President Bush last week showed Clintonesque skill in the art of political triangulation. An alleged champion of free markets and free trade, the Bush White House last week announced plans to impose tariffs as high as 30% on steel imports to the U.S. next year. The tariffs would theoretically phase out over the next three years and end, conveniently, in 2005 — the year Bush expects to begin his second term.
The steel tariffs are a transparent appeal for votes in this year’s midterm elections, and in 2004’s presidential election. Specifically, they’re aimed at Ohio, Pennsylvania and West Virginia, all big steel producers with well-organized unions and politically active pensioners. Bush narrowly won Ohio and West Virginia in 2000, and a victory in Pennsylvania in 2004 might give him some electoral breathing room.
But Bush’s careful political calculation just may come back to hit him below the (rust) belt.
Reprisals from the world trade community are already rolling in. The first, from Russia, could be a $1 billion hit to America’s poultry producers, an industry with nest eggs in 38 states. Russia is America’s top steel supplier, and stands to lose about 700,000 jobs as a result of the tariffs.
On March 1, the day Bush originally planned to announce the tariffs, Russia announced an immediate ban on all imports of U.S. poultry. Russia is the number one importer of U.S. chicken, and the United States is the top supplier of the Russian chicken habit.
With a wink and a nod, Russia announced that the ban was due to “alleged shortcomings in the processing and labeling of U.S. poultry products.” But the timing is unmistakable. No Russian official on record has discussed the ban without alluding to the steel tariffs. Speaking to the Los Angeles Times, Russian trade representative Aleksey Yegortsev first insisted the two issues weren’t connected, but then added that the “coincidence” could “perhaps” have an affect on U.S. import policies.
“I think it would have some impact,” he told the Times, “Russian steelmakers are suffering from American laws.”
The ban came two days after Russian steel interests pressed Moscow for action against the pending U.S. tariffs. What’s more, the poultry ban’s projected economic impact – about $900 million – is just about on par with the $1 billion impact the steel tariffs are expected to have on the Russian economy.
In other words, the “safety” concerns are bogus. This was retaliation.
Should the poultry ban continue, industry experts predict the U.S. may lose as many as 300,000 jobs. Hardest hit would be Delaware — which Bush had hoped to win in 2000, but lost handily – and Arkansas, which Bush won, and badly needed last time around.
But should chicken producers mobilize, the political repercussions could be even greater. Big Chicken (and here I refer to the industry, not the President) employs more workers than Big Steel. Also affected would be soybean and corn producers, who fatten the chickens we send overseas. Higher steel prices brought on by the tariffs will also hurt appliance manufacturers and the automobile industry. So while the tariffs may at first blush appear a political winner, closer scrutiny suggests otherwise.
American trade officials privately worry of other reprisals. Brazil, whose support the U.S. needs to expand NAFTA-like free trade to Latin America, is furious over the steel decision. The EU and Japan may file challenges with the WTO. Referring to our angry allies, one administration official told the Los Angeles Times, “They’re going to have recourse in other venues.”
There’s another danger here, too. It’s possible — likely even — that Bush may stray further from free market principles in order to stop the political bleeding effected by his sellout on steel. Russia is itching for WTO membership. Instead of doing the right thing – ending the steel tariffs – the administration may instead hold Russia’s membership just out of reach until they cave on the poultry ban.
Bush might also offset the ban by upping farm subsidies to chicken producers. He’s already shown he’s not averse to federal largesse when it comes to scoring political points. Last month he made an absurd assertion to Texas cattle producers – fierce supporters throughout his political career — that beef subsidies are “an issue of national security.” And a federal poultry bailout would find little resistance in Congress, which just passed a $170 billion farm subsidies bill. Bush’s main political nemesis at the moment is Tom Daschle, a man who declared on national television last December that runoff from chicken waste is yet another “issue of national security” – and thus a legitimate (and expensive) line item in the then-pending economic stimulus package.
(Perhaps the next terrorist attack will not involve airplanes or anthrax, but flank steaks and chicken droppings.)
Whatever happens, there’s no end in sight to possible repercussions from the steel tariffs. Grudges and animosity from our trading partners will stew for years to come. President Bush put politics above principle. And, not unlike his predecessor, Bush now runs the risk of losing on the politics, leaving him with neither politics nor principle.
What a chicken.
