- The Washington Times - Monday, July 22, 2002

Jim Zawacki has worn his patriotism on his sleeve since September 11 but doesn't hide his disappointment with President Bush's decision in March to slap tariffs on imported steel.
Mr. Zawacki's answering machine message at GR Spring and Stamping Inc. in Grand Rapids, Mich., tells callers that "the elimination of terrorism and support of our president" must be the nation's highest priority.
But Mr. Zawacki, the company president, is wrestling with dramatically higher steel prices as a result of the tariffs, which he said have dealt a heavy blow to his business of manufacturing seldom-seen automobile parts, such as sun-visor frames.
Out of loyalty to Mr. Bush, the 200-employee company chose not to stockpile cheaper steel as the March deadline for imposing the duties approached. It has paid dearly.
"I never thought he would do it," Mr. Zawacki said.
Nearly six months after President Bush hit steel imports with tariffs of as much as 30 percent, companies that fashion steel into a range of other products say they are the real losers. Skyrocketing prices created by a tariff wall around the United States in some cases increases of 30 percent since March have driven business toward foreign companies that have lower steel costs, according to Mr. Zawacki and others in the business.
The steel industry, which lobbied aggressively for the tariffs, counters that manufacturers such as Mr. Zawacki have enjoyed abnormally low prices for the past few years prices that have forced more than a dozen U.S. steel producers into bankruptcy and that the duties do little more than level the playing field with foreign steelmakers.
"Prices are not rising," said Bob Johns, director of marketing at Charlotte-based Nucor Corp., a company that makes steel products. "Prices are returning to normal levels."
The war of words this year between the producers and users of steel marks the latest installment in a debate that has raged for at least 20 years: Do tariffs help manufacturers at the expense of their own customers? Steel manufacturers say the tariffs are a justified response to years of "unfair" trading by foreign companies.
For businesses such as Mr. Zawacki's, tariffs are nothing but trouble.
Early this year, GR Spring and Stamping had locked in a lucrative $6.5 million contract with a regular customer, whom Mr. Zawacki declined to identify, for a part that used more than 2 pounds of stainless steel. Mr. Bush's tariff of 30 percent added 75 cents to the part's cost, making the contract a net loss for the company.
"The tariff was the straw that broke the camel's back," he said.
Instead of renegotiating with Mr. Zawacki, the customer took its business to a French company, and another regular job went to Mexico, which will result in five layoffs in Grand Rapids, he said.
Mr. Johns dismisses stories like these as "part of a carefully orchestrated public relations campaign" by opponents of the tariffs such as the Consuming Industries Trade Action Coalition, a Washington group representing steel consumers. He adds that businessmen like Mr. Zawacki should have been aware that the tariffs were coming, given that planning for them began early last year.
"If people were planning an undisrupted business environment for this year, they're living in a cave with Osama bin Laden," he said.
Nucor recently financed a study by Peter Morici, a professor at the University of Maryland, which says steel prices have increased abroad as well, so there is no net disadvantage for U.S. steel users. Though he conceded that tariffs helped boost prices this year, such factors as currency rates and labor costs also affect the fortunes of companies such as Mr. Zawacki's.
"To some extent, the steel tariff did have a price effect," Mr. Morici said. "But there are other things happening to U.S. manufacturers apart from steel prices."
John Jenson, chairman of the Consuming Industries Trade Action Coalition, counters that Mr. Morici's contention is little more than a "lame attempt to justify protection for the steel industry."
"Is he seriously trying to tell us that high prices are not disruptive to U.S. consumers?" Mr. Jenson said.


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