- The Washington Times - Tuesday, March 5, 2002

President Bush's imminent decision on whether to curb imports of steel will not solve the ailing industry's problems and could inflict significant damage on companies that rely on cheap steel to stay competitive. It also could draw the ire of the nation's largest trading partners.
But it does have the potential to be a stroke of political genius that bumps working-class votes out of the Democratic column and into Mr. Bush's own.
"Decisions like these are one of the good reasons not to be president," said Bill Frenzel, a former Republican representative from Minnesota who studies trade policy at the Brookings Institution. "It's the moment of truth."
Mr. Bush must decide by tomorrow whether to impose tariffs of up to 40 percent on imported steel of all types, ranging from flat-rolled steel used to make automobiles to huge slabs that are transformed into other products like refrigerators. The deadline was an outgrowth of an investigation that the Bush administration began last year into whether steel imports were harming the U.S. industry.
Administration officials have hinted that Mr. Bush will not approve the 40 percent tariff on all imported steel that the industry and the United Steelworkers of America are seeking. Instead, he is likely to impose a lower tariff and exclude some countries, such as Canada and Mexico.
Nevertheless, other trading partners, such as the 15-nation European Union, have promised they will fight any U.S. action in the World Trade Organization. Europe even may retaliate against American exports.
Undaunted, the steel industry is pressing ahead.
"This is not the time [for] a business-as-usual compromise approach that disappoints all sides, earns the administration no credit and does not solve the problem," said Andrew Sharkey, president of the American Institute for Iron and Steel, an industry group.
No one disputes that the giants that take iron ore and turn it into steel are hurting, but the best cure is the source of ample debate.
In the past few years, 27 companies have filed for Chapter 11 bankruptcy protection from creditors. A few, including Ohio-based giant LTV Steel, have closed. Thousands of workers have been laid off. Although imports have declined in some categories of steel, soft demand still is hurting the industry, economists say.
For months, the steel industry and its union, the United Steelworkers of America, have exhorted Mr. Bush to take tough action against the imports they say are costing American jobs and driving U.S. companies into bankruptcy by the dozens.
"President Bush has a choice to make, and he has the power to make it," Steelworkers President Leo W. Gerard said.
Steelworkers, among them the thousands who rallied last week in Washington to press their case, have not been shy about dangling the political payoff in front of Mr. Bush if he penalizes imports. Union members are mostly Democrats, but they are potential swing voters.
The people who journeyed to Washington last week hail "largely from Indiana, Ohio, Pennsylvania, West Virginia and Maryland states the Bush Administration recognizes as crucial to the 2002 congressional elections as well as a presidential reelection bid," the Steelworkers noted in a press release.
"The very people who did not vote for President Bush are badgering him for protection," Mr. Frenzel said.
But in the past few weeks, the administration has come under intense pressure from all sides. Unlike previous battles over steel, the industries that buy steel and fashion it into products like appliances, fasteners and vehicles have made their voices heard.
Jon Jenson, president of the Consuming Industries Trade Action Coalition, has pleaded with the administration not to penalize imports, a step that likely would make steel much more expensive for companies that employ about 12.8 million workers, far more than the roughly 200,000 who make steel.
"Steel is an important industry," Mr. Jenson said. "It is not the only industry."
But Mr. Bush also faces the dilemma that import restrictions will not be nearly enough to save the steel industry. Companies also are groaning under the huge burden of providing for the thousands of retired workers who depend on their former employers for health care and pensions.
The Steelworkers say these "legacy costs" amount to $13 billion. Economists say these huge liabilities prevent consolidation in the industry, which is crucial to its recovery.
"You can't merge if the stronger company has to take on these costs at face value," said Ben Goodrich, an economist at the Institute for International Economics.
Over the past week, Bush administration officials have suggested that the president will not propose a solution to this problem when he makes his decision on tariffs. Instead, he will allow Congress to propose a plan.


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