Speaking in tongues
The US will have to dismantle illegal tariffs on steel if it is to escape trade sanctions, writes Faiza Rady
Until recently it looked like United States President George W Bush could be all things to all people. An ardent free trader preaching the dismantling of any and all forms of tariff barriers across the globe, Bush also happens to preside over one of the world's most protectionist economies.
Unfortunately, all good things must come to an end. And so, it is expected that by the end of this week the Bush administration will have to choose between having their cake and eating it.
It all started with something resembling a collective action suit against US hubris. The European Union (EU), Japan, China, South Korea, Norway, New Zealand and Brazil all filed complaints with the World Trade Organisation (WTO) about American tariffs on foreign steel imports. On 10 November, the WTO ruled that the US should repeal the offensive tariffs -- which defy international trade regulation -- or face tough economic sanctions.
Under existing WTO regulations, all plaintiff countries can now retaliate and impose sanctions against the US.
But superpowers, unlike lesser nations and peoples, always get a break. Thus, the WTO granted the Bush administration a one-month grace period to take deep breaths and meditate. Meanwhile, nobody is holding their breath, and most analysts expect Bush to cave in and scrap the tariffs. According to The Washington Post, the move was "all but set in stone" since the sanctions would most certainly compromise the Bush re-election campaign.
On the surface, it appears that Bush and his team have an ideological problem: while posturing as a die-hard neo-liberal and a fervent advocate of "free trade", the American president is known to quickly change his tune when, and if, sufficiently challenged at home.
Thus, more often than not, the concept of "free trade" becomes elastic in response to national political expediency, while being aggressively promoted overseas. By no means unique to the Bush administration, this kind of elasticity applies to Republicans and Democrats alike. "Since 1994, America has doubled its subsidies, rather than phased them out," wrote economist and Nobel Prize Laureate Joseph Stiglitz.
The point was made last year in March when the ailing, but still powerful, US steel industry provided the Bush administration with just the right dose of incentives to suddenly go "protectionist" and "save" American steel jobs. Although going against the grain of the neo-conservative mantra of "free trade" at any cost and come what may, Bush heeded the steel industry's call by slapping some foreign steel imports with up to 30 per cent tariff markups.
Unperturbed by the flagrant contradictions in their discourse, the Bush administration went about the serious business of counting vote blocks where they matter come election time: namely in the pivotal steel-producing states of Ohio, Pennsylvania and West Virginia.
Thus the steel barons and the Republicans found a common cause. Never mind that the neo-liberals and the industrialists veered from "less government" to "more government", suddenly discovering the virtues of protectionism. "US trade positions shift according to geography," headlined the Washington Post.
Speaking in tongues, the neo-conservatives argued that American steel manufacturers needed government protection to compete with perfidious EU and other countries, who were flooding the US market with cheap goods.
The exporters, however, decided to fight back -- with a vengeance. Among Asian nations, China was particularly incensed because its steel exports to the US fell by 15 per cent as a direct result of the Bush administration's tariffs.
Collectively, the plaintiffs put a lot of thought into effective retaliatory strategies, and threatened to impose tariffs on US imports from political heavyweight states considered pivotal in terms of electoral votes.
The EU alone plans to target US imports worth $2.2 billion a year, among them citrus fruits -- in particular Florida oranges, produced in the state that initially put George W Bush in business. Other tariff targets include heavily subsidised textiles from southern states, which the Bush crowd has been courting in the primaries. For symbolic reasons Harley Davidson motorcycles also figured high on the EU hit list. Like apple pie, the bikes are considered a quintessential American product.
On the campaign trail and on the defensive, Bush railed against the foreign onslaught.
Speaking at a BMW plant near Spartanburg, North Carolina, Bush claimed his aim was to assure that "free and fair trade" gave American workers a chance to compete with foreign workers. But the president's belated concern with job opportunities did not overly impress American workers. "Without jobs, Bush won't win this time next year. That is why they are now rattling about jobs," comments political analyst Michael Roberts on ZNet.
Notwithstanding the populist rhetoric, the administration's 30 per cent tariff imposition did not intend to protect jobs, but to rescue big business. "Steel duties have not saved jobs because cheap imports are only part of the picture," explains economist Lee Sustar on ZNet.
New technologies, based on the use of scrap metal for steel production, have facilitated the establishment of non-union "mini-mills". Basically hi-tech sweatshops, the mini-mills are competing with the established steel industry because of lower production and labour costs.
However, over and above cheaper costs, overall productivity in the industry has risen dramatically. "Since 1980, the number of person-hours needed to produce a ton of steel in the US has dropped from 10 hours to four hours," says Sustar.
As a result, the work-force was decimated over recent decades. According to estimates there are only 160,000 steel workers left in the US, down from 800,000 in the 1960s. Even the much-touted tariffs did not manage to halt the job slide. Since the tariffs were imposed in March 2002, the industry eliminated several thousand more jobs -- a testimony to the Bush administration's lack of engagement in labour issues.
Moving beyond the steel industry, overall job figures make the point. Since Bush took office, 2.6 million jobs have been scrapped. Regardless of other accomplishments, George W Bush will go down in American history as the man who presided over the largest net job losses since the days of the Great Depression.
