Thursday, November 13, 2003

President Bush will decide “in a reasonable period of time” whether tariffs to help the steel industry have worked and should be lifted.

“I’m in the process of reviewing the … extent to which the industry has been restructured,” he said yesterday at the White House.

Mr. Bush imposed duties on foreign steel in March 2002 to give U.S. producers breathing space as the industry consolidated and to shore up political support in steel-making states such as Pennsylvania, West Virginia and Ohio.

But the three-year program was unpopular with major trade partners, who protested at the World Trade Organization, and American companies that use steel to make finished products.

A WTO decision Monday allowed the 15-nation European Union, where foreign producers have been hardest hit, and other nations to retaliate against billions of dollars in U.S.-made exports.

The White House has closely guarded the decision-making process on the tariffs, though with the WTO decision the economic and political stakes have increased. Where the steel tariffs were designed to boost political support in key election states, the retaliation is targeted to hit back at equally important voter bases such as Florida, a big citrus producer, and the Carolinas, a major textile center.

The president can maintain the tariffs for a full three years, eliminate them or search for some compromise. Bush administration advisers have only hinted at what the president might decide.

Last week, a senior Commerce Department official said the administration faced a “stark” choice between completely lifting or maintaining the tariffs; this week, the administration’s top trade envoy said they had helped the industry consolidate.

“Frankly, the safeguards gave the industry an opportunity to do what we hoped it would do,” U.S. Trade Representative Robert B. Zoellick said Wednesday.

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

But since the tariffs, the biggest traditional steelmakers have been involved in mergers or merger talks. Economist disagree about what caused this consolidation — some credit the tariffs while others look to new, more flexible labor agreements and unloading pension costs for allowing the industry to find its footing.

The White House officially maintains it is still considering all options and listening to interested parties. One key adviser, Karl Rove, has been the focus of intense lobbying efforts as those parties look to sway the final decision.

Congressional opponents of the tariffs, led by Rep. Joe Knollenberg, Michigan Republican, met Wednesday with Mr. Rove to urge their repeal.

“[Mr. Rove] didn’t argue too much about the points they made” in favor of steel consumers and against tariffs, Chris Close, Mr. Knollenberg’s spokesman, said of the meeting.

Leaders on the Congressional Steel Caucus, who favor the tariffs, are mostly home in their districts and have not formally met with White House advisers, according to their offices.

Observers have not ruled out a compromise.

“I think he will get rid of the tariffs but he will do something that will at least take the edge off the anger of the steel company executives,” said Gary Hufbauer, a trade expert with the Institute for International Economics, a Washington think tank that supports free trade.

Steel companies worry about a flood of foreign products entering the U.S. market. Mr. Hufbauer said a quota system would allow steel imports to increase but would cap them if they surged.

Any compromise would require the approval of the European Union to avoid sanctions.

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