Bush not man of steel in the face of WTO

0 Comments | Oakland Tribune, Dec 5, 2003 | by David E. Sanger, New York Times

WASHINGTON -- President Bush had little choice on Thursday when he reversed himself and lifted the tariffs on imported steel that he imposed last year.

For the first time in his nearly three years in office, the president, who has often reveled in the exercise of American power, finally met an international organization that had figured out how to hit back at the administration where it would hurt. Employing relatively untested powers, the eight-year-old World Trade Organization authorized European and Asian nations to devise retaliatory tariffs against the United States, just 11 months before a presidential election. Not surprisingly, the Europeans pulled out an electoral map and proudly announced they would single out products made in the states Bush most needs to win a second term.

In fact, what the WTO accomplished when it forced the Bush White House into a rare 180-degree turn was exactly what its American champions envisioned andits opponents warned about during the first big globalization debates of the 1990s. Acting as the final arbiter of the world's trade rules, it reversed the politics of protectionism, making sure that nations that protect their markets -- in the name of saving jobs -- are forced to pay a steep price.

Bush's trade representative, Robert Zoellick, argued on Thursday that the president had reached an "independent decision" to lift the tariffs, and he acted as if the WTO's ruling that the tariffs are illegal was only a minor consideration in Bush's deliberations.

But the raw political fact remains that the WTO made the price of protecting the steel industry simply too high. It was left to the Europeans to design the penalties, and they pinpointed textile mills in the Carolinas and farmers in the Midwest and California with a precision that Karl Rove, the president's political adviser, must have grudgingly admired.

"Defiance had real costs," one of Bush's senior aides said. "It was going to cost us exports and export jobs. It was going to cost us credibility around the world. It was going to put us at odds with Europe again."

There was another potential cost: The United States wins many more cases than it loses at the WTO, and to ignore the steel ruling would be to invite Japan, China and Europe to ignore rulings in Washington's favor.

So while the White House was loath to say so, Bush's decision to comply fully with the ruling helped establish the trade organization's authority, showing that even the world's largest economic power, and the nation that spurred its creation, had to bend to its rulings.

For the organization that conservatives, and some liberals, once denounced as an "unelected bureaucracy" that should never be given power over American jobs, this case was the rough equivalent of Marbury v. Madison, the 1803 decision that established the Supreme Court as the final arbiter of the Constitution, able to force Congress and the executive branch to comply with its rulings.

"It may be remembered as a critical case," said Martin Baily, a scholar at the Institute for International Economics in Washington and the chairman of the council of economic advisers when the steel industry was beginning to appeal for White House aid in the late 1990s. "They changed the political equation in the U.S. and made the calculation for lifting the tariffs look good."

Bush, Baily said, must have swallowed hard.

"It wouldn't fit the Crawford image to be seen kowtowing to these Europeans," he said. "But as they sat down and debated the issue among themselves, the WTO's ability to impose sanctions and aim them at particular congressional districts had to be a very major factor."

Fortunately for Bush, the economy at home and around the world has changed enough in the past year and a half that he could claim that his main mission had been accomplished. The steel industry is in far better shape now than it was when he imposed the temporary "safeguards" that were supposed to slow the inflow of 10 types of foreign steel for three years.

When Bush imposed the tariffs he said that the steel industry had to use the time to close old and inefficient factories and to consolidate operations. Independent studies, including one by the International Trade Commission, demonstrate that much of that consolidation has already happened. Producers have merged. Labor contracts have been renegotiated, though often at considerable cost to the approximately 150,000 workers still employed in an industry that is just a shadow of its former self.

Bush was also aided by the fact that industry itself was divided. In recent months he has come under quieter, countervailing pressure from the executives of many companies that consume steel, carmakers among them. Those executives are also major donors at the fund- raisers that have already put more than $100 million into Bush's re- election coffers.

Oftentimes, they used those events to send back-channel messages that European sanctions would be a disaster for their exports, and could ultimately cost more jobs.