- The Washington Times - Tuesday, April 2, 2002

The Bush administration has the dubious distinction of having started a trade war that is gaining some momentum. As part of its election strategy to woo key states, the administration contradicted its own advocacy of free-trade and erected tariffs on steel imports of up to 30 percent, which took effect last month. Unsurprisingly, that move has triggered retaliation the world over. It provides an illustrative lesson on the perils of politically motivated protectionism.

The Europe Union, which doesn't often take the high road on trade issues, said it might strike the area the Bush administration was most trying to protect. After the White House tried to curry the support of politically sensitive states through its steel tariff increase, Europe said it was considering imposing tariffs on goods produced in U.S. states that are, not incidentally, politically crucial, such as Florida, Wisconsin, Pennsylvania and West Virginia. On Europe's wish list are U.S. exports worth about $2.1 billion annually. The actual process of applying the tariffs would likely take at least a year, since it requires consultation within the European Union and a notification to the World Trade Organization. If the EU should ultimately decide to apply the duties, U.S. producers won't be the only losers. European consumers will also have to foot the bill, by paying higher prices on a range of products.

But Europe isn't stopping there. This week, the European Union said it would levy tariffs as high as 26 percent on imports of 15 types of steel, above certain quotas. While this doesn't seem the best way to respond to the administration's decision to increase steel tariffs, the Bush administration well knew it was goading the rest of the world into this type of behavior. Curiously, Robert Zoellick, the U.S. trade representative, said, "Europe says one thing on steel and does another." This comment could certainly apply to the White House as well.

The U.S. increase in steel tariffs is also sending shock waves across the globe. Canada said last week it is concerned that the steel exports crowded out of U.S. markets due to higher tariffs would land on its shores. It has, therefore, launched an investigation into the impact of potentially higher levels of steel imports a clear precursor to an increase in tariffs. Brazil said it is considering raising its steel tariffs from 12 percent to a weighty 30 percent. Malaysia, meanwhile, has levied a whopping 50 percent tariff on its steel imports.

The White House should have foreseen just what it was putting into motion.


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