W.T.O. Rules Against U.S. on Steel Tariff

[Timber Loftis]

TL's oh-so-brief OpEd:
I predicted this nearly a year ago, some of you may remember. The US officials whined as expected, saying unfair decisions undermine the WTO blahda blah blah. Yeah, same song and [img]graemlins/dancing.gif[/img] - if the US doesn't like a decision it threatens to leave the body. Just like the UN. Whatever.

Now, there is a reasonable argument to be made that the WTO treaty should protect anti-dumping. "Dumping" occurs when a nation (take Japan as a not-so-hypothetical) sells stuff (take steel as a not-so-hypothetical) cheaper than its real cost in a country (take US as a not-so-hypothetical) just to destroy the domestic producers. The theory is that it's worth taking the loss of profits for a few years to gain a near-monopoly on the market. Well, accounting for that just isn't really in the WTO agreements. NAFTA has a good anti-dumping agreement (which, incidentally leads to many high-paid lawyer jobs in D.C.). But, the USA signed on to the WTO/GATT without such an agreement in place. Maybe they need to address that, but until then they should live by the rules.

Today's NY Times:

W.T.O. Rules Against U.S. on Steel Tariff By ELIZABETH BECKER WASHINGTON, March 26 — The World Trade Organization ruled today that the steel tariffs imposed by President Bush last year were illegal. The administration said it would appeal the decision. While the trade decision was called interim, with the final report expected next month, it is rare for an interim decision to be reversed. If the United States loses next month, European and other nations could impose trade sanctions of comparable value against the United States. Last spring, Mr. Bush imposed tariffs of nearly 30 percent on most types of steel imported from Europe, Asia and South America, the biggest government action to protect an industry in several decades. While it was praised by the steel industry and trade unionists, the move was criticized by free trade advocates and companies that use steel in manufacturing. The case against the tariffs was brought by the European Union, which accused the United States of illegally protecting the steel industry. Pascal Lamy, the European Union's trade commissioner, called the tariffs "unjustified, highly protectionist U.S. measures." "I am in no doubt that the U.S. will lose this case, as it has lost all six previous safeguard cases," Mr. Lamy said when the initial case was brought against the United States. But there was no celebratory statement or any comment from the Europeans today. All spokesmen said they would not discuss an interim decision, but foreign officials also said Europe wanted to avoid creating a further division with the United States in a time of war. Today's ruling, which was not a surprise, was the second major loss for the United States at the W.T.O. in the last year. The trade panel awarded Europe the right to impose $4 billion worth of trade sanctions against the United States for giving tax breaks to American exporters through foreign sales corporations. When administration officials imposed the steel tariffs they said they were legal under provisions in the world trading rules allowing a response to a surge of steel imports. The tariffs were meant to help the American steel industry find its footing in the global market. American trade officials said today that the strategy worked. "The domestic steel industry has undergone an unprecedented level of consolidation and restructuring over the last year that have made it more competitive," said one American trade official, who insisted on not being identified. Democratic lawmakers criticized the trade decision, citing a United States International Trade Commission study done before the tariffs were imposed that showed imports were seriously injuring important parts of the American steel industry. They said the W.T.O. had exceeded its authority. "I support the goal of an international trading system," said Senator Max Baucus, Democrat of Montana. "But we have a growing problem with dispute settlement decisions that are inventing obligations and requirements to which the United States and other countries never agreed. Ultimately, these types of decisions will only undermine confidence in the W.T.O." Some Democrats said the administration was partly to blame for failing to adopt an aggressive strategy to end a series of rulings against the United States. Representative Sander M. Levin, Democrat of Michigan and ranking minority member of the House Ways and Means trade subcommittee, accused the administration of overseeing the loss of 13 of 15 cases brought against the United States since 2001. "This decision furthers a trend that jeopardizes the credibility of the W.T.O. dispute-settlement system and must serve as a wake-up call for the administration," Mr. Levin said. In Congressional hearings today, steel officials and union representatives praised the tariffs. Leo W. Gerard, international president of the United Steelworkers of America, told lawmakers that they should not forget the history that led to the president's decision to impose the steel tariffs. For several years, he said, the domestic steel industry was "under attack from foreign producers, aided and abetted by foreign governments through subsidies and other market manipulations." "The consequences of this assault have been disastrous for our steelworkers and for the American steel industry," Mr. Gerard said. The result, he said, was that 37 companies were forced into bankruptcy, 54,000 steel workers lost their jobs, and pension plans and health care programs were being scaled back for retirees, widows and other dependents. But some manufacturers have complained that the tariffs have led to higher prices for steel and hurt their companies. Wes Smith, the president of the E&E Manufacturing Company, with 250 employees in Plymouth, Mich., testified that the tariffs and rising cost of steel amounted to a new tax for him. "We are willing to meet the challenge of competing with the Asians," Mr. Smith said. "However, we cannot do that with our hands tied behind our backs by having our government tax our largest input by 30 percent."

