Tariffs on Imported Steel

The proposed imposition of tariffs and/or other trade restrictions on imported steel in order to protect the U.S. domestic steel industry evokes a long-standing dispute about the necessity and/or efficacy of protectionist policies. A number of the issues are raised in the problem itself--that this is considered a necessary industry needed by the nation, that foreign firms sell their goods in a protected domestic market, that many have subsidies by their governments, that we have to do the same to compete, and so on.

Such protectionist policies are a form of import substitution, an attempt to replace commodities that are being imported with domestic sources of production and supply. Usually, the first step is to erect stiff trade barriers or quotas on certain important commodities. The second step is to set up a local industry to produce those same goods, and typically this involves joint ventures with foreign companies which are encouraged to set up their plants with tariff protection. In this case, the local industry already exists but has not been faring well by comparison. Often, we give such industries a variety of tax and investment incentives, again mirroring what the foreign country has been doing with subsidies and tax breaks domestically. The cost of production may at first be higher than former import prices, but it is expected that the industry will in time be able to reap the benefits of large-scale production and lower costs or that the balance of payme

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to destroy the most promising aspect of today's world economy: the beginning of widespread economic development" (Krugman 67). Protectionism has an effect in the country U.S. companies are being protected from and beyond. Krugman indicates that a shortsighted effort to protect a domestic industry cold reduce the ability of developing nations to create an industry of their own, noting that "Economic growth in the Third World is an opportunity, not a threat" (Krugman 67). The U.S. should not erect trade barriers to free trade in the steel industry. Doing so does not counter trade barriers or protectionist efforts elsewhere and indeed may merely encourage them as retaliation. Developing world markets is a better way to open new markets and allow competition on a larger scale. Work Cited Krugman, Paul. Pop Internationalism. Cambridge, Massachusetts: The MIT Press, 1998. The central character in the novel A Deadly Indifference by Marshall Jevons is economist Henry Spearman, a man who makes decisions and judges events on the basis of economic principles. For instance, early in the novel he is on a train with his wife, Pidge, who begins remembering their dating pattern, which she realizes was unusual: "The peculiarity

Category: Economics - T