Banner website_back to school

French-American Commercial Feuds (5/5): Steel vs. Orange Juice

Franco-American history features a number of commercial and diplomatic disputes, from the “chicken war” in the 1960s to Donald Trump’s recent declarations about taxing steel and aluminum imported from Europe. With its boycotts and protectionist policies, we explore these conflicts through five episodes looking at the history of certain controversial products.

Episode 5: Steel and Aluminum, a Historical Battle

Trade relations between the United States and its partners have entered a new, turbulent phase since Washington decided to tax steel and aluminum imported from Europe, Mexico, and Canada in an effort to bolster national production. The initiative threatens to undermine the balance of the world economy, and French president Emmanuel Macron described the measure as a “mistake” and “illegal” during a recent phone conversation with Donald Trump. But this maneuver is nothing new; the same plan was in fact implemented under the Bush administration.

“Saving” Steel: A Political Issue

On March 5, 2002, President George W. Bush announced he was going to “save” the American steel industry while it was in the midst of a major restructuring plan. He imposed customs tariffs of between 8% and 30% on around a dozen imported products including sheet, hot- and cold-rolled, and pre-painted steel.

Steel companies in the United States have been subsidized and protected since the interwar years but struggle to be competitive. However, Bush was more motivated by political gain than economic advancement, as the Rust Belt industrial region around the Great Lakes has a major impact in elections. Supporting jobs in these states was therefore a way for the president to secure a second term.

The Bush administration used Article 22 of the 1962 Trade Expansion Act to impose the tariffs. The article enables the restriction of goods seen to be a threat to national security if the U.S. Department of Commerce can identify any danger. This legal specificity allowed the United States to sidestep World Trade Organization (WTO) rules and block imports of foreign products. Although the White House claimed they were “safety measures” and “temporary restrictions” applied in line with international trade rules to protect its domestic market from sudden massive, unexpected imports. Following the move, the European Union lodged a complaint with the WTO.

Underwear, Orange Juice, and Politics

Pascal Lamy, the then-European commissioner for trade, condemned the measures as a “perverse and extraordinary signal sent to the world.” The Europeans retaliated by raising taxes on imported American products including T-shirts, underwear, and yachts. Tariffs, some as high as 100% of the value of the products, reached an estimated total of 2.2 million dollars. Europe strategically targeted certain states that held sway over Bush’s re-election. For example, in Florida — a swing state capable of changing the result and governed by the president’s brother — the cost involved in exporting orange juice skyrocketed.

The steel tariffs were supposed to apply for three years and one day but were lifted after just 18 months on December 4, 2003. By way of an explanation, Bush said that “America’s consumers and its economy would be better off with a world that trades freely and fairly.”

The economic benefits were lackluster, however. While the steel industry enjoyed a slight boost, the overall U.S. economy took a hit. Industries that relied heavily on steel such as the automobile sector saw their purchasing power shrink considerably. Some studies even found that 200,000 jobs were lost — more than the jobs created or maintained in the steel industry over the same period (170,000). As for Europe, Pascal Lamy’s secretary claimed he had found it all “quite amusing” in an interview with Politico. “We knew it was the sort of situation we were sure to win,” he said.