Over the last eighteen months, there has been much discussion in Congress, on editorial pages, and throughout the country of the steel import surge. The Clinton administration released with some fanfare its plan for addressing the steel industry's problems and the Congress considered legislation to sharply limit imports. Out of the spotlight and under a little known law dubbed Section 201 of U.S. trade law, however, an almost unnoticed administrative process has been working to address one part of the steel crisis, the problems caused by steel wire rod imports. Within a few days, the Clinton administration is expected to issue its final decision on whether and how to restrict imports of steel wire rod, but regardless of this decision Section 201 deserves much more attention from U.S. policymakers.

Section 201 -- referred to internationally as the escape clause -- has been around since the beginning of modern trade agreements. Early on, trade negotiators realized that lowering tariffs and eliminating trade barriers would from time to time cause serious economic dislocations sparked by a surge imports. To preserve political support for free trade and to avoid unnecessary dislocations trade agreements included an escape clause that allowed trade barriers to be temporarily raised to allow a domestic industry facing severe import competition time to adjust. In the United States, escape clause actions are considered under Section 201.

Relief under Section 201 is far from automatic. In order to qualify for relief, imports must be causing serious injury to a domestic industry as judged by the U.S. International Trade Commission. Even then, the President makes the final decision on whether or not to grant relief after considering other factors such as foreign reaction and impact on the U.S. economy. Unlike some other proposals made to limit imports, Section 201 is entirely consistent with U.S. obligations under the World Trade Organization (WTO) and other international trade agreements.

Despite the seemingly obvious appeal of consistency with international law, Section 201 has fallen into disuse in the United States. In the 1970s and early 1980s, a number of Section 201 actions were taken by the United States, but in recent years Section 201 seems to be forgotten. This summer, President Clinton did opt to restrict imports of lamb for three years, but this is one of only five import limitations under Section 201 since the early 1980s and all have been of relatively minor products. If successful, the steel wire rod case would be the first example of relief being granted to a manufacturing industry in fifteen years.

If this trend were the result of U.S. industries not facing problems from imports, it would hardly be cause for concern. Unfortunately, that does not seem to be the case. The steel import surge is only the latest import problem to effect industries from semiconductors to wheat, but Section 201 is no longer seen as a realistic solution for at least two reasons. First, U.S. law actually requires a higher threshold for serious injury resulting from imports than is required by the WTO; U.S. law requires that imports be the largest single cause of injury. Since industries suffering from import competition often face other economic problems ranging from technology changes to recessions, this test can be difficult to satisfy. Second, the President is granted complete discretion to waive relief even for an industry seriously injured by imports if he feels appropriate. A number of industries, including copper producers and footwear manufacturers, have proven that they meet the serious injury test only to have the President opt for no relief.

What is most troubling about the decline of Section 201 is that it has worked well. In two cases from the early 1980s, motorcycles and steel, temporary import limits allowed the industry to adjust and become more competitive to the point that the industries were able to thrive and create jobs without import limits. The temporary breathing room provided by Section 201 allowed the industry to regain its competitive health without further job losses.

Section 201 also seem to fill an important political need. As the steel import crisis demonstrated, a surge in imports can also spawn resistance to free trade witnessed by the House of Representative's vote to impose quotas on steel even though such restrictions seemed to violate the WTO. As the creators of the world trading system recognized, if there is not an escape valve to deal with surges of imports in order to allow adjustment, resistance to free trade and the organizations like the WTO will build. Ultimately, the world trading system could be endangered. Section 201 is the escape valve to release this pressure in the United States.

In a few days, the Clinton administration will make its decision in the steel wire rod case. Though it may attract little public notice, this will be one of the most important trade policy decisions this administration will make. If it allows Section 201 to further fall into disuse, it will be speeding the erosion of a fully WTO consistent trade device that has the potential to encourage positive adjustment while preserving support for free trade. This decision is an excellent opportunity for the administration and the Congress to begin a long overdue effort to once again make Section 201 a central part of U.S. trade policy.