The steel tariff may become a major issue in this year’s presidential campaign, placing Howard Dean in the odd position (for a Democratic candidate, at least) of attacking President Bush for caving in to a decision of an international body—in this case, the World Trade Organization.  But then, over its 21-month life, this tariff has made for some rather strange bedfellows.

For instance, many libertarians—not usually fans of the WTO, which they generally regard as restricting free trade rather than facilitating it—applauded the trade agency’s action, even though it trampled on U.S. sovereignty by striking down a constitutionally enacted tax.  The Constitution is a document to be revered—except, it seems, when it allows things that violate libertarian principles.

The protectionist right, of course, took the opposite view, praising Bush when he imposed the tariff on European, Asian, and South American steel in March 2002 and damning the administration for backing down in December in the wake of threats by the European Union to impose retaliatory sanctions on American products if Bush chose not to abide by the WTO’s decision.  While right on the sovereignty question—the very fact that an international agency demanded the tariff be removed was almost reason enough to retain it—these commentators are as dogmatic as the libertarians, endorsing protectionism on principle without considering the consequences of any particular tariff in the light of the national interest.

In this case, those consequences have been nearly disastrous for the small manufacturers of America, upon whom—for a little while longer, at least, until the libertarians have their way—the U.S. economy still rests.

Back in the 1980’s, when Ronald Reagan imposed tariffs on steel from Asian countries that were dumping below cost into the American market, U.S. firms still produced most of the steel necessary to meet domestic demand.  With the Cold War still raging, the tariffs served not only the interests of the American economy but of national security.  Today, the national-security interests are no less great, but, in the wake of the Bush I-Clinton-Bush II NAFTA-GATT free-trade push, domestic manufacturers no longer come close to meeting the demands of U.S. businesses for steel.  Small manufacturers, such as those struggling to survive here in Rockford, have been forced to rely on imported steel—not to lower the costs of production but simply to meet demand.  It is not an exaggeration to say that no small business owner here in Rockford would choose to import steel if he could rely on domestic steel instead, even at a slightly higher price.  Unlike the CEO’s of multinational corporations, who can’t see beyond the next quarterly profit and loss statement, or politicians, who are simply focused on the next election, most owners of small manufacturing firms understand that the health of the American economy—and the health of their local economies—depends upon a certain degree of self-sufficiency.  The domestic supply, however, simply isn’t enough.  Thus, the Bush tariff has increased their companies’ costs and decreased their ability to compete—not just in the “global marketplace” but in the domestic market.

It didn’t have to be that way.  Unlike previous tariffs, which imposed surcharges on both raw materials and finished products made from those materials, the Bush tariff—the result of intense lobbying by large, politically connected steel corporations, not small manufacturing concerns—left the price of finished products untouched.  Thus, companies such as Rockford Acromatic—a producer of after-market automobile parts—found that Chinese companies could often export finished goods to the United States more cheaply than U.S. companies could purchase imported steel to make competing products.  The result has been accelerated job losses and factory closings here in the industrial Midwest over the past 21 months.

President Bush’s political advisors had clearly hoped that the tariff would shore up electoral support in Rust Belt states this November.  In one final irony, however, the WTO may actually have done Bush a favor by providing him an easy way out of this disastrous policy.  While the Republicans may lose some campaign contributions from Big Steel, Bush may regain the support of traditionally Republican small manufacturers and their employees, some of whom had begun to look for another standard-bearer.