The World Trade Organization's rejection of Washington's appeal to preserve US steel tariffs came as no surprise. But it tightens the political vise the Bush administration stumbled into when it unwisely levied the tariffs in the first place.
The three-year, 30-percent tax was meant to bail out an ailing US industry that claimed damage from unfairly priced steel imports. While the administration generally supports free trade, the White House calculated that imposing the tariff would please voters and labor unions in steel-producing states like Ohio, Pennsylvania, and West Virginia.
But the tariff was shortsighted. While the tax, in effect for some 18 months now, allowed steel companies to spend $3 billion in streamlining and reorganizing, steel consumers squawked. Auto and metal-stamping companies say the higher prices on imported steel have caused them more harm and cost more jobs than the steel industry has saved. Two recent reports by the International Trade Commission, a US government agency, provided ammunition for both sides. For its part, the steelworkers' union thanked the president by endorsing Rep. Richard Gephardt (D) for president.
With the loss at the WTO, the US now faces $2.2 billion in retaliatory tariffs from the European Union, which filed the original complaint. The EU will carefully aim those taxes at politically sensitive US exports from Republican congressional districts. They include California and Florida fruit and nuts, Harley Davidson motorcycles, and Southern textiles - as well as steel, farm implements, kitchen stoves, and many other goods. The US itself used such tactics against the EU a few years ago when Europeans illegally tried to set quotas on banana imports and ban US beef containing growth hormones.
To compound the problem, such important US trading partners as Brazil, China, Japan, South Korea, New Zealand, Norway, and Switzerland may add their own tariffs.
Now the president must decide which group of voters to anger: Big Steel and the steelworkers union, who want him to defy the WTO; or steel-consuming companies and their workers in Michigan, Tennessee, and elsewhere - not to mention the millions of workers in other sectors the EU tariffs would hurt. The electoral math is easy.
Experts expect steel prices to rise in coming months as global demand increases. That makes the answer even more obvious: Mr. Bush should lift the steel tariffs and uphold free trade. The US doesn't need a harmful trade war with one of its biggest commercial partners over tariffs that were the wrong remedy in the first place.