I've said it before and I'll say it again: Free trade is always better. Always.
Robert Samuelson explains why:
Consider what happens if Bush retains the [steel] tariffs and defies the WTO.
For starters, he incurs the wrath of many small industrial users of steel -- makers of auto parts, various steel components and machine tools. They've complained that tariffs have raised their costs and undermined their competitiveness against foreign rivals. Indeed, tariffs have probably cost more jobs among steel users than they've saved among producers. Gary Hufbauer and Ben Goodrich of the Institute for International Economics, a think tank, estimate that tariffs preserved 3,500 steel jobs; by contrast, they think that the tariffs might have cost steel users between 12,000 and 43,000 jobs.
We clear?
Whenever anyone tells me that free trade doesn't work, I relate to them this scenario:
We have a product that is produced here in the US, but it also produced more cheaply abroad. These countries have fixed the price in order to destroy America's domestic production industry.
The countries that produce this commodity work against us, and in some cases cooperate with our enemies. Their production facilities are state owned, so the revenue generated goes right into their state coffers, whereas our production facilties are in private hands.
And to make it worse, we let their products in tariff free free while they slap huge tariffs on our exports to them, so we run huge trade deficits with these countries.
I ask: should we stop this injustice and begin to apply punitive tariffs on these foreigners? Wouldn't that undo the harm to the US economy?
The protectionist usually answers "YES!"
And then I tell them the product is OIL.
If only it were so simple. The Steel pension funds are bankrupt and have in turn bankrupted the Federal Pension Guaranty Fund. Someitimes the choice is between two undesirable alternatives. To assume the tarriff was just a Rove inspired sop to steel unionists is just skimming the surface.
"Three big steelmakers accounted for most of the drain on the PBGC’s resources: Bethlehem Steel, whose pension fund required an infusion of $3.7 billion; National Steel, which was $1.1 billion in deficit; and LTV Steel, whose pension bailout (the second in 16 years) cost $1.6 billion.
All three pension plans were bankrupted by the virtual collapse of the US steel industry. Bethlehem, for instance, has 67,000 retirees receiving benefits, 15,000 laid-off workers eligible to receive pensions in the future, and only 13,000 current workers producing profits for the company."
--Corporate bankruptcies exhaust US pension guaranty fund By Patrick Martin
29 January 2003
wsws.org
Samuleson, a brilliant economist, no doubt makes a valid point. However. we have over 100,000 retirees that are about to be bent over a log.
A good argument for fully funding pensions as they are earned, using actuarially sound principles, not so good for defending tariffs now. It would be cheaper in a social welfare sense to directly fund those pensions from general revenues and let one or more of the big steel companies die than accept the economic damage these tariffs are doing to steel users.
