WASHINGTON — I cannot help but remind everyone that I thought President George W. Bush made a bonehead decision when he imposed the quotas on imported steel a couple of months ago. I said it was a mistake for him politically, both domestically and internationally. I said it would destroy his hopes of providing leadership in the world to further lessen trade barriers. And I keep being proven correct.
Now comes a report that the steel quotas are hurting here at home. Steel prices have spiked dramatically. Imports are down. The market is the tightest it has been in 15 years, and prices for the most popular forms of steel used in manufacturing are about 30 percent higher than last summer.
In other words, the president’s effort to assist one industry, steel, is hurting many other manufacturing companies that employ many more workers than do the steel companies. Whatever favor he won with the steel makers and their employees is now being offset by the anger of other manufacturers and their employees, whose jobs are now on the line because of the presidential action.
The zero-sum domestic politics of the American industrial belt is one matter, but Bush has lost on many other fronts. He has angered our international trading partners, first with the steel import tariffs and more recently by signing a farm bill that protects American markets from the products of many less developed nations’ agricultural producers. Bush’s ability to lead the world into a new era of free trade no longer exists.
Bush has also sent a leery Congress a bad message. In short, he has essentially lost control over trade in Congress. The bottom line from members of Congress is: “If the president can be protectionist, why can’t we?”
The president set this cycle in motion in March when he chose politics over principle and imposed steel tariffs. He paid for it over the past month as the Senate worked through a bill to give him the authority he wants to make new trade deals around the world. It was a tough fight, and not a total victory.
The Senate is the free-trade half of the Congress. The House had passed the trade bill earlier in the session with a dramatic and extraordinary display of pure political power by Speaker Dennis Hastert and his team, closing the vote the moment they had the bare majority.
In the Senate, the bill passed by a nice margin, about 2-1. But the devil was in the details. Vice President Richard Cheney had to stick close to the Senate floor most of the week in case he was needed to break tie votes on amendments. (He did have one tie-breaking vote.) The administration got a number of items on the bill it did not want: additional trade-impact assistance in the form of health insurance for laid-off workers; congressional insistence on the right to veto any dilution of antidumping and other trade-remedy laws, effectively gutting the trade-negotiating process; some specific and detailed instructions on what to do, such as a provision that will force U.S. trade negotiators to make open automotive markets a priority in future talks.
These amendments all had broad bipartisan support in a body that traditionally has been a defender of free trade. So, the president got his authority by bare margins, but with strings that will hinder his negotiators’ freedom.
The previous week Congress had passed an appalling farm bill that is worse than anything agricultural protectionists have dared propose in years. The administration officially disapproved, but its resistance was lame and ineffectual. As a result, the president signed an antimarket bill that will raise farm subsidies by more than 80 percent and abandon the previous decade’s effort to kill off this wasteful spending.
Sadly, Bush doesn’t have anyone to blame for this unraveling of trade policy but himself — and his White House advisers. Clearly the steel decision is based on the 2004 electoral map. My contention is that in this context it was a very bad decision, and unfortunately the fallout of the presidential hypocrisy is global. It’s a godsend for protectionists around the world to see how America plays politics with trade. After all, they can play that way, too.
When Bush let the protectionist genie out of the bottle, he set off a whirlwind of trade actions — none of them positive. He hoped that his actions would help him politically. Specifically, he hoped that the steel companies and their workers would support him in the industrial states from Pennsylvania and West Virginia west through Ohio, Indiana and Illinois in his presidential campaign in 2004.
I think his calculations were skewed. The increases in steel prices will hurt more manufacturing workers than the steel tariffs were supposed to help. He has more voters in the industrial belt mad at him than grateful. And his leadership potential in Congress and in the rest of the world is badly damaged, because of this miscalculation.
Trade is a tough subject with which to play politics. It is an easy way to lose votes, and a tough issue on which to win. I’m afraid Bush is learning this lesson the hard way.
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