LONDON: America’s game has been rumbled. The country that brought us the ‘Washington Consensus’ has driven a coach and horses through the foundations of its own economic philosophy. Since this is a philosophy it has been trying to export to the rest of the world for several decades, the implications are disturbingly profound.

I refer to President Bush’s plan to impose tariffs of 30 per cent on most of its steel imports. This plan comes from an administration that, like its predecessors, preaches the virtues of free trade and open markets to all comers, including countries whose steel it no longer wishes to import.

Sorry, did I say ‘preaches’? I should have said ‘insists upon’ — often via the conditions imposed by International Monetary Fund and World Trade Organization, on which bodies the US administration exercises such a huge influence.

One obviously sympathises with US steel firms and workers whose profits and jobs are threatened by cheap imports. But by this simple action the US administration has forfeited all moral authority in economic diplomacy.

There is nothing new about protectionism in the US. It helped, by nurturing ‘infant industries ‘ to make the US such a major economic power in the late 19th and early 20th centuries. Protectionism also helped the UK in its time, and the (until recently) ‘miracle economies’ of East Asia. It took time for Japan and South Korea to build industrial structures that made their corporations into world beaters and they were helped on the way.

Paradoxically, an excessively strong dollar is bad news for an economy when it weakens the competitiveness of exporters and encourages cheap imports. But the ‘market’ solution is not to impose tariffs, but to lower the exchange rate to a more sensible level.

There was even concern that the mighty US economy might suffer de-industrialisation as a result of the impact of a strong dollar on its competitiveness vis a vis foreign suppliers.

The strategy succeeded in the mid 1980s. Now the dollar is almost back to those 1985 levels and those competitiveness pressures are recurring. The tariff move is yet another example of an over mighty hegemonic power behaving as it likes. But the hidden tale here is that the economy itself is not as mighty as most financial analysts seem to believe. The US, and I fear, world economies are in for a very rough ride. —Dawn/The Guardian News Service.