Marketplace December 3, 2003
Bush lost Pennsylvania and Michigan in 2000 and barely won Ohio and West Virginia -- so these will almost certainly be battle-ground states in 2004. Onething they have in common is steel. Only a few hundred thousand steel workers remain but they're politically active, as are the owners and executives of the steel mills. For years now, steelmakers have been complaining about cheap steelcoming from abroad. So last year the Bush administration slapped tariffs of as much as 30 percent on imported steel.
It seemed like a shrewd political move, but it unleashed two political boomerangs. First, the steel tariffs meant that American automakers, appliance companies, and equipment manufacturers suddenly had to pay a lot more for the steel they used than did their foreign competitors. As a result, these Americansteel users had to charge their customers higher prices. This in turn caused some customers to switch to products made abroad. And this has meant losses of American jobs in industries that use steel -- an estimated 200,000 last year, which is more than the total number of Americans who work in steel mills. The job losses include an estimated 9,000 in Michigan and almost identical number in Pennsylvania -- two of the battle-ground states.
The second political boomerang came last month in the form of a World Trade Organization ruling that the Bush steel tariffs violated international trade law. The WTO has allowed America's trading partners to retaliate with tariffs aimed at more than $2 billion worth of U.S. exports. And it so happens that those retaliatory tariffs are to be applied to the products of states that are likely to be battlegrounds in 2004 -- motor cycles from Michigan, farm machinery from Ohio, and oranges from Florida.
It's just possible that the Bush administration anticipated these boomerang effects, but calculated that the political benefits of putting tariffs on steelwould still outweigh the political risks. That was then, in 2002. But now that the political costs have become real, the calculation is different. Apparently Bush is about to lift the steel tariffs.
Maybe all this is smart politics, but it's also cynical politics. The tariffs weren't in place long enough to enable steelmakers to consolidate, retool, and become more competitive. But they were there long enough to signal to the rest of the world that for America, politics always trumps trade agreements.
