- The Washington Times - Monday, June 25, 2001

Hoping soon to be able to take a significant step forward in his commendable efforts to pursue his high-minded free-trade initiatives, President George W. Bush took a major step backward earlier this month. By pursuing, as the first major trade initiative of his administration, a highly protectionist gambit as a sop to the perennially afflicted domestic steel industry, its shrinking work force and its politically influential retirees, Mr. Bush is gambling that this lurch in the wrong direction will pay off in both the near and distant futures. Both are tough bets.
Dangling the steel-protection carrot in front of wavering Democrats, the president hopes to convince enough of them to soon vote for the trade-promotion authority he will need to negotiate sweeping free-trade agreements both globally and throughout the Western Hemisphere. Down the road, Mr. Bush hopes his early jaunt in the steel-protection quagmire will win the political support in 2004 of many of the more than 300,000 retired steelworkers who inhabit the politically pivotal states of Pennsylvania, Ohio, Illinois, West Virginia and Florida and whose long-term retirement benefits are being threatened by steel-industry bankruptcies.
The chances are rather remote that the ill-timed protectionist initiative will yield either political dividend the president seeks. On the other hand, the negative economic consequences of the presidents actions could reverberate around the world, exacerbating the economic slowdowns currently afflicting the United States, Japan and Europe.
Mr. Bush took the initial step toward substantially raising domestic steel prices by calling upon the U.S. International Trade Commission (ITC) to investigate whether the U.S. steel industry has been significantly harmed by a surge of imports that began during the Asian financial panic in 1997 but has abated. If the ITC concludes that the domestic steel industry has been substantially harmed, even if that harm is not directly attributed to unfair trade practices of foreign steelmakers, the Commerce Department could then impose trade penalties, including tariffs and quotas, on steel-exporting nations.
The immediate effect of tariffs and quotas would be to raise the price of steel for automakers, appliance manufacturers and other industries that consume steel, whose cumulative employment of 8 million workers, its worth noting, dwarfs the 160,000 work force of the steel industry. This inflationary effect of protectionism would make the Federal Reserves job all the more difficult, and the protectionist policy for steel pursued by the United States would invite retaliation from trading partners.
As for the likelihood that steel protection would encourage steel-state Democrats to vote in favor of granting Mr. Bush trade-promotion authority, previously known as fast-track authority, consider the statement issued to the Wall Street Journal on the day Mr. Bush announced his new, anti-trade, pro-steel policy by the spokesman of Indiana Democratic Rep. Peter Visclosky, who has been demanding steel restrictions: "Nothing the administration may or may not do this afternoon would in any shape or form influence opposition to fast track." Nor does the steelworkers union expect to change its opposition to trade-promotion authority, much less its support of the Democratic Party. Mr. Bush could well be embarking upon a lose-lose policy.

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