The Perils Of Protectionism

The Bush administration is about to find out the price of protectionism. The ruling by the World Trade Organization against the tariffs the U.S. imposed on steel imports is completely justified. Those tariffs were politically motivated, cost more U.S. jobs than they saved, hurt more industries than they helped, and undermined America's credibility on free trade. The President, who says he is a free-trader, should elbow aside his political advisers and do the right thing: immediately dismantle the tariffs.

Tariffs are going to cost President Bush politically. He must now choose between alienating voters and pols in Pennsylvania, Ohio, and other steel-producing states, who want the tariffs to continue, and voters in Florida, South Carolina, and elsewhere, who face punitive duties by the European Union on exports of U.S. citrus fruit, textiles, Harley-Davidson (HDI ) motorcycles, and other products if the U.S. doesn't comply with the WTO ruling. The White House has already angered Midwestern voters where the car and other steel-consuming industries have seen some prices jump 30% because of the tariffs. Clearly, steel tariffs were one political manipulation of the marketplace that failed politically as well as economically.

The same fate awaits another round of tariffs, this time on Chinese goods. Some 139 House of Representative members and 26 senators have written the President urging him to limit imports of Chinese textiles. Another proposal would impose a 27.5% tariff on all Chinese imports. Neither makes sense. China is already one of America's largest and fastest-growing export markets. For every U.S. job saved in the textile-producing South, others could be lost in the aircraft manufacturing, semiconductor, and farming states if Beijing retaliates. Protectionism is a political no-win for the White House. And an economic no-win for the U.S.

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