Steeled Against Tariffs
President Bush soon will need to choose between long-term economic well-being and short-term political gain. The occasion is a March 6 deadline for deciding whether to impose tariffs on imported steel.
The issue has arisen because Mr. Bush decided last June to fulfill a campaign promise and initiate a review of steel imports and their impact on domestic producers. The outcome of that process was a recommendation in December from the International Trade Commission, a US agency, to impose tariffs of 20 to 40 percent on foreign steel.
The commission found US steelmakers had been substantially injured by increased imports since 1997, and deserved tariff protection to give them time to regroup and become more competitive.
But that finding has been subject to intense criticism. Just this week, Federal Reserve chairman Alan Greenspan said that the tariffs would do more economic harm than good. He pointed out that while a few thousand jobs might be saved in the steel industry, more would be lost because of the higher costs the tariffs would bring to industries that use steel.
Even more important, said Mr. Greenspan, is the probable impact of high US steel tariffs on world trade. Analysts predict that Europe, Brazil, and other steel exporters would be swift to retaliate. The resulting turmoil would not be helpful to a world economy struggling to rebound.
This isn't to say the US steel industry doesn't have deep problems. But those problems go beyond a recent uptick in steel imports. The old-line firms that produce steel from raw materials have been closing mills and paring back for decades. Their difficulties include huge pension and health-benefit obligations to retired workers - a situation the federal government may have to help alleviate.
Meanwhile, the other half of the US industry, so-called mini-mills that efficiently produce new steel from scrap, has been prospering.
On the political scales, a protariff decision by Bush might shore up his support in steelmaking states like Pennsylvania, which he barely lost in 2000. But the negative economic effects likely to flow from such an action would cancel out any gain.
The president's, and the country's, interests are best served by holding off on tariffs.