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[P]
US Temporarily Abandons Free Trade Philosophy: Pleads for Leniency

By Talez in Op-Ed
Wed Mar 06, 2002 at 02:30:45 PM EST
Tags: Politics (all tags)
Politics

The EU is fuming and Australia isn't very happy about the new 30% steel tariffs either. It's agreed that the US steel industry is in need of help desperately, but I don't think that tariffs are the answer.


Robert Zoellick, the US trade representative and President Bush both believe that the US steel industry can both make a profit given a chance. Zoellick has gone on the record saying that "We believe the actions the president is taking today can restore the strength and profitability of this very important American industry.". President Bush has delivered a similar remark saying that the industry needs time to "restructure".

If the Bush adminisration believe that the US steel industry can turn a profit given the chance, the answer is not to place a tariff on all steel from the US' main suppliers. Instead, I think it's time for Bush to put his money where his mouth is and offer subsidies to the steel works companies to give them breathing room to compete. The subsidies would be roughly equivalent to the tariffs currently set and could quite possibly be paid back over several years either in part or in full when these companies start turning a profit.

While subsidies would be rather expensive to America in the short term, I believe there would be some long term benefits for the US steel indusry and the US economy in general.

The first is that some countries might lower their prices to beat US steel no matter what the cost. Some people have mentioned Japan as a country that already sells steel below cost. What would happen if they started selling even lower to beat the tariffs?

The second is the credibility that the US holds. Currently, China is going for WTO membership and US companies are geared up, ready to expand into a market of over 1 billion people. The US has been trying to prod China into a more bilateral trade agreement. I think that supporting free trade rather than taking a protectionist stance would make its arguments more credible, possibly debunking the myth that lies within China of capitalism being bad.

The third is industries that rely on steel wouldn't have to pass on price rises from steel onto consumers. These industries would include, but not be limited to, the automotive industry and the housing industry, both of which use steel quite freely within many of their products.

The forth is that the US is going up against the rest of the world on this one. The EU is threatening a trade war which could prove devistating to other US industries that probably don't care about the domestic steel industry. Is the US ready to risk the prosperity of those industries on the gamble that steel mills become profitable again?

A couple of US citizens expressed the "big deal, the US is protecting its citizens" viewpoint when it comes to these sanctions. I'd just like you to know, many countries, including Australia, have lost many thousands of manufacturing positions due to free trade policies. These positions were often lost to foreign manufacturing industries that could produce the goods more cheaply and efficently than the domestic markets and have survived the industry shakeout. Most notably in Australia, the textile industry was one of the hardest hit with some providers moving the production plants offshore where the labour market is much larger and cheaper than Australia. Is it right for the US to refuse to make sacrifices after other countries have made these same painful concessions in the name of "Free Trade"?

The US needs to realise what exactly it is up against here before it commits to these rather large and unneccessary tariffs. If Bush is serious about these industries and their viability in the future, why doesn't he support them directly rather than penalising the rest of the world for streamlining production, remaining competitive and generally putting the consumers or the world first. I implore Bush and his administration to consider other options before bowing to the steel industry, possibly incurring the wrath of the rest of the developed world.

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Poll
Should the US use tariffs to help local industry?
o Yes, the US needs to save itself 5%
o No, subsidies are more fair to the market in general 12%
o Let the businesses either fix themselves or die off 77%
o There is another way... (Explain Below) 3%

Votes: 54
Results | Other Polls

Related Links
o EU is fuming
o isn't very happy
o gone on the record
o textile industry
o Also by Talez


Display: Sort:
US Temporarily Abandons Free Trade Philosophy: Pleads for Leniency | 71 comments (66 topical, 5 editorial, 0 hidden)
Weak grasp of economics... (3.71 / 7) (#1)
by trhurler on Wed Mar 06, 2002 at 12:23:25 PM EST

Subsidies and tariffs, if they work, do precisely the same thing. They cause your product to be bought instead of someone else's. Maybe the subsidies do it in a more oblique manner, giving the other guy less to point at and be pissed about, but there is NO difference in the end result.

Unless of course, they don't work, in which case subsidies are a red herring.

--
'God dammit, your posts make me hard.' --LilDebbie

Actually... (none / 0) (#2)
by Talez on Wed Mar 06, 2002 at 12:26:43 PM EST

Subsidies don't inflate the price of a commodity on the market like a tariff will... The key difference between subsidies and tariffs is that a subsidy will come out of America's pocket rather than the rest of the world's pocket.

Si in Googlis non est, ergo non est
[ Parent ]
not quite right (5.00 / 2) (#4)
by streetlawyer on Wed Mar 06, 2002 at 12:28:52 PM EST

What you mean here is that the cost will come out fo the pocket of American taxpayers, rather than being shared between American steel consumers and foreign steel producers. Americans suffer from a tariff too.

--
Just because things have been nonergodic so far, doesn't mean that they'll be nonergodic forever
[ Parent ]
Very True (none / 0) (#5)
by Talez on Wed Mar 06, 2002 at 12:30:49 PM EST

I think I mentioned it briefly in the article but forgot to mention it in the comment...

