Tue, Mar 12, 2002 page19

• US steel tariffs should give Asia reason to pause

  It's been amusing to see protectionist countries such as Japan scream about the recently announced tariffs

  • By William Pesek Jr / BLOOMBERG
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  Not since his "axis of evil" comment has President George W. Bush touched so many nerves in Asia as he has with his move to slap tariffs on steel imports.

  With a rare unified voice, Beijing, Seoul and Tokyo condemned Bush's decision to impose duties of up to 30 percent on foreign steel. It stoked anger among government and steel industry officials across Asia. Japan, South Korea and others may cry foul to the WTO.

  Bush didn't make his decision because of the economics involved in the issue, but in spite of them. Never mind that he's effectively raised taxes on Americans, or that tariffs won't save steelmakers. Bush and his party had a debt to repay the steel industry and the states where it operates.

  

  A National Steel Corp plant, a unit of Japan's NKK Corp, in Portage, Indiana last week. National Steel Corp filed for bankruptcy protection, citing low prices and a weak economy, a day after the US imposed tariffs on most steel imports.

  PHOTO: BLOOMBERG

  What's obvious is that Bush dropped the ball on free trade.

  Not only did he dent the White House's free-trade credentials, but he also shoulder-checked the ongoing round of trade talks launched in Doha, Qatar last November. Washington's message? Free trade is great, so long as it doesn't squeeze American businesses.

  Less obvious is what Asia can do about it. It's been amusing to see how Japan and South Korea have come out screaming about US protectionism and the evil it will do to the global economy.

  No offense to trade officials in Seoul and Tokyo, but HAH! While what Bush did was a step backward for free trade, Japan and South Korea have little room to criticize others for protectionism.

  Really, how will Asia retaliate here? Will countries allow fewer US-made automobiles on their roads? Make it harder for American banks and insurance companies to do business in their economies? Oh, that's right, they already do these things.

  Take Japan. It's hard to think of a nation that fears the forces of globalization -- and that means free trade -- more than Japan. In the agricultural sector, for example, Japan's subsidies are the highest in the developed world, shutting out foreign goods.

  That allows domestic producers to charge what they want for everything from rice to vegetables to fruit, forcing Japanese consumers to pay exorbitant prices.

  Japan was outraged by Bush's tariff decision. While it was probably a bizarre coincidence, NKK Corp's US unit, National Steel Corp, last week filed for bankruptcy. The move by the Mishawaka, Indiana-based company, which makes about 6 million tonnes of steel a year and has 8,400 employees, came a day after the Bush administration announced its steel tariffs.

  And when you visit South Korea, how many foreign-made cars do you see? Not many, thanks to the nation's high tariffs. Last year, South Korea imported about 7,700 cars, a far cry from the 6.4 million sent to the US.

  So let Tokyo and Seoul complain to the WTO. In a perfect world, neither country would have a leg to stand on or much leverage, given their own trade practices. But if history is any guide, neither does the US in the case of steel tariffs.

  Bloomberg reporter Blair Pethel persuasively made that point in a March 7 article. The WTO, Pethel pointed out, has overturned three previous US "safeguard actions" to protect industries from import surges. The EU last week filed a complaint with the WTO. The EU will probably win, and rightfully so.

  Still, it's hard not to chuckle at the reaction here in Asia -- a region where few are in a position to complain about protectionism.
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