Posted on 03/07/2002 11:27:12 PM PST by JohnHuang2
In slamming 30 percent tariffs on imported steel, President Bush did more than keep his word to U.S. steelworkers. He sent a Reaganite message to the world: "I'm a free trader, but I put America first."
Just as Ronald Reagan imposed quotas on steel being dumped in the United States in the 1980s, Bush has decided that U.S. national interests and America's steel industry will not be the next sacrificial lambs thrown up on the altar of the Global Economy.
Though threatened with a trade war, the president did not buckle or back down. Good for him. Economic patriotism may just be back in style. And if the European Union decides to haul us before the World Trade Organization for a caning, the president should tell the WTO to take a hike. If Europe wants a trade war with the United States, let it begin here.
For, no matter the pain, these annual $300 billion trade deficits in manufactured goods must stop. We cannot sustain them; we cannot survive them. They will sap our dynamism, gut all of our industries, put an end to our economic independence and undermine the foundations of our military power. As Holland, Spain and Britain can all testify, Great Powers that chronically import more than they export soon cease to be Great Powers.
Look at the numbers: From 1990 to 2000, the United States ran a cumulative trade deficit in manufactured goods of $1.6 trillion. And what were the returns from the celebrated trade deals negotiated by Bush I and Bill Clinton – NAFTA, GATT and MFN for China?
Between 1990 and 2000, the U.S. merchandise trade deficit with all the WTO nations, including the EU, grew 300 percent. Our merchandise trade deficit with China grew 700 percent. Our merchandise trade deficit with Mexico exploded by 1,900 percent. Those who cut and sold these deals will one day have to answer before the bar of history for what they did to America.
Justice, as well as the national interest, supports Bush's stand in defense of the U.S. industry. In each of the last five years, steel imports have exceeded 30 million tons, as 31 U.S. steel companies have had to file for bankruptcy. In the last two years alone, 46,000 more steel jobs disappeared and another 19 percent of our capacity was lost.
To pundits who sniff that the U.S. steel industry is inefficient and should be allowed to die, Rep. Peter Visclosky, D-Ind., replies: "Since 1980, the industry has spent $60 billion to increase efficiency. Productivity has increased 156 percent, and man-hours per ton have declined from 10 to 3.5. Today, no one produces a ton of steel more efficiently than American steelworkers do."
While U.S. steel mills are creations of free enterprise, most overseas mills would not even exist were it not for state subsidies. And in finding that illegally traded foreign steel created the crisis, the U.S. International Trade Commission was unanimous. As for threats from across the pond, the EU will be hammered if it starts a trade war – for at risk would be the entire $49 billion trade surplus in manufactures the European Union ran with the United States in 2001.
Will U.S. consumers suffer from these tariffs? Writes Visclosky: "Even under a 40 percent tariff, the average cost of a $25,000 car would have risen only about $25; the average cost of a refrigerator just $3."
But if imports were allowed to kill our industry, scores of thousands of steelworkers would have to file for unemployment, as the United States became as dependent on foreign steel as we are on foreign oil.
For Bush, it was a moment of truth. All the big-name economists, editorial writers, corporate lobbyists and think-tank scholars were demanding that he stand by "free trade." But, like a Texas Ranger, the president decided to stand alone, beside the U.S. steelworkers whose numbers were few but whose cause was just.
It was a brave decision, and in taking it the president made a statement the Financial Times did not miss. "Bush's move marks U.S. trade policy turning point," read its warning headline. Indeed, it does. For the president said with his decision that there are U.S. national interests that supersede any and all claims of free trade.
Bush's decision was not in the Wilson-FDR mold, but it was in the tradition of Washington, Hamilton, Madison, Lincoln, McKinley, T.R., Coolidge and Reagan, the last of whom intervened again and again to block flood tides of imported steel, autos, computer chips, machine tools and motor bikes. And if the president's father disapproves of his decision, his grandfather surely would not. For Sen. Prescott Bush stood with Barry Goldwater and Strom Thurmond to oppose the free-trade policies of JFK that started the de-industrialization of America.
BRAVO FOR BUSH!!!
[.....................crickets.........................]
