U.S. Still Facing Pressures on Trade Despite End of Steel Tariffs

December 9, 2003 - 0:0
WASHINGTON (AFP) -- The U.S. move to drop controversial steel tariffs eases fears of an imminent global trade war, but several other skirmishes loom with Europe, China, and other trading partners, analysts say.

These disputes, if not resolved, threaten to hinder U.S. leadership in efforts to build a freer global trading system and could spark a protectionist spiral, say global trade experts.

"The unfortunate situation is that the U.S. has resorted to a strategy of Chinese water torture for global trade," said Stephan Richter, president of the Global Research Center, a Washington think tank devoted to globalization issues.

George W. Bush's decision to rescind the steel tariffs imposed in March 2002, said Richter, "removes one U.S.-inflicted torture mechanism, but the U.S. has completely reversed its earlier role as a positive leader on free trade. Now it is a negative influence, if not a spoiler." Looming on the trade front are several other battles.

The EU has threatened to press ahead with duties on U.S. goods starting from 200 million dollars next March unless Congress repeals the tax breaks under the Foreign Sales Corporation (FSC) law.

Friction is also rising between the United States and China after Washington imposed quotas on Chinese lingerie under a special clause in the World Trade Organization, a move aimed at protecting U.S. textile makers.

Concurrently, many U.S. trading partners are angry with the United States for a bill providing domestic farm subsidies of 173.5 billion dollars over 10 years, undermining efforts to drop trade barriers.

"I've been concerned about the Bush administration pandering to special industries, whether it's steel or textiles," said Joseph Quinlan, economist at Bank of America in New York.

"Global trade accounts for around 25 percent of GDP (gross domestic product), so if there's any disruption, you could forget about a 2004 recovery," he said. More optimistically, Lehman Brothers' John Dew said Bush's decision to lift steel tariffs "represents a much-needed shot in the arm for the authority of the World Trade Organization and global free trade."

But David Littmann, chief economist at Comerica Bank, said the Bush administration has lost its credibility as a champion of free trade.

"They are going one step forward and another step backward," Littmann said. "This administration has not been a consistent principled free-trader. It has to be pretty much without exception in order to be credible."

Economist Steve Galbraith at Morgan Stanley said the United States is squandering its role as leader of the free economy with the trade skirmishes.

"Somehow, we don't think tariffs on Chinese-made bras are the answer," Galbraith said.

"Instead of blaming others for our manufacturing job woes, we suspect the current jobless recovery will be solved as others have been -- by creative capitalists building better mousetraps that spur new job growth," he said.