This is a big, important news story that you probably haven’t been keeping tabs on unless you work in heavy industry, either making steel or making things out of steel.
Almost 2 years ago, the Bush Administration approved a hefty tariff on imported steel. This protectionist measure was designed to combat alleged “dumping” of cheap steel by foreign nations. This made American steel more competitive and foreign steel more expensive, at least within the United States.
Like many things, there were unintended consequences. American manufacturer’s costs were driven up because they no longer had access to “cheap” foreign steel. By contrast, overseas competitors were not subject to the American tariffs, allowing them to buy steel for 30% less than American companies could. It does not take a genius to see that foreign manufacturers would be able to make product much more cheaply with such steel. So, although hundreds of thousands of American steel workers’ jobs may have been protected by this measure, the millions of workers who made things out of that steel found their jobs endangered by uncompetitiveness.
As if this were not a serious enough consequence, the World Trade Organization found the tariff illegal. This opened the door for countries harmed by the tariff to impose punitive trade measures, including duties of 100% on some goods exported from the United States to the European Union. It would be polite to say this would not help the American manufacturing sector, which has already shed millions of jobs since 2000.
Repealing this tariff should have been a complete no-brainer. It should not even be an issue today. However, politics got involved. It seems that Bush needs votes from steel producing states to get re-elected. Here is where it gets even more complicated: he also needs votes from states where they make things out of steel.
Just today, the Bush Administration announced that they will do the right thing, abide by international trade law, and dump the anti-dumping tariffs. They will however, keep a “licensing system” designed to prevent “surges” in steel imports. This has already been described as “little more than a fig leaf” for the steel industry.
It will be interesting to see whether there is a new measure which will have the same net effect of the old tariff, or whether the Administration will let bad rules die.