Tariffs set for foreign steel goods

President imposes three-year levies of as much as 30%

No bailout of legacy costs

U.S. Steel's plan to acquire Beth Steel is apparently dead

March 06, 2002|By Kristine Henry | Kristine Henry,SUN STAFF

President Bush imposed three-year tariffs of up to 30 percent on imported steel yesterday to give the beleaguered domestic industry time to consolidate and get on its feet, a move that drew praise from steelmakers, lukewarm support from steel workers, and vitriol from exporting nations and domestic steel users.

But even as Bush attempted to give the industry relief against a flood of imports, he declined to support a government bailout of the multibillion-dollar tab for retiree health care costs and pensions. As a result, the head of bankrupt Bethlehem Steel Corp. said yesterday that its tentative deal to be acquired by United States Steel Corp. is dead.

"I take this action," Bush said, "to give our domestic steel industry an opportunity to adjust to surges in foreign imports, recognizing the harm from 50 years of foreign government intervention in the global steel market, which has resulted in bankruptcies, serious dislocation and job loss."

Steel imports reached an all-time high in 1998 of 41.5 million tons, helping to drag prices to a 20-year low and push more than two dozen steelmakers into bankruptcy. Acting at Bush's request, the International Trade Commission determined that imports had harmed the domestic industry and in December recommended various remedies, including tariffs of up to 40 percent.

For Bush, his announcement yesterday was a delicate balancing act. Key states in the coming congressional election - including West Virginia, Pennsylvania and Ohio - depend heavily on steel jobs, and the issue has been an emotional one among voters. On the other hand, steel-using industries and major trading partners - many close allies of the United States - bitterly opposed tariffs.

Yesterday, those nations lashed out at Bush's decision, and steel-using industries warned that the levy will raise prices for consumers and harm the nation's economy.

"The U.S. decision to go down the route of protectionism is a major setback for the world trading system," European Union Trade Commissioner Pascal Lamy said, adding the EU would challenge the decision before the World Trade Organization.

Major exporters, including Japan, Russia and Australia, also harshly condemned the move. Mexico and Canada, which account for 10 percent and 15 percent, respectively, of steel imported by the United States, will be exempt from the tariffs because of the North American Free Trade Agreement.

Bush, defending his decision, told reporters that international trade rules permit such temporary tariffs to protect battered industries. "We're a free trading nation, and in order to remain a free trading nation we must enforce law. That's exactly what I did," he said.

Steelmakers upbeat

U.S. steelmakers were upbeat yesterday about Bush's decision, though it delivered less than they had requested.

"We wanted something that was plain and simple - 40-percent tariffs for four years, and we got something less than that," said Robert S. "Steve" Miller Jr., chairman and chief executive of Bethlehem. "But we regard it as giving us the sufficient breathing room we need for a restructuring process."

Leo Gerard, president of the United Steelworkers of America, said he was "cautiously optimistic" that the tariffs could help the industry. "We commend the president for his bold action," he said. "He took a risk, and we applaud him for that."

Local reaction was not so positive. Ron Allowatt, president of local 2610, which represents workers at Bethlehem's Sparrows Point division, said 30 percent is "not going to do it."

"I'm upset," he said. "We needed the 40 percent, and we needed something out of the tariffs to help with legacy costs, and if that doesn't happen, we're right back where we started."

A failed strategy

Bethlehem, which employs 3,500 in Baltimore and supports another 25,000 local retirees, filed for Chapter 11 bankruptcy protection in October. The company and the steelworkers union had pushed for the 40-percent tariffs in the hope of using the revenue to fund a government takeover of its nearly $4.9 billion in unfunded health care and pension benefits, paving the way for its consolidation with U.S. Steel. Yesterday Miller acknowledged that strategy had failed.

"We are going to have to proceed with other strategic alternatives as we work our way through bankruptcy," Miller said. "The most likely alternative for us is to pursue a series of joint ventures and find the best and strongest and most logical partner for each of our operations."

Bethlehem officials have already started looking. Executives from Brazil's largest steelmaker, Companhia Siderurgica Nacionale (CSN), were at Sparrows Point last week to prepare for a possible joint venture with Bethlehem.

Miller, who has not publicly discussed CSN, said yesterday that under any joint venture, Bethlehem would remain the corporate parent responsible for legacy costs and the partner would "add value and profitability to various operations so we would be more able to take care of retiree liabilities."

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