Politics Over Philosophy

President Ford made his first major foreign-trade decision last week and came down in favor of election-year politics against free-market philosophy. In response to vigorous lobbying by steelmakers and the steelworkers union, Ford agreed to limit imports of most stainless and alloy tool steels. He directed his special trade representative, Frederick Dent, to attempt to negotiate "orderly marketing agreements" with the major foreign exporters: Japan, Sweden and the European Common Market. If such agreements are not concluded by June 14, Ford will impose quotas similar to those recommended in January by the U.S. International Trade Commission (ITC). They would hold imports this year to no more than 146,000 tons, v. 153,000 in 1975, meaning that any increase in demand would be filled entirely by domestic mills.

Disputed Findings. The 1974 Trade Act permits quotas when domestic producers can show that imports are causing grave injury to a U.S. industry--and the stainless-and specialty-steel producers have been seriously injured. Domestic mills in 1974 ran at full capacity; last year they operated at 40% of potential. During last year's third quarter, 40% of the 65,000 workers in the industry were idle. The ITC found that imports of four of the five types of steel covered by Ford's order--stainless sheet and strip, bar, plate and alloy tool steel--rose in 1975, and concluded that imports were at least as important a cause of the industry's troubles as any other factor, a prerequisite for relief under the Trade Act.

That finding is disputed by some Administration economists, who contend that recession hurt the industry more than imports did. Paul MacAvoy, a member of the Council of Economic Advisers, faults the ITC for "never even questioning" the role of industry price policy. ITC data indicate that on most of the products concerned, domestic prices were rising last year while the prices of imports either were falling or going up less than the made-in-America steel. Richard Simmons, president of Allegheny Ludlum Steel Corp., the largest U.S. specialty-steel producer, challenges that finding: he says his company cut prices in 1975 by as much as 25% but nonetheless was undersold by foreign producers whose exports were subsidized by their governments.

In any case, the real reason for Ford's decision was not economic. His political advisers were convinced that Congress would force acceptance of the ITC recommendation, so Ford might as well impose quotas and take the credit. The stainless-steel case is only the first of several that the President must resolve soon. By May 20, he must decide whether to raise tariffs sharply on imported shoes; by June 1, he must make a similar decision on stainless-steel flatware. Present prospects give no comfort to free-traders.

This file is automatically generated by a robot program, so viewer discretion is required.