American tariffs

[Spiral_Staircase]

I agree with the original post, that this is hypocritical of the U.S. government, but not very surprising. Countries just love to play games with subsidies, tariffs, and other trade-distorting mechanisms. Bush was here in our city yesterday, and the steel workers were out picketing for increased tariffs.
I'm all for free (or at least freer) trade. I work in the agriculture sector, an industry dominated by subsidies and tariffs. I just read a very interesting article today on New Zealand's lack of agricultural subsides. People talk about industries being destroyed when they lose their protections...the current steel debate is a great example. In New Zealand, ag subsidies were eliminated in 1984, over night. No phase out. The industry responded, became more efficient, and is still going strong 17 years later. Take a look: http://www.washingtonpost.com/wp-dyn...-2002Mar1.html

[Popmartijn]

Hello,

Nice article sulawesigirl. I want to focus on one small quote from that article:

from the New York Times:

Playing Politics With Trade

Any such tariffs, essentially a new tax on a broad array of manufactured goods, will hurt the American economy as it struggles to rebound. The move would cost far more jobs at companies that consume steel, such as auto parts makers, than those it might save at inefficient steel companies. Moreover, such brazen protectionism could plunge the world into a bruising trade war capable of derailing the administration's ostensible goal of lifting living standards at home and abroad by breaking down barriers through a series of new trade agreements.

I already read yesterday that the EU is going to complain to the WTO (World Trade Organisation) for this 'illegal' use of tariffs. If their complaint gets acknowledged (which I think is very likely) then the EU is allowed to set tariffs themselves against US products with the same monetary consequence. I only think the EU will especially choose those products that have a bigger impact on the US economy. Examples may include US cars, aviation, peanuts or corn (I don't know which sectors the EU will target exactly, I'm only giving examples here).
The result will be that the US economy will be hurt more by the decreasing foreign demand for those products than the gain for the steel mills. And some industries may get a double hit. So can the auto industry suffer from higher local steel prices and for a much lower foreign demand. And the EU is only one party (although it is probably the biggest party the US has to deal with), other countries who are member of the WTO can file similar complaints that, when acknowledged, allow them to target specific US products with tariffs.

I fear this trade war will result in some kind of economic vicious circle...

Marty




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People criticize me but I know it's not the end
I try to kick the truth, not just to make friends

Spearhead - People In Tha Middle

[sulawesigirl4]

It looks like Bush is actually going to go ahead and do it...raise steel tariffs up to 30%. I think this is an awful move and is only going to hurt our economy not to mention foreign relations.

from the New York Times:

Playing Politics With Trade

Many corporate chieftains around the country must be scratching their heads in amazement, wondering why they worked so hard to elect a market-loving, free-trading Republican administration. Democrats are supposed to be the ones who pander to labor unions. Yet it is President Bush who is considering the ill-advised move of slapping tariffs on steel imports, one that his Democratic predecessor responsibly resisted.

Any such tariffs, essentially a new tax on a broad array of manufactured goods, will hurt the American economy as it struggles to rebound. The move would cost far more jobs at companies that consume steel, such as auto parts makers, than those it might save at inefficient steel companies. Moreover, such brazen protectionism could plunge the world into a bruising trade war capable of derailing the administration's ostensible goal of lifting living standards at home and abroad by breaking down barriers through a series of new trade agreements.

America's International Trade Commission has ruled, at the administration's behest, that imports have financially hurt the nation's steel producers. It set tomorrow as a deadline for the president to decide on what steps, if any, he will take to protect the industry. On the merits, rejecting the protectionist impulse would seem easy, as the president's top economic advisers have reportedly argued.

They will probably be overruled, however, by politics. Some scoffed at the Bush campaign's efforts to woo steelworkers during the 2000 campaign, but Mr. Bush ultimately carried traditionally Democratic West Virginia. Without that upset Mr. Bush would still be in Austin, such was his razor-thin margin of victory. He would like to add the rich electoral prize of Pennsylvania to his win column in 2004, and help Republican Congressional candidates from steel-producing states this November.

Yet in trying to balance the nation's economic and foreign policy concerns against his political interests, Mr. Bush might still damage the former without advancing the latter. He is reportedly going to reject Big Steel's call for a 40 percent across-the- board tariff, settling for a mix of quotas and lower tariffs that vary according to the steel product. Some poorer nations, along with Mexico and Canada, might be exempted.

That may seem like a reasonable compromise to those involved in drafting it, but it is unlikely to satisfy Big Steel. In addition to the 40 percent tariff, the industry wants a $12 billion taxpayer bailout of its troubled companies' lavish retiree pension and health care benefits. The industry says this would free steelmakers to consolidate and become more efficient. Even an administration eager to cater to West Virginia cannot support such a fanciful end run around the nation's bankruptcy laws. The president's rejection of this plea, combined with his embrace of more modest tariffs, is likely to strike those wooed steelworkers as a betrayal.

In truth, steel imports have been drastically declining since the glut caused by the Asian financial crisis. International negotiations are making progress at cutting excess capacity worldwide, and American steel production capacity remains strong. Many steel companies have gone bankrupt in recent years, admittedly, but they are as much the victims of newer, more efficient domestic competitors as of foreign competitors.