Si in Googlis non est, ergo non est
[ Parent ]
Results (5.00 / 1) (#7)
by Woundweavr on Wed Mar 06, 2002 at 12:40:12 PM EST

Tariffs raise the effective price of imports so as to make domestic products competitive in price. Effectively, money is paid by the US taxpayer to the company, which then gives the excess money to the US in the form of a tariff. So if something was going to be sold for 100 and there was a 10% tariff, it would be sold for 110. The consumer pays 110, the government gets 10 and the company gets 100. Domestic companies are charging 110 already. The consumer pays +10/unit while the government taxes -10/unit(we'll ignore administration costs).

Subsidies let local companies charge less and stay afloat. Instead of charging 100, they charge 90, like the foreign companies. That 10 per unit must be made up for by the government. The consumer pays more but then has to compensate for this in taxes.

The end result is: subsidies -10/unit consumer, +10/unit taxes, tariffs -10/unit taxes, +10/unit consumer.

These are only the most simple cases of course, often subsidies are much much more complicated. The results are fairly similar. Either way, the consumer pays more in the end, while (theoretically) the businesses stay afloat. The difference is just how the money flows and who pays for whom.

[ Parent ]

bad assumption (none / 0) (#24)
by streetlawyer on Wed Mar 06, 2002 at 01:23:34 PM EST

So if something was going to be sold for 100 and there was a 10% tariff, it would be sold for 110.

No; this assumption (that the incidence of the tax would be entirely on the consumer) is an extreme one which is only true for the special case of a perfectly inelastic demand curve. It would be more normal to assume that it would be sold for around 108, with the producer's profit being reduced by 2.

--
Just because things have been nonergodic so far, doesn't mean that they'll be nonergodic forever
[ Parent ]

True (none / 0) (#26)
by Woundweavr on Wed Mar 06, 2002 at 01:34:20 PM EST

It was just meant to be an overview. I was assuming a constant supply and demand rate and just the artificial change to price. The actual effect on supply and demand and thus the end price is much more difficult, or even impossible to a certain level of exactness, to calculate.

[ Parent ]
tu quoque (4.60 / 5) (#3)
by streetlawyer on Wed Mar 06, 2002 at 12:27:32 PM EST

Subsidies and tariffs, if they work, do precisely the same thing.

They don't. Subsidies don't create a consumption wedge (they don't make people consume less of the good than they would under free markets), so they create less deadweight loss (unless they have to be financed by a tax which is actually more distortionary than the tariff, which is empirically improbable). The original author is correct; it is almost always better to support an industry through subsidies rather than tariffs.

--
Just because things have been nonergodic so far, doesn't mean that they'll be nonergodic forever
[ Parent ]

Also (4.00 / 1) (#6)
by jabber on Wed Mar 06, 2002 at 12:37:08 PM EST

Subsidies don't piss of the foreign suppliers nearly as much as tarriffs do. And the money involved, while ultimatelly coming from the consumer in either case, routes differently, and makes different people look like the 'bad guy'.

In a local paper article today, I read that the consequence of this tarriff is likely to be a $285 percieved cost increase in consumer goods.. It's so nice of GWB to give us all that $300 tax break, while protecting the US Steel Industry from those nasty foreigners..

[TINK5C] |"Is K5 my kapusta intellectual teddy bear?"| "Yes"
[ Parent ]

BTW (none / 0) (#46)
by Wah on Wed Mar 06, 2002 at 09:58:32 PM EST

That $300 "tax break" wasn't one. It was an advance on last year's tax return, time shifted for political gain, i.e. your return will be $300 less than it would have been..
--
Choas and order, flowing down the drain of time. Ain't it purdy? | SSP
[ Parent ]
True, but... (5.00 / 2) (#9)
by trhurler on Wed Mar 06, 2002 at 12:41:26 PM EST

The problem I see, aside from the fact that any subsidy from Washington would inevitably turn into a highway-system style fiasco(ie, it has strings attached, and now you can't afford not to have it, so in fact the government runs the steel industry, and we all know the history of government run businesses in free markets(see France buying Honeywell's computer business a few years back,)) is simple.

From a political standpoint, who would US politicians rather piss off? A bunch of foriegners(remember, even though tariffs hurt Americans, very few of them will complain,) or a bunch of Americans(the government goes to extreme lengths to avoid ever saying the word "subsidy" in public, because it pisses people here off)?

The answer is blatantly obvious.

In point of fact, what they OUGHT to do is let US Steel and its pathetic union old boy's network hangers on go bankrupt(and believe me you, labor unions are the reason our steel is not competitive,) and then just let the capital markets create a new steel industry with less idiotic historical baggage. It isn't like foriegn steel producers can afford NOT to sell to us in the interim, after all. That's like saying OPEC might quit selling to us; if they did, they'd have to learn to eat sand.

--
'God dammit, your posts make me hard.' --LilDebbie

[ Parent ]
"Precisely" the same thing? (5.00 / 3) (#10)
by M0dUluS on Wed Mar 06, 2002 at 12:41:49 PM EST

A subsidy provides guaranteed income for a speculative producer of a commodity regardless of whether there is a market or not. It's a sure bet.
A tariff is merely going to reduce the profit for an importer.
Thus a subsidy can encourage local over-production which in turn will lead to dumping in markets that don't have tariffs.

"[...]no American spin is involved at all. Is that such a stretch?" -On Lawn
[ Parent ]
Subsidies can be tied to improvements (5.00 / 1) (#18)
by ikeaboy on Wed Mar 06, 2002 at 01:03:31 PM EST

True...

But the added benefit (if any) of subsidies is that they can be tied to other improvements -- such as improved efficiency, improved worker skills...

