Thursday, December 04, 2003

Bush Dsicovers Miracle Cure for U.S. Steel

Let me be the first liberal instapundit to say that the steel tariffs erected by President Bush in March 2002 were the wrong solution to a very serious long-term economic and national security problem. The tariffs were a cynical political ploy to curry favor in key states for the 2002 mid-term elections (PA, WV, OH, IL, MO, IN, et. al.), and in no way resembled a legitimate solution to the problem at hand. **This is what inside the beltway political analysts who have never even heard of a blast furnace derisively refer to as the Nascar vote.**

The decision by President Bush to nix those tariffs less than two years later signals that they have served their purpose. Did the tarrifs "allow American steel makers to get themselves in shape to survive against intense global competition"? Well, let's see:

1. Employment in the US steel industry has fallen more than 20% since its peak five years ago...more than 7% since the tariffs went into effect.

2. Scores of US steel companies are in the midst of bankruptcies, suffering from a global glut in the supply of steel.

3. Foreign steel producers still benefit from government industrial policies that promote overinvestment in steel productive capacity and beggar-thy-neighbor trade competition.

That's curious. If you actually look at the situation in the steel industry, it might seem that the steel industry is actually in worse shape now than it was before the tarrifs. So either the steel tariffs are an example of really ineffective policy choices by the Bush administration, or they were intended only to court a politically important constituency. Maybe that's why Bush announced the tariffs in a very public display, but has opted to ax the tariffs behind the scenes, sending his commerce envoy (and oil crony), Donald Evans, to do his unpleasant biddings.

The only real viable solution (other than letting the US steel industry go down the tubes which is politically unfeasible and would do unthinkable dammage to US national economic and security interests) lies well beyond the reach of the Bush administration's capabilities--the steel crisis, like all global challenges, demands multilateral cooperation.

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