Monday, November 17, 2003

I Could Have Written This One

George Will's latest column reads like one of my spiels on my late radio show, Laissez Faire.

Back when I lived in Cleveland, I traded messages with now-Presidential candidate Dennis Kucinich. I don't have the first, since it was an email, but I have the response from him. It is clear that he thought I was a Republican (what else could there be besides Republicans and Democrats?) because he replied, "I voted with the President on this issue". Well, that was the form-letter response he sent out to the other side. I didn't get that it was a form letter until after I sent the following reply:

Congress of the United States
House of Representatives
Attn: Dennis J. Kucinich
1730 Longworth Office Building
Washington DC 20515

Dear Mr. Kucinich: July 18, 2002

I am in receipt of your letter which responded to mine regarding steel tariffs. Thank you for your response. It is gratifying to know that the comments were read and considered

I am not quite sure what I wrote, since it was an email, so I would like to add a few more thoughts.

As I understand it, the problem with other nations “dumping” steel is that it causes there to be too much steel on the market, which causes the price of steel to plunge, making the relatively less subsidized American steel less competitive. If this is true, why were tariffs the solution of choice? Do you know what a tariff does?

A tariff on imported steel is a subsidy for American steel. No problem so far, since the point of the policy was to boost the US steel industry… except that any time you subsidize anything, you get more of it, because there is greater incentive to produce and try to gain market share. If the problem is that the price is too low, the tariff raises the price, and that looks good, right? Unfortunately, whenever prices rise, the incentive is to produce more, which, if acted upon, has the effect of bringing the price right back down because more steel lands on the market, which was the problem in the first place.

Wouldn’t it have been better to devise a policy that would have made it cheaper for Americans to produce steel? If the steel costs less to make, it is easier to meet the competition on price and thus sell the steel.

Besides, cheap steel, while painful for the steel industry, is a positive boon for every other American industry that uses steel. Cheap steel means cheaper cars, tools, appliances, bridges- anything at all that uses steel. In fact, on analysis, it looks like the countries that dump steel actually do us a favor. It may not be politically expedient to say that, but it’s true.

Come to think of it, though, it might be politically expedient to say all of this if phrased properly, after all, the brothers in the UAW must certainly appreciate the availability of cheap steel, as must machinists and other tradesmen and assemblers.

I would be very interested to know what, in your estimation, is fair subsidization. You cited steel that was “unfairly subsidized” by other nations. It interests me because other nations, especially the EU nations but also others, are now looking at our tariffs on steel and calling them unfair subsidies. In light of the host of commodities we have recently subsidized (farm products) or placed tariffs on- (foreign steel and lumber), we face the prospect of a trade war with many of our international friends. Do other nations have a point when they look at our subsidies and call them unfair? And what do American producers of fruit or cotton think of steel tariffs when they are told that tariffs will be placed on American fruit and cotton in response?

So, I have to say that I disagree with your assertion that “tariffs correct this imbalance”. On the whole, I think it is rather like driving on ice on W. 25th Street in January. You start to veer off-course, so you pull the wheel feeling like you’ve got the car under control, but the harder you pull the wheel to straighten out the car, the more you swing it side to side, and less in control. I think if you asked an economist at Cleveland State, you might hear the same thing.

Sincerely Yours-

Michael R. Kole
2436 Grovewood Ave
Parma OH 44134

There was no response from Kucinich on this one. The EU is responding finally, and will target products made in states like California and Florida so as to attack the Bush Administration on the grounds the battle is being fought- tariffs in exchange for the favor, or disfavor, of American voters.

No comments: