US Steel Tariffs Essay Example | Topics and Well Written Essays - 2250 words

US Steel tariffs - establish ExampleIn 2001, US Steel lost $62 per alwaysy interior(prenominal)ally produced ton. US Steel, the largest American producer, now that LTV, National Steel, and Bethlehem Steel went bust. US Steel Kosice made a profit of $55 per ton. USSK plans to grease ones palms still mills in the Czech Republic as well. To remedy the situation and the strengthening the domestic steel sector by decreasing imports of cheaper steel and therefore shielding domestic steel producers from orthogonal competition. The US argued that under the World Trade Organization agreements safeguard measures are acceptable if the domestic diligence is severely harmed by the cheaper imports and if these measures are limited to a timeframe of less than four years. The government hopes the industry bequeath take advantage of the break to modernize and become more efficient. The history of the industry, however, sheds doubt on the industrys magnate to overcome past inefficiencies (Abbo ushi, 2006). In March 2002, Bush imposed tariffs of up to 30 percent in the first year of the new regime on $8 million of steel imports, mainly from Europe, south-central Korea, and Japan. This is about one tenth of the global market. The tariffs were scheduled to decline to 24 percent in the reciprocal ohm year and 18 percent in the third. Both Europe and Japan are challenging these measures in the WTO (Vaknin, 2004).The optimal tariff maximizes welfare of a large trading country that acts like a monopoly in trade. It is based on the naive assumption that trading partners do not retaliate. It is arguing that US could absorb from a tariff if its trading partners do not retaliate. Economists are not arguing that US should resile imports for this reason. Maximize Uy1 + z1,y2 + z2, subject to F(y1,y2,L,K) = 0. Figure 1Use Steel trade indifference curves.z2Optimal Tariff to = 1/(* - 1), where * = - (z*1/p*1)(p*1/ z*1) is the price elasticity of foreign import demand.For the in a h igher place reasons, on June 5, 2001, prexy Bush announced his optimal tariff comprehensive initiative to address the challenges face up the U.S. steel industry. But The American Institute for International Steel (AIIS) opposes the tariffs. Steel distributors largely support President G.W. Bushs decision to impose the tariffs because they expect it to stabilize the market for their suppliers and help financially-struggling mills regain liquidity. Can Protectionist measures ever be justified on economic grounds There is a classic case to unsafe protectionism of the recent steel quarrel between the USA and the EU. American steel producers ended up compel quotas and tariffs on manufacturers they have only recently purchased in central and Eastern Europe (Vaknin, 2004). This argument has neer been used by protectionists. The administration has backtracked. It promised to consider more than 1000 requests to exclude up to $1 billion in steel imports from the tariffs. The gaffe-prone then US Treasury Secretary, Paul ONeill, said that this is done in army to reduce the shrillness of the conversation. More likely, it is aimed to prevent the emergence of an anti-American trade coalition (Vaknin, 2004). U.S. trade policy has been facing widespread criticism around the world. The economic devastation suffered in the United States resulting from the tragedy could be ameliorated by resurgence in the U.S. steel industry. Significant indications of the crisis began to emerge