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Steel Tax
When President George W. Bush (MBA '75) imposed a tariff of up to 30 percent on most types of steel imported into the United States, the Boston Globe (March 10, 2002) turned to HBS professor Debora Spar to explain the implications. Noting that there are a lot of countries that can produce steel more cheaply than the United States, Spar said, “The industry has been seeking and receiving protection for almost thirty years. Parts of the industry have already restructured and become quite competitive in certain niches.” However, she continued, “there are higher costs in the United States that are unlikely to go away. Over the long run, you want firms to change their cost structures and move into different parts of the market.” That, she admitted, “is easy to say and hard to do.”
Asked what the likely fallout with trading partners will be, Spar gave a grave response. “It's only going to get messier. Countries like Russia, Korea, Brazil, and Japan are major producers of steel. They are going to retaliate, and the United States is a major exporter to those countries,” she said, adding that free trade has worked particularly well over the last decade because the United States has been in a period of economic growth. “As things slow down, industries get hurt,” Spar noted. “For individual groups, it's easy to see protectionism as the solution, even though in the long run it becomes part of the problem.”