- The Washington Times - Sunday, November 16, 2003

Conventional wisdom holds that President Bush faces a Hobson’s choice on trade: risk a trade war by rejecting World Trade Organization demands that he roll back his 30 percent steel tariffs, or risk losing the next election by offending American steelmakers and their workers if steel imports are allowed to surge.

But if the battleground industrial state of Michigan is any guide, this apparent lose-lose dilemma is in fact an opportunity. By ditching the tariffs now, Mr. Bush would be making two points: that he respects America’s international commitments, and that he isn’t willing to place the broader economy at risk in the service of a special interest. And by the time November 2004 rolls around, it would be yesterday’s story.

The harsh fact is that jobs in the steel industry have already declined to the vanishing point. In Michigan, for example, there are a mere 7,000 people employed in steelmaking at only two companies these days — one of which is in negotiations to be acquired by a Russian steelmaker interested in evading the tariff. By contrast, there are some 1,500 companies that consume steel in the metropolitan Detroit area alone, notes U.S. Rep. Joe Knollenberg, Michigan Republican, including such huge employers as General Motors, Ford and DaimlerChrysler.

The story is much the same in Ohio, West Virginia and Pennsylvania. These three states, with 47 of the 270 electoral votes needed for election, employ a large fraction of America’s 150,000 steelworkers. But steel has been declining in those states for decades, no more so than during the Clinton years.

President Bush arguably instituted the tariffs for a noble cause — to pick up the handful of votes he needed in the industrial states to gain trade negotiating authority from Congress. But so far the negotiations have gotten nowhere, and Mr. Bush now is looking at an outright trade war. Once started, trade wars are very difficult to stop.

If the European Union and others retaliate against American goods, as they would be permitted to do under WTO rules — rules to which the United States subscribes — the backlash by the American public, already offended by lack of support in Iraq, would be unstoppable.

The markets will be watching closely over the next week or two as Mr. Bush conducts his “review” of the steel tariff issue. If there is the least hint a trade war is in the offing, the reaction is likely to be harsh — as it was in 1929 when it became apparent Congress was likely to broaden a proposal for a few minor tariffs into a broad-based protectionist package that would be ruinous to world economic health.

Likewise, refusal to acknowledge the legitimacy of the WTO ruling would bring a raft of demands for special favors from other industries. The American auto industry, for example, already is lobbying hard for a weaker dollar. It hopes this dollar protectionism will restore its worldwide competitiveness with Japan by making Japanese exports more expensive. But tinkering with the currency has always and everywhere been a recipe for catastrophe. Far better for the White House to improve competitiveness by making it possible for Detroit to buy the best and cheapest steel it can — wherever it can.

There would appear to be plenty of room for compromise. The Bush tariff expires in March 2005. Moving that date up might mollify the WTO. Bush might also widen the list of exceptions he has been making for a number of steel products.

But ending the tariffs outright would make far more sense, politically as well as economically. The president isn’t going to win any union hearts with a partial rollback, so he might as well go the whole way. And in doing so, he would signal the broader electorate that he is keeping a healthy economy at the heart of his re-election strategy.

The steel industry has been on life support for decades. It’s not worth a trade war to protect a commodity of declining significance to the American economy. What people in the older industrial states need and want is a vibrant economy that will provide opportunity to their children, not hot, sweaty jobs in aging, uncompetitive steel mills.

Tom Bray is a Detroit News columnist.


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