Tariffs themselves are just money for nothing and can only hurt consumers.



[ Parent ]
Tariffs Helped Harley Davidson (4.00 / 4) (#8)
by wiredog on Wed Mar 06, 2002 at 12:40:20 PM EST

The temporary (and now gone) tariffs that were imposed on Japanese bikes helped HD survive, and now it's able to compete. They might do the same for the US steel industry. They only last a max of 8 years.

Peoples Front To Reunite Gondwanaland: "Stop the Laurasian Separatist Movement!"
Harley Davidson bikes are crap (1.00 / 6) (#13)
by Ken Pompadour on Wed Mar 06, 2002 at 12:49:41 PM EST

And the company <I>should</I> have gone bankrupt years ago.

You must have an interesting definition of 'compete.'

...The target is countrymen, friends and family... they have to die too. - candid trhurler
[ Parent ]
Crap for what purpose? (none / 0) (#19)
by trhurler on Wed Mar 06, 2002 at 01:13:48 PM EST

They're not sport bikes, that's true.

--
'God dammit, your posts make me hard.' --LilDebbie

[ Parent ]
HD's main product is 'farting exhaust pipes.' NT (1.00 / 2) (#21)
by Ken Pompadour on Wed Mar 06, 2002 at 01:17:18 PM EST



...The target is countrymen, friends and family... they have to die too. - candid trhurler
[ Parent ]
Um... (none / 0) (#23)
by trhurler on Wed Mar 06, 2002 at 01:22:13 PM EST

I hate to break this to you, but pretty much ALL motorcycle manufacturers are making those things, or buying them. In fact, the trend towards under-muffled bikes has led many places to attempt bans on them.

I don't ride motorcycles, because I have a survival instinct and am acutely aware of the incompetence of the average US car driver. However, I have lots of friends who do. Harleys seem to be like Cadillacs - not everyone wants one, not everyone could buy one if he did want one, but if you want one, there's nothing else in the world you'd rather have.

--
'God dammit, your posts make me hard.' --LilDebbie

[ Parent ]
So tax everything! (none / 0) (#28)
by inerte on Wed Mar 06, 2002 at 01:51:38 PM EST

I really can see how it helped HD. But if you want to help _every_ company on USA, tax it all!

Okay, okay :-)

Not _every_, but at least some. What's going to be the criteria? If HD was going bankruptcy, some bad management probaly happened. Or the consumer's base is smaller than when HD was the ride hype.

It's competition that drive things (no pun! ;-) If HD was going down, so be it. You can't save/protect, no, better: You should't save protect everything. Just crucial areas. Water, electricity (forget Eron for a minute :-), food, those kind of things.

I mean, it's just a motorcycle. Perhaps you could have mentioned other topic...

Anyway, with the increased tariff on Japa bikes, consumer didn't had access to better products.

Keep crucials, feed competition, and blow away useless old commerce paradigms. Exactly the opposite that the 'third way', or more generally, 'globalization' preaches. Okay, it isn't correct to name it globalization, but it sure helps to see the bigger picture :-)

--
Bodily exercise, when compulsory, does no harm to the body; but knowledge which is acquired under compulsion obtains no hold on the mind.
Plato
[ Parent ]

Tariffs vs. subsidies (none / 0) (#29)
by bobpence on Wed Mar 06, 2002 at 02:31:19 PM EST

Good point, plus subsidies come from taxes, thus the cost is born by everyone, which is regressive. Tariffs effect those who consume steel - true, this is also almost everyone, but it can't just get siphoned out at dividends as subsidies might.

Overall, it's a good response to the dumping that takes place. Instead of fighting subsidies with subsidies, even the field of competitiion while calling on U.S. firms to actually compete, rather than underwriting any bad management that exists.
"Interesting. No wait, the other thing: tedious." - Bender
[ Parent ]

underwriting poor performance (none / 0) (#50)
by tenpo on Wed Mar 06, 2002 at 10:57:51 PM EST

My understanding is that both tariffs and subsidies seek to underwrite the poorer but domestic performer at the expense of the more competitive but foreign performer. I'm not a professional student of economics, though, so perhaps I am wrong. If I am incorrect someone correct me.

[ Parent ]
All's fair in trade wars (4.00 / 1) (#57)
by bobpence on Thu Mar 07, 2002 at 10:29:17 AM EST

Stated bluntly, yes, subsisdies and tariffs are both ways of favoring domestic production over imports, and generally this is not a good idea from a non-political point of view. If you have concluded that it is wrong for either side to do this, good for you.

I think that a few people in this discussion are missing that point. The tariff is a reaction to subsidies other countries are giving to their own less competitive producers. If such below-cost selling were happening in the domestic market, it would be called predatory pricing and the company doing it could be prosecuted for trying to unfairly drive competition out of business (think Microsoft).

If the other guy shoots first, and won't stop shooting, is it fair to shoot back? Sure, U.S. trade policy is not without blame, but that does not justify flying planes into... Wait, I'm getting my pick-on-the-U.S.-when-they-do-what-any-other-country-would-do issues confused.


"Interesting. No wait, the other thing: tedious." - Bender
[ Parent ]

Show me the money (none / 0) (#62)
by tenpo on Thu Mar 07, 2002 at 06:58:21 PM EST

That may be true, but I haven't seen any figures on government subsidies for the Australian steel industry. Indeed, the European Union was partially founded on the Treaty of Rome which laid provisions for Government assistance to the coal and steel industries (leading to widespread subsidy). In the case of Western Europe especially I see the need for the US to impose tariffs on steel imports.

