STEEL’S TAXING TARIFF

It is a timeworn observation that an executive decision reviled by all sides of an issue indicates a fair compromise. Others say universal scorn merely indicates a bad decision. President Bush’s decision regarding tariffs on imported steel provides an interesting test of these two conflicting hypotheses.

The president’s plan for temporary tariffs of up to 30 percent on steel imported from Asia, Europe and South America (but not Canada, Mexico and some developing countries) is as close to a split-the-difference compromise as it could possibly be. Help for domestic steelmakers is balanced against the damage the resulting higher prices for all steel-containing products might do to economic recovery. His desire to win trade-negotiating authority from Congress is balanced against the need to maintain strong relations with nations vital to the coalition against terrorism. Shoring up voter support in key steel-producing states is balanced against his reputation as a tax-cutting free-trader.

Steelmakers, and their members of Congress, were quick to blast the plan as doing far too little – “The steel industry is drowning 40 feet offshore; the president has thrown them a 30-foot rope,” said Sen. Richard Durbin of Illinois. Steel-using manufacturers say the break for Big Steel is nothing less than a tax on consumers, who will pay higher prices for everything from automobiles to refrigerators, reducing demand and leading to massive layoffs. A few trade authority votes have been picked up, but within minutes of the White House announcement, America’s European allies and Japan said they would challenge the tariffs before the World Trade Organization; Russia warned of broad diplomatic implications. Political support in such swing states as Ohio, West Virginia and Pennsylvania got a boost; elsewhere, Mr. Bush got scolded by everyone from liberal activists to GOP true believers.

Yet amid all this reviling, there is little evidence of a good decision. The tariffs do buy American steelmakers some time – up to three years – but there nothing to require the time be put to good use. An industry that was bloated with inefficiency and woefully outdated 30 years ago, when imported steel first appeared as a threat, is still that way despite several rounds of federal help. President Reagan imposed steel-import quotas in the mid-1980s in response to the same arguments and pleas, he took the same criticism for abandoning his principles, and 15 years later there is no apparent gain for all that pain. It is particularly telling that Big Steel, despite ample evidence that its fundamental problem is rooted in mismanagement, continues to blame its plight on unionized workers and their demands for decent pay and benefits, a condition that seems to harm Germany’s robust steel industry not a bit.

The increase in prices on steel-containing goods is expected to be modest – $50 on a $30,000 car, $5 on a refrigerator. Still, it is an increase, it is a new tax and taxpayers deserve some guarantees, some clearly defined performance measures Big Steel must meet. The questions of whether votes gained in Pittsburgh will overcome votes lost elsewhere, or of whether winning presidential trade-agreement authority is worth losing support among allies are theoretical matters for which no definitive answer can be expected. The question that the president and Congress must answer is whether the American people, who will pay for these tariffs, who will pay this tax, will get a good return on their investment – a modern, competitive steel industry.