Bush’s Decision of Steel Is Political, a US expert believes
Making a decision to increase duties on metal products imported by the US from many countries, including Ukraine, US President George Bush has put the world on the brink of a trade war. In response to US steel import restrictions and tax privileges to American exporters, the EU is slated to impose an almost $6 billion import duty on a number of US-made items. “The US prefers to shift the burden on foreigners rather than make difficult decisions within the country,” says a message from the WTO’s EU representation to the American government. Analysts point out that the duty the EU plans to raise in reply to the US government’s subsidy of its exports will be an all-time high in the WTO history, for it exceeds US sanctions against European beef by 20 times. It is intended to make the final decision on this matter on April 29. The list of goods subject to the European duty is already in the making. In particular, the list can include US steel products worth $600 million.
Thus it is no accident that not all US experts support their government’s actions in this direction. Thomas Delamarter told The Day straight away this is a “very mindless” decision and added, “The impression is that America does not have a well-established trade policy toward other countries. First we say we are for free trade and then we make an opposite decision. The point is the latest US elections were of no tangible advantage to the winner. Both Gore and Bush had almost the same results. And what Bush is doing now was least of all caused by economic considerations. These politically-colored steps are clearly aimed at turning around opposition votes. The latter is the Democratic Party which largely relies on trade unions, including those of steel makers interested in barriers against foreign metal. I do not think this is a financially viable step of the US administration. The government can only gain from it politically, for by so doing it can hope to get a true majority in a short time.”
“As an economist, you must be aware that the steel duty decision could cause harm to the US too. Do you see here any risk for your own country?”
“This decision can undoubtedly have negative consequences. First, it will tell on the industrialists who use imported steel. Owing to the new tariffs, they will have to pay a higher price for US steel than they did for imported, say, Ukrainian, steel. In other words, American customers will be the first victim. US steel producers will also have problems. This is not a very efficient industry in the US. If metal producers were not protected by this duty, they would take more care about competitiveness, cost-effectiveness, and technological improvement. But now that they feel protected they will need none of this. Therefore, this decision will also adversely affect our own steel industry, which will be evident a little later.”
“Ukrainian officials have more than once announced that Ukraine has set up an investment-friendly climate. Could you, as a foreign expert in investments, explain the reason why the latter still give Ukraine a wide berth?”
“Perhaps investors are better informed about the condition the investment climate is in. I can give an example from American history. In the mid- nineties the US produced bad and expensive cars. Japanese producers built their factories here and taught us a lesson. The share of US producers on the market dropped sharply. So our producers had to learn quickly. Otherwise, our automotive industry would not have survived. And learn they did. This is why the Ukrainians will have to do the same: to learn how to survive. But you must have investments for this, of course... In the early 1990s I worked in Ukraine to attract investors here and made some progress. But as soon as 1996 the companies that had come to Western Ukraine were forced to quit. The reason is Ukrainian executives and the national leadership would only appropriate the companies’ money instead of protecting them. So the American entrepreneurs quit. Ukraine disappointed and advised their friends to keep clear of this place. Ukrainian corruption robs investors of everything. Scared by what is going on in Ukraine, foreign investors will never come here under such circumstances. But if the Ukrainian economy and industries are not brought up to date, this will doom Ukraine to operating exclusively on raw-material, low-tech, and agricultural markets, where it is very difficult to compete. Yet, even on these markets one can achieve very much with new technologies. The departure point here is not what you can do but what others need, what the market expects and will buy. For instance, Taiwan and Japan used to be very poor countries, but they understood what other markets would buy from them and thus got rich. This is hard but not impossible to do in Ukraine if it stamps out corruption, of course. Ukraine kills the chickens that lay the golden eggs only because somebody wants to eat them.”
“Many think that US aid corrupts, rather than improves, Ukraine. Do you agree?”
“I agree. This is true even if I am declared persona non grata for saying so. Here is what The New York Times wrote on this occasion: US and Ukrainian officials estimate that, while Ukraine has had $100 billion smuggled out, America has given Ukraine $1 billion in aid. This was not enough to overpower corruption. But, in principle, this is not bad for America because some of this stolen money was invested in New York or Florida. The United States has not suffered from this. Ukraine has.”
The Day’s Reference
Yale graduate and Professor Thomas Delamarter earlier worked as the international economy leading expert at the US Treasury Department. He also taught at the Budapest Economic University. In Ukraine, he is founder and president of the Trident Consulting and Investments Company. In addition to Yale University, he graduated from Cornell (USA) and Louvain (Belgium). Assisted by the UMC Company, he teaches an MBA course, Global Prospects for International Business, at the Kiev-Mohyla Academy Business School.
