Show some steel, Mr. Bush
The European Union wants to play tough. And the World Trade Organization wants to help it out. The WTO ruled last week that the 2002 U.S. steel tariffs violate international trade law. The decision clears the way for the EU to make good on its retaliation threats to the Bush administration. And soon we'll find out whether President Bush has the courage of his convictions. I hope that Mr. Bush demonstrates the same leadership on international trade as in geopolitics.
The EU might want to think twice before it launches a trade war against the United States. The Europeans, despite their union, are hardly monolithic. The United Kingdom, Spain, Italy, and Ireland can be counted upon for both support and, ultimately, mediation should a full-scale trade war break out. The France, Germany, Belgium, and Luxembourg axis is one we should dismiss out of hand. And, frankly, they are about as important to American economic interests as they were to our success militarily against Saddam Hussein. They're losers before even the first shot is fired in any trade war.
It may have escaped the attention of the Brussels bureaucrats, but America is Europe's biggest and best customer, and Europeans simply can't afford the price of economic warfare. The U.S. trade deficit with Europe last year totaled more than $82 billion. The United States has not run a trade surplus with Europe since 1992. Collectively, the EU sold the United States far more in goods and services than it bought for more than 10 years.
The president issued the steel tariffs not to alienate the EU but rather to save 150,000 jobs in our beleaguered steel industry. There have been more than 30 industry bankruptcies since 1997, and many of its representatives credit the president's decision to put tariffs on steel imports with keeping the domestic industry alive. The president has a far more important constituency to serve than the members of the WTO and the EU: the American people.
"We have made significant progress in getting back on our feet, which would have been impossible without the president's program," says Thomas J. Usher, chairman and CEO of United States Steel Corp. Usher also calls for a continuation of the tariffs. "Rebuilding the steel industry is not an event; it is a process," he says. "To prematurely end this program would put the restructuring process in jeopardy."
As usual, the boys in Brussels want to play cute. The EU has chosen a list of products to sanction in order to inflict economic and political pain on the United States and Bush. Oh so cleverly, the EU is targeting merchandise from states critical to President Bush's re-election bid. Among the goods pinpointed are textile products from the Southeast, steel from West Virginia, and citrus from Florida.
Bitter battle over bananas. Such sanctions are always designed to carry the most political punch, but playing trade hardball was definitely not invented by the Europeans. Back in 2000, the United States imposed 100 percent tariffs on several European luxury goods. The move followed a bitter battle with Europe over beef and bananas. The EU blinked, however, when the United States threatened to include cashmere on the list of goods to carry the steep tariff. Cashmere products are exported mainly to the United States, and such sanctions would have meant the end of the industry in Scotland. The Europeans got the message.
If the United States were to escalate the conflict beyond steel, we could find ourselves in an actual trade war, something unprecedented in recent history. Nonetheless, escalation cannot be ruled out. The Bush administration has demonstrated that it does not need the approval of the global community when it comes to protecting U.S. interests. Simply put, this is a dangerous and silly game for the EU to play.
The Bush administration may be forced to take further action. The global economy is absolutely dependent on the United States. This country carries an annual current-account deficit of $481 billion with the rest of the world. Our gross domestic product was more than $10 trillion in 2002, greater than the next five countries combined. The success or failure of the American economy is more than important to the rest of the world.
President Bush has some difficult decisions to make. And the EU may be in for an unpleasant surprise.
This story appears in the November 24, 2003 print edition of U.S. News & World Report.