The result was one of the biggest man-made economic disasters in history, a worldwide Great Depression which came after the Roaring Twenties of ludicrously inflated stock prices on Wall Street. By 1932, the jobless rate in some US cities was put at 50 per cent of the workforce. This Hoover-inspired economic catastrophe led directly to the election of Franklin Roosevelt in November 1932.
Perhaps in the cynical calculations of the White House they have recognised that the moves on steel tariffs may simply provoke a series of skirmishes at the World Trade Organisation, the international referee on such matters. If the WTO says the steel tariffs should not stand, then Mr Bush can claim he tried to protect Big Steel but those terrible foreigners would not let him.
you put all that on Hoover's tariff?
Expect them to ramp up their lobby operations on K Street (which employs mostly former Fed.gov. officials) to overturn this through WTO.
BushSr also threatened and in some cases used these weapons.
It is a (Barf Alert!) CATO INSTITUTE / HERITAGE FOUNDATION MYTH that somehow Reagan and BushSr were categorically doctrinaire free traders down the line. Not true. The both of them had a streak of "fair trade" in them; and it is history that they acted when they saw patent trading injustice.
Oh, by the way, the US taking the hardline on Japan through 301 and Title VI cracked open the market, getting no less than 15 US contractors into the market. Up until that point it was meaningless hours and hours of negotiations with Japan's Foreign Ministry and Construction Ministry with delays, shill games, intransigence and basically a 'screw you' from Japan. They woke up and took action once Uncle Sam matched his fair trade rhetoric with executive action.
I have somewhat revised my opinion of Bush II; first on his response to international terrorism and now his response to trading inequities.
However, it is also obvious that Pat is simply giving Bush an "attaboy" for a first-step rather than addressing what needs to be done further.
Bush's action's are a step in the right direction, but still inadequate due to inconsistancy.
The optimal solution is a relatively low, across-the-board revenue tariff of 10-20% on ALL imported goods from ALL foreign countries.
"Targeted" tariffs have the disadvantage of providing loopholes and, as others will be quick to point out, the potential to hurt other domestic industries.
A prime example is our failed embargo on the importation of Cuban goods. Cuban sugar has been routinely imported to the U.S. through the back door: Canada. Cuban sugar is shipped to Canada where it is dissolved in molasass. "Canadian" molasass is then legally imported to the U.S. where the sugar is easily refined back out. The leftover molasass is then exported back to Canada where the cycle is repeated. Large sugar-users (such as candy makers) are also closing their domestic factories and moving to Canada where they can legally use Cuban sugar, then import it as candy to the U.S.
An across-the-board revenue tariff of 10-20% would circumvent this type of abuse. Additionally, the revenue could be used to offset a major reduction or elimination of the corporate income tax, providing domestic producers a more "level playing field". (A Proposal to Abolish the Corporate Income Tax)
From a historical perspective, a revenue tariff of 10-20% is NOT excessive:
Boo Pat Boo!!!!
i don't think it is a good idea for the US to depend on others for certain critical things our country needs.
hence, i tend to agree with this tariff.
Furthermore, at the outset of the Great Depression, Imports formed only 6 percent of the GNP. With average tariffs ranging from 40 to 60 percent (sources vary), this represents an effective tax of merely 2.4 to 3.6 percent.
Even an effective tax of 2.4 to 3.6 percent is overstating the effects of the tariff. The tariff rates were already high to begin with. One source reveals that Smoot-Hawley raised rates from 26 to 50 percent; another source from 44 to 60 percent. In that case, we are talking about an effective tax increase of 1.4 percent at most.
Yet the Great Depression resulted in a 31 percent drop in GNP and 25 percent unemployment. The idea that such a small tax could cause so much economic devastation is too far-fetched to be believed.
Steel production is an industry vital to National Defense.
The "free trade" extremists typically ignore national security interests in their quest to fatten their portfolios. Such extremism has also led to willful neglect of border security on immigration issues.
Bush has FINALLY shown some independence from these extremists when national security is seriously jeopardized. However, as you note, the inconsistant application of targeted tariffs has its downside. It is neither good trade policy nor economic policy.
It would be much better for America to have a relatively lower (10-15%) flat-rate revenue tariff that is applied consistantly to all imported goods from all countries. The revenue from such a tariff could be used to offset a corresponding reduction in the corporate income tax. Such a consistant trade/tax policy would enhance our economy and jobs.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.