I think the primary reason that in this case Australian steel feels hard done by is that the industry is not significantly subsidised by the government and hence feels entitled to similar free trade agreements to those which the US has entered into with Canada and Mexico.

[ Parent ]
The EU is fuming over its own vulnerability... (4.66 / 3) (#12)
by demi on Wed Mar 06, 2002 at 12:46:15 PM EST

and not any 'free market' considerations which they are employing in their current rhetoric. No, by imposing the steel tariffs in the US, we are making the market in Europe comparatively sweet (as its usual price levels for commodity steel are substantially above those in the US), and a likely target for further dumping by Japanese, Korean, and Russian companies. As we've seen before, the instant the US decides it is tired of sticking its neck out for its allies, Europe has a panic attack.

Here is some text from the EU press release on the US steel tariff decision:

The European steel industry is already in a very fragile state because of an increase in low priced imports. Today's announcement by the US President could mean a loss of exports to the US market of 4 million tonnes; and up to 16m tonnes of trade diversion. In light of this, the EU may be forced to take provisional measures as a matter of urgency to avoid serious consequences for our industry which could undermine the restructuring efforts of the EU steel industry over the last decade.

However, such action would not be designed to cut the current high levels of imports to the EU, but only prevent the negative effects of massive trade diversion caused by the American measures. Any EU safeguard action would, of course, only be undertaken in full conformity with WTO rules and could be introduced swiftly on a provisional basis.

Personally, I am against the imposition of tariffs, but steel is a strategic industry for the US and the EU, and I doubt that Europe would act any differently were the circumstances reversed. It's not in the interests of national security to let domestic steel production be swamped by imported goods made under subsidies and sold at a loss. National Steel and Bethlehem Steel are both in Chapter 11, so the domestic steel industry is definitely in trouble. We've let plenty of market sectors bleed that were once important revenue sources for the US economy (automobiles, consumer electronics, textiles, light manufacturing, etc.), but steel production is one of those things that should not be allowed to atrophy further (compare US Steel in 2000 to the way it was in 1960). Again, I don't agree with the tariffs but you have to realize that there are security considerations that shouldn't be swept under the rug.



Some of Europe would... (5.00 / 2) (#27)
by jonathan_ingram on Wed Mar 06, 2002 at 01:44:58 PM EST

and I doubt that Europe would act any differently were the circumstances reversed

Chorus (ex British Steel) now employs 70,000 less workers than it did 10 years ago, mainly due to the cheap imports flooding the UK, and the refusal of the UK government to interfere with the market. Despite all the claims that the US is the bastion of free market capitalism, it is often more protectionist than the supposedly left-leaning EU.
-- Jon
[ Parent ]

UK lost some of its manufacturing capacity (4.50 / 2) (#31)
by demi on Wed Mar 06, 2002 at 03:29:51 PM EST

during the last 10 years, as it replaced much of its light industry with information technologies, and its heavy industries were subsumed as subsidiaries of foreign corporations. The problem with British Steel in the 1990s was a decrease in domestic demand, not just foreign competition, so tariffs would not have mattered at all. Here are my sources: BBC and the House of Parliament.

Despite all the claims that the US is the bastion of free market capitalism, it is often more protectionist than the supposedly left-leaning EU.

To say that the US is more protectionist than central Europe is completely asinine, although the charge of protectionism in this case is perfectly warranted. I guarantee you that the EU will raise their own tariff levels to protect their own steel industries if the US will not do its traditional job of sopping up the world's cheapest commodities. I can't say that I blame Europe either, because without the labrinthine trade agreements, the Common Market and the EU would have been economic fratricide right off the bat.



[ Parent ]

Free Trade (4.66 / 3) (#16)
by Znork on Wed Mar 06, 2002 at 01:01:12 PM EST

IIRC, subsidies are regulated by the WTO too, you cant use subsidies to bolster industries any more than you can impose import tariffs.

Of course, it shows just what 'Free Trade' means to the US. And the EU isnt really much better. We want free trade when we get to suck other countries dry, but not when it means our industries have a problem.

If we really want free trade it's time to realize we cant both have the cookie and eat it. If we dont want it, we shouldnt be trying to bullshit developing nations into opening their markets to the West.

but we have to! (none / 0) (#34)
by andrewm on Wed Mar 06, 2002 at 04:36:28 PM EST

How can we exploit them, if we don't convince them to open their economies? And the US isn't evil, it's just protecting itself. (By doing something they try to tell everyone else is bad? Well, I'm sure that'll surprise all sorts of people - especially those who actually believed the US gave a damn about any other country on the planet. Not that there's any countries I know of that do, of course. Doesn't matter where you go, the one constant is "we have to look after our own and screw everyone else".)

Fortunately, the WTO is a completely independant and humane organisation, devoted to peace and prosperity for all (rather than just the already wealthy nations). And santa claus is real, too.

[ Parent ]

Free Trade Is Not A Virtue ... (4.33 / 6) (#20)
by Scrymarch on Wed Mar 06, 2002 at 01:15:53 PM EST

... it makes people better off on both sides of the trade. The US consumes more steel than it produces, so this is just classic political pork-barrelling. Both tariffs and subsidies reward the steel industry for its lack of business sense.

