Let's Put Steel in Our Fight, Not Fight Over Steel

The Wall Street Journal ^ | March 13, 2002 | Charles Powell

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Let's Put Steel in Our Fight,  Not Fight Over Steel

By CHARLES POWELL

LONDON -- President Bush's decision to impose tariffs on steel imports is blatantly protectionist, as well as a setback for free trade and open markets. By increasing costs for American manufacturers, it will hurt the consumers who have, almost single-handedly, kept the U.S. economy -- and thus the world economy -- from serious recession since Sept. 11.

It won't save inefficient steel producers in the U.S. either, and will only buy them more time to go on being inefficient. It's also not the right signal to give the world as it embarks on a new round of free trade negotiations. The British government and the European Union are fully within their rights to challenge the measures in the World Trade Organization.

That said, let's weigh other factors before we froth too much at the mouth. First, the U.S. is not alone in protecting its key industries. Secondly, the purpose of the measures may be political -- to strengthen the position of President Bush and the Republicans. But to those who support freer trade, that is a desirable outcome compared with letting the Democratic Party, which is more overtly protectionist, back into power.

Third, our highest priority at present has to be to maintain the unity of the coalition against terrorism, which is already showing signs of strain. Besides, when it comes to prosecuting the war, can anyone doubt that President Bush has shown a far higher quality of leadership than we would have had from a President Gore, or any likely Democrat leader?

All these considerations give us a strong incentive to stop the fallout from the steel dispute from spreading.

Let's take those points in turn. This is not the first time that a major industrialized country has indulged in protectionism for short-term political purposes. The Japanese have practiced it for decades, and the EU does so every day with the Common Agricultural Policy.

Moreover, the steel industry is a notorious hotbed of subsidy, market distortion and protection. Europe has itself been contemplating safeguards against imports should they rise to the levels faced by the U.S. It currently imposes quotas against several steel-producing countries as well as measures to restrain imports from Eastern and Central Europe. The argument that the EU will face a flood of steel imports from developing countries, now diverted from the U.S. market, hardly holds water, since most of those countries have been exempted from the new measures.

The U.S. government has said it is following the WTO process. Its record of abiding by WTO judgments is good. There is every incentive to try to negotiate a solution there by either ameliorating the American measures or compensating the EU, and that would be better than becoming enmeshed in a cycle of retaliation.

There are other trade benefits in the pipeline. President Clinton was unable to secure Trade Promotion Authority, the so-called "fast track" that enables the administration to sign free trade agreements without having to obtain congressional authority for every concession. President Bush has gone to Congress for TPA, has got it approved by the House, and has a good prospect of obtaining the Senate's approval this month. Indeed his measures to support the steel industry may make it easier for him to do so.

Similar considerations apply to American leadership in the war against terrorism. President Bush has displayed far better leadership than could have been expected from a President Gore, given the latter's record, as vice president in the Clinton administration, of going along with pinpricks against Osama bin Laden.

Global terrorism is a far more direct threat to our civilization than is a dispute over steel. We cannot allow lesser issues to drive the U.S. and Europe apart. The Atlantic relationship has been under enough strain recently from sneering bien pensants in Europe who set out to ridicule President Bush's "axis of evil" speech.

But the president was right. There is a common thread linking the governments of Iraq, Iran and North Korea: the determination to acquire weapons of mass destruction. Their goal is to use them directly against us one day, or to make weapons materials available to terrorists to do their dirty work for them.

Tony Blair has begun to make the case in Britain for action against Iraq. Other EU leaders are making their voices heard after initial kneejerk opposition. The U.S., for its part, needs to consult more intensively with its allies on options to prevent the nightmare scenario of nuclear-armed terrorists from coming true. Although there will be intermediate steps involving U.N. weapons' inspectors, the likelihood must be that military action against Iraq will be necessary, given Saddam Hussein's record of deceit.

Despite Europe's justified anger at the U.S. action on steel, we cannot afford a dispute that puts at risk the coalition against terrorism. We should take lawful recourse to the WTO to resolve the trade issue and keep our true steel for the fight against terror.

Lord Powell was a foreign affairs adviser to Prime Minister Margaret Thatcher.

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