- The Washington Times - Thursday, March 14, 2002

President Bush's tactical decision to raise tariffs on steel imports sparked the kind of responses that the White House fully expected: Critics said he had deserted his free trade principles for the sake of political expediency.

As a dyed-in-the-wool free trader, this is not a decision I liked. The tariffs are going to raise prices for a lot of things made with steel, like automobiles, trucks, refrigerators, washer and dryers, hot water heaters, you name it.

That will make many U.S. businesses less competitive, and the people who will be hurt most by the higher prices will be those who can least afford to pay them those at the lower end of the income scale. The benefits to big steel companies and a relatively small number of steel workers pale in comparison to the higher costs that the rest of our economy will have to pay for higher tariffs.

On the other hand, White House officials say Mr. Bush had to weigh longer-range political and legislative strategies in deciding whether to bow to big steel's demands for temporary protection. His critics, they say, do not see the forest for the trees.

The president's decision was politically necessary to smooth the way for the larger and strategically more important free trade authority he needs to negotiate global trade deals that are going to be enormously beneficial to the U.S. economy's future growth.

Here's how White House political adviser Karl Rove put it when I interviewed him recently:

"We've got to send a signal that if you're a Republican or a Democrat member of Congress who have doubts about free trade, and the people of your districts are hurting because of the transitions required by globalization and free trade, that we will enforce the existing trade laws. And that they can, therefore, vote for free trade agreements and trade promotional authority, knowing they've got an administration for the next three years or the next seven years that is going to be committed to upholding the laws that we have on our books."

Interviews with other top administration officials in the aftermath of Mr. Bush's decision reinforced this point.

"This is not simply about the price for the product sold. If we are going to have a free-trade environment in this country, we are going to have to reassure people who are in industries and in areas of the country where they feel threatened by free trade," said another official.

No one was a bigger free trader than Ronald Reagan, but he found it necessary OK, politically expedient to raise tariffs from time to time to protect some industries in some politically important states. The tariffs on motorcycles to help Harley-Davidson was one highly visible example. But the popular assurance level Mr. Reagan won on trade helped achieve his vision of the North American Free Trade Agreement that has strengthened our economy and those of our neighbors.

The White House is under no illusions about the problems that beset the U.S. steel industry, and it hopes the tariffs, which will be phased out over three years, will buy time to make necessary changes. There is a real recognition that they have got to modernize, that part of the reason they are getting their lunch eaten is because they are not modern and that they have too much capacity, too many blast furnaces and not enough demand for what comes out of them, a senior administration official told me.

"We will see a continuation of the consolidation of the industry, but I think it will be a more rational one done by management and labor together, not simply the companies declaring bankruptcy," he said.

"We want free trade in this country. We do not want it to grind to a halt. We passed trade promotion authority in the House by one vote. There are 20 some Democrats who voted for free trade when Bill Clinton brought it up who voted against it this time," he said.

The trade authorization bill is bottled up in the Senate, blocked by Majority Leader Tom Daschle, South Dakota Democrat. The White House thinks Mr. Bush's decision on steel will loosen up a few Democratic votes to get it passed.

Is Mr. Bush playing electoral politics with the trade issue? Sure. He's not going to get anywhere if he's not re-elected. Nor is he going to have the votes to pass his agenda on trade expansion, tax reform, or personal Social Security retirement accounts if the Democrats reclaim the House and strengthen their hold on the Senate.

Pennsylvania, a state Mr. Bush lost in 2000, and West Virginia, a state he won, could be critical to his re-election prospects. Both are states where steel plants are in trouble. West Virginia has swung 21 points between 1996 and 2000. It's a state Bob Dole lost by 16 points and George W. Bush won by six points. And that was without saying, "hey, we're going to have a tariff," a Bush adviser said.

Nothing in politics ever moves in a straight line unendingly. Sometimes you have to take steps that say, OK, I understand where you're coming from, I'll take this step, and in this instance the resulting product is that we feel more comfortable about free trade, another official said.

How is Mr. Bush's decision playing in Congress and elsewhere?

"The early indications are that it was very positive," Mr. Rove said. "People who had concerns about free trade [and] worried about voting for additional free trade measures, but nonetheless had a deep interest in trade, are now saying, this makes it easier for me."


Donald Lambro, chief political correspondent for The Washington Times, is a nationally syndicated columnist.


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