WASHINGTON — U.S. President George W. Bush’s decision to impose tariffs on steel imports into the United States has been decried as a politically motivated and economically ruinous move that marks the end of free trade and initiates a battle in the World Trade Organization.
We could, of course, dispatch our experts again to WTO hearings and start the traditional international charges and countercharges. The better alternative is to use this occasion to informally delineate a U.S. trade strategy that lets our industry and foreign friends know where we stand and where we are headed. Doing so will provide predictability to the market and consistency to our decision-making, both of which will increase market confidence.
Here are the components of our trade strategy: First is world leadership. The U.S. carries the leadership mantle due to astute policymaking, a willingness to contribute to the greater global good, and fortuitous developments in history. Some of our allies desire to be the leaders when it comes to international economic standards but are happy to let us bear the burden of armed conflict or the risk of terrorism. Global leadership is not a partitionable function, applicable to only a few issues: It is all encompassing.
Next are the benefits of leadership. We don’t know how long the currently unassailable position of the U.S. will last, but world history tells us that positions can change. Past leadership is good for prominence in the history books, or for minor privileges, such as Greece’s position of first flag carrier during the Olympics. Past accomplishments do little when it comes to resources or influence. Just think, in 1948 the U.S. almost launched the International Trade Organization, which would have streamlined global commerce. We didn’t push hard then and the effort failed. It took almost 50 years to relaunch such an institution — now called the World Trade Organization, which still does not have the same strengths as the ITO would have had. It is important to make hay while the sun shines. Britain, long in decline, was able to draw on the resources acquired during the height of empire for more than half a century. The U.S. will get things done now and also acquire bankable resources for a rainy day.
Third, we need ongoing international help in counting our blessings when it comes to free trade. Every elected official has many vocal constituents recount vivid tales of travails caused by imports. The positive effects caused by free trade are not self-evident; they must be explained, defined and provided by industry and our trading partners on a regular basis, particularly when it comes to jobs. As far as congressional votes go, trade-related employment effects are the currency of the realm.
Fourth, in a global world, local issues are important. When it comes to trade, expectations of a perfect track record may be the enemy of good achievements. Trade is only one component of the mosaic of mankind’s activity. Policy needs to reflect the broad scope of human desires and needs. The steel decision needs to be seen in such a context. There is a political price tag associated with strong U.S. support of free trade. The rare and limited protection of a domestic industry with much leverage is such a price.
During the anthrax scare, the U.S. government negotiated rather harshly with Bayer, the producer of Cipro. Some claimed that such an approach was in violation of long-standing support for intellectual property rights. Realistically, it is an emergency-appropriate deviation from the established routine, a necessary price of past and future enforcement consistency.
Fifth, our trade strategy is balanced. The fact that jobs matter also helps the free traders. As the chairman of the congressional House Small Business Committee stated: “I will watch very carefully how the steel tariffs affect the steel users and exporters in my district. And if jobs get lost, I will pounce!” Our representatives have become familiar with global concerns. In the future, international trade actions will perhaps mainly be addressed domestically, after a battle between, say, sugar vs. steel interests.
Was the steel decision political? Of course it was, in the sense of exercising the art of compromise. The decision also defines new boundaries. It has a clear context, provides direction and promises containment. It demonstrates U.S. leadership and, simultaneously, strengthens the world trade framework.