Bush should cut his losses and revoke steel tariffs

Bob Tippee

US President George W. Bush has one way to escape a political mess he created in March 2002 by imposing tariffs as high as 30% on imported steel.

He can revoke the tariffs.

Doing so would alienate workers and managers in the struggling steel industry. And it would renege deals the administration made in Congress to win trade promotion authority in July 2002.

Bush should revoke the tariffs anyway.

He should accept whatever political losses he must in order to correct a mistake and prevent economic jeopardy.

His political losses will be much worse if a threatened dispute over the tariffs materializes and stalls economic recovery.

The World Trade Organization soon will decide whether to uphold its May repudiation of the steel protections.

If, as expected, the appellate ruling goes against the US, Bush will have to decide whether to defy the WTO, repeal the tariffs, or seek compromise.

Defying the WTO would be wrong because the tariffs are wrong. A compromise can't help.

The world needs a show of commitment to trade from a US administration so far alarmingly protectionist.

A US rebuke of the WTO would complicate the difficult challenge of reviving multilateral trade discussions after September's failure in Cancun, Mexico.

It also would invite retaliation. The European Union promises to impose sanctions totaling $6 billion if Bush doesn't revoke the steel tariffs and Congress doesn't end tax preferences for companies selling goods abroad.

The portion of those sanctions targeting the steel tariffs—totaling $2.2 billion—would hit Harley Davidson motorcycles, textile products from southeastern states, and Florida fruit products.

They're obviously designed to do maximum political damage. The likely timing couldn't be worse for Bush's quest for reelection.

More significant than the chance of higher prices for noisy motorbikes is the real potential for a trade war, the earliest signs of which would chill an economy just now regaining stride.

The steel tariffs failed to win Bush the support of the steelworker's union, which endorses the presidential campaign of Rep. Richard Gephardt (D-Mo.).

The president should wonder if they're worth risking his job.

(Author's e-mail: bobt@ogjonline.com)

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