- The Washington Times - Thursday, February 14, 2002

The European Union this week moved to head off a potentially damaging confrontation with the United States over steel imports with a broad plan aimed at guiding the struggling American industry back to profitability.
European trade commissioner Pascal Lamy asked the Bush administration not to slap tariffs on imports, but instead agree to a plan to shut down unprofitable steel mills worldwide and pave the way for consolidation in the U.S. industry.
At the behest of the American steel industry, President Bush is expected to announce on March 6 plans to hit imports from Europe, Asia and Latin America with stiff trade sanctions.
"This window of opportunity will remain open for a few more weeks," Mr. Lamy said in a letter to U.S. Trade Representative Robert B. Zoellick on Tuesday. "We hope and trust that the U.S. does not decide to close it by taking unilateral action to reduce access to its steel market."
Mr. Bush initiated a trade case against foreign steel last year. In October, the International Trade Commission concluded that imports were damaging the U.S. industry and recommended tariffs of up to 40 percent on imports.
Steel companies, many of whom are in bankruptcy or facing heavy losses, have bluntly rejected Mr. Lamy's ideas, which have been raised by less-senior European officials over the past few weeks. Bush administration officials also have reacted very coolly to the proposals.
"A strong tariff remedy is the only answer," said Barry Solarz, director for tax and trade policy at the American Institute for Iron and Steel, an industry group.
The administration, which has the final say in the matter, is in the middle of a furious lobbying campaign that pits steel-buying companies and major U.S. trading partners against steel companies and their union, the United Steelworkers of America.
Calling their quest a "countdown to justice," the union is airing radio and television advertisements around the country to pressure the Bush administration. The steelworkers have also hired prominent Republican lobbyists to make their case.
"We're calling on [Mr. Bush] now to fulfill the hope of justice that he has created for steelworkers and steel communities throughout this country," said union President Leo Gerard.
Companies that buy steel and fashion it into other products argue that higher prices will drive production of kitchen appliances, tools and other metal-containing machines out of the United States.
"Even during this downturn, steel users must compete with efficient global manufacturers of all types," said Jon Jenson, chairman of the Consuming Industries Trade Action Coalition.
Adding to the mix, Russia's deputy economics minister, Maxim Medvedkov, flew to Washington this week to argue against trade protection that would affect his country's steel producers. A 1990 trade agreement between the two countries permits such action, but Mr. Medvedkov argued that it would devastate Russian companies.
Mr. Lamy proposed that the United States and Europe make an "all-out effort" to persuade other countries to join them in shutting down steel mills that are inefficient and cannot be affordably modernized. Reduction in steelmaking capacity is critical to solving the industry's long-term problems, according to Charles Bradford, a New York-based steel analyst.
"Without plant closures, the problems of the steel industry will always come back," he said.
Mr. Lamy also proposed a 2 percent levy on steel sales that would help cover the cripplingly high cost of pension and health care benefits that American steelmakers must pay their retirees. And he urged countries to conduct international negotiations to limit subsidies paid to steel companies.


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