I could go on, but it would be reheated from The Economist, you may as well read their coverage yourself. Remember too, any anti-traders, that tariffs and subsidies mainly shore up corporate profits with money that could have been spent on, say, healthcare. Little of it ends up helping steel workers.

Shutting the gate... (4.66 / 3) (#25)
by ikeaboy on Wed Mar 06, 2002 at 01:32:04 PM EST

Bush has a very clear policy of "US First" (excuse the obvious pun). As his dad put it "The American Way of Life is Not Negotiable". This has been clearly demonstrated since his term started -- Several faceoffs with China, trashing Kyoto, a war on terror where America is openly prepared to act unilaterally and now US Steel tariffs. Looking back on Clinton's administration it seems like a different universe.

I do not want to stand in judgement of his philosophy or the actions of the US as a whole, certainly as an overall philosophy it is far from ignoble. What is the purpose of a president, but improving the way of life for his constituents?

However, from my perspective I see that slowly a fence is being put up around the US. If this is for the betterment of the US and the World as a whole, I'm far from convinced.

Tariffs could easily have the effect that prices are increased in the domestic market (and decreased in the International market). This is profit for the domestic industries, but pain for downstream consumers such as the car and construction industries -- and the end consumers of course. On the surface it looks like a stand for US Industry and US interests, but looking deeper I have suspicions about where the real benefit will go.


Imagine... (none / 0) (#61)
by Betcour on Thu Mar 07, 2002 at 11:29:02 AM EST

If people behaved the same... "me me me and me first, fuck the others" (not that some people aren't like that, but fortunately not all of them !)

[ Parent ]
Hang em (3.66 / 3) (#30)
by MicroBerto on Wed Mar 06, 2002 at 02:54:49 PM EST

How about this: We do absolutely nothing, let some of our steel industries die, and tell them that we can get cheaper steel and labor from Japan.

Eventually we can all enjoy a competitive marketplace, and people will stop depending on Uncle Sam because the only thing they know how to do is grunt work at a steel mill.

I'd rather pay for their educations than for their subsidies or higher-priced steel.

Berto
- GAIM: MicroBerto
Bertoline - My comic strip

This country... (5.00 / 1) (#33)
by Vlachen of Aranias on Wed Mar 06, 2002 at 04:35:20 PM EST

Runs on grunt work my friend. No matter what happens, there will always be those on the "lower" end of the career spectrum that toil with physical labor. But thats beyond the point. What if these people want to do physical "grunt" work to create the goods you and I use. Were the United States to become a country of intellectuals that had all our goods imported, the rest of the world would have us by the balls.

We get rid of our industries, we become weak

[ Parent ]
Ahh, but when... (none / 0) (#52)
by Kaki Nix Sain on Wed Mar 06, 2002 at 11:58:07 PM EST

... some particular type of grunt work becomes unneeded, then people are less than human if they do not do what is needed to move on, to some different grunt work. Even that would require some education.



[ Parent ]

Well, sure (none / 0) (#67)
by ariux on Sat Mar 09, 2002 at 12:44:26 AM EST

That's the problem, and the challenge, of free trade - it creates interdependence. You have to trust your trade partners, because you rely on them.

In the real world, there must be a balance struck between the bounty of efficient interdependence and the cautious necessity of self-reliance.

But we shouldn't expect others to make sacrifices we're not willing to make ourselves.

[ Parent ]

Problem (none / 0) (#37)
by RandomPeon on Wed Mar 06, 2002 at 06:27:10 PM EST

We need steel for national defense. This is why we use depleted uranium munitions, instead of tungsten munitions, because tungsten, while arguably a better material, is found almost exclusively in the People's Repblic of China, a country we may not always be friends with.

The alternative to having a domsetic steel industry would be to has a Strategic Steel Reserve (SSR). That's what we do with another critical resource we get from potentially unfriendly people - petroleum. The government would stockpile a couple million tons of the stuff at taxpayer expense. Put that in your libertarian pipe and smoke it.

[ Parent ]
I was waiting for that angle... (none / 0) (#60)
by minra on Thu Mar 07, 2002 at 11:23:52 AM EST

Absolutely correct.

Anything this (or most any) administration does should be analyzed primarily with respect to the global-resources / military-empire / realpolitik situation.

Steel, like uranium and oil is vital for military domination. Possibly even military survival. The potheads like to remind us that one of those scarce resources in WWII was hemp, aka cannabis.

Just imagine for a moment an unarmed, pacifist US... and try not to pee your pants.

[ Parent ]
"The myth that lies within China... (5.00 / 2) (#32)
by concept on Wed Mar 06, 2002 at 03:33:17 PM EST

... of capitalism being bad."

I must say, I'm living here right now and I cannot see any evidence of that kind of attitude! In fact, every second schmuck has 'WTO' plastered on his wall/car/business-card or on the book he's reading, the TV he's watching, etc. It seems that embracing capitalism has been a wholly state-sponsored decision that is now either hurtling-towards, or has become irreversible.

I have only met one mainland Chinese person that disagrees with the WTO thing, at all!

That said, I am a little concerned as to why the author would argue for espousing "capitalism being bad" as a myth ...

