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| Steel: Dean Baker Spears the Press |
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Thursday, March 14th, 2002
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As a commentator on the American economy, Dean Baker of the Center for Economic and Policy Research is truly in a class of his own. He is known in particular for his acuity in pointing out the American press�s innumerable howlers in reporting on economic developments. With permission from the Center for Economic and Policy Research, I reproduce below Baker�s recent commentary on how major newspapers reported on President Bush�s decision to impose tariffs on imported steel. EF.
�Bush Weighs Raising Steel Tariffs But Exempting Most Poor Nations,� David E. Sanger and Joseph Kahn, New York Times, March 4, 2002, page A1.
�President Opts For Compromise On Free Trade,� Steven Pearlstein, Washington Post, March 6, 2002, Page E1.
�Politics a Key Force in Forging Policy,� Mike Allen, Washington Post, March 6, 2002, Page E1.
�Bush Puts Tariffs Of As Much As 30% On Steel Imports,� David E. Sanger, New York Times, March 6, 2002, page A1.
�Steel Tariffs Weaken Bush's Global Hand,� Richard W. Stevenson, New York Times, March 6, 2002, page C1.
�Reaction Abroad on Steel Is Harsh,� Steven Pearlstein and Clay Chandler, Washington Post, March 7, 2002, Page E1.
�U.S. Users of Steel Worry That Tariffs Will Be Costly,� Claudia H. Deutsch, New York Times, March 7, 2002, page C4.
These articles discuss President Bush's decision to impose tariffs on some imported steel. Much of the reporting in these articles implies or asserts that President Bush's actions in this case represent a fundamental departure from past trade policy and his political philosophy. For example, these articles repeatedly characterize this action as a departure from "free trade." Several articles, such as the one by Allen in the Post, also note that politics played a key role in President Bush's decision, as if this was a new practice in trade policy. The Stevenson article in the Times warned that the tariffs may be seen as a departure from President Bush's "free trade, anti-tax philosophy."
In fact, there is little basis for asserting that the United States has had a consistent policy promoting free trade. One of the main goals in recent trade agreements has been to extend copyright and patent protection to developing nations. These forms of protectionism are extremely costly to the economy, since they typically raise the price of goods by several hundred percent above their competitive market price. By contrast, none of the tariffs that were imposed on steel exceed 30 percent, and they are scheduled to be phased out over a three year period.
The United States has also been quite willing to impose protection for other politically powerful sectors. For example, when doctors complained that the entry of foreign doctors was reducing their income, the government tightened restrictions on the entry of foreign medical residents and doctors. Unlike the steel case, there was no discussion of the impact of the restriction on foreign doctors on U.S. consumers. On the contrary, the fact that foreign doctors may be lowering physicians wages (and therefore reducing health care costs), was presented as an argument for restricting the number of foreign doctors (e.g. see "Caught in the Middle," by Lena H. Sun, Washington Post, March 19, 1996, Health Section, page 10;"A.M.A. and Colleges Assert There is a Surfeit of Doctors," by Robert Pear, New York Times, March 1, 1997, page A7 and "U.S. to Pay Hospitals Not to Train Doctors, Easing Glut," by Elisabeth Rosenthal, New York Times, February 15, 1997, page A1).
It has been quite transparent for some time that politics plays a very large role in trade policy. It is no secret that corporations and unions spend millions of dollars on lobbyists and campaign contributions in order to ensure that their specific concerns are addressed in trade negotiations. For example, when the United States negotiated the conditions under which it would consent to China's admission to the W.T.O., it made a set of very specific demands for entry to industries such as banking, telecommunications, and on-line services, at the bequest of the firms that expected to benefit. This was widely reported at the time (e.g. see "U.S. Business Lobby Poised for China Trade Deal," by Robert G. Kaiser and Steven Mufson, Washington Post, November 14, 1999, page A1;"White House and Business Groups To Push Congress on China Pact," by Richard W. Stevenson, New York Times, November 16, 1999, page A1). Protections for specific crops, such as sugar and tobacco, is also quite explicitly influenced by politics. It would be newsworthy if President Bush had made a decision on trade policy without taking into account politics.
While President Bush may like to portray himself as having a "free trade, anti-tax philosophy," there is little substance to this image. President Bush has been quite open in supporting a wide range of protectionist measures, such as patent and copyright protection, or professional restrictions which obstruct foreigners from high paying occupations like law, accounting, and medicine. It is obviously in his political interest to portray himself as possessing a consistent political philosophy, rather than being a politician who responds to powerful interests, but there is little basis in reality for this view. Several of these articles discuss the costs of the steel tariffs and imply that they will impose a large burden on the economy. The size of the tariffs, coupled with the relative unimportance of steel in the cost of most products, imply that the effect will be quite limited. For example, a ton of flat rolled steel costs around $180. If the tariffs raise the average price by 10 percent, then this would be an $18 increase. If a car uses one ton of flat rolled steel, plus an amount of other steel of equal cost, then the total impact on car prices would be $36, less than 0.2 percent of the price of a typical new car. It is unlikely that this price increase would have too much impact on the car market. By comparison, if the CEOs and other top executives at Ford or GM earn a total of $200 million in wages, stock incentives, and bonuses, it would add approximately $40 to the price of a car.
It is also important to note that the dollar is 20-30 percent above its sustainable level. As a result, the United States is borrowing more than $400 billion a year to pay for its imports. If the dollar fell to a sustainable level, it would have more impact on imported steel prices than the tariffs imposed by President Bush. None of these articles even mentioned the over-valuation of the dollar.
You can sign up to receive CEPR�s Economic Reporting Review every week by sending a "subscribe ERR" email request to [email protected]. You can find the latest ERR at http://www.cepr.net/Economic_Reporting_Review/index.htm.
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Contact Eamonn Fingleton |
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