The Political Economy of Trade Protection: The Determinants and Welfare Impact of the 2002 US Emergency Steel Safeguard Measures

This paper analyses the political economy of trade protection in the context of the factors determining the US Emergency Safeguard Measures for steel imposed in March 2002. The paper identifies several factors in addition to the official justification of problems of global over‐capacity and the penetration of imports in the US market, namely the continued failure to restructure poorly performing firms, failure of previous attempts at protection and the influence of the domestic steel lobby and short‐term political gains to the Bush administration of protectionist action. The paper also reviews several ex ante and ex post empirical studies of the impact of the steel Safeguards on the steel industry and downstream steel‐consuming activities. All of these studies find that the costs of the Safeguard Measures outweighed their benefits in terms of aggregate GDP and employment as well as having an important redistributive impact. The paper provides a brief summary of the subsequent WTO steel case and the final resolution of the dispute. The evidence suggests that the steel Safeguards owed more to political expediency than justification for protection under the WTO rules.ost empirical studies of the impact of the steel Safeguards on the steel industry and downstream steel‐consuming activities. All of these studies find that the costs of the Safeguard Measures outweighed their benefits in terms of aggregate GDP and employment as well as having an important redistributive impact. The paper provides a brief summary of the subsequent WTO steel case and the final resolution of the dispute. The evidence suggests that the steel Safeguards owed more to political expediency than justification for protection under the WTO rules.