Protectionism for Steel

Inconsistent policy hurts U.S. credibility and will not help the steel industry in the long run

President George W. Bush has always portrayed himself as a proponent of free trade. The imposition of heavy tariffs on steel imports announced this week runs counter to his usual free trade stance—and is a mistake. The trade barrier, which levies an import tax of up to 30 percent, is reminiscent of the protectionism of America’s isolationist age just before the Great Depression, and it marks a regression in this nation’s attempt to form a new, open global economy. While economists and academics in the United States proclaim the benefits of free trade, the Bush administration has cast aside their views in order to protect America’s inefficient steel industry from foreign competition.

In defending the administration’s decision, U.S. Trade Representative Robert B. Zoellick said, “The global steel industry has been rife with government intervention, subsidies and protection,” and explained that the American response served to counter the protectionism of other governments. In order to equalize trade opportunities, the administration should not raise America’s trade barriers, but rather continue to break down the barriers of other countries. American tariffs will only lead to retaliatory tariffs, which will weaken the international free market economy and possibly lead to a trade war.

The World Trade Organization is dedicated to free trade, and through it the United States and other developed nations have sought to promote open national economies and global free trade. America’s hypocrisy in raising tariffs destroys its credibility; the Bush administration appears to think the rules apply only to others, not to the United States. Bush’s unilateralist streak has been well documented in the international press—his withdrawal from the Kyoto protocol, his position on missile defense and this latest violation of international collective agreement will only reinforce the world’s perception of American arrogance and further weaken America’s influence in the global community.

Policies to prop up the steel industry in the United States are understandable and laudable; steel is a vital national security resource, and it is imperative that the U.S. be able to produce its own steel in a time of war. The key to saving the steel industry, however, is not to prevent competition, but rather to seek ways to make the steel industry in the United States more efficient and more competitive. Direct government aid to the steel industry could spur the struggling companies to reduce production costs and increase competitiveness on the global market. The development of new, more modern processing facilities would lead to more efficient and streamlined production. Competition should be used as motivation for improvement and to help boost awareness of the need for change in the industry.

Tariffs and protectionist trade policies will not contribute to a better national or global economy in the long-term, nor will it motivate foundering industries to improve. Rather than raising barriers, the government should seek to encourage American industries to improve themselves, and thereby compete in the international marketplace.