State-controlled free-market (4.00 / 1) (#45)
by DodgyGeezer on Wed Mar 06, 2002 at 09:24:02 PM EST

I seem to remember the BBC describing things a decade ago as a "state-controlled free-market". I guess they were trying to apply the free-market to things, but in a communist way.

I really think that there is a lot of ignorance and FUD about China in the western world. Everybody I know who's been there tells a different story compared with what we hear from the media and government here in N. America.



[ Parent ]
Capitalism (none / 0) (#68)
by ariux on Sat Mar 09, 2002 at 12:54:18 AM EST

That said, I am a little concerned as to why the author would argue for espousing "capitalism being bad" as a myth ...

Because many myths, complete with bold heroes, dastardly villains, and a happy ending always "just over the next hill," have been built with that as a centerpiece.

Of course, it's a fallacy to draw the conclusion that, because such criticisms were unrealistic, all possible criticisms are similarly unrealistic.

[ Parent ]

As if /Bankrupcy/ helps anyone? (3.00 / 3) (#35)
by BackSlash on Wed Mar 06, 2002 at 04:38:22 PM EST

It took the government 10 years and 27 bankrupcies to impose tariffs. Many of these union steel workers are now without pension and without health-care.

The steel industry has its problems, but these 3-year tariffs are to afford it the chance to restructure. Corperate profits didn't kill the US steel industry. The fact that there are 3 retired steel workers for every 1 working killed the steel industry.

Besides, foreign dumping of steel on US soil is only possible because in many countries, their steel industry is subsidized by the government. Importers aren't making any money. They are out-spending the domestic steel producers to drive them out of business.

As if high prices protectionism helps anyone? (4.50 / 2) (#44)
by DodgyGeezer on Wed Mar 06, 2002 at 09:19:51 PM EST

"It took the government 10 years and 27 bankrupcies to impose tariffs. Many of these union steel workers are now without pension and without health-care."

So you want the rest of the world to pay for the failure of US social policies and attitudes? To generalise, Americans seem to enjoy sneering at other countries for being "socialist". The people in those countries pay in to a system that provides health care and pensions for the unemployed. If your system is better as so many Americans suggest, then stop whining about it.

"The steel industry has its problems, but these 3-year tariffs are to afford it the chance to restructure. Corperate profits didn't kill the US steel industry."

Why should the US have that luxury? Other countries have gone through the painful process of becoming more efficient WITHOUT resorting to subsidies or trade tariffs. I'm thinking in particular of Britain, where as long as I can remember, the steel industry has been taking a horrific hammering.

"Corperate profits didn't kill the US steel industry. The fact that there are 3 retired steel workers for every 1 working killed the steel industry."

Of course, the unions had nothing to do with it did they? They didn't try to jack up salaries, or make it hard to get rid of the crap.

"Besides, foreign dumping of steel on US soil is only possible because in many countries, their steel industry is subsidized by the government. "

Do you have any proof of that? For example, how many subsidies has Corus received in the last year?

It's also been hard on the companies that export steel to the US recently as US steel imports declined 20% in the last year.

If you're going to artificially prop-up the steel industry in the US because it can't produce steel as cheaply as elsewhere, why not do the same for other industries too? How about getting manufacturing and textile jobs back from Mexico and Asia? Of course not: nobody wants to see the huge increases that would occur in retail prices if this occurred. It's called change, and it happens all the time. Industries rise and fall, and get replaced by something else. Since the industrial revolution, this has been happening more and more quickly. Move along. Learn a new skill.



[ Parent ]
Objection (none / 0) (#59)
by Betcour on Thu Mar 07, 2002 at 11:23:35 AM EST

The steel industry has its problems, but these 3-year tariffs are to afford it the chance to restructure.

Sorry to burst your bubble, but if the steel industry restructures (with the goals of cutting costs and becoming competitive), the first thing they'll do is fire a bunch of peoples... That's what happened in Europe when the steel industry.

[ Parent ]
Uh... (5.00 / 4) (#36)
by Thaeus on Wed Mar 06, 2002 at 05:56:41 PM EST

This is already happening, just in another industry: softwood lumber.

As I understand it (and I am by no means an expert), the US is arguing that Canada's (especially British Columbia's) system of Crown Land is an illegal subsidy under NAFTA and the WTO. Basically, instead of selling land to companies by auctions, the provincial governments grant land-rights to companies, saying that they can log n hectares of trees at $x a tree. Here in BC, they're weighted so that easily accessible, valuable logs are expensive, but hard-to-get to trees are cheap. The effect is to keep forestry a valuable industry in little towns in the middle of nowhere. And it grants the government final say under the land, so they can take back the land at any time and give it to an Indian nation, or make it into a park, or whatever valuable political action desired.

At any rate, a 19.3% countervailing duty and a 12.57% anti-dumping duty were imposed on imports of Canadian softwood lumber last year.

It's been in the papers a lot up here, but I don't think it's had much notice in the US thus far. Here's an article from the Seeb.


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Hopefully they bit off more than they can chew (4.50 / 2) (#42)
by DodgyGeezer on Wed Mar 06, 2002 at 08:54:24 PM EST

Thank you - I was going to bring up the same point.

This softwood lumber problem has been going on for some time. I believe it went to court at least once under the Clinton administration. That time the court ruled that Canada was innocent of any trade violations. Certain industry members in the US have continued whining and have now got their way thanks to the newer protectionist and hypocritical government of GWB.

