The cause of free trade has suffered a major blow. That stalwart opponent of protectionism, West Germany, has finally resorted to retaliatory protectionist measures.
In one of the last government decisions before officials vanished to their August vacations, Bonn has now pledged 1.34 billion deutsche marks ($550 million) to support its domestic steel industry -- and prepared to collect a tarrif on imports of subsidized steel from other members of the European Community (EC).
This exasperated decision follows years of West German turning of the other cheek to British, French, and Italian steel subsidies. In the 1970s there was some limited West German government aid for steel in such forms as subsidized coal prices. But this indirect German support for steel never reached anything like the other EC steel producers.
Despite this -- or because of it, some would argue -- the West German steel industry did the best job of adjusting to the challenge of cheaper steel imports from Japan and the developing countries. The West German industry -- the largest of any in western Europe -- slimmed , modernized, diversified, and remained the most efficient in Europe. Companies moved in the direction of specialty steels and engineering.
In theory the West Germans had won their antiprotectionist battle within the EC, finally obtaining a ruling this year that all government aid to steel must be phased out by 1985. In practice, however, Bonn doubted that this policy would ever be enforced in an industry that has lost 180,000 jobs in EC lands in recent years and currently has a surplus of an official 30 million and an unofficial 50 million tons. Reluctantly, Bonn decided it could no longer tolerate imports of foreign-subsidized steel that undersold domestic production by some 60 to 100 marks a ton.
Bonn said it could not continue to watch its steel industry and jobs threatened by "massive distortions of competition" in rival countries.
The new West German steel aid will involve reimbursement for up to 10 percent of companies' investment in rationalization and modernization; expansion of federal research in this sector to an annual 150 million marks through 1985; 70 million marks funding per year for retraining and resettlement of workers moving to other industries; and support of up to 8.75 percent of provincial programs to generate jobs.