NCPA - National Center for Policy Analysis

The Consequences of Protectionism

March 11, 2002

Even if President Bush had rejected new tariffs, the U.S. steel industry would still be heavily protected from foreign competition, says Bruce Bartlett. And the demand for protection -- and the consequences thereof -- will not end with the selective imposition of tariffs of up to 30 percent.

  • Some 80 percent of steel imports were already subject to tariffs under previous trade rulings, according to Brink Lindsey of the Cato Institute.
  • The decision sets a precedent for other industries that want increased protection against imports, such as domestic textile mills.
  • The steel industry has other demands, the most important of which is a government bailout of their so-called legacy costs -- health and pension benefits promised to retired steel workers that the industry can no longer afford.

The only argument in favor of the steel tariffs is that Trade Promotion Authority might die in Congress without them. But Japan and the European Union have already announced plans to challenge Bush's action. Even if they don't retaliate against the U.S. immediately, they undoubtedly will find ways to get even at some point.

This is why trade protection is so often self-defeating. What one industry gains in terms of lower imports frequently is paid for by other industries in terms of lost exports.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, March 11, 2002.


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