[wellard]

Why Why oh Why does a grown up nation like the U.S need to be told it has done wrong by some world body. It was a childish act that has upset a lot of the friends of America. If you have a problem with a certain country *cough Japan cough* then take the issue up with that country. Take those poor working class people in Australia that over the last ten years have had wages, conditions and jobs slashed in order to be competitive in a world marketplace. Cuts which have hammered whole cities and not to mention the miners who fetch the coal and iron. The mantra used to justify such hardships was the "level playing field of world trade" I'd personally like to see an apology from those responsible but all we are going to get methinks is a "the U.S. has been done wrong again whinge"

If you all think this makes me angry, don't get me started on the subsidies you give to your farmers

MR ANGRY from AUSTRALIA [img]tongue.gif[/img]

[Thorfinn]

I knew it would fall out this way, too, but HIP HIP HOORAY!!!! (Sorry for the shouting, but it is nice when common sense wins the day every once in a while, even if it is purely fortuitous.)

Ever since I studied economics, I have viewed tariffs thusly;

You impose an embargo on some nation because you think that economic sanctions will impose some kind of hardship. Unfortunately, that hardship is never on the government -- they can just tax the serfs to pay for the added cost of doing business. The common people get hurt because they cannot get cheaper goods from other nations, then they get whacked again when the gov't raises taxes to pay thier bills.

So if indeed embargos are Bad Things^TM, why, oh why would any nation voluntarily impose a tariff, quota or other restriction, in effect a mini-embargo, upon itself? Oh, yes, because it doesn't affect the government. It ly affects the people, and that can be propagandized as some evil action of some evil other nation.

[EDIT]
I do find it ironic that this body, who allegedly stands for free trade, decided that in response to trade restrictions, there should be other restrictions. Hey, if the US civilian population has to pay more for their steel, why shouldn't European civilians have to pay more for their goods, too...
[/EDIT]

[EDIT2]
Don't get me started on our "farm" subsidies. Over 60% of it goes to "farmers" such as David Rockefeller (yes, of that Rockefeller family), The Hartford Insurance Group, 66 members of Congress, including 3 multi-millionaires, Sam Donaldson and Scottie Pippin. The Environmental Working Group put up a page with the names of the recipients, and it was eye-opening to say the least...
[/EDIT2]

[ 03-27-2003, 07:22 PM: Message edited by: Thorfinn ]

[Timber Loftis]

Moreover, from and economics purist point-of-view, protectionism is bad for us all. If those islands in the mediterranean cannot compete with Ohio-based and Nicaragua-farmed Chiquita Banana, then it would be best for us all if they simply grew something they were better at - be it apples, grapes, whatever.

It's a notion of utility: why support an industry (via tarrifs on foreign competitors or subsidies on domestic producers, which are essentially the same thing) that cannot make money and stay afloat? The answer usually is "the jobs, silly, it's all the jobs." Well, yes transition from one economy to another is hard on the individuals at the moment - but better for the greater good in the long run.

Take Vermont's historical economies as a for instance. Though there have always been other products to come from VT (wood, for instance), the usage of farms in VT is a good picture of changing economies. First, sheep were produced there for local purposes - and shipped up and down the rivers of VT as far as Boston for sale. As railroads opened up, overcoming the transportation problems, the local rivers of VT became a non-issue, and Boston and New England could get their sheep goods from Wisconsin. Sheep farming largely dried up, and more farms began producing dairy. Cows like the climate of Vermont (cold). Sometime about 1970, it became cheaper to house cattle in air-conditioned warehouses in California rather than on hills in VT, so the "cold" advantage disappeared, meaning that only specialty dairy products (Cabot Cheese, B&J Ice Cream) could be supported in VT. Now, those farmers have over the past few decades adopted two new production types in Vermont: (1) eco-tourism (such as the Billings-Rockefeller farm in Woodstock, and such as selling farmland for little out-of-the-way retreats and ski slopes), and electronics manufacturing (e.g. IBM) (which is where many farm families have sought work).

