WTO rules U.S. tariffs on steel illegal

President Bush’s efforts to protect the steel industry from foreign competition are illegal, the World Trade Organization ruled yesterday. The decision opens the way for billions of dollars in retaliation against American products by next month.

The Bush administration in March 2002 placed tariffs on foreign steel in an attempt to help U.S. steel consolidate, to shore up political support in states like Pennsylvania and Ohio, and to help win trade-promotion authority in Congress.

While immensely popular with steelmakers and their unions, the tariffs have alienated the companies that turn steel into finished products, especially auto-parts makers and machine shops, and some U.S. trade partners.

The WTO yesterday confirmed a July ruling that said the U.S. barriers to foreign steel break international trade rules. The ruling cannot be further appealed.

The Bush administration now is in a politically difficult position in the run-up to the 2004 elections. It can leave the tariffs in place with mixed domestic support and certain foreign retaliation targeted at electorally important states, or drop them against the wishes of the steel industry and seemingly in the face of foreign pressure.

The 15-nation European Union has promised to be the first to strike against steel tariffs, in mid-December, and Japan has warned it would consider action. South Korea, China, Brazil, New Zealand, Switzerland and Norway also filed at the WTO and won the right to block U.S. products from their markets.

In a joint statement, the countries said yesterday’s decision “leaves the United States with no other choice but to terminate” protectionist measures “without delay.”

EU sanctions would cover $2.2 billion worth of trade unless the United States removes its steel tariffs by early December. Clothes made in the Southeast, Florida produce and Harley-Davidson motorcycles are targeted. Games, metal, and processed-food exports also would be hurt when they faced tariffs, a kind of tax that raises the price of the good before it enters countries that retaliate.

“In short, the list is designed to maximize political pain for Republicans in 2004,” the Institute for International Economics, a Washington think tank, said last week in a report.

The other nations combined can retaliate against up to $1.2 billion in U.S. goods depending on calculations, the think tank said.

The Bush administration yesterday said it was still reviewing reports on the tariffs and considering the final WTO decision, but has not announced a timetable to resolve the issue.

“We are studying the report, considering the implications and considering all the options,” said Richard Mills, spokesman for the U.S. Trade Representative’s Office.

The president can end the tariffs at the halfway mark, allow them to run for their full three-year term until March 2005, or look for a middle ground that would grant exemptions for many imports, a partial measure already employed to allay foreign and domestic pressure.

In past disputes, the Bush administration repeatedly has said it is important to respect decisions by the WTO — a body the United States helped create to maintain a rules-based trading system.

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