America's imposition of tariffs on imported
steel has been greeted with a howl of protest around the world. But harsh
words have not been followed by a strong counter-attack. Now is the time
to confront America's hypocrisy, not to bluster.
The global financial crisis of 1997/1998 - mismanaged by the IMF, largely
at the direction of the US Treasury - led to an increased flow of steel
imports. But that is part of the market adjustment process the US trumpets
so loudly at other times.
The argument put forward by the US, that it was entitled to safeguard
against a surge of imports - utilizing safeguard measures that are part
of the WTO - is unlikely to past muster with a WTO panel when one is eventually
convened, but the argument itself is disingenuous. Europe pushed to restructure
its steel industry in the 1980s and early 1990s, and succeeded mostly.
In America, many efficient new firms (mini-mills) were indeed created,
but yesterday's lumbering giants stood still. They cannot compete with
efficient steel mills elsewhere - including (perish the thought) Korea's
state-owned steel company.
Many of America's problems are made in the USA. America's deteriorating
fiscal position is leading to a strong dollar, just as the deteriorating
fiscal position of the US after Reagan's irresponsible tax cut of two
decades ago did. While countries may pride themselves on a strong currency,
a strong dollar is bad for exports and good for imports.
In a dynamic economy, if jobs are lost in one sector, new jobs are being
created in another. Government's role is to facilitate the movement of
labor from one to the other. It is a primary responsibility of government
to maintain full employment. Both in assisting shifts in employment and
in maintaining full employment, the Bush Administration has failed.
President Bush recognized that a fiscal stimulus was needed when he arrived
in office, but rather than pushing for genuine stimulus, it pushed for
regressive tax changes under the name of a fiscal stimulus. Aid to old
economy firms that spent more on avoiding taxes than in restructuring
took the form of a repeal of the alternative minimum tax, a tax provision
designed to limit the extent to which firms could make use of loopholes
in the tax code.
Lowering taxes for the rich: under the Bush administration's original
proposal, a family of four earning $50,000 would have received zero -
yes zero - benefits over four years, while a $5 million dollar a year
family of four "struggling to make ends meet" would have received
a whopping $500,000! The Democrats rightly resisted; the number of jobs
that would have been created was miniscule. But the weaknesses in the
economy as a result of this economic mismanagement mean that those who
lose their jobs will face a tougher time.
While America loses, Europe loses, many in the developing world lose,
and much more is at stake. Globalization, well and equitably managed,
can benefit all countries. But under globalization, as currently managed,
many have not gained; and some of the poorest have lost out. Instead,
globalization is an unfair game, with the rules written by rich advanced
industrial countries for rich industrial countries.
But the US believes that even this is not enough: it will interpret these
rules in ways which suit its political interests, bending and breaking
them at will, challenging those who do not like it to do something about
it. The motto of the Bush Administration seems to be, "Trade is good,
but imports are bad! "
Think of the lessons that poor developing countries learn. Lowering import
duties lead to a surge of imports. So, under the "new" US rules,
that country is entitled to reinstate tariffs as "safeguards."
If the US needs to worry about unemployment with an unemployment rate
of less than 6%, what is a poor country with unemployment at 10% or 20%
to say?
The US pleads for understanding; elections are coming in November, and
voters in West Virginia and other states must be "bribed" to
accept a new round of trade negotiations. But democracies exist across
the developing world, and their voters have even more legitimate concerns
about the jobs that result from liberalization. The IMF - in which the
US is the only country with veto power - shows little sympathy with such
political concerns in the developing world. Why the double standard?
If the increase in steel tariffs were an isolated incident it would be
bad enough. But, while preaching free market doctrines abroad, the US
bails out its airlines and increases agricultural subsidies at home. Even
before these increases, subsidies to agriculture by the advanced industrial
countries were enormous - exceeding the total incomes of sub-Saharan Africa.
The rich effectively close their markets to many goods that represent
the comparative advantage of the poor. Argentina's economic position today,
indeed, would be vastly different if America and Europe opened their markets
to its agricultural goods. The same can be said for country after country
in the developing world.
Globalization entails increasing interdependence. Given the volatility
in the global economy, this entails bearing some risks. Rich countries
- like the US - are in the best position to bear those risks.
Much discussion has taken place of late of the advantages to be gained
by the world adopting global standards, e.g. in banking. Inevitably globalization
will entail adopting such standards. America's actions over steel seem
to suggest that the US embraces a double standard. This cannot be allowed.
Countries, particularly in Europe, that are capable of standing up to
the US must oppose it here. Taking strong measures will be in their interests,
will be in America's interest (even if it is not in the interests of particular
special interests, or President Bush's political interests), and will
be in the broader interests of the world.