Time for Steely Resolve

It is no fun to be chastised by an international institution, but this time, Bush deserved it. The World Trade Organization (WTO) was entirely correct last week in ruling that the heavy steel tariffs imposed by the Bush administration in 2002 are blatantly illegal under the free trade rules to which America has agreed. Revoking protections for America’s domestic steel industry would be politically risky for Bush—the industry is concentrated in key swing states Ohio, Pennsylvania and West Virginia—but the president needs to place multilateral cooperation over electoral calculations and tear down this American-made wall against trade.

By heavily favoring steel-producing states, Bush is ignoring the national and global harm inflicted by the patently protectionist measures he has imposed. Not only do American steel tariffs disadvantage workers in the steel sectors of Europe, Japan and other foreign nations; they also harm other U.S. sectors, such as automobile manufacturing, which are forced to pay inflated prices for their steel inputs. These higher prices are then passed on to U.S. consumers.

Conversely, abandoning barriers to free exchange expands the domestic and international pies of economic output. Broad majorities of both Republicans and Democrats recognize the benefits of global trade—as does the Bush administration, when it’s politically more convenient—which is why the United States has been a strong defender of the WTO since its founding eight years ago. But if America selectively flouts the WTO rulings with which it happens to disagree, it will seriously undermine the free trade rules the intergovernmental institution has assiduously forged over the years. Moreover, disrespecting international institutions and rejecting policies that mutually benefit America and other countries is an especially foolish move at this time, given the resentment American unilateralism has recently engendered.

Of course, exposing the domestic steel industry to international competition will mean that the price of U.S. steel will fall, and in the short term many steel workers may lose their jobs. The Bush administration has not been a provider of social support networks in the past, but it must now look after those steel workers who will be displaced by liberalization. By providing retraining services to these newly unemployed, the government may help to speed their transitions into new jobs that trade will create.

The administration is currently mulling whether to comply with the WTO’s ruling. At stake in its decision are the living standards of consumers and workers both in America and abroad, the sanctity of international law and America’s standing as the leader of trade liberalization. On the other side are the narrow political considerations to which Bush gave in when he imposed the tariffs last year. Let’s hope Bush’s better angels win out.