It seems that Canada has been unable to do anything about this situation, even though they are the US's biggest trading partner. (Most Americans don't seem to realise that Canada is in this position and that trade north of the border dwarfs what goes on with Mexico, which in turn dwarfs the amount of trade with Japan). I guess Canada has been too frightened or something to strike back and escalate things in the current economic climate, especially considering they're so dependent on the US who represent 80% of their trade.

Steel was a stupid thing to pick a trade war over as this directly affects many countries, who when grouped together can really hurt US trade. I was just reading an article in the January National Geographic about the growing strength of the EU and how it is leading to enough economic power to keep the US in line. I guess this is where the World will have to look to in the future when it comes to dealing with US hypocrisy and double-standards. It's about time somebody stood up to the "school yard" bully.

I mean really, the US really really whines about free trade when it's affecting their exports, and they get quite upset about government subsidies in foreign industries. Going the other way, they are consistent hypocrites.

Finally, how does this even help the US? Wouldn't it be cheaper to let the steel industry go through the same restructuring process that has occurred in other countries, even if they support the newly unemployed? This is just going to keep steel prices artificially high, or even lead to increases. And steel is in everything!


[ Parent ]
Hypocritical? (none / 0) (#65)
by Thaeus on Fri Mar 08, 2002 at 10:38:46 PM EST

Perhaps I'm just feeling terribly cynical at the moment (I am), but if you were in the US's position, wouldn't you be a hypocrit? They're the only remaining world power. They hold all the cards. They can act independently of the UN and veto resolutions condemning their actions.

They're the only super-power left. Isn't it America's inherent desire to remain the only remaining super-power?

Canada doesn't have any means of negotiating with the US because they have all the cards. Hypothetical Hydro Quebec could cut-off power to the eastern seaboard, but that'd beg a military reprisal. So if it's convient for the US to have free-trade for natural gas or whatever, so be it. But if it's not, then so be it.

It's a frustrating situation.


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[ Parent ]
Why the USA is not popular in the world (3.80 / 5) (#38)
by hengist on Wed Mar 06, 2002 at 07:02:42 PM EST

The hypocrisy of the US Government.

The USA wants free trade - when it suits them

The USA follows international law - when it suits them

The USA wants freedom and democracy in other countries - when it suits them

There can be no Pax Americana

amazing (none / 0) (#41)
by cyberbuffalo on Wed Mar 06, 2002 at 08:50:41 PM EST

A self interested state actor. I didn't think those existed anymore ...

[ Parent ]
Nothing wrong with self-interest, (none / 0) (#43)
by gilmae on Wed Mar 06, 2002 at 09:17:38 PM EST

but there is something wrong with hypocrisy. If you don't agree with what the original comment said, then argue what the comment said. Don't argue the point by arguing a different point.

[ Parent ]
Hypocrisy and power (none / 0) (#69)
by ariux on Sat Mar 09, 2002 at 01:03:40 AM EST

Sure, but when a nation is more powerful than the rest of the world put together, that imposes special moral duties of fairness on it.

It's like the way a cop who beats a guy up in the precinct house is worse than a guy who beats another guy up in the street - they both deserve jail, but the cop deserves more, because he committed his crime under the color of justice.

What's bread for a "first among equals" is poison for a "hyperpower." The sooner we learn that, the better - our stubbornness is destabilizing the entire world.

[ Parent ]

Examples, please (none / 0) (#49)
by tenpo on Wed Mar 06, 2002 at 10:54:54 PM EST

I can appreciate the sentiment, but unless you're going to provide evidence for your statements it's all just nasty words.

[ Parent ]
Examples (4.00 / 1) (#51)
by hengist on Wed Mar 06, 2002 at 11:15:36 PM EST

Free trade - the parent story, illegal (ruled so by the WTO) tariffs on NZ and Australian lamb

International law - execution of juvenile offendors

Freedom and democracy - support of dictators, e.g. the Shah of Iran, Saddam Hussein, the House of Saud...

There can be no Pax Americana
[ Parent ]

attempt at rhetoric (none / 0) (#63)
by tenpo on Thu Mar 07, 2002 at 07:09:02 PM EST

I didn't really need the examples. I am aware of some of the hypocrisy practised by the US (especially the last you mention: support of dictators). I was simply pointing out that without evidence the earlier poster was spouting empty euphemisms that everyone's seen before.

[ Parent ]
More examples... (none / 0) (#58)
by Betcour on Thu Mar 07, 2002 at 11:19:41 AM EST

CIA & dictator Pinochet, the Gantanamo prisonners...

[ Parent ]
It seems so arbitrary... (3.66 / 3) (#39)
by qon on Wed Mar 06, 2002 at 07:13:41 PM EST

Why does the US seem to want to protect certain industries over others? For example, any protection the goverment provides to the steel industry comes directly at the expense of the steel using industries, who will have to stomach higher prices than the market will bear.

Don't steel-consuming industries have Republican lobbyists too? Won't their combined lobbying power exceed that of the beleaguered steel industry?

q

Congressional elections are this year... (none / 0) (#48)
by tenpo on Wed Mar 06, 2002 at 10:53:08 PM EST

"The tariff decision is seen as an attempt by Mr Bush to help his party's chances in swinging Rust Belt states in this year's congressional elections." - Sydney Morning Herald, 7th March 2002

[ Parent ]
It was a campaign promise (none / 0) (#70)
by ariux on Sat Mar 09, 2002 at 01:06:20 AM EST

The corporations would support Bush anyway; he wanted to entice some Democrats (labor).

