10/15/2004

Steel tarrif lifted

In an effort to give the steel industry a chance to consolidate and modernize, President Bush had impose a tariff on imported steel. The President recently announced that the tariff will be lifted. This decision resulted in a negative response from the steel industry who claims that they need protection from unfair foreign competition.

My question is: What about competitive advantage? In Principles we learned that everyone benefits when we each produce what we're good at. We would all get more of everything. High steel prices are reflected in the price of many consumer goods: cars, buildings, etc... Electrolux vacuums has even announced a change in this year's projections because of rising steel prices. Something as small as a screw at the hardware store will go up.

If the price of consumer goods is held at a lower level, doesn't everyone benefit?

2 comments:

Ernie said...

Comparative advantage seems to be a favorite subject on this classes blog. It is true that it does work out better for society, when companies and or countries produce something in which they hold a competitive edge. I think that it will actually be beneficial to the U.S. steel industry in the long-run, now that Bush has repealled the tariffs. They will have to trim the fat and compete with European firms that currently are just running more efficient steel businesses.

Dr. Tufte said...

Comparative advantage - not competitive advantage ...

Bush's steel tariff is widely perceived as one of his dumbest, and most shamelessly politically motivated policies. They did this to ensure that West Virginia stayed a red state, and now that this seems assured they are repealing it.