- The Washington Times - Thursday, December 4, 2003

President Bush yesterday lifted steep tariffs on imported steel, citing new evidence that the 21-month program had enabled sagging U.S. steel companies to restructure and become more competitive with foreign producers.

“These safeguard measures have now achieved their purpose and as a result of changed economic circumstances, it is time to lift them,” the president said in a statement.

While Mr. Bush rescinded tariffs that the White House had planned to keep in place until 2005, he announced a stepped-up monitoring program to guard against a surge of foreign steel entering the country.

The removal of the tariffs ended the threat of a trade war with Europe and Japan and threw into flux the president’s re-election campaign strategy in steel-producing states, which supported the tariffs, and steel-consuming states, which opposed them.

Minutes after the president lifted the tariffs, effective at 12:01 this morning, the 15-nation European Union announced it would lift its threat of sanctions on $2.2 billion of U.S. products that would have taken effect Dec. 15.

The move has wide political impacts for next year’s presidential campaign, especially in states in the Rust and Steel belts — all targets of the Bush-Cheney 2004 re-election team. The tariffs had pleased the $50 billion steel industry in states such as Pennsylvania, Ohio and West Virginia, but angered small manufacturers and their workers in Michigan, Minnesota and Wisconsin.

Thomas J. Usher, head of the Pittsburgh-based U.S. Steel Corp., said: “The tariffs were working as planned, and have been instrumental in bringing about the improvements in the industry that we’ve seen over the last two years. This decision will complicate the historic restructuring that is ongoing in the industry.”

Said Leo Gerard, president of the United Steelworkers of America: “His unwillingness to defend U.S. trade laws is an affront to all American workers.”

But William Gaskin, president of the Consuming Industries Trade Action Coalition steel task force, called the end of the tariffs the “right decision for the 13 million workers in steel consuming industries, for the manufacturing sector that is just beginning to recover from tough economic times, and the overall U.S. economy.”

The watchdog group Council for Citizens Against Government Waste said the tariffs shored up the U.S. steel industry on the backs of average Americans.

“They were imposed at a high cost to consumers and taxpayers,” group President Tom Schatz said. “The only benefit to the U.S. economy … was the approximately $650 million collected in tariff ‘revenues’ from U.S. consumers.”

In March 2002, after the International Trade Commission had reported to the White House that a surge of imports was costing the industry as much as $2 billion a year, the president imposed tariffs ranging from 8 percent to 30 percent on 10 categories of steel products. At the time, Mr. Bush said he was doing so to “help give America’s steel industry and its workers the chance to adapt to the large influx of foreign steel.”

The proclamation establishing the tariffs said the restraints “shall not terminate until the earlier of March 21, 2005, or such time as the secretary of commerce establishes a replacement program.”

But in the official declaration yesterday rescinding the tariffs, the White House said the president is authorized “to reduce, modify, or terminate a safeguard action if … he determines that changed circumstances warrant such reduction, modification or termination.”

The president removed the tariffs after the European Union threatened to impose billions of dollars in sanctions on products from states ranging from Florida to California. But he did so not out of political expediency, he said, but because the tariffs had had their desired effect in a short time.

“The U.S. steel industry wisely used the 21 months of breathing space we provided to consolidate and restructure,” Mr. Bush said is his statement. “The industry made progress increasing productivity, lowering production costs and making America more competitive with foreign steel producers.”

U.S. Trade Representative Robert B. Zoellick agreed, saying sales of domestic steel and company profits are up dramatically.

“Not only is the industry much stronger today than it was 21 months ago, but the economic circumstances that justified the safeguard have changed,” Mr. Zoellick said.

He noted that production has risen across the board on more than a dozen major steel products and said “prices today are about 15 to 30 percent higher than in February 2002, the month before the safeguard.”

From 1998, 42 steel companies went into bankruptcy, more than 50,000 steelworkers lost their jobs, and the government was forced to take over pension plans for 17 steel companies with 240,000 participants and nearly $7 billion in benefits, according to the steelworkers union.

But the tariffs helped stabilize steel companies.

“After losing nearly $5 billion in the 24 months before the safeguard was initiated, the flat-rolled [steel] industry posted profits of $400 million during the first 12 months of relief,” Mr. Zoellick said, adding imports “are at their lowest levels in a decade.”

Continuing the tariffs, he said, would place an undue burden on taxpayers.

“In the first 21 months of the safeguard, the benefits to the industry outweighed the marginal cost to consumers. Going forward, however, this is not the case.”

Mr. Zoellick also said the decision to rescind the tariffs was “independent” of politics, despite the fact that the EU had carefully chosen its target list to cover a range of products from oranges to pajamas that would inflict maximum political pain in key swing states that Mr. Bush is hoping to win in next year’s presidential race.

“The industry’s much better off. We’re not facing retaliation. That strikes me as a good combination,” he said.

While the tariffs are over, Mr. Bush announced he was continuing early reporting requirements that had been imposed when the tariffs were levied in 2002 to detect any big influx of steel into the United States.

The reporting program requires steel importers to apply for import licenses, giving the government a quicker way to detect import surges than waiting for Customs Service data when the steel arrives at U.S. ports.

“We’re very grateful to him for the help he did give, and we accept that he will step in again if necessary,” said Wilbur Ross, financial backer for International Steel Group, a Cleveland company that has bought the assets of former giants LTV Steel, Acme Steel and Bethlehem Steel.

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