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Free Trade for Other Nations
8 March 2002
Presumably, open markets and free trade happen when government steps out of the market's way. President Bush supports this ideology, except when there is political-economic hay to make.
Take the Bush White House s imposition of up to 30 percent tariffs on imported steel. This recent intervention in the world market for steel sheds light on the myths and realities of free trade as preached and practiced by the president.
We begin with the 2002 Congressional elections. It's no secret that the Bush administration wants Republican congressional candidates to get the steel industry vote in states such as Ohio, Pennsylvania and West Virginia.
Remember that free trade supporters claim small government is best. Is this why the president is willing to go to such market-distorting lengths to get Republicans elected to Congress?
Now to be sure, times have been tough for steel employees in the U.S. They certainly need a hand, but so do the nation's other workers.
The lives of American workers have become less secure than those of the previous generation. One big reason is the nine percent rate of unionization for workers now, down sharply from around 37 percent in the 1960s.
In the meantime, world economic growth, led by the U.S., is slowing. Almost all national economies are struggling to grow.
Accordingly, world markets for commodities are glutted. Workers are increasingly unable to buy what they make.
The wealth that the labor-power of workers creates is being taken more and more by wealthy non-workers. Their drive to take more of this wealth is constant in a capitalist economy.
At the same time, a major why of the domestic steel story is being underreported in big circulation newspapers. That story is the dollar's overvaluation, which is making imports of foreign steel cheaper than steel produced in the U.S.
The fact that the dollar is 20-30 percent above its sustainable level effectively subsidizes foreign imports by 20-30 percent relative to domestically produced steel, noted economist Dean Baker.
A Mar. 4 article in The Guardian headlined EU threatens trade war over steel looked away from the dollar's role, as did articles in the Mar. 4 and Mar. 6 New York Times and Mar. 6 Los Angeles Times. What s at stake is that the high dollar cuts two ways.
On one hand it hurts U.S. manufacturers in the world market. On the other hand, the overvalued dollar attracts foreign investors to U.S. soil.
Foreign lenders are a key part of the American economy. The Bush administration well knows this, but doesn t say much about it in public.
U.S. consumers and companies rely on credit-driven consumption. Private debt has driven the nation s record economic expansion, but may (not) be able to spur a recovery from recession.
At any rate, Japan is one of those foreign investors in the U.S. economy. That nation, with the world's second-largest economy, is also a target of the steel tariffs approved by the president.
In addition, Japan is the world s second-leading steel producer. The nation's main trading partner is America.
On his recent trip to Asia, Bush stopped first in Japan. There, he chided the nation in part for its bad bank loans.
The president then visited China and urged the country to practice free trade. The U.S. government is pushing China, a new member of the World Trade Organization, to open its domestic markets to foreign firms.
Are open markets and free trade for other nations, not the U.S., the world's only superpower?
It's been written that history moves through the resolution of contradictions. The political economy of the world steel market is a contradiction whose resolution remains to be seen.