Editorial: US steel tariffs unjustifiable
( 2003-07-29 07:02) (China Daily)
Earlier this month, a panel of the World Trade
Organization (WTO) stated in their reports that the United States' safeguard
measures on imported steel "run contrary'' to WTO regulations, and should
therefore be dropped.
In order to safeguard and encourage domestic steel
producers, the United States has appealed against the decision of the WTO panel.
This is an unjustifiable measure taken by the United States for the
following reason:
First, one of the main purposes and aims of the WTO is
to support and encourage free trade. The most obvious means to achieve this is
to lower trade barriers.
A few years ago, Ross Perot used a very similar argument to
urge the implementation of trade barriers to defeat NAFTA (the North American
Free Trade Agreement). He claimed that massive unemployment will result due to
US firms relocating to Mexico for its "cheap labour.''
Although this
argument might seem correct at the first glance, it denies the truth that trade
benefits from "comparative advantage.'' Now, the reason for trade has become the
reason to limit or restrict trade. Open trade is beneficial precisely because
resources may be cheaper or used in manufacturing more effectively elsewhere.
The benefits of trade are independent of cheaper wages in another country or the
relatively cheaper price of imports. Think about it, if foreign governments
chose to subsidize their exports to the United States (make them cheaper), they
would, in effect, tax their own citizens to benefit US consumers.
There are always those
producers that are more efficient, and those that are less so. For those high
cost or inefficient producers and their employees, a protection such as a tariff
is the perfect refuge from foreign competition.
This would thus
ask consumers to pay higher prices for goods and services than are available to
them through trade, thereby negating the potential expansion of trade benefits.
Second, as the former US president Herbert Hoover once expressed,
"competition is not only the basis of protection to the consumer, but is the
incentive to progress.'' And by discouraging foreign competition within the US
domestic market, who loses? The answer is simple, the US consumer. Protection
for any reason, means lost benefits for the consumer.
Instead of appealing against a
just decision made by the WTO panel, the US Government should strive to either
eliminate or reform those inefficient manufacturers so that they become more
competitive in the international market.
If eliminated,
the scattered domestic resources could be re-allocated to other fields of
comparative advantage. For example, the resources released from US steel
production might be allocated to computer production. This would pave the way
for a stronger and healthier US economy.
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