Japan, EU drop tariff threats

Reviewed by Hitoshi URABE

Article:
"Japan, EU drop tariff threats"
CNN
http://edition.cnn.com/2003/BUSINESS/12/04/us.steel.asiareax/index.html

Comments:

The whole show lasted for a year and nine months and ended the way it was envisaged at the outset by spectators, and the actors who had to pretend they wouldn't know the outcome. Perhaps it was a failure as a mystery entertainment since the results were too obvious from the beginning, and the audience had no opportunity to experience any wonder or thrill, but it was the only reasonable way to end it in the real world, especially when a significant chunk of the wealth of the world was the object of fiddling.

The tariffs imposed in March 2002, supposed to protect the U.S. steel industry, and intended to win popularity for President Bush, was finally scrapped by Mr Bush himself last week, which was, although the only practical consequence it was heading for, still a relief in realistic terms for other steel producing countries, and another victory for those believing in free trade, which the US itself had been claiming to subscribe to.

In March, 2002, in response to the reports on the US decision to impose import surtax on steel imports, this column commented as follows.

"A simple fact is that the American steel industry has failed, no matter how cleverly excuses are stated. Their incompetent management who could not recognize the industry's fragility has been ignoring to renovate the aged facilities, and the near-sighted union interested only in the earning for the day has been pretending that tomorrow never comes. In short, they failed to modernize and stay competitive. ... And once again, the industry ran to the government, like a wheedling child, accusing the hard working neighbors as the cause of their dissatisfaction.

"This has been going on for decades, surfacing every now and then as trade disputes with other countries. It is perfectly legitimate, therefore, for other countries, including Japan, to bring the case to WTO. As a matter of fact, it would be a shame if Japan, as a supporter of WTO, and who claim to be a true believer of free trade, do not stand up."

This was a year and nine months ago, and the issue is now resolved, and that in the way as if there had been a prepared scenario from the beginning.

Raising any import tariff, for whatever the reason, and in any country, is in effect charging their own people for the sake of a certain sector of the economy. The US, when they stepped up its tariff on steel imports was in fact charging the US citizens to protect their domestic steel industry, which in consequence most severely clobbered those domestic industries who need steel to manufacture goods of their own.

This is the major reason Japan never employed retaliative tariffs, which is a measure specifically authorized by WTO when the counterpart's import tariff is found illegal and is not remedied. Retaliative tariff hurts people and saves no one. A counterproductive measure by definition, and in this context, it was relieving that Japan was not cornered into utilizing it to show its determination, for whatever its worth, in a game akin to chicken race.

History indicates that it is difficult to expect for the US to learn a lesson from this sort of experience. But one thing established through the exercise this time perhaps is that if other countries, including Japan, could hold on to a determined stance against rogue measures, it could change the policy of even the most powerful nation.