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Steel Quotas

Mises Daily: Saturday, March 20, 1999 by

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The Journal of Commerce
March 22, 1999

A dangerous vote

Strip away all the rhetoric and the question facing Congress and the Clinton administration is simple: Does the United States want to try to stem global financial crisis or accelerate it?

To put it another way, is the United States willing to work to keep afloat the global boat it shares with a cantankerous crew of other nations, many of which are unable or unwilling to help? Or would it rather wrap itself in self-righteousness, stare at its navel and drown with everyone else as the boat sinks?

An overwhelming majority in the U.S. House of Representatives gave a frank answer last week: The House is more interested in the nation's navel than its future. By a vote of 289-141, one short of the number needed to override a veto, it approved a blatantly protectionist bill to slap quotas on steel imports.

Nevermind that the entire world has faced a steel glut as a result of widespread financial crisis, or that demand for American steel is increasing. Nevermind that continuing unemployment in the American steel industry is related more to productivity improvements than foreign competition. Nevermind that the U.S. economy and employment are strong. Nevermind that such quotas would hurt other U.S. industries, violate world trade rules and invite retaliation, a round of protectionist tit-for-tat, just as Washington and the rest of the world are preparing for new trade-liberalization talks.

There are harrumphs that the bill will never be passed into law, that it's a message to nefarious, self-absorbed and unappreciative foreigners. To be sure, there should be no doubt abroad that trade rules should apply to everyone.

But the steel-quota bill's primary message is aimed at a much closer target: U.S. steel makers and their unions. What it says is that a large number of politicians are your friends; kindly remember them when they run for reelection.

What's even more troubling is this won't be the last time a trade issue will face the new Congress. Trade will come up again and again, from the fast-track presidential negotiating authority that is vital for U.S. participation in global negotiations to trade initiatives in regions near and far. This vote sets a highly negative precedent.

Moreover, it does so at a dangerous time. A streak of unthinking xenophobia in the U.S. public is being fanned by a number of factors. One example is the U.S. trade deficit, which leaped 17% in January and could reach more than $200 billion this year, far above last year's record $169 billion. That's going to be noted more for the danger it could pose for the future than for the current economic strength it underlines.

Another example is China and its bid to join the World Trade Organization, an action that would lower Chinese trade barriers and open the way to more U.S. exports. Concerns over China's repressive politics at home and apparent spying in the United States will complicate matters.

And, of course, the politicking has already begun for the 2000 presidential election.

The United States is in the enviable position of having a booming economy at a time when much of the rest of the world is floundering. It is in the strongest position to help pull the rest of the world back to its feet. It may not like that burden. But its own future is tied to everyone else's. If Washington shuns the burden, it won't be able to escape the worldwide economic consequences.



Read William Anderson on the steel industry's History of Privilege.

Read Murray N. Rothbard's The Dangerous Nonsense of Protectionism.