- The Washington Times - Wednesday, August 20, 2003

The upcoming review of steel tariffs is prompting detractors to reiterate their criticisms. The broad barrage has characterized the steel tariffs as politically motivated, unilateral and protectionist — transforming a technical matter into a hot-button issue. This opposition has been sweeping, but short on the facts, which demonstrate that the Bush administration’s temporary safeguard for steel is allowing a vital industry to compete against global unfair trade practices.

The White House imposed steel tariffs, which are capped at 30 percent and exempt developing countries, in March 2002. On Sept. 18, the International Trade Commission will give its 18-month review of the three-year tariff safeguard. By law, President Bush can only revoke the safeguard under two criteria: The industry is not adjusting to global competition; the industry no longer needs the safeguard. Neither of these two criteria are applicable. The fact that the World Trade Organization (WTO) has ruled against the tariffs is not one of those criteria. (At any rate, the WTO usually allows countries about 15 months to become compliant with its rulings, which is roughly equivalent to the period left for the tariffs.) Therefore, the president should allow the industry to benefit from the full term of the safeguard.

Most major steel producers outside of the United States benefit from a range of measures to protect against free-market pressure, such as subsidies, “special access” to loans, special purchasing agreements, quotas, tariffs. Before the United States implemented the tariffs, it had one of the most open markets for steel imports, with foreign products claiming, according to 1999 data from the Organization for Economic Cooperation and Development, about 30 percent of the U.S. market, compared to 16 percent and 9 percent for the European Union and Japan, respectively.

These protections have caused a worldwide steel glut and made U.S. steel investments in labor and equipment redundant. Since steel production is so capital intensive, the cost has been considerable. About 45,000 steelworkers have lost their jobs since 1997. The administration has correctly stated that U.S. steel producers must face foreign competition — fair or not — but should be given a chance through the safeguard to consolidate.

These facts didn’t get a mention in an Aug. 13 editorial in the Wall Street Journal. What the editorial did allege is a near-doubling of hot rolled steel as a result of the tariffs. But the editorial used an arbitrary time period to make its point. When comparing hot rolled steel prices in March 2002 (when the tariffs were put in place) to July 2003 (the most recent figures), there is no change in prices. The Journal used a “late 2001 to July 2002” period for its analysis, comparing a record low in prices to a record high. Prices spiked in July of last year primarily because U.S. steel company LTV went bankrupt, causing a shortage. Since implementation of the tariffs, longer-term hot rolled steel contracts have risen moderately, between 10 percent to 17 percent. The Journal editorial also cited a February study by the Consuming Industries Trade Action Coalition. That study said higher steel prices as a result of the tariffs cost 200,000 U.S. jobs and $4 billion in lost wages from February 2002 to November 2002. That study has been debunked. As the pro-free trade Financial Times noted in its Observer column, the job loss occurred two months before the tariffs were implemented.

The steel industry has invested about $3.6 billion since March of last year to consolidate and restructure, demonstrating the industry is adjusting to global competition. But workers and steel companies need the next 18 months to further adjust. Mr. Bush should carefully consider the facts, and maintain the safeguard for its allotted time.

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