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The Honolulu Advertiser

Posted on: Friday, December 5, 2003

Steel tariffs eliminated

 •  Bush signs legislation on credit, ID theft

By Edwin Chen and Richard Simon
Los Angeles Times


WASHINGTON — President Bush lifted tariffs on imported steel yesterday, averting a costly global trade war but angering the domestic steel industry and many of his Republican allies from Rust Belt states, where steelworkers have benefited from the protective measures he imposed almost 21 months ago.

His decision came after the European Union threatened to levy $2.2 billion in retaliatory tariffs on U.S. exports. Similar threats were made by other trading partners, including Japan and China.

But the president justified the policy reversal by saying the tariffs, which raised the price of imported steel, "have achieved their purpose" — granting a weakened domestic industry sufficient time to restructure and regain profitability.

At the same time, Bush warned he would "quickly respond" if heightened U.S. monitoring mechanisms should detect unfair practices by foreign steel companies that damage the American steel industry. In the past, foreign companies have benefited from government subsidies and have sold their products in the United States at artificially low prices.

Given the cross-currents in the debate over steel tariffs, the reaction to Bush's decision was predictably mixed. The steel industry and labor assailed the move, while manufacturers that buy steel praised it.

Tariffs are a schedule of fees that a government levies on imported goods to protect domestic makers of the same products. In announcing Bush's action, the White House and U.S. Trade Representative Robert Zoellick studiously clung to the word "safeguards" as a synonym for tariffs, with the trade official describing such duties as "an accepted principle of global trade rules."

He and other administration officials insisted that Bush made his decision to lift the tariffs, which took effect at midnight, "independent" of domestic political considerations, without regard to any potential backlash in such steel-producing states as Pennsylvania, West Virginia and Ohio, all likely battlegrounds in next year's presidential election.

Yet Bush's actions — in lifting the tariffs and in imposing them — have political implications.

In March 2002, when the tariffs were announced, domestic steel manufacturers were in trouble; in the previous four years, more than 30 companies had declared bankruptcy. Bush's political advisers viewed the tariffs as not only a tool to help a vital domestic industry but also an opportunity to bolster political support among the nation's estimated 150,000 steelworkers.

But the move antagonized manufacturers in steel-consuming states — such as Michigan, with its auto-making plants — because they had to pay more for steel.

Had he not lifted the tariffs, an ensuing trade war almost certainly would have hurt the economy, and Bush politically, as America's trading partners imposed retaliatory duties against such U.S. exports as citrus fruits grown in Florida, textiles made in the Carolinas, and motorcycles assembled in Pennsylvania and Wisconsin.

Minutes after Bush's announcement lifting the tariffs, European Union officials canceled their plans for retaliatory levies.

Bush's initial decision to impose tariffs ranging from 8 percent to 30 percent on most steel imports from Europe, Asia and South America marked a significant departure in policy for a self-avowed free trader. The move prompted accusations from manufacturers and free-trade activists that the president was sacrificing his principles for political gain.