It's interesting that a foreign-trade&finance expert like PK never mentions that a lot of the steel industry's problems recently have been due to the steep appreciation of the dollar (relative to its biggest trading partners) since 1995.
Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine > [no mention of the 'Mexico' bailout as a form of > protectionism...] > > [NYTimes] > March 8, 2002 > Testing His Metal > By PAUL KRUGMAN > Just a few days ago, some supporters of George W. Bush hoped > that he would show his mettle by standing up to steel industry > demands for tariff protection. Instead he capitulated, with a > cravenness that surprised even his critics. > > It's quite a contrast with Bill Clinton, who - like Mr. Bush - > declared his belief in the benefits of free trade, but - unlike > Mr. Bush - was willing to spend a lot of political capital in > support of that belief. Many Democrats are protectionists, so > Mr. Clinton reached out for Republican support to pass both the > North American Free Trade Agreement and the treaty creating the > World Trade Organization. He defied intense bipartisan > opposition to rescue Mexico from its 1995 financial crisis, > which might have destroyed Nafta, and resisted pressure to limit > imports, including steel imports, during the Asian financial > crisis of 1997-1998. > > It's possible that Mr. Clinton's determination to do what he > believed was right on international trade cost the Democrats the > White House - not just because West Virginia's electoral votes > provided Mr. Bush with his winning margin, but because Mr. > Clinton's free-trade policies fueled Ralph Nader's spoiler > campaign. > > Now we know for sure what some of us already suspected: that the > Bush administration is all hat and no cattle when it comes to > free trade, and probably free markets in general. > > Never mind Mr. Bush's claim that his decision to impose high > tariffs on imported steel was simply a matter of enforcing the > law. Nothing in U.S. law obliged him to impose tariffs - and > it's pretty clear that the tariffs violate our international > trade treaties. > > We can also dismiss the claim that this was "temporary relief so > that the industry could restructure itself." Traditional steel > producers are in long-term decline, the result less of imports > than of competition from so-called mini-mills, exacerbated by > the fact that an increasingly service-oriented economy uses far > less steel per dollar of G.D.P. than it used to. A temporary > import tariff won't turn this trend around. > > True, the steel industry does have a special problem: "legacy > costs," the benefits steel companies promised to retired workers > in happier days. These costs mean that the failure of major > companies would cause disproportionate hardship; they also make > it hard for the industry to reorganize itself, because no > investor wants to buy a company burdened with huge liabilities. > > But economists long ago concluded that import restrictions are > the wrong way to deal with domestic problems. Such problems > should, instead, be dealt with at the source - in this case, by > having the government take over at least some of those > liabilities. Trying to mitigate the problem with tariffs will be > far less effective, and will impose a lot of collateral damage. > As one harsh critic of the administration's action declared, > tariffs "are nothing more than taxes that hurt low- and > moderate-income people." > > Oh, sorry - that wasn't an administration critic. That's what > Robert Zoellick, Mr. Bush's trade representative, said a few > weeks before his master decided that protectionism in the > pursuit of political advantage is no vice. > > If Mr. Bush really felt he had to do something for the steel > industry, why not address the legacy costs? His excuse - that > such action is up to Congress, not the White House - was, like > the claim that he was just upholding the law, a weak (and > characteristic) effort to shift the blame. (Am I the only one > who thinks of this as the 'Johnny did it!' administration?) The > real reason, presumably, was that direct help to the industry > would be an explicit budget item, while the costs of > protectionism - though far larger - are mostly hidden. > > In addition to being bad economics, the steel tariffs are > terrible diplomacy. Our staunchest allies are outraged: > Britain's prime minister, Tony Blair, pronounced the move > "unwarranted, unacceptable and wrong." Even before the steel > verdict, the United States was developing a reputation for > hypocrisy - ready and willing to criticize others for failing to > live up to their responsibilities, but unwilling to live up to > its own. Now that our free-trade rhetoric has proved empty, who > will listen to our preaching? > > Let's be clear: Many Democrats were on the wrong side of the > steel issue. But it was up to Mr. Bush to show leadership, to > demonstrate that he really cares about the principles he > espouses. I guess not.