Home » Politics & Society » International Politics » Iron Allies no more?

Iron Allies no more?

© Glenn Brigaldino

Just as all eyes had gotten accustomed to the western allies standing side by side in the US-driven, so-called war or terror, the allies are turning against each other on the economic front. It does not seem to make much sense to anyone that the US would slap tariffs on foreign steel of up to 30 percent. So what is happening and why? To get to the heart of this matter is technically a question economists and lobbyists dwell on; still an average reader, someone from the real world may appreciate a few comments and ideas on why steel is once again the product over which high-tech economies cannot resist squabbling over.

First, it seems that steel is not the dominant issue, it may simply be a shade behind which deeper economic confrontations between globalizations' dominant players take place. For too long the US has maintained an over-valued US-dollar on the world's currency markets. Given that manufactured goods from the US are generally of lower quality than many Asian and most EU products, US exports have been hurting as "made in USA" has become a hard sell. The US is officially denying that the strong dollar is a motivational factor for the steel tariffs, but high level doubts from the EU side do carry some weight. "U.S. Treasury Secretary Paul O'Neill Friday denied claims by the President of the European Central Bank that there was a link between a U.S. decision to impose tariffs on imported steel and the dollar's strength. Washington said this week it was imposing tariffs of up to 30 percent on imported steel, sparking the European Union to officially lodge a complaint with the World Trade Organisation (WTO) seeking the start of consultations with Washington on a settlement to the dispute. The EU later filed a second complaint that asked for consultations on compensation the European Union would seek from the United States to cover the cost of the tariffs." (1)

Secondly, the question of low productivity of US steel producers compared to foreign steel manufacturers is a serious reason for the inability of US producers to compete. The US steel industry is in decline, trying to deny or to reverse this trend artificially, without consideration for the socio-economic underpinnings will do nothing to halt the slide into oblivion. Indeed, the current tariff move appears to have been ill advised and not based on competent economic analysis.

"The punishing import tariffs (President Bush) has authorized will not save the US steel industry, where 31 companies have filed for bankruptcy since 1997. It has resisted consolidation for too long; fat benefits paid to retired steelworkers, of whom there are now 600,000, are alone enough to drive most of them to the wall and the Administration is not going to pick up that bill. And the crisis in steel is global: worldwide, although companies are working at only 77 per cent of capacity, production exceeds demand by 100 million tons a year. Mr. Bush's act has weakened the chances of international agreement to deal with this surplus capacity. It is politically foolish; and it makes no economic sense." (2)

The copyright of the article Iron Allies no more? in International Politics is owned by . Permission to republish Iron Allies no more? in print or online must be granted by the author in writing.