "Tariff revenues were the main source of revenue to the federal government" (Editors EcEdWeb, 2006, para. 1). This remains important today, as Hill notes "While the principal objective...
References: Ackman, D. (05). Bush cuts steel tariffs, declares victory. Retrieved April 8, 2006, from http://www.forbes.com/2003/12/05/cx_da_1205topnews.html
Editors BW Online. (08). Behind the steel-tariff curtain. Retrieved April 8, 2006, from http://www.businessweek.com/bwdaily/dnflash/mar2002/nf2002038_1478.htm
Editors Ecedweb. (2006). How can big business make money from tariffs? Retrieved April 8, 2006, from University of Nebraska Omaha Web Site: http://ecedweb.unomaha.edu/lessons/feus1.htm
Hill, C.W. L. (Ed.). (2004). International business: competing in the global marketplace (5th ed.). New York, NY: McGraw-Hill/Irwin.
Lehrer, J. (04). Online newshour: steel tariffs ended. Retrieved April 8, 2006, from http://www.pbs.org/newshour/bb/international/july-dec03/steel_12-4a.html
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