Salvatore Babones - Associate
professor of Sociology and Social Policy at the University of Sydney.
When U.S. president Donald Trump announced sweeping
new tariffs of 25 percent on imported steel and 10 percent on aluminum
Thursday, the world’s commentariat broke out in a frenzy of condemnation. Trump
was accused of playing politics in
a way that could “destabilize the global economy.” It was said that
Trump’s actions could “bring global trade growth
to a halt” (notwithstanding the fact that levels of global trade have
already been declining since
2011). His critics screamed “trade
war.” Canadian and European leaders immediately threatened retaliation. China
didn’t, but American China experts predicted
that Beijing soon would.
It is likely that few, if any, of these experts have read
the two detailed Commerce Department reports that
prompted the tariff decision, or the Defense Department memo endorsing
their findings. The goal of the tariffs proposed by Commerce and endorsed by
the president isn’t to punish Chinese dumping or put an end to free trade. It’s
to ensure that the United States retains any domestic steel and aluminum
production at all. Like President Barack Obama’s controversial auto industry bailout in
2009, these tariffs are about keeping an industry for the future, not about
making it profitable today.
If China has merely expressed concern over
Trump’s plans, it’s because China is not really the target of the planned
tariffs. China’s massive state-owned steel and aluminum firms may
ultimately lie behind the world’s glutted markets, but Chinese products account
for only a fraction of U.S. imports (2.2 percent for steel and 10.6 percent for
aluminum). The real problem is that other countries—including allies like
Canada and the European Union—have responded to years of Chinese dumping by
subsidizing their own industries and imposing broad tariffs on
Chinese steel. American antidumping measures have traditionally been more
narrowly focused. In a sense, Trump is only catching up with what the rest of
the world is doing already.
The simple fact is that the world produces much more steel and aluminum than it
needs. A global shakeout is inevitable, and every country wants to make sure
that its own industries are the ones that survive. The only question is: who
will blink first? If one country has done a lot of blinking over the last
twenty years, it’s the United States, as the Commerce Department report amply
documents. Embracing a free-market approach, being reluctant to provide
subsidies, applying very selective tariffs and never even thinking about
nationalizing its strategic industries, the United States has consistently
ceded market share to its statist rivals overseas. The Trump tariffs bluntly
but effectively draw a line under twenty years of creeping retreat.
In its evaluation of the Commerce Department reports, the
Defense Department flatly concluded that “the systematic use of unfair trade
practices to intentionally erode our innovation and manufacturing industrial
base poses a risk to our national security” and agreed with the Commerce
Department’s conclusion “that imports of foreign steel and aluminum based on
unfair trading practices impair the national security.” Of the three
national-security responses offered by Commerce, DoD
preferred the second option, targeted tariffs, over the first (global tariffs)
and third (global quotas). But that’s a question of strategy, not principle.
The DoD is, obviously, a military organization, not an
economic one. It is “concerned about the negative impact on our key allies” of
a broad, uniform tariff. So the DoD prefers targeted tariffs on countries that,
except for South Korea, are not U.S. allies. But as the DoD memo admits,
targeted tariffs raise complicated enforcement challenges due to the
international transshipment of steel and other jurisdiction-shifting exercises.
The Commerce report estimated that targeted tariffs would have to be at least
53 percent on steel and 23.6 percent on aluminum to be effective. Trump’s flat
tariffs of 25 percent and 10 percent would be easier to implement and harder to
avoid.
A single, global tariff also sends a simple, universally
understood message that this time, the United States is not going to blink
first. This dispute is not about the World Trade Organization, playing by the
rules, commitment to globalization or the much-hyped international liberal
order. It’s about the fact that some countries are going to have to give up
their steel and aluminum industries. The United States should not be one of
them. Countries that have historically made high steel and aluminum output a
matter of national policy should act responsibly to dismantle their bloated
industrial bases. Until they do (and there are no signs that they will), the
U.S. government should act to ensure a fair price for those few American
producers that remain.
Salvatore Babones is an associate
professor of Sociology and Social Policy at the University of Sydney.
No comments:
Post a Comment