The adjective that Joe Biden’s administration invariably attaches to its trade policy is one of those political labels whose undeniable banality is its strength. The phrase “worker-centric” sounds like the “hard-working families” long referred to in US and UK politics: you can no more oppose a trade policy that supports workers than you can be biased in favor of loners. inept.
But helping all workers equally is not what this means in practice. Almost 10 months after administration, this worker-centric politics shows a disturbing focus on old-fashioned protectionism centered on manufacturing – and not even on all manufacturing, just the politically rewarding parts.
While it is also proposing to expand trade-distorting support to new sectors like electric vehicles, the Biden administration has continued the United States‘ historic obsession with steel. He inherited the steel and aluminum tariffs imposed by the Trump administration and continued to defend the deceptively transparent logic of promoting national security.
In October, to prevent the EU from imposing retaliatory tariffs, the United States converted the tariffs into a horribly complex quota system, but still controls imports, including from other countries. And with that comes a new idea: a carbon club meant to prevent the environmentally friendly steel of the United States, the EU and like-minded countries from being undermined by carbon steel. strong emissions from China. In fact, he has great potential, depending on how he’s designed, to become a metastization traditional protectionism.
Now, for consumer goods, you can pretty much argue that tariffs move money from richer households, which buy imports, to poorer domestic workers, who compete with them. Yet given the complexity of modern supply chains and the losses in efficiency due to clumsy interventions, it is highly likely that things will go wrong. Trying to redistribute income through trade policy is like cutting toenails with garden scissors. The result can be shorter nails, but you are more likely to lose a toe.
For an industry like steel, that doesn’t make sense. On the one hand, steelworkers are already far better off than the median employee, like a recent joint editorial by US Trade Representative Katherine Tai and Trade Secretary Gina Raimondo noted.
Second, steel is an upstream commodity upon which large swathes of downstream manufacturing and construction depend, including Biden’s infrastructure plans. There are 80 jobs in downstream industries that use steel for everyone in the steel business. Beware of those who claim to encourage American manufacturing in general and illustrate their case by referring to steel prices: they are arguing against themselves.
There is compelling evidence that steel protectionism is crushing other manufacturers and the construction industry. A glossy paper by Harvard scholar Lydia Cox analyzes the steel tariffs imposed by President George W Bush in 2002. With remarkably happy political timing, they were imposed just eight months before the midterm elections, during from which the Republicans took control of both houses of Congress. They were lifted in 2003 after being successfully challenged before the World Trade Organization.
Cox found that even short-term tariffs had lingering negative effects. A 1 percentage point increase in upstream steel tariffs resulted in a relative 0.2 percentage point decline in the downstream industry’s global market share for steel-intensive products.
It’s not as if the steel industry has been abandoned by the government all these years. Decades of diligent deployment of import tariffs intended to prevent the entry of allegedly dumped and subsidized steel into the United States have led Americans to steel price often being 50 to 100 percent higher than those in the rest of the world. There are very little Chinese steel circulating in the United States.
Biden’s policy as applied to the steel industry is not “worker-centric” in the sense that it supports hard-pressed employees against pampered consumers. It centers on a small number of relatively well-off workers whose interests conflict with those of other sectors but whose unions happen to be an important part of the democratic base.
If that’s what the administration deems necessary to retain control of the White House in 2024 and help its allies in Congress in the meantime, so be it. Bush’s steel tariffs, after all, seemed to do the trick at the time. But let’s be clear: The jobs this worker-centric policy is primarily aimed at saving are those of Biden and the Democrats on Capitol Hill.