- The Washington Times - Friday, September 19, 2003

Steel tariffs imposed by President Bush last year probably had a slight negative impact on the economy, the U.S. International Trade Commission said in a report released last night.

But the tariffs also gave steelmakers a chance to regain footing in a competitive world market and did not drastically harm small steel consumers, the report said.

“Since imposition of the safeguard measures, the industries producing steel products have undergone major restructuring and consolidation,” said the report, which focused separately on steelmakers and steel consumers.

The report is meant to help President Bush decide whether to keep disputed tariffs on steel for their full, three-year term, to eliminate the program sooner, or to find some middle ground in an attempt to placate sensitive political constituents.

The tariffs, fees placed on foreign steel when it crosses the border, have created political problems for the president in the United States and abroad.

The Bush administration is not expected to make a decision on the tariffs immediately.

“A majority of steel-consuming firms indicated that neither continuation or termination of the safeguard measures would change employment, international competitiveness, or capital investment,” the report said in a finding that would clearly help the Bush administration maintain the tariffs.

“We will begin a thorough review and analysis of these reports, and will use them as a part of our ongoing review of developments in the steel industry, and the economy more generally, since the imposition of the steel safeguard measures,” Richard Mills, a spokesman for the U.S. trade representative, said yesterday before the report was released.

In the United States, steelmakers and their political allies laud the safeguards, but companies that buy steel and make it into parts or finished products say that the protectionist measure has cost revenue and jobs.

President Bush in March 2002 implemented the three-year steel tariffs, as high as 30 percent on some products, to protect an ailing industry. Steelmakers were losing money as high legacy costs drained budgets, and foreign competitors won customers with lower prices.

Some 35 steel companies declared bankruptcy and 54,000 steel jobs were lost from 1997 through 2002, according to the American Iron and Steel Institute.

The tariffs were meant to protect U.S. companies, boost prices and give the industry a chance to consolidate from several unprofitable companies to fewer, stronger firms.

The president also sought to shore up his political base in steel states such as Pennsylvania and West Virginia.

The efforts have had limited success. Steelworker unions have not switched allegiance from Democrat to Republican, and manufacturers that rely on imported steel have been alienated.

Prices quickly rose and remain higher than before the tariffs.

Several companies have come out of bankruptcy or found buyers.

For example, International Steel Group acquired Bethlehem Steel, LTV and Acme Steel; U.S. Steel bought National Steel; and Nucor has acquired assets from several companies.

“There has been a reduction in imports, and now they are coming in at fair market values. [The tariffs] have allowed a massive consolidation and rationalization,” said Dan DiMicco, president of Nucor, the largest steel producer in the United States.

“It’s been very positive. But the rationalization process is just under way, and it’s going to take at least three years,” Mr. DiMicco said.

But the tariffs are unpopular with a large segment of manufacturers.

“What the president did is, he completely disrupted the market overnight,” said Mike Lynch, vice president of government affairs for Illinois Tool Works, a company that makes plastic and metal fasteners and has 24,000 employees in 37 states.

“From our perspective the problem wasn’t price, it was availability, chemistry and quality. In some cases we’re still not finding the quality we need,” Mr. Lynch said, indicating that U.S. companies often supply a product that is inferior to foreign suppliers that were cut out of the market by the tariffs.

Legislators from Illinois and Michigan have been especially active trying to get Mr. Bush to repeal the tariffs.

“The section 201 steel tariffs have caused some steel consumers, notably in the electronics and automotive parts and components industries, to move production offshore or buy finished steel products and import them from offshore,” said Rep. Joe Knollenberg, Michigan Republican, and seven other Michigan representatives in a Sept. 16 letter to Mr. Bush.

Lawmakers from steel states are just as vocal; 98 members of Congress from 31 states yesterday sent a letter to Mr. Bush urging him to keep the tariffs for three years.

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