SECTION: EDITORIAL; Pg. A24

LENGTH: 421 words

HEADLINE: Trading Places

BODY:


THE BUSH team came into office promising to strengthen alliances and rejuvenate the nation's commitment to free trade. Now, as the president makes his first trip to Europe, the administration has angered allies in the European Union by seeking trade protection for the U.S. steel industry. This turnaround is especially remarkable because the Clinton administration faced even greater pressure to protect the steelmakers with the tool that the Bush team has now turned to. But the Clintonites resisted that pressure, showing more free-trade courage than their successors. The tool in question is a so-called Section 201 initiative, under which a theoretically independent trade tribunal investigates whether a surge in imports is responsible for damaging a domestic industry. Unlike anti-dumping cases, which are brought privately by U.S. companies, Section 201 can be initiated by the president, putting the weight of his office behind the process. Because presidents are generally wary of endorsing protectionist impulses, they rarely initiate these cases. This is the first in 16 years.

The administration argues that extreme distress in the steel industry justifies its action. It is true that since the Asian financial crisis triggered a wave of cheap imports, 18 U.S. steel firms have gone bankrupt. It is also true that many foreign governments subsidize their steel industries, forcing U.S. producers to compete on unfair terms. But it does not follow that foreigners' bad policies should be compounded with bad U.S. responses. Protection for U.S. steelmakers amounts to a tax on steel-consuming industries, which employ far more U.S. workers.

The administration argues that the 201 action gives it leverage to launch talks on overproduction in the steel industry worldwide. This idea may prove good or bad, depending on how it is pursued. If governments simply agree to curb output in order to support prices, they will have created a cartel -- and the losers will be global steel consumers. If they agree to cut subsidies, allowing the market to force a rationalization of production, the Bush administration will be able to claim a real achievement.

Protectionist sentiment is powerful in Congress, and the steel vote is important in swing states such as West Virginia and Pennsylvania. The sincere free traders around the president are inevitably hemmed in by this political fact. With luck, they will recover from last week's act of steel protectionism and make progress on other fronts.



LOAD-DATE: June 12, 2001