The US 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 and1998 -- 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 yester-day's lumbering giants stood still. They cannot compete with efficient steel mills elsewhere -- including (perish the thought) South Korea's state-owned steel company.
Many of America's problems are made in the US. America's deteriorating fiscal position is leading to a strong dollar, just as the deteriorating fiscal position of the US after former president Ronald 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, President George W. Bush's administration has failed.
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 stimu-lus. 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 US$50,000 would have received zero -- yes zero -- benefits over four years, while a US$5 million-a-year family of four "struggling to make ends meet" would have received a whopping US$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 the US 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."