EDITORIAL
Steel: Bush endorses blatant protectionism

While there were no simple answers available to President Bush on the question of imported steel, his attempt at finessing the issue will do little good and perhaps a great deal of harm.

A host of inefficient steel producers in the U.S. "rust belt" have been closing their doors in the face of cheaper imported steel. This is not a question of cheaper labor — Japanese steel workers are paid more than their Yankee counterparts — but newer, better production facilities overseas.

By giving the industry only a portion of the tariff protection they demanded, Bush hoped to satisfy U.S. steel workers without overly angering foreign producers. Instead, the former are still grumbling while the latter are talking trade war.

Domestic politics undeniably plays a central role in Bush's decision. President Clinton angered steel workers by his adherence to his free-trading principles, and Bush's willingness to exploit that as a political weakness explains why Al Gore unexpectedly failed to carry West Virginia, a steel state, in the 2000 election.

It appears the hope of assuring re-election by corraling "rust belt" votes has blinded Bush to the likely severe consequences of these tariffs:

• Creating higher prices for American steel makers by barring cheaper imports will hurt the American consumer, and economic recovery, with higher prices for steel products.
• It will subsidize American steel makers' inefficiency.
• The fallout is immediate. Already, Maui Pineapple Co. says its existence is threatened because the Japanese steel it uses for cans will be subjected to a 30 percent tariff; yet inefficient U.S. shipping policies mean the comparable U.S. product will still be more expensive than the Japanese product.
• There's no telling who will suffer when foreign steel-producing nations launch retaliatory measures. In 1999, when Europe discriminated against American bananas, Washington retaliated with higher tariffs against imported luxury goods — which had a devastating effect on shops like Gucci and Louis Vuitton in Waikiki.
• America's policy of urging other nations to open their markets and lower tariffs suddenly smacks of rank hypocrisy.
• The nations most hurt by the steel tariffs are economically struggling allies like Japan and South Korea and protégés like Russia and the Ukraine.
• Ultimately the most serious threat is the possibility it will trigger a trade war like that of the 1930s, which brought on and prolonged the Great Depression.

In all, Bush's move appears hasty, unilateralist and ill-considered.