Competitive Intelligence

Bush Lifts Tariffs on Steel & Averts a Trade War

President Bush announced that he finally succumbed to his advisors' counsel and lifted the 21-month-old steep tariffs on imported steel that had riled trading partners in both Europe and Asia. Here's an excerpt from the Washington Post:

The action, although expected, marked a rare about-face for an administration not noted for reversing course. And it brought angry reactions from labor unions and executives in the steel-producing states of West Virginia, Ohio and Pennsylvania, all of which were closely contested in the 2000 presidential election and are expected to be battlefields in 2004.

The tariffs, which were as high as 30 percent when imposed 21 months ago, were lifted at midnight, 15 months before their scheduled expiration. Bush said the tariffs had done their job, stemming a flood of cheap steel imports long enough to allow U.S. producers to consolidate and get back on their feet.

In a written statement read by his press secretary, the president also noted that economic circumstances have changed markedly since the tariffs were imposed. Surging demand for steel has boosted prices, and a weakening dollar has made U.S. steel exports more competitive in the global market, administration officials said.

"I took action to give the industry a chance to adjust to the surge in foreign imports and to give relief to the workers and communities that depend on steel for their jobs and livelihoods," Bush said. "These safeguard measures have now achieved their purpose, and as a result of changed economic circumstances it is time to lift them."

Administration officials had signaled that the tariffs would be lifted as far back as mid-September. Bush's economic team had united in a push to lift them, arguing that they had cost more jobs among steel users than they had saved among steel producers. Even Bush's political advisers, who had been instrumental in imposing the tariffs last year, had concluded that they may have backfired politically. Then in November, the World Trade Organization ruled the tariffs illegal, allowing other countries to prepare to impose retaliatory tariffs this month.

Shortly after the White House announcement, the European Union withdrew its threat to impose tariffs on about $2 billion of U.S. exports.

The Commerce Department will closely monitor steel shipments into the United States and continue licensing imports, so the administration can react if there is a surge of cheap imports, Bush said. The president, however, offered no additional aid to the industry or its workers.

That elicited a sharp response from steel producers, which had hoped for more assistance or a phaseout of the tariffs rather than an immediate lifting. Publicly, steel officials were muted in their criticism. Thomas J. Usher, the chairman and chief executive of U.S. Steel Corp., who had just hosted Bush at a campaign fund-raiser earlier this week, said he was "delighted" to hear that the Commerce Department will "aggressively monitor" steel prices. In public comments, other steel executives were similarly understanding.

The New York Times, notes moves of the World Trade Organization and the European Union, which determined that the best way to beat back the tariffs would be to go after American exports from states deemed more crucial to Bush's re-election efforts, such as Florida citrus and Michigan's automobiles. "For the first time in his nearly three years in office, the president, who has often reveled in the exercise of American power, finally met an international organization that had figured out how to hit back at the administration where it would hurt," the Times notes.

Still, organized labor thinks the decision stinks:

Leo W. Gerard, president of United Steelworkers of America, vowed to make Bush pay a political price for his "betrayal of American steel workers and steel communities."

"We're not going to give up," he said. "We're going to fight like hell for justice."

Mark Glyptis, president of the Independent Steelworkers Union, vowed that his union "will now work very hard to make sure George W. Bush joins the ranks of the unemployed next year."

"What we've now told the world today is, 'You're welcome to come abuse us, to come and abuse our trade law,' " Gerard said, because "we're going to cave in when you threaten to retaliate."

U.S. Trade Representative Robert B. Zoellick said yesterday that the decision was made independently of the threats of retaliatory tariffs.

And, lifting tariffs here have made it more confusing to interpret the administration's trade policy:

Just last month, the administration slapped import quotas on some Chinese textile imports, in what is widely seen as a first installment of actions against Chinese apparel, and this month, it is expected to take action against imports of Chinese bedroom furniture.

Zoellick portrayed the tariff decision in different terms. In the past 18 months, he said, the federal government had assumed $8.2 billion in pension benefits from 14 bankrupt steel companies. U.S. steel exports in August were 49 percent higher than they were a year earlier, and Bush had proven that he is willing "to help people that are knocked off their feet."

"You've got about 150,000 steel workers in this country, and they can thank this president for having a chance to compete in the future," he said.

Steelworkers responded with their own statistics: 225,000 steelworkers with lost health benefits, thousands more who have lost all or part of their pensions, the federal Pension Benefit Guaranty Corporation teetering under the weight of its new steelworker benefit responsibilities, and companies still on the edge of viability.

- Arik

Posted by Arik Johnson at December 5, 2003 03:31 PM | TrackBack