IMF adds its voice to chorus of US trade critics
by Tim Shorrock
Washington, 5 Jul 2001 (IPS) - The International Monetary Fund may be a creature of the United States, but that hasn’t stopped the organization from criticizing US policy when it strays from the free-market path.
In its latest report on the US economy, the IMF points to a George W. Bush administration decision to investigate a recent surge in steel imports as evidence that protectionism may be alive and well in Washington.
US officials say they are not being protectionist. Ironically, their move - upon which free-trade purists might frown - is designed at least in part to help Bush win authority to negotiate new trade pacts. Few think the gambit will prove successful.
The IMF warns that continued US refusal to alter anti-dumping policies, which have sparked severe criticism in the World Trade Organization (WTO), could damage prospects for wider trade agreements in the future.
“The slowdown in US economic activity and the continued strength in the dollar may give rise to increased demands for import protection, as suggested by the recent initiation of a safeguard investigation of the steel industry,” the IMF says. “Such protectionist pressures need to be strongly resisted.”
The ‘safeguard investigation’ is being conducted by the US International Trade Commission (ITC) and could lead to quotas and other measures that generally meet with free-traders’ disapproval but that are designed to give the domestic steel industry some breathing space. Even if the ITC recommends sanctions, the president will have the authority to reject the agency’s findings and seek other solutions.
US anti-dumping and countervailing duty procedures, which impose penalties on countries found guilty of selling products in the US market for less than production costs and allow injured parties to collect some of the fines, have been controversial in the WTO. Many observers say they believe that the collapse of the Seattle WTO ministerial in 1999 was due in part to US refusal to change its anti-dumping rules.
Countries likely to be affected by the ITC steel investigation include Brazil, Japan, South Korea, and members of the European Union. At Seattle, they were joined by China and India in assailing US anti-dumping practices.
The IMF also believes a policy shift is in order.
“To enhance market competition with substantial benefits to the economy overall, the IMF staff believes that a change in the administration (of the anti-dumping programmes) is needed,” the IMF report says. “Such import protection should be provided only in those cases where foreign producers are found to be engaged in anti-competitive behaviour.”
Ironically, the Bush administration official most critical of the IMF - Treasury Secretary Paul O’Neill - has played a key role in the decision to seek the steel investigation. Before joining the administration, O’Neill was the chief executive officer of Alcoa, the US aluminium giant.
The IMF’s trade statements are significant in part because they come as the Bush administration is trying to convince Congress to grant ‘trade promotion authority’ (TPA), previously called ‘fast-track’, to allow the president to negotiate new trade deals without fear of Congressional amendments.
High on the administration’s priority list is the Free Trade Agreement of the Americas (FTAA), which would expand the North American Free Trade Agreement (NAFTA) to the rest of the hemisphere, as well as a new round of WTO talks on investment and trade in services. To get fast track, which Congress refused to provide then-President Bill Clinton in 1997, the Bush administration is hoping that its action on steel will convince lawmakers from steel regions it is serious about ending unfair trade practices abroad.
“It’s in our nation’s interest that if there are unfair trade practices in the steel industry, we address them in a very aggressive way,” Bush said on 5 June, shortly after his trade representative, Robert Zoellick, asked the ITC to launch the investigation into whether increased imports are causing serious injury to the US steel industry.
The ITC investigation covers a wide range of steel products but excludes pig iron and other forms of unfinished steel manufactured heavily overseas.
The Bush administration says its moves are not protectionist, but aimed only at foreign industries that their governments have kept alive with subsidies.
“The US steel industry has been affected by a 50-year legacy of foreign government intervention in the market and direct financial support of their steel industries,” Zoellick says. “The result has been significant excess capacity, inefficient production, and a glut of steel on world markets.”
A lawyer for the steel industry, who observed some of the negotiations with Congress on steel, says the Bush administration never made a direct link between the ITC investigation and a positive vote for fast track.
“No one ever said, ‘You have to support TPA if we help you on steel’,” the lawyer says. “But the administration understands that if it doesn’t give relief to an industry when it’s warranted, it will weaken support for free trade.”
Opponents of the FTAA say the steel investigation has had no impact on their opposition to TPA.
Many Democrats remain firmly opposed to expanding NAFTA and signing new trade agreements without stronger language on protecting labour rights and the environment.
The United Steelworkers of America (USWA) has praised Bush’s steel investigation. Nevertheless, the union is gearing up for a major fight against fast track.
“I don’t see this (Bush’s action) as tied to fast-track,” says USWA President Leo Gerard. “These are investment deals. We’ve never stopped asking our members to end their opposition to FTAA.”
The IMF’s muted criticism of US trade policies appeared in a 26 June statement on the ‘2001 Article IV Consultation with the United States of America’. The Fund publishes such reports annually, after discussions with economic and financial officials from each member country.
The statements on trade are among 19 key points made in this year’s IMF analysis, which leads off by praising the “sound fiscal and monetary policies (that) over the past decade have provided a strong foundation for the longest US economic expansion on record.” However, it goes on to lament “the sharp slowdown in economic growth” that began in mid-2000.
Mark Weisbrot, co-director of the Washington-based Center for Economic and Policy Research, says the IMF’s comments on trade aren’t surprising considering the Fund’s historical commitment to free trade.
“They do have their religion, and they do believe it,” Weisbrot says. “But I wouldn’t expect harsh measures” directed at the US.
In one section of the report, Weisbrot adds, the IMF makes an oblique reference to its previous opposition to the US Federal Reserve’s gradual lowering of US interest rates, saying the Fed’s “substantial easing of monetary policy since early 2001 has been appropriate.”
“That’s the IMF admitting they were wrong,” he says. – SUNS4931
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