[ Parent ]

Subsidies *are* protectionist (4.50 / 2) (#40)
by valency on Wed Mar 06, 2002 at 08:33:42 PM EST

The WTO sanctions countries that unfairly subsidize industries just as they sanction countries that unfairly impose tariffs.

Think about it -- if I tax my citizens and use that tax money to subsidize domestic steel, but not to subsidize foriegn steel, I'm still blocking importers.

Your solution offers no advantage over tariffs.

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If you disagree, and somebody has already posted the exact rebuttal that you would use: moderate, don't post.

Australian steel gambit (none / 0) (#47)
by tenpo on Wed Mar 06, 2002 at 10:51:22 PM EST

Australia's largest exporter of steel to the US, BHP Billiton, ships 800 000 tons of steel every year. Apparently more than 40% of what they ship is 'steel slabs' which will escape the new 30% tariff.

That aside the exports lost to Australia's other steel producers as well as the remainder of Billiton's products will be affected should the tariffs proceed. The amount of money involved is about $400 million, which is not insignificant. That said, the Australian Government has pledged to fight the tariff 'tooth and nail'. The feeling is that Australian steel producers are being penalised for production inefficiencies in US steel companies. For example, imports to the west coast of the US from Australia are on average $US40 cheaper per ton than shipments from the east coast of the US. That in spite of the enormous distance handicap.

A spokesperson for the Federal Opposition has suggested that Australia use its logistical and SAS troop support in the war against terrorism as a gambit for a better negotiation position. The Federal Government's Trade Minister Mark Vaile, however, has said that Australia did not commit troops to the war on terrorism "to improve our trading circumstance".

That information was from the Sydney Morning Herald and from news24.com.

At Least Bush (3.00 / 2) (#53)
by n8f8 on Thu Mar 07, 2002 at 12:45:44 AM EST

At least Bush scheduled the tarriffs to end before the next elections. As opposed to many Clinton measures considered contoversial that he scheduled to take be enacted after his Presidency.

Sig: (This will get posted after your comments)
Huh? (none / 0) (#71)
by ariux on Sat Mar 09, 2002 at 01:07:40 AM EST

I read three years.

[ Parent ]

The USA has two steel industries. (none / 0) (#54)
by arheal on Thu Mar 07, 2002 at 03:03:15 AM EST

My understanding is that the USA has two steel industries: firstly a small group of old, large and heavily unionized companies and secondly a lot of small, agile and (relativly) new 'minimills'. The second group resemble the foreign competition (or visa versa), and these USA minimills are holding thier own against the foreigners (even making money). The first set, industrial dinosaurs, are not. Even elementry economics would suggest that the best course is to let the dinosaurs die out. The primary problem that bit corporations and big unions have lots of lovely cash to bribe^h^h^h^h^hlobby the politicians...
There can be only one!
Let's dump the WTO (none / 0) (#55)
by LeftOfCentre on Thu Mar 07, 2002 at 04:06:17 AM EST

I support the right of the United States to protect its industries -- with tariffs, subsidies or anything else. Personally, I think trade issues should be decided on a case by case basis and not by the rather undemocratic World Trade Organization. Of course, since we are both in the WTO, it makes sense to use its opportunities to retaliate -- but ideally the organization should be dismantled. There are too many worrying aspects of giving free trade priority over local social, environmental or job market considerations.

Learning from history... (5.00 / 1) (#56)
by Curieus on Thu Mar 07, 2002 at 04:57:59 AM EST

The US imposed tariffs on several types of steel. As expected all major steel producers complained. Bush claims that this is necessary to protect the US steel industry, and to give them time to "revitalize".
Justly, several people already remarked that if other countries had to reform their steel industries without such protections, then why should the US have such leeway?

History however has shown that the US steel industry tries to do everything but restructuring. Where in other countries mergers have created cost benefits (Corus, Alrecor, etc) the US firms still hold on to their fragmented existence.
Worse, protectionist measures imposed in 98 and 99 did not motivate the industry to change. On the contrary, they used that time to get a short time profit. Why should it this time be different?
The steel industry will probably figure that they will get away with it, again. And, if 5 years from now,they'll get in trouble again, they get the US gouvernment to impose new barriers.

A second good question is: Why do the US import that much steel? Could it be that there is a mismatch between demand and production? After all, steel isn't steel.
Is there a metallurgist in the forum that can elaborate on this question?



NZ Perspective (none / 0) (#64)
by hengist on Fri Mar 08, 2002 at 05:54:18 AM EST

is right here [stuff.co.nz]

There can be no Pax Americana
Hypocrisy (none / 0) (#66)
by ariux on Sat Mar 09, 2002 at 12:25:34 AM EST

If others should open their markets, so should we. If we should preserve trade barriers, so should others.

The only thing that would balance the equation is if this were a tit-for-tat punishment directly linked to equally market-distorting subsidies, targeted only, and in compensatory amounts, against specific subsidizing countries. Anyone know?

Otherwise, Bush is bowing to the kind of political pressure which, when ignored by the leaders of poor nations, turns into rioting. If so, perhaps this should teach us something.

US Temporarily Abandons Free Trade Philosophy: Pleads for Leniency | 71 comments (66 topical, 5 editorial, 0 hidden)
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