Protectionism is not the answer

(Fort Wayne) News-Sentinel

A few countries — most notably China — are said to be “dumping” cold-rolled steel in the United States, subsidizing it so it can be sold here well below market price. As a result, 13,000 people in the industry have been laid off, including more than 1,000 let go here in Indiana last year.

Consequently, the U.S. Department of Commerce has slapped a 522 percent tariff on Chinese steel imports. That’s not enough for Gov. Mike Pence, Sens. Joe Donnelly and Dan Coats and other Hoosier politicians. They want an investigation and even higher tariffs, perhaps even a ban on imported steel.

And that’s the wrong way to go. That is not free trade, which conservatives like Pence and Coats usually say they are for. That is a futile attempt to create “fair” trade. That is protectionism, which historically has caused more harm than good.

Tariffs have all sorts of negative consequences. In the long term, they can prevent companies from innovating in ways that will make them more competitive. And they can, as they have often before, trigger a trade war that escalates into economic stagnation.

And in the near term, they hurt the U.S. economy and the American consumer. We should thank the Chinese people. Their subsidy of steel makes it cheap here, which means cheaper value-added products that use the steel, like cars and refrigerators.

Forbes magazine puts it in perspective: “Those downstream manufacturers are a much larger factor in the U.S. economy than are steel producers. Department of Commerce statistics indicate that ‘primary metal manufacturing,’ which includes steel, copper, aluminum, magnesium, etc., added about $60 billion of value to the economy in 2014.

Downstream manufacturers that utilize steel as an input generate value added of $990 billion, more than 16 times larger. Employment by primary metal manufacturers was 400,000, while downstream manufacturers employed 6.5 million, also 16 times greater.”

True free trade will always be the answer. Of course, that can be hard to find, especially in agreements that are hundreds and even thousands of pages long. A true “free trade agreement” could go on a single page: “Our countries pledge not to impose any taxes or tariffs on each other’s goods.” Period.

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