- The Washington Times - Wednesday, October 8, 2003

The International Trade Commission’s (ITC) report on steel tariffs has introduced empirical sobriety to a testy debate — and vindicated those supporting a temporary safeguard for steel producers, such as this editorial page.

In March 2002, the White House implemented a three-year safeguard to give U.S. steel producers a chance to restructure to compete against cheap, and often below cost, imports. The administration imposed steel tariffs that were capped at 30 percent and exempted developing countries. By law, President Bush may only revoke the safeguard if the industry is not adjusting to global competition or the industry no longer needs the safeguard.

The report that the ITC released Sept. 19 indicates neither of these criteria has been met. “Since the safeguard measures went into effect,” the report said, “there has been extensive restructuring of the domestic industries producing certain carbon and alloy flat-rolled steel and tin.” The report also said that, due to depressed market conditions during the first 18 months of the tariffs and increased imports from countries exempted from the tariffs, the benefits of the safeguard were reduced. This bolsters the steel industry’s claim, also backed up by many analysts, that the full three years are needed to complete restructuring.

The study also found that the tariffs’ affects on the overall U.S. economy have been negligible, with the impact ranging from a positive effect of $65.6 million to a negative effect of $110 million, which represents a .0006 percent impact on the positive side and .0011 percent impact on the negative side for America’s economy.

The report also found that steel consumers have been only modestly affected by the increased tariffs on steel imports, with the $600 million cost of steel tariffs exceeded by a $51 billion increase in operating income. “A majority of steel-consuming firms indicated that neither continuation nor termination of the safeguard measures would change employment, international competitiveness, or capital investment,” the report said.

Meanwhile, the report found the safeguard has helped U.S. steel producers. No large firms went bankrupt during the first year of the safeguard, while in the previous two-year period, several large firms filed for bankruptcy. Steel producers Nucor, ISG and U.S. Steel have invested $3 billion to restructure and consolidate the flat-rolled industry, and consolidation has led to a reduction of about a dozen steel companies.

The steel tariffs have come under attack at home and in the World Trade Organization. But the ITC report demonstrates the president used sound judgment in implementing the tariffs. Since the safeguard has reached its midway period, Mr. Bush can now decide to leave it in place, alter it or revoke it. Given the ITC’s finding, Mr. Bush should give U.S. steel producers the full three-year relief and, at most, alter the tariffs to avoid WTO conflict.

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