Some people in circles of power equate markets with freedom. They claim
that so-called free trade meets the needs of sellers and buyers.
“The market gives individuals the opportunity to demand and decide, and
entrepreneurs the opportunity to provide,” said then GOP presidential
candidate George W. Bush after returning from China on Dec 9, 1999.
And government’s role? It needs to step aside so that the free market can
naturally balance supply and demand.
Announcing his presidential candidacy in Cedar Rapids, Iowa, Bush said,
“I’ll work to end tariffs and break down barriers everywhere, entirely, so
the whole world trades in freedom. The fearful build walls. The confident
demolish them. I am confident in American workers and farmers and producers.
And I am confident that America’s best is the best in the world.”
Now that Bush is in the White House, does his talk about freedom, market and
trade match its walk? We turn our eyes to what the president is doing for
the steel market.
On June 5, President Bush moved to restrict steel imports from South Korea.
As a result, the U.S. Trade Representative has launched a Section 201
investigation to determine if Korean steel producers are unfairly competing
with the U.S. steel industry.
Companies and workers in the U.S. steel industry want the Bush
administration to give them government protection from South Korean steel.
The U.S. buys a bit of Korean steel.
“Korea, ranking No. 6 in terms of global steel output, was the world's
fourth largest steel exporter to the U.S. market last year, with shipments
totaling 2.35 million tons, taking a market share of 7.1 percent,” according
to a recent report in the Korea Herald.
Presumably, the Koreans are producing steel at a lower cost than the U.S.
Which means in part that the wages of Korean steelworkers are lower than
their U.S. counterparts.
Economist Dean Baker has a different view of what ails the U.S. steel
“The Clinton and Bush administrations have both pursued a high dollar
policy, under which the dollar has risen 20-30 percent above a sustainable
level,” Baker noted. “In the short-run this policy has the effect of
reducing the price of imports by approximately 20-30 percent. When the
dollar falls back to a sustainable level, it is not clear that South Korean
steel will still be cheaper than steel made in the United States.”
Export-led economic growth defines the global steel market. South Korea, an
East Asian “tiger economy” that crashed four years ago, is no exception.
What is exceptional is the role of the U.S. economy. It has been compared to
that of a sponge, soaking up the rest of the world’s exports.
The rub is that the U.S. has been able to be the buyer of last resort
because it can borrow big from abroad. Thus keeping the dollar high lets
foreign creditors earn a tidy sum lending to the U.S. so that it can
continue buying other nations’ exports.
In fact, the U.S. is currently borrowing $450 billion a year from foreign
lenders. That’s about $1.23 billion each day. “This level of borrowing
clearly cannot be maintained for more than a few years,” Baker warned.
If the Bush administration erects trade barriers to slow the imports of
Korean steel, such protectionism would surely distort the global steel
market. There’s more, and the effects would fall hardest on foreign shores.
Such a violation of free-trade principles in our economically interdependent
world would make the South Korean economy contract. But in this way, Bush
would for a short time be able to partly displace the effects of the global
economic slowdown onto South Korea and away from domestic producers.
Why? Part of the story is that the president needs the support of domestic
steel firms and their workers in his campaign to convince Congress to
approve the Free Trade Area of the Americas. It’s a proposed expansion of
the North American Free Trade Agreement, which in the past seven years has
sunk farm incomes and increased bankruptcies throughout the U.S., Canada and
Mexico, as U.S. food prices climbed 20 percent, a recent study by Public
Citizen’s Global Trade Watch found.
President Bush praises market competition but seems to be pursuing an
anti-competitive trade policy for U.S. steel makers. It appears that when
it comes to the steel market, free trade is to freedom and trade what Apple
Jacks are to apples and jacks.
Seth Sandronsky is an editor with Because People Matter, Sacramentos
progressive newspaper <email@example.com>.