Steel folks angered as tariff is loosened

178 additional products exempted by Washington

August 23, 2002|By Kristine Henry | Kristine Henry,SUN STAFF

U.S. steel interests reacted angrily yesterday to yet another round of products that are being exempted from the steel tariffs that the Bush administration imposed in March.

The Department of Commerce and the Office of the United States Trade Representative announced yesterday another 178 products that will not be subject to the tariffs, which range from 8 percent to 30 percent.

That brings the number of excluded products to 727 and covers 3.2 million metric tons of steel - nearly 25 percent of the 13.1 million metric tons of steel included in President Bush's March tariff order.

"These particular exclusions are counterproductive to the original aim of the president's program - that being to provide breathing space for the industry to restructure and consolidate following years of unfairly traded imports flooding our shores," Bethlehem Steel Corp. said in a statement. "[We are] particularly troubled by the exclusions granted to a grade of plate made at our Coatesville, Pa., facility and several tin plate products made at our Sparrows Point, Md., division."

Bush, who campaigned in 2000 as a friend of steel, imposed the tariffs in order to give the troubled domestic industry "breathing room" from the flood of imports that had helped drag down prices. More than two dozen U.S. steelmakers - including Bethlehem - have filed for bankruptcy protection in the past four years.

Steel-producing states such as West Virginia, Ohio and Pennsylvania were key battlegrounds in the 2000 presidential race and are expected to figure prominently in this November's fight over which party will control the House and Senate.

The tariffs "can be compared to a block of Swiss cheese," said Jim Strong, Baltimore's sub-district director for the United Steelworkers of America. "It's an agreement with a lot of holes in it."

Even with the tariffs, the American Iron and Steel Institute reported, steel imports increased in June to 2.6 million tons, 8 percent more than in June 2001 and a 37 percent jump since May.

The tariffs, which went into effect March 20, did seem to have an immediate impact; imports in April were down 25 percent from April 2001. That reduction, along with the closure of several U.S. plants, drove supply down and prices up - so much so that foreign producers can now pay the tariff and often still net more than they did before the tariffs were imposed.

Spot prices for hot-rolled steel, for example, were up 67 percent in July vs. July 2001, while cold-rolled was up 57 percent. Both are key products for Bethlehem, whose revenue declined 6 percent in July to $303 million, according to a filing with the Securities and Exchange Commission. Its net loss, however, shrank 45 percent to $25 million.

The 178 excluded products covered a broad range of steel categories including plate, hot-rolled, cold-rolled, corrosion-resistant, tin mill and stainