Is America in the right on the steel tarrifs fight with the EU?

[astro]

Per this story. Is the US’s imposition of a 30% duty on EU steel imports morally and logically justified, or is it pure political pandering?

US goods set to double in price as Europe plans huge trade war

American jeans, Florida orange juice and dozens of other US products could double in price from next month because of a growing transatlantic trade war.

The World Trade Organisation gave the European Union permission yesterday to impose huge import tariffs, which will allow price increases of between 8 and 100 per cent on a range of goods.

The row, which began when America imposed special duties of up to 30 per cent on European steel last year, reached a climax yesterday when the trade watchdog gave a final decision in favour of the EU. It said the US action was “inconsistent” with free trade commitments. Europe can now impose duties on products ranging from T-shirts and lavatory paper, to bras, pantyhose, suspenders, ballpoint pens, ski suits and bowling alley equipment. Harley Davidson motorcycles were included in an early draft of the sanctions list, but were not included yesterday.

The EU says its sanctions, amounting to ¤2.2bn (£1.5bn) a year, will come into force on 15 December unless Washington drops its steel duties. The sanctions would be the biggest in the history of the WTO.

Most of the affected imports face tariffs of 30 per cent on top of existing duties, though a small number will be set at 8 or 15 per cent and some at 100 per cent.

President George Bush now faces a dilemma over whether to back down and remove the steel tariffs. The American government issued a statement yesterday saying that it disagreed with the ruling but would study it carefully.

[London_Calling]

Here’s a couple more views. Quite interesting stuff:
http://news.bbc.co.uk/1/hi/business/3212311.stm

The imposition of tariffs on imported steel was supposed to gain President Bush support in the Midwest. But now it might appear to be backfiring.

Nobody has ever quite defined the “The Law of Unintended Consequences”, or at least not with any precision.

<snip>

Jim Zawacki, the president of GR Spring and Stamping in Grand Rapids, Michigan, says his costs went up by 40%.

“My prices have gone up. My profits have gone down. In my industry, people are closing. We’ve had four stampers close their doors since the start of the tariffs,” he said.

Or take the case of the Morgal Machine Tool Company in Springfield, Ohio which has laid off workers because of the tariffs.

It makes pulleys and sprockets - though not like it used to.

Before the tariffs, it would import steel to the US, then process it. Now it imports to Canada and processes there, according to Jim McGregor who runs the company:

“What happens is that the steel lands in Canada instead of America. They blank the part out in Canada, and ship the parts to the United States. When the part comes across the border there’s no 30% tariff on the steel,” he explains.

http://news.bbc.co.uk/1/hi/business/3256197.stm

The World Trade Organisation (WTO) has confirmed that US tariffs on steel imports are illegal.
The WTO’s announcement is a victory for the European Union (EU), and puts fresh pressure on Washington to withdraw import duties on steel.

<snip>

Speaking on the BBC’s Newsnight programme, British Trade Minsister Mike O’Brien, said: "We hope the Americans will lift these tariffs, which the WTO have said are unlawful.

“If not then we (the European Union) will have to impose retaliatory measures. I hope the Americans will now comply with the WTO ruling.”

The European Commission has drawn up a hit list of US imports worth about $2.2bn a year - including Harley Davidson motorcycles, citrus fruits and textiles - which will be targeted with retaliatory sanctions.

Bush has to back down, doesn’t he ?

[John_Mace]

This was blatant political pandering to the steel industry. That was a good quote, L.C., about the law of unintended consequences. Yeah, you can bolster one industry, but it’s always at the expense of other industries and consumers as a whole.

I’m pretty much in favor of eliminating all tarrifs, even if it means doing so unilaterally. I don’t know if Bush will change his policy, but I think he should. If the economy continues to improves, he probably will feel like he doesn’t need to.

[Sam_Stone]

Yes, I think Bush has to back down. And he should. The steel tariffs were a huge mistake.

[Airman_Doors_USAF]

No. The steel tariffs have demonstrably been a bad idea from the get-go. I’ve not seen a single positive thing result from them.

[Askance]

But what argument does Bush have that they are justified? I assume not just pure protectionism.

Funny that while doing this and upping subsidies to US agriculture, he wants Australia to remove all barriers to imported films, TV, change our copyright laws, etc etc.

