Pressure to protect US trade not easing, Bush flip-flopping

There is no sign of a quick easing of pressure on President Bush to provide trade protection for besieged US industries, especially with his re-election race ahead and manufacturing employment still in free-fall.

Experts say, however, that the Bush administration’s hasty turnabout over steel may foreshadow more careful picking of future trade battles. As for steel, they said Bush wanted to honour a 2000 campaign pledge to the domestic industry, and the tariffs were imposed despite overwhelming evidence they could not survive a challenge from the World Trade Organisation. Trade analysts also said Bush leveraged the trade penalties on steel into congressional passage of legislation that gave the president power to negotiate new trade agreements, including one that would create a hemisphere-wide free trade zone. Bush has resorted to selected protectionism while espousing allegiance to free trade. In doing so, he is using the same tactics as many of his predecessors, seeking to win votes for free trade by offering measured doses of protecting industry. “The whole history of free trade is littered with squalid little side deals that provide favoured industries with protectionism,” said Brink Lindsey, a trade economist at Cato Institute, a Washington think tank. “But I don’t think this administration realised the black eye it was going to receive over the steel issue.”

The steel case put a variety of US producers, from citrus farmers in Florida to nut growers in California, at risk of retaliatory tariffs from Europe. A top Bush aide said the potential trade penalties from abroad were “minuscule” in the context of the overall US economy. Explaining the president’s decision, chief of staff Andrew Card also told Fox News Sunday that it took into account “the restructuring that had to take place and did take place in the steel industry.” Bush will face a political backlash from the steel industry, a critical force in Pennsylvania, West Virginia and Ohio, even though the decision appeases a larger collection of states upset by the tariffs.

Mark Glyptis, president of the Independent Steelworkers in Weirton, WVa, backed Bush last month when he signed a $401 billion defence spending bill. Glyptis belongs to the Workforce Coalition, a group that lobbies for defence spending. But now, Glyptis is angry at Bush’s recent decision to end tariffs. “I can promise you this: Our union will now work very hard to make sure George W Bush joins the ranks of the unemployed next year,” Glyptis told The Charleston Gazette for Sunday’s edition.The Democratic presidential candidates seized on the flip-flop as yet another example of flawed Bush economic policies. Rep Dick Gephardt, D-Mo, said Bush’s withdrawal of the steel tariffs demonstrated a “callous disregard for the workers and the communities whose jobs and livelihoods have been decimated by unfair competition.” Because of attacks like that and Bush’s vulnerabilities on jobs, analysts believe the administration will continue sounding a tough line on trade at least through the November election.

The government announced Friday that even though the overall unemployment rate dropped to 5.9 percent in November, manufacturers suffered a 40th consecutive month of job losses. During the past three years, 2.8 million factory jobs — one in six — have disappeared. That has raised fears that many of those jobs may be lost forever to overseas factories where labour costs much less. The administration insists the economy finally is turning around but also is trying to show through its trade policy that it is doing everything possible to bolster job growth. Many analysts believe that China will be the next big target. The US trade deficit with China was $103 billion last year and is headed for $120 billion or higher this year, the largest imbalances ever recorded with any country. The administration put quotas on certain Chinese textiles and apparel last month and is threatening to levy duties on Chinese television sets. Disputes over Chinese furniture and barriers to American soybean sales in China are probable issues.

Bush and Treasury Secretary John Snow have lobbied Chinese leaders to stop pegging the value of the Chinese currency to the US dollar. US manufacturers contend that practice gives Chinese goods as much as a 40 percent advantage over American products. Members of Congress are threatening across-the-board tariffs on Chinese goods as punishment for China’s currency policy. Talk of increasing trade barriers led Federal Reserve Chairman Alan Greenspan to warn recently, “It is imperative that creeping protectionism be thwarted and reversed.” While economists are big fans of reducing trade barriers as the best way to achieve maximum global growth rates, they agree that such economic principles are a tough political sell during hard times. “Economists are opposed to any kind of trade restrictions,” said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis, “but political reality often forces compromises.”