President Bush's decision to impose tariffs of up to 30 percent on steel imports was wrong. However, its effects won't be entirely bad. (More on that later.) Such steel states as Pennsylvania and West Virginia are key to Mr. Bush's re-election hopes, and that probably was enough to make Mr. Bush swallow his free-trade rhetoric.
Rather than get into a tariff fight with our trading partners, Mr. Bush would have done better for the overall economy to have directly helped steel through government contracts that would help maintain the sector in a much more honest and healthy way.
Despite replacement in many products by some new materials, steel is still a strategic material, and is likely to continue to be for years to come. America must maintain a steel sector that includes more than the highly efficient mini-mills that have taken much business away from the big mills. We cannot, in a crisis, depend on our trading partners to provide all the steel we need.
But tariffs, and the trade wars they cause, can add an unfair cost across society. This expense is mostly hidden, so there's less political impact, whatever the macroeconomic damage. So no wonder tariffs are such a tempting tool.
Having said that, Mr. Bush has inadvertently done well to focus more public attention on the dangers of letting foreign manufacturers take too big a bite out of our domestic capacity. Flooding American markets with foreign manufactured goods can ravage some essential domestic industries, lower overall wages here and hurt a wide range of vendors -- vendors that are important for the economic and security health of the nation.
In some industries there has been an ominous "race to the bottom," wherein companies not accountable to anyone rush to the lowest-wage places around the world, aided and abetted by (frequently corrupt) foreign governments there.
In some industries, the damage to standards of living, not to mention political and social stability, far offsets "economic growth," as measured by comfortable academic economists. In any event, utterly "free trade" will remain a myth in a political world.
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