[ralph124c]

I don’t understand why the US Steel industry is so powerful in Congress…For one thing, the US Steel industryis pretty small these days. Also, most US steeli mports come from Korea, China, etc., not europe. Its not like Bush has a lot of votes in West Virginia anyway.

[Brutus]

*Originally posted by ralph124c *
**I don’t understand why the US Steel industry is so powerful in Congress…For one thing, the US Steel industryis pretty small these days. Also, most US steeli mports come from Korea, China, etc., not europe. Its not like Bush has a lot of votes in West Virginia anyway. **

Methinks that GW carried WV in '00…

[jjimm]

Damn, this probably means that the Reeses Peanut Butter Cups in my local convenience store are going to rocket in price. Shakes fist Curse, you, steel tariffs!

[Pjen]

According to news reports yesterday, the tariffs are due to take effect from early next year and are aimed at swing states in the 2004 election.

[Early_Out]

Just to clarify Pjen’s post, if I may be so presumptious: the EU’s rataliatory tariffs are due to take effect next year. From what I’ve heard, they do seem to be targeted at swing states. The fact that Florida citrus is first on the list speaks volumes. Well done, EU!

[ruadh]

Yep. The report I heard on Irish radio this morning started off with “Well, there’s good news for those opposed to George Bush …”

[smiling_bandit]

I also think it may be a deliberate trade war. Its entirely possible that Bush will use this as an excuse to force certain European nations to drop their own tariffs in exchange. And yes, they do have them, the bastards.

So, it may wind up being that we both win and lose.

Its what I’d do.

[London_Calling]

*Originally posted by smiling bandit *
I also think it may be a deliberate trade war. Its entirely possible that Bush will use this as an excuse to force certain European nations to drop their own tariffs in exchange. And yes, they do have them, the bastards.

This I didn’t know; cite please for “certain European nations” having tariffs not permitted by the normally US friendly WTO ?

[Jonathan_Chance]

Holy cow! They’re really aiming them at the swing states?

Man, that could get ugly.

The steel industry does have one large item to hold over the federal government: their pension liability. There’s an enormous amount of pensioners out there due an awful lot of money due to previous contracts. If the steel industry folds it’ll be the federal government (and therefore the taxpayers) stuck holding the bag.

[Neurotik]

*Originally posted by jjimm *
**Damn, this probably means that the Reeses Peanut Butter Cups in my local convenience store are going to rocket in price. Shakes fist Curse, you, steel tariffs! **

I thought Euros didn’t like the peanut butter/chocolate combo.

And it should never have gotten this far since the steel tariffs never should have been enacted in the first place.

[ruadh]

Never mind that, I just want jjimm to tell me where in Cabra you can get Reese’s Peanut Butter Cups :eek:

[China_Guy]

Pure political pandering. Remember the US slapped steel tariffs on China what 12-24 months ago. Again unintended consequences. May have helped the US steel industry remain uncompetitive, but hurt manufacturers in the US dependant on the high priced US steel. A buddy of mine that manufactures gearboxes and trailor hitches in China for export, suddenly became by far the low cost producer and US exports quadrupled. So, saved a couple of uncompetitive steel industry jobs and put a lot more people making gearboxes out of work.

I have zero sympathy for the US steel industry. They have had chance after chance in the past decades to get competitive and didn’t. It’s a lot more socialist than the steel industry in China.

[John_Mace]

Further on the law of unintended consequences, from this morning’s SJ Merc:

One study by the Institute for International Economics, a non-partisan center in Washingto, D.C., concluded that Bush’s action had saved 3.500 jobs in the steel industry, but had cost U.S. steel users 12,000 to 43,000 jobs.

This should probably fall under the law of blindingly obvious consequences since it’s really just Econ 101.

[Magiver]

hmmm. French wine, vs Florida orange juice. If Europe is exporting more to the US than they are importing then which side wins in a tariff war? Answer: China
Tariffs can be hidden in the form of government subsidies so it is difficult to compare tariff laws without also acknowledging subsidies (both of which are bad in the long term). I don’t think they are completely evil but they should be tied to a specific need such as national defense. It is natural to keep the high tech stuff local. You could extend that to steel industries if you can prove a need (beyond just financial). I personally don’t like to see all manufacturing jobs disappear because there is a need in any society for good paying low-skill jobs. I’m not adverse to an agreed upon tariff system between countries.

I don’t think it is kosher that EU would deliberately interfere in US politics by targeting swing states. I say this because I don’t think France or Germany would appreciate US attempts to influence their elections.