Steely Motives

The American steel industry, protected by so-called voluntary import restraints for almost five years, is mounting a massive campaign to extend for another five years these limits on competition. Protectionism is indeed addictive. And, like so many addictive substances, it also is unhealthy.

Congressmen, led by their rust-belt colleagues, have been rushing to sign on as sponsors of legislation extending the restraints when they expire at the end of September. That is a sign of the lingering illusion that protectionism buys jobs and prosperity. It does not. All it does is discourage and postpone the modernization and commitment to competitiveness that are essential for the future growth and development of American industry.

The campaign is being waged in the guise of assuring fair trade, and of punishing foreign forces that are charged with subsidizing their own industries and dumping the products on the world market. That is a hollow argument. Rules already exist to protect American manufacturers from dumping and unfair practices, as is evident in the new actions being taken by the American government under the omnibus trade act of last year.

Some steel makers acknowledge that they have no need now for the protection of the import restrictions because foreign producers are shipping substantially less than the 20% of market that they are allowed to fill under the plan. But the steel makers argue that a downturn of world markets will inevitably see a flood of underpriced foreign steel masking its way to the U.S. market. So they want to be ready. And they want to be ready with the quick and easy instrument of quotas rather than the slower process using anti-dumping legislation.

If steel makers had their way, every American commodity would be erecting new managed trade arrangements to guard its own narrow interests. The result would be distorted markets, erosion of free trade, the risk of reduced competition and price inflation. These negative factors are behind the campaign against the import restrictions being mounted by 189 U.S. manufacturers and exporters who use steel in their products.

The politics of the situation are complicated by a promise made by George Bush in the last days of his successful campaign for President. He said he would extend the voluntary restraints. Fortunately, he did not say how many or how long. He can now demonstrate his own commitment to freer trade by allowing only the most limited and most narrowly defined extension.