When US President George W. Bush decided earlier this month to impose punitive tariffs on steel imports, there was considerable support for it among ordinary Americans. His already-spectacular ratings rose even higher.
The White House was seen as acting tough, putting US interests first rather than pandering to ungrateful foreigners. Those American commentators who said that Bush’s aims were more mercenary — to win support in steel-producing areas like Pennsylvania and so retain control of the House of Representatives — were damned as partisan cynics. The even smaller number who drew an analogy with President Hoover’s signature to the Smoot-Hawley protection tariff in 1932 which spiraled into the Great Depression, and warned that Bush’s protectionism might trigger a new international trade war with similar catastrophic consequences, were derided as naive and out of touch. That is not altogether surprising. In its more recent trade clashes, notably with the European Union over bananas and hormone-enhanced beef, the US won hands down. That may explain why the Bush administration might have though that it was on to a winner. But while it won those battles, the chances of winning any more look bleak.
The chickens are already coming home to roost — “chickens” being something of the operative word. Russia, the largest consumer in the world of US poultry, last week banned such imports, ostensibly on the grounds that they contain too many antibiotics — but no one can be in any doubt Moscow was retaliating for the steel tariffs.
It is the Europeans, however, who look set to do the greater damage — not so much to the American economy as to George Bush himself. If he reckoned that by the time the WTO censured the US, the mid-term elections would be over and the votes banked, he reckoned without the cunning of the Brussels Eurocrats.The decision to increase levies on goods from the states where Bush narrowly won in the 2000 presidential elections or where he hopes to win in this year’s mid-term elections — such as orange juice from Florida and Harley-Davidson motorbikes from Wisconsin — merits a gasp of admiration, if not actual applause, not so much for what it may achieve but for its sheer boldness.
This is, without doubt, overt interference in the American political system. But Bush can hardly complain. He started the game, trying to use protectionism for domestic political advantage. The Europeans are merely playing a return volley, but doing it with a master shot.
Unfortunately, that is unlikely to be the end of it. Initially, after the WTO’s decision in January that American tax breaks for corporations like GE, Boeing and Microsoft amounted to illegal export subsidies of $4 billion, the EU had said that it would not use levies to retaliate; but that was before President Bush went on the attack with his steel tariffs. European hearts have now hardened. He cannot afford to retract, but if he does not, the likelihood is yet more European countermeasures. Meanwhile, South Korea, Japan and China are also preparing their responses.
It looks as it is going to be a very dirty trade war.