While Vermont's model is odd indeed, it shows how the market causes the greatest utility use of the land/people/resources. Messing with this is like mucking with the environment, IMHO: it's combating nature herself, who always wins in the end.

Now, let's keep in mind that "dumping" is bad. If Chiquita can sell for less and make more profit than those small producers in the EU market, that's one thing. But, if Chiquita is taking a loss just to out-last those small producers and gain a monopoly, it is a Very Bad Thing (TM) and should be illegal under the WTO rules.

And Thorfinn, the notion of further trade restrictions to make up for past wrongs is simply what the nations agreed on as a proper punishment. The US wins a beef-hormone case, the EU refuses to relent, so the US gets to put tarrifs on Ducati motorcycles to make up for the difference. Ideally, Ducati and other local mfgr's will go to their government, and the government will face pressure from all sides to right the wrong (the tariff or restriction).

[Davros]

Originally posted by wellard: If you all think this makes me angry, don't get me started on the subsidies you give to your farmers MR ANGRY from AUSTRALIA [img]tongue.gif[/img]

I can identify with this Wellard [img]smile.gif[/img] , but the US is not alone in subsidising their farmers, the EU does its' fair share as well if I recall.

[Attalus]

Timber, have you read John McPhee's The Control of Nature? Chilling stuff. I drive over the Atchafalaya Spillway at least once ayear on my way to Florida or New Orleans, and If you are right, that will all one day be under water. But, not if the U.S. Army Corps of Engineers has its way.

[ 03-30-2003, 05:32 PM: Message edited by: Attalus ]

[Timber Loftis]

Looks pretty good, Attalus. I'll check it out. IMO, the inability to CONTROL nature does not stop us from building are modern marvels IN HARMONY with nature. I'm not saying don't build bridges, just that you can't stop the occassional flood. Boy, I'm starting to drag my own thread offtopic.

[Thorfinn]

Oh, I understand that is what the nations agreed to as a suitable punishment, but considering who is actually harmed by these sanctions, applying the same logic to, say, child abuse, if your neighbor was abusing both your kid and his kid, then the judge hearing the case would rule that you should smack the kids around a while, too. That outghta show him...

[ 03-31-2003, 10:50 AM: Message edited by: Thorfinn ]

[Dreamer128]

Originally posted by Davros: Quote: Originally posted by wellard: If you all think this makes me angry, don't get me started on the subsidies you give to your farmers MR ANGRY from AUSTRALIA [img]tongue.gif[/img]

I can identify with this Wellard [img]smile.gif[/img] , but the US is not alone in subsidising their farmers, the EU does its' fair share as well if I recall.[/QUOTE]'Fair share'?! I was under the impression that 70% of the EU budget was wasted on this. We've been trying to get rid of this waste of money for years now, but the French wont agree on any budget cuts (big surprise- most of it goes to French farmers). So now we just spend billions on food that gets thrown away anyway, because we can import it much cheaper from the Third World...

[Timber Loftis]

Thorfinn, you are correct to point out that the "Two Wrongs Make Right" system of punishment is certainly illogical at best.

Dreamer128 wrote: 'Fair share'?! I was under the impression that 70% of the EU budget was wasted on this. We've been trying to get rid of this waste of money for years now, but the French wont agree on any budget cuts (big surprise- most of it goes to French farmers). So now we just spend billions on food that gets thrown away anyway, because we can import it much cheaper from the Third World...

Trust me, I love to grind this axe against US farmers, too. Especially since these days the majority of such benefits are enjoyed by BigAgribusiness(TM). Tax me to keep farmers afloat -- that's welfare, pure and simple.

[edit:] Let me temper this, however. Though it may not be smart trade-wise, keeping American farms functioning is smart from a national security standpoint. Just like we pay taxes to buy tanks, it is smart to keep enough farms operating that we can say "F-U" to other nations if we need to.

[ 03-31-2003, 01:18 PM: Message edited by: Timber Loftis ]