- The Washington Times - Wednesday, January 23, 2002

The United States faces economic sanctions from other countries if President Bush goes ahead with a plan to curb steel imports in support of the domestic industry.
Since imports of many kinds of steel are falling, the United States cannot keep out foreign products and comply with the rules of the World Trade Organization, according to a new study by the Institute for International Economics.
If Mr. Bush imposes wide-ranging import curbs, WTO rules would allow trading partners including Europe, Japan, Korea and Brazil to demand compensation from the United States or penalize American exports.
"The United States will pay [for curbing steel imports], one way or another," said Ben Goodrich, an economist with the institute, a Washington-based think tank, which supports free trade.
Mr. Goodrich said penalties against U.S. companies could hit $8 billion or higher, turning the steel issue into the largest trade dispute between the United States and other major trading nations.
Mr. Bush opened a case against steel imports in June with a government investigation. Following a December recommendation by the independent International Trade Commission to slap tariffs of up to 40 percent on foreign steel, Mr. Bush must make the final decision early next month.
Mr. Bush faces strong pressure from the steel industry and its union, the United Steelworkers of America, to slap foreign imports with tough curbs. The union in particular has touted its strength in Indiana, Ohio, Pennsylvania and West Virginia, steel states that Mr. Bush won or narrowly lost in the 2000 election.
Groups opposed to the curbs, such as manufacturers of construction equipment, automobiles and appliances, are raising the problem of WTO rules as the Bush administration considers what kinds of penalties to impose. They argue that other countries will retaliate against highly competitive U.S. industries, such as financial services, agriculture and technology.
"You face a Hobson's choice that to save the steel industry, you might have to hit" other industries, said Calman Cohen, president of the Emergency Committee for American Trade, a business group that supports the study.
Officials with the American Iron and Steel Institute, the main trade association for the steel industry, said they could not comment on the issue and referred questions to their attorney, who could not be reached at press time.
WTO rules permit "safeguards" to curtail imports for up to three years if an industry is under pressure from imports, without fear of retaliation from other countries. But the imports causing harm to American producers must be rising, or else other nations can hit back, according to trade rules.
"The freedom from retaliation is conditioned on an absolute increase in imports," said Robert Hudec, a professor of law at Tufts University in Boston and a highly regarded scholar of trade policy. "That's absolutely clear."
Mr. Hudec said that these WTO rules, which were part of the Uruguay Round of negotiations that ended in 1994, were supposed to make these types of import cuts less frequent.
In the case of steel, imports have actually been falling off in key categories, such as flat-rolled steel, which is used to manufacture automobiles and household appliances. Imports in 1997 hit 25.8 million tons, but receded to 21.5 million tons last year.
If Mr. Bush stopped these shipments, the United States could be on the hook for billions of dollars in retaliation. Under WTO rules, the affected countries could hit back at American exports within about four months.

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