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Posted on 03/06/2002 6:54:41 AM PST by Tumbleweed_Connection
President Bush's decision to impose tariffs on imported steel prompted European countries to hit back Wednesday with a complaint to the World Trade Organization and the threat of retaliatory trade barriers.
Pascal Lamy, the European Union trade commissioner, said that the EU will lodge an "immediate complaint" with the WTO. The British government is considering filing a complaint of its own.
Lamy said the U.S. decision would hurt the EU in an "unjustified and unfounded way."
"The decision to go down the route of protectionism is a major setback for the world trading system," he said. "Imports are not the cause of U.S. difficulties and the measures announced today will not provide a solution but will aggravate matters ... we will take whatever measures are necessary to safeguard our own market."
Bush announced tariffs ranging from 8 to 30 percent Tuesday, calling them a "temporary safeguard" against a glut of steel worldwide. The surplus has driven down prices, forcing more than 30 U.S. steel firms into bankruptcy in the past four years.
"An integral part of our commitment to free trade is our commitment to enforcing trade laws to make sure that America's industries and workers compete on a level playing field," Bush said in a statement issued by the White House. "This relief will help steelworkers, communities that depend upon steel and the steel industry adjust without harming our economy."
Bush said the tariffs, effective for three years, would help to offset "the harm from 50 years of foreign government intervention in the global steel market."
The president tried to hold the middle ground in the trade dispute, rejecting domestic steel industry calls for tariffs of up to 40 percent.
British protest
British Prime Minister Tony Blair made his opposition to the tariffs clear in a letter to Bush last month, saying that additional trade barriers would be bad for the world economy. The prime minister's spokesman also revealed last week that the two leaders had discussed the issue alongside matters such as a possible attack against Iraq.
"We believe that tariffs are against not only the interests of countries such as ours and Europe, but also against the interests of U.S. consumers themselves, because it would be U.S. consumers who would have to pay the higher prices for steel imports," Blair's spokesman said.
Romano Prodi, president of the European Commission, warned that U.S.-Europe relations might be hurt because of the import taxes. Japan and South Korea may also join Europe in complaining to the WTO.
Britain's steel companies are worried that they will lose access to the U.S. market and that cheap imports that would have made their way to North America will end up in Europe, driving down prices.
The tariffs are expected to come down particularly hard on the beleaguered Corus Group, a company formed in 1999 by a merger of the formerly nationalized British Steel and a Dutch company.
Corus, the U.K.'s largest steel producer and one of the biggest steel companies in the world, has cut its workforce by 10,000 in the past two years because of rising costs and low steel prices in Europe.
The company said Wednesday that it was "disappointed" with Bush's decision.
"U.S. steel producers' problems are caused by a failure to restructure and consolidate, not by imports which actually declined by 20 percent in 2001," the company said in a statement. "The blanket measures that the President has announced are not necessary and are not the answer to the U.S. steel industry's problems."
The company will lobby for "countermeasures" by the British, Dutch and German governments.
We have to keep the American steel industry strong, or we'll be relying on foreign allies for a basic necessity.
The optimal solution is a relatively low, across-the-board revenue tariff of 10-20% on ALL imported goods from ALL foreign countries.
"Targeted" tariffs have the disadvantage of providing loopholes and, as others will be quick to point out, the potential to hurt other domestic industries.
A prime example is our failed embargo on the importation of Cuban goods. Cuban sugar has been routinely imported to the U.S. through the back door: Canada. Cuban sugar is shipped to Canada where it is dissolved in molasass. "Canadian" molasass is then legally imported to the U.S. where the sugar is easily refined back out. The leftover molasass is then exported back to Canada where the cycle is repeated. Large sugar-users (such as candy makers) are also closing their domestic factories and moving to Canada where they can legally use Cuban sugar, then import it as candy to the U.S.
An across-the-board revenue tariff of 10-20% would circumvent this type of abuse. Additionally, the revenue could be used to offset a major reduction or elimination of the corporate income tax, providing domestic producers a more "level playing field". (A Proposal to Abolish the Corporate Income Tax)
From a historical perspective, a revenue tariff of 10-20% is NOT excessive:
Corporate Income Taxes comprise 10% of Federal revenue. Without a corresponding reduction in Federal spending, elimination of the corporate income tax would either shift the burden to individual income taxes or result in large budget deficits. Swapping the corporate income tax for a 20% revenue tariff, on the other hand, is an approximate revenue-neutral proposal that favors domestic production.
I smell an opportunity here either in the futures, currencies or equity market.
Rather than eliminate the Department of Education, Bush increased its budget.
Conservative principles were sold out again.
After handing their steel industries more than $5.4 billion in subsidies during the past six years, Japan, the European Union and seven other steel-producing countries...In March 1999, three of Japan's largest steelmakers received lines of credit totaling more than $1 billion from the government-affiliated Japan Development Bank because commercial banks would not lend them any more money....
In Europe during the 1990, steel subsidies were massive. In 1994 and 1995, EU subsidies, earmarked for the steel sector amounted to $2.2 billion and $1.5 billion, respectively, excluding aid for R&D and other objectives. Although steel-specific aid has declined dramatically in recent years, subsidies averaged $233 million annually from 1996 to 1998. European steel producers also benefit from aid to the coal industry, which reduces raw material costs, and handouts to the ship-building industry,...
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