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Protectionism Lives Through Steel
Our Buy American Mention of the Week!
by Roger Simmermaker
March 8, 2002

It seems that every professed free-trade president in recent memory has flirted in some way with protectionist policies, yet George W. Bush has come out with maybe not one of biggest tariffs in terms of percentage, but arguably one of the most significant in terms of industry and its relation to both economic and national security. George W. certainly did not pattern himself after his Father, but his Grandfather, Senator Prescott Bush, publicly voiced his support for a policy of protection for the U.S. market. Commenting on Dwight Eisenhower's free-trade policies, Prescott Bush said "I was never a free trader. I never felt we could abolish tariffs and do away with all protective devices, because we would have been flooded with imports, which would have hurt our economy, hurt our defense posture, and I felt these things had to be done gradually, selectively." Few industries today can claim to play a more significant role in our "defense posture" than steel.

The typical free trade arguments against tariffs don't line up with pure free-market advocates in this case anyway. Heck, even Business Week applauded Bush's decision for tariffs on imported steel, although they still wrongly believe sustained protectionism makes America poorer in the long run. Free traders can't argue that American steel production is too inefficient, since U.S.-based Nucor Steel is one of the most efficient steel producers on earth.

The smaller, less efficient steel producers that have filed for bankruptcy did so because countries around the globe have illegally dumped steel since the Asian crisis of 1997. Free-market theorists also cannot fault U.S. steel for artificially high prices since domestic prices have plummeted 50% since 1997. Nor can they accuse the U.S. Government of too much industry regulation since it is precisely a free-market hands-off policy that has resulted in global overproduction and has driven prices through the floor.

The real problem is that our U.S Government has defaulted on its responsibility to regulate trade with foreign nations per the U.S. Constitution, which has forced 30 domestic producers to go bankrupt, and the ones that remain can't make enough profits to justify spending on newer or more efficient technology. It is blatantly unfair to accuse any U.S. industry of not investing to upgrade their efficiency when its own government has failed to enforce anti-dumping laws that strip companies of the dollars necessary to make those investments possible. Mass layoffs accompany bankruptcies, and free traders will nod in agreement if you remind them that plants operating at less than 100% lose their efficiency capabilities due to lower economies-of-scale.

The steel industry, as well as any other American industry, has every right to be protectionist. Our government has a responsibility to protect any U.S. industry it has saddled with costly laws and regulations from foreign industry and production that is exempt from those same costly laws and regulations. These include, but are not limited to, higher labor costs, tax laws, safety laws, environmental laws, labor laws, civil rights laws, etc.

Anything less than equalizing tariffs on imports is an outright subsidy for foreign production and a free ride on the backs of the American workers, companies and unions that created our high wages and high standard of living. America's unions and protective tariffs worked hand-in-hand to create the lucrative market that imports are now whittling away at. Protectionism needs to be protected, and the steel industry is a wonderful place to start.


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