We must steel ourselves to strengthen transatlantic relations

By Charles Powell

President Bush’s decision to impose tariffs on steel imports is a blatantly protectionist step. It is a set-back for the cause of free trade and open markets. By increasing costs for American manufacturers, it will damage American consumers who have almost single-handedly kept the US economy, and thus the world economy from serious recession since 11 September. It will not save inefficient steel producers in America, only buy them more time to go on being inefficient. And it’s not the right signal to give at a time when the world is supposed to be embarking on a new round of negotiations on free trade. The Government and the EU are fully within their rights to challenge the American measures in the World Trade Organisation.

But before we froth at the mouth too much, let’s weigh a few other factors. First the US is not exactly alone in protecting its key industries: there are plenty of other examples world-wide, not least in Europe.

Secondly the purpose of the measures may be blatantly political, to strengthen the position of President Bush and the Republicans. But from the point of view of those who support freer trade, that is a desirable outcome compared with letting in the Democrats who are much more overtly protectionist. Moreover when it comes to prosecuting the war on terrorism, does anyone doubt that President Bush has shown a far higher quality of leadership than we would have had from a President Gore or any likely Democratic Party leader?

And third, our highest priority at present has to be maintaining the unity of the grand coalition against terrorism, which is already showing signs of strain with reports of dissension in our own Cabinet.

All these considerations give us a strong incentive to stop the fall-out from the steel dispute spreading.

Let’s take those points in turn. This is not the first time that a major industrialised country has indulged in protectionism for short-term political purposes. The Japanese have notoriously practised protectionism for decades in parts of their economy in order to protect the interests of voters supporting the ruling Liberal Democratic Party. Europe practises protectionism including within its own internal European market when political interests are paramount: no one can claim that Germany’s financial markets are open to competition even from its European partners. Nor is the Common Agricultural Policy a monument to free trade.

Moreover the steel industry is a notorious hot-bed of subsidy, market distortion and protection. It is an open secret that Europe has itself been contemplating safeguards against imports should they rise to the levels faced by the US. It currently imposes quotas against several steel-producing countries as well as measures to restrain imports from Eastern and Central Europe. The argument that Europe will face a flood of steel imports from developing countries, diverted from the US market by the American measures, hardly holds water since most of those countries have been explicitly exempted from the application of those measures.

The Americans have said they are following the WTO process. The American record of abiding by WTO judgments is good. There is every incentive to try to negotiate a solution there with either some amelioration of the American measures or compensation for the EU, rather than become enmeshed in a cycle of retaliation.

President Bush will not be the first leader to allow calculations about what is necessary to preserve his public support determine his policy on trade or other issues. From the UK and European point of view the balance of interest seems clear. President Clinton and the Democrats ducked securing Trade Promotion Authority, the so-called ‘fast track’ which enables an American Administration to sign up to agreements freeing world trade without having to obtain Congressional authority for every detailed concession. President Bush has gone to Congress for Trade Promotion Authority, has got it approved by the House and has a good prospect of obtaining the Senate’s approval in March. Indeed his measures to support the steel industry may make it easier for him to do so.

Moreover the Democrats have a track record of appeasing anti-globalisation protestors, even conniving with them, where President Bush has taken a firm stand against them.

Similar considerations apply to American leadership in the global war against terrorism. President Bush has displayed an altogether higher quality of leadership than could have been expected from a President Gore, given his own record as Vice-President in the Clinton Administration of going along with pin-pricks against Bin Laden, firing off a few volleys of Cruise missiles cratering the Afghan desert.

Terrorism with a global reach is a far greater and more direct threat to our civilisation than a dispute over steel. We cannot allow lesser issues drive the US and Europe apart. The Atlantic relationship has been under strain enough recently from sneering comments by bien pensants in Europe who set out to ridicule President Bush’s Axis of Evil speech. But the President was right. There is a common thread linking the pernicious governments of Iraq, Iran and North Korea: the determination to acquire weapons of mass destruction with the nightmare they may one day either use them directly against our countries, or make nuclear or chemical or biological materials available to terrorists to do their dirty work for them. That is now the greatest risk facing us and there is only limited time available to prevent it materialising.

Tony Blair has begun to make the case in Britain for action against Iraq. Other European leaders are qualifying their knee-jerk ridicule of President Bush’s speech, recognising that their own people are at risk. The Americans for their part need to consult far more intensively with their allies on all the options for preventing the nightmare scenario of nuclear-armed terrorists coming true. Although there will be intermediate steps involving UN weapons’ inspectors, the likelihood must be that military action against Iraq will be necessary, given Saddam Hussein’s record of deceit and evasion. Vice-President Cheney’s very important visit to London next week is the best place to start the planning

Despite our justified anger at America’s action on steel, we cannot afford a dispute across the Atlantic which puts at risk the coalition against terrorism. We should take the lawful course of appealing to the WTO to resolve the trade issue and keep our true steel for the fight against terror.

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