- The Washington Times - Saturday, March 16, 2002

The president has decided that the struggling American steel industry needs relief from unfair foreign competition, so he has announced firm steps that will stem the tide of imports. But for those who warned of the dangers of protectionism, there is truly heartening news: The measures he imposed to help steelmakers will last only three years. Please understand that this is nothing permanent merely a respite designed to give the industry some time to regain strength so it can compete without special assistance.

You probably think I'm talking about George W. Bush's decision to impose tariffs of 30 percent on most imported steel products, which he announced last week. Actually, the steps I'm referring to were taken by President Lyndon Johnson in 1969. In the closing weeks of his administration, he insisted that Japanese and European companies "voluntarily" limit their shipments here in an effort to raise prices to a level where American companies could make money. They agreed to do so through 1971.

The steel sector has been a ward of Washington pretty much ever since. But give President Bush credit for a sense of humor: In announcing the latest program to shield U.S. producers from the rigors of international competition, he made a point of asserting that his tariff increases are "temporary safeguards to help give America's steel industry and its workers the chance to adapt to the large influx of foreign steel." In case anyone missed the point, he went on: "The U.S. steel industry must use the temporary help today's action provides to restructure and ensure its long-term competitiveness."

You hear that? Temporary. Three years and not a day longer. And we really mean it this time.

Well, if you can believe that, you probably believe a jellyfish can grow a backbone. The reason presidents take action to shut out steel imports is because American steel companies and workers are so relentless in demanding special favors with credible threats to punish politicians who refuse. Alas, there is no reason to think that whoever occupies the White House in 2005 will be any more courageous than President Bush is today.

This phenomenon is what Ronald Reagan had in mind when he said, "A government bureau is the nearest thing to eternal life we'll ever see on this Earth." Lyndon Johnson's voluntary restraint agreement gave way to Jimmy Carter's "trigger price" scheme, which prevented foreigners from underpricing American steelmakers. Then came Mr. Reagan to validate his own remark by imposing quotas on imports from various countries, which lasted until 1992.

Since then, the industry has wielded our ridiculous antidumping laws to prevent foreign firms from selling too much steel here. Now Mr. Bush comes along to provide yet another shelter from all that nasty foreign competition. Here's the Washington definition of "temporary": lasting no fewer than 36 years.

It should come as no surprise that when the government shields American producers from foreign competition, they don't necessarily learn to compete. Sugar producers and peanut farmers have enjoyed a protected market for decades and still show no interest in giving it up.

Textile manufacturers likewise first got import relief in the 1950s a program "designed as a temporary measure to give the industry some breathing room to become more efficient," notes Dartmouth College economist Douglas Irwin in his new book, "Free Trade Under Fire." Since then, the protection hasn't disappeared it has expanded. It is supposed to expire in 2004, though and you just know it will.

But why should anyone expect coddled industries to outgrow the need for special help? Corporations battered by competition don't make decisions to cut costs, close plants, lay off workers and tighten quality control because it's so much fun. They do it because they have to do so to survive. If they don't have to do these things, they won't.

On the contrary, they'll do things that impede their ability to compete. The steel industry, for example, is asking the government to relieve it of "legacy costs" a crushing $13 billion in health and pension benefits owed to retirees. Steelmakers would find it much easier to match the prices of lower-cost producers if Washington would simply pick up that tab.

Their request brings to mind the boy who was convicted of murdering his parents and then asked the court for mercy because he was an orphan. The legacy costs, explains Cato Institute trade analyst Dan Ikenson, came about because this industry, unlike most others, was insulated from reality. "They are the product of an intransigent union and a management confident that the government would bail them out," he says.

That confidence, it turns out, was solidly grounded. Mr. Bush is probably not being entirely truthful when he vows that the steel industry will get help for only three years. Three hundred, I could believe.


Steve Chapman is a nationally syndicated columnist.


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