- The Washington Times - Sunday, December 7, 2003

President Bush’s rollback of the steel import tariffs he imposed 20 months ago will give the American economy a big boost, and Mr. Bush yet another political advantage as he heads into the 2004 elections.

Mr. Bush, a free-trader, agreed to raise tariffs only after months of intense lobbying by steel industry executives who claimed they couldn’t compete with cheaper foreign steel. The move was internally opposed by administration economists who warned many more steel-using firms and consumers would be hurt most by the higher tariffs, which would invite retaliation from overseas and the World Trade Organization.

(As they predicted, Japan and other countries threatened to strike back with higher tariffs on U.S. products and the WTO eventually ruled that the U.S. tariffs were illegal.)

But White House political adviser Karl Rove overruled the president’s economic advisers, saying the decision would help Mr. Bush in heavily Democratic, steel-producing states like West Virginia and Pennsylvania, where U.S. Steel is headquartered, and with rank-and-file labor union members there and elsewhere.

In the end, the economists were proven right. The tariff increases were bad economics and bad politics. Wherever Mr. Bush went in his political travels, he heard complaints from manufacturers who said the tariffs were driving up their costs and making them less competitive here and abroad. Moreover, the tariffs were a disincentive for U.S. steelmakers to modernize, cut costs and make other improvements in their production line.

Some of the manufacturing states hit hard by the steel tariffs were Michigan, Ohio and Wisconsin in the Midwest, states Mr. Bush has targeted to win next year. Manufacturing unemployment remains high in these areas, and many of the jobs are not returning because technological advances have eliminated them.

The White House must now push a clearer political message than it has recently if it is to stem the economic mythology polluting the global trade issue.

It needs to get the message out that the steel tariff rollback is going to sharply reduce manufacturing costs, effectively giving steel users a big tax break that will improve their bottom line. This in turn will lower consumer costs for things like automobiles, washers and dryers, farm machinery and a host of other products — boosting durable goods orders and retail sales and mostly likely creating new jobs.

America produces and exports nearly $1 trillion a year in goods and services, a figure expected to grow as the global economy expands and trade barriers are lowered.

Trade is not a zero-sum game. We are a wealthy nation because we sell so much of what we make to other nations. Export-related jobs are also among the highest-paid jobs in the country.

There are those who do not like the free market or free trade. These are people who believe we would be better off if we raised tariffs on most or all imports, set product import quotas, and imposed regulations on businesses so bureaucrats would make their market decisions.

But, in comparing the economies of the world, you’ll find the most affluent ones with the lowest unemployment and highest growth are those with the least regulation and lowest taxes — Hong Kong, Singapore, Taiwan and the U.S. are just a few.

Countries among the poorest in the world — most of Africa and Latin America — have imposed huge obstacles to increased trade and foreign investment.

The best long-term economic policy for America is to reduce or even eliminate tariffs through trade agreements with other countries. The White House’s decision to repeal most of its ill-conceived steel tariffs moves us back in the right direction and comes at a particularly good time for the United States on the brink of new growth in the global economy.

Japan’s economy grew last month for the seventh straight quarter, a sign it was finally emerging from a two-decade slump. Even in Europe, where draconian regulations on businesses and trade and high taxes have stunted economies and pushed unemployment to 9 or 10 percent, Germany and France are beginning to show modest economic growth.

With U.S. productivity exploding in the third quarter by 9.4 percent, the fastest in more than 20 years, and with unemployment backsliding, there is no better time for the administration to step on the gas and let the U.S. economy rip.

That’s what Mr. Bush’s well-timed pre-election steel move will do — a decision that was all about unleashing the power of free markets, free trade and free people. It represents good economic policy and even better politics.

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

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