A senseless rush to impose tariffs will reinforce suspicions around the world that the United States does not believe its own preaching about the paramount importance of embracing free trade, regardless of whatever transitional pain it inflicts on some economic sectors. European and Asian nations will surely retaliate.

[Lemonite]

These are all a result of an election year.. Sadly..

Anyways, It's important just to know that not all Foreign steel is going to be slapped with a Tariff of 8%-30% initially.. It is not until a certain amount has been shipped.. Which means that relatively little Steel will actually be tariffed in the end.. I'm not saying I'm all for this, but just letting you know the details of it all..

Here's How the Tariff's will be applied...

From the Chicago Tribune:
How the tariffs apply

The 30 percent tariff increase applies to flat steel products such as cold- and hot-rolled steel, plate-rolled and coated sheet steel, and hot and cold "bar" steel products. Slab steel also qualifies for a 30 percent tariff increase, but only after countries have shipped a total of 5.4 million tons.

A 15 percent tariff increase applies to stainless steel bar, stainless rod and circular welded tubular products, as well as "rebar" used in construction. The 8 percent tariff applies to stainless steel wire.

Bush struck a middle course in the tariff relief recommended by the six-member International Trade Commission, which ruled last year that the U.S. steel industry had been harmed by the surge of imports. The president acted under federal trade laws that allow the U.S. to take "safeguard" measures to help industries damaged by imports.

Zoellick went to great lengths to assure Americans that Bush was not departing from free-trade principles, saying that traditional manufacturers such as steel cannot quickly adapt in a swiftly moving global economy. The U.S. steel industry needs "breathing room" to adapt, Zoellick said, while noting that the global steel industry "is rife with government intervention, subsidies and protection."


Copyright � 2002, Chicago Tribune

[zoomerang II]

That socialist president bush you have - protecting the unions, interfering with business and old industry instead of allowing competition and modernisation - i don't know how you Americans can cope with him.

Perhaps its time to bring back a right wing conservative like clinton

[melon]

All the reason more why I dislike the idea of "free trade," especially that ridiculous WTO. If the world was on the same economic level, then I could see it. But when we have to compete with nations with poor regulation and standards of living, whereas they can sell their products far underpriced, it hurts Americans in the long run. If we had just left things the way they were, our entire steel industry would have went bankrupt. Period. And it is my opinion that a nation's strength is dependent on it's industrial capacity, not on our population of paper-pushers.

Regardless, I think that if we wish to continue free trade, the WTO member nations will have to start setting standards, such as a global minimum wage, global production/environmental regulations, global labor protections, etc. As it stands, America has to compete with near slave labor in too many cases, and it is all perfectly legal. I find that appalling.

Melon

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"He had lived through an age when men and women with energy and ruthlessness but without much ability or persistence excelled. And even though most of them had gone under, their ignorance had confused Roy, making him wonder whether the things he had striven to learn, and thought of as 'culture,' were irrelevant. Everything was supposed to be the same: commercials, Beethoven's late quartets, pop records, shopfronts, Freud, multi-coloured hair. Greatness, comparison, value, depth: gone, gone, gone. Anything could give some pleasure; he saw that. But not everything provided the sustenance of a deeper understanding." - Hanif Kureishi, Love in a Blue Time

[zoomerang II]

While I understand the basis of your sentiments Melon, a lot of the overseas corporations and NGOs operating in foreign countries give those countries huge benfits:
- foreign income raising the local standard of living.
- employment, often well paid by local standards.
Are you saying that these people should not have the right to work and raise their own standard of living? I would assume not but international trade has generally lead to a raising of global wealth.

I agree that safety and environmental standards should be uniform - but I would not necessarily say that American standards are necessarily the highest around the world.
Europe takes a heavy regulatory approach whereas you guys might end up in litigation as a means for resolution. If BP Amoco and Shell were forced to meet European regulations in America you might find your gas prices over there skyrocketing.

As for a minimum standard or minimum wage, well, absolutely. So I assume there is a minimum wage in America?

I completely disagree though that it hurts america in the long run. In fact, over history the oposite has proved true. It is more likely to hurt America in the short run, but those steel industries that should survive will go on and prosper, and look at what America is good at - not making the steel, but turning it into useful everyday objects. Those objects like cars and fridges that will now cost American consumers more, probably far more than the benefit gained from tarrif imposition.

Finally, I totally disagree that a nation's strength is dependent on it's industrial capacity, not on our population of paper-pushers. In fact global economic activity is generally measured in terms of GDP, which is an often archaic approach because it does not assess the activity of all services. The world should be mature enough to place a value on the mind and creativity of it peoples, rather than purely what we manufacture or "produce".

In terms of steel, lets face it, the real problems have been the overvalued American dollar, poor management, and massively overvalued steel industry pension funds. A 30% tarrif will do nothing to solve these core issues - all of which will probably result in steel industry bankruptcies anyway - even if there was a 100% tarrif.
Instead of tarrifs Bush should have provided localised aid to those regions most affected, and help given temporary tax incentives for those areas for new economic activity to replace or modernise those outdated industries and those workers who are about to lose their pensions - Not a global trade war that will hurt us all.