Quite a thread there on US steel tarifs with people trowing generalities back and forth. I bet most of participants rushed to post rather then read reputable sources.
I thought I would provide a few points for those who do not venture beyong this board. It will not be as good as reading a real article though.
The capitalism in US is not a political system. It is a state of economy life like sunshine or hurricane are states of weather. We do have capitalism because there are no laws restricting ownersip of means of production but here the legal stuf pretty much ends.
The laws of capitalism are very different from legal laws. They really are laws of nature - just like in physics. You do not enact them. You cannot even violate them. You can ignore them at your own risk - what US seems to be doing. There is no consious component in capitalism.
Our political life is determined by our legal laws and political realities. Democracy is the most important part of it. There is no requirement for a politician to obey the laws of capitalism or nature in general - only the wishes of it's constituents.
Having free trade is all nice, but politicians have to do what their electorate demands, not laws of nature or common sense.
The steel makers and their workers are a powerful domestic lobby, partly because they are largely concentrated in a few rustbelt states. Mr Bush unexpectedly won West Virginia in the 2000 presidential election, largely because of President Bill Clinton’s failure to do anything to help the steel industry. Mr Bush did not win Pennsylvania, where some of America’s biggest integrated steel producers are based. But he hopes that decisive action to help the steel industry now might help the chances of Republican candidates in Pennsylvania and other north-eastern states in the mid-term congressional elections in November.
Why the heck blame the president if he is doing what people who elected him want? Blaming us all would be more reasonable.
What justifications do they present?
The aim, says the administration, is to give the steel industry a breathing space—time to restructure and modernise to cope with foreign competition. Much of this competition, the industry alleges, is unfair since many foreign steel companies enjoy government subsidies.
That is true - many foreign countries support their steel industries and for some good reasons besides economical, like steel being a stategic industry that a country may need in time of war or other emergency even if the suppliers are not able or willing to continue selling it.
Why are the american companies are failing? Exellent quality resulting in higher cost is not really the reason.
One of the key problems that the large integrated steel companies face is not so much that of inefficient production but expensive medical and pension benefits to which retired workers are entitled and with which the companies are now saddled. History suggests that the protection of the sort now being extended to the steel sector simply enables the industry concerned yet again to postpone the day of reckoning.
It would make sense to allow for the companies to go bancrupt so that their current unionised workers and former employees who enjoyed "lavish" pensions and health benefits lost their livelihood and learned to deal with like the rest of us. Then the new smaller companies (new technology does allow small "mini-mills" to be competitive) not burdened with the traditional expencive pension and health plans or unions would be competitive again. Unfortunately or fortunately all those pesky workers and retirees have votes and they are concentrated to make those votes count.
US consumers will have to pay more for products that have steel in them. The alternative is to pay for the unemployment benefits and Supplementary Security Income for people who lose their jobs and their pensions/health coverage. As a free-marketeer I would opt for the second one - life is risk and most of those benefits were wrangled by the union blackmail tactics that were sure to ruin the industry. They should reap the fruit, so to speak.
Well, I have only my single vote and I am disappointed by this move by Bush. May be he knows something that I don't but I suspect he just went softhearted on those workers.
By the way, The tariffs, from which Canada and Mexico, as members of the North American Free-Trade Area, are exempt, have been imposed for three years.
Hopefully they will not be renewed. Hopefully we do not get a full-scale trade war in the next few months.
miko
P.S. Oh, yes - the blue quotes are from the Economist.
