From: matus [matus@snet.net]
Sent: Thursday, April 11, 2002 12:05 AM
To: matus@snet.net
Subject: MFD List - Harsh international reaction to steel tariff

(Bush recently imposed an import steel tariff, this article relates the
harsh reaction this so called 'free market' supporter has received. - Mike)

Harsh international reaction to steel tariff
----------
Washington Post
   By imposing a high tariff on imported steel, President Bush
   has opened up his administration to charges of hypocrisy.
   International critics point out that Bush espouses free trade
   and free markets, but practices different policies at home.
   (03/07/02)
http://www.free-market.net/rd/90217108.html

http://www.washingtonpost.com/wp-dyn/articles/A51352-2002Mar6.html

Reaction Abroad on Steel Is Harsh
Bush Decision to Impose Tariffs Called Setback to Free-Trade Effort

By Steven Pearlstein and Clay Chandler
Washington Post Staff Writers
Thursday, March 7, 2002; Page E01



Six weeks ago, speaking at the ornate headquarters of the Organization of
American States in Washington, President Bush called on the assembled
diplomats to step up the fight for economic liberalization around the world,
challenging those who would "hold out the false comfort of protectionism."

As Bush spoke, the collapse of an Argentine economy had begun to undermine
faith in the U.S. model of free trade and free markets, much as the Asian
economic crisis had done only two years before. His message to the doubters:
It's worked for us, and it can work for you.

Now, with his decision this week to impose temporary tariffs on imported
steel, Bush has opened up his administration to charges that he can talk the
talk of free trade, but not walk the walk.

>From Canberra, Australia, to London, from Tokyo to Brasilia, world leaders
took turns pointing out what they viewed as U.S. hypocrisy. America's
largest trading partner, Europe, threatened to retaliate with its own
tariffs, and Japan, Australia, South Korea and Brazil promised to take the
United States to court over the issue -- in this case, the Geneva-based
World Trade Organization -- despite protests from U.S. officials that the
tariffs comply with rules allowing just such temporary "safeguards."

"The international market isn't the Wild West, where everyone acts as he
pleases," said the European Union's trade commissioner, Pascal Lamy,
reflecting the widespread European displeasure with what they view as the
unbridled unilateralism of the Bush administration.

Although less than 2 percent of the EU's steel production is likely to be
affected by the U.S. decision, Lamy said the EU faces the almost certain
prospect that all that low-priced Chinese, Ukrainian and Russian steel that
used to unload in Long Beach, Calif., and New Orleans would be diverted to
Rotterdam and Hamburg -- a fact not lost on Europe's political leaders, who
have already gone through the painful process of privatizing their once
government-owned steel industries.

In Germany yesterday, Chancellor Gerhard Schroeder declared the Bush
decision"against free world markets," while French President Jacques Chirac
called the move "serious and unacceptable." In London, Patricia Hewitt,
Britain's minister of trade and industry, took to the floor of the House of
Commons yesterday to ask, "Why should developing countries commit to free
and open markets when the U.S. closes its domestic market to address a
problem which many see as largely of the U.S. industry's own making?"

"It makes a mockery of America's claims to be a champion of free trade,"
said the normally pro-American Daily Telegraph, reflecting the unanimous
condemnation of the steel decision in the British press.

Meanwhile in Asia, China's Foreign Trade Ministry declared Beijing's "strong
displeasure" at the U.S. action, while a top South Korean trade official
called it nothing less than a "tragedy" for that country's struggling
economy. Japan's trade minister, Takeo Hiranuma, condemned the U.S. move as
"deeply regretable" and warned it could well trigger "compound
retaliations." Indeed, Russia's decision earlier in the week to ban imports
of U.S. poultry -- for health reasons -- signaled the low-level trade war
may have already begun.

In Washington yesterday, Bush administration officials reiterated their view
in private that the pursuit of trade liberalization always involves striking
a politically delicate balance between the demands of domestic
constituencies on the one hand and trading partners on the other. Whatever
damage the temporary tariffs might inflict on the political cause of free
trade, they argue, is nothing compared with the damage that would have been
caused if half of the U.S. steel industry were forced to shut down.

Still, there was no disputing that the decision has already caused the
United States to cede some of the moral high ground on free trade.

"It's such a blatant exception to free-trade principles that it will put us
on the defensive, that's for sure," said Murray L. Weidenbaum, a top White
House economist in the Reagan administration.

And Clyde Prestowitz, president of the Economic Strategy Institute, noted
that the steel decision is not the first time the Bush administration has
signaled a tactical retreat in an effort to win the worldwide war for free
trade. Just last month, he noted, in a blatant bid to win House passage of
legislation giving the president authority to negotiate new trade treaties,
the White House agreed to renege on a policy that allows some Caribbean-made
clothing to enter the United States duty-free.

Prestowitz said there was now "zero probability" that South Korea would lift
restrictions on imports of American movies, as had been talked about, or
that Brazil would join in any serious talks to create a free-trade zone for
the entire Western Hemisphere.

But other analysts cautioned that much of the huffing and puffing in foreign
capitals is mostly just political posturing aimed at gaining advantage in
future rounds of trade negotiations.

"This is tough diplomatics, not hypocrisy," said David Richardson, a trade
expert at the Maxwell School of Public Policy at Syracuse University.
Richardson called the decision a "carefully calibrated gamble," and
predicted the administration will use the tariffs to accelerate negotiations
in Paris aimed at closing inefficient steel plants around the world and
eliminating the endemic overcapacity that is at the heart of the steel
problem.

Indeed, for all their talk about free-trade principles, U.S. Trade
Representative Robert B. Zoellick reiterated yesterday that none of the
countries complaining about the U.S. action come to the table with clean
hands on the issue of steel subsidies and protections.

But private analysts warned that the decision to indulge in a bit of
protectionism today will eventually require U.S. negotiators to give up
something else on its trade agenda sometime later.

"The issue isn't about control of the moral high ground but how much of our
negotiating capital we will have to expend," said Lael Brainard, senior
fellow at the Brookings Institution.

C. Fred Bergsten, managing director of the Institute for International
Economics, agreed.

"This gives the French and others in Europe a very handy excuse to get on
their high horses and say it's all U.S. hypocrisy," he said. "But really
what this does is give them a better chance to torpedo something that we
want, like opening up their markets to American agricultural products or
financial services. The people who will pay for this in the long run aren't
so much steel consumers -- it's U.S. exporters."

Pearlstein reported from Washington, Chandler from Hong Kong. Correspondent
T.R. Reid in London contributed to this report.



© 2002 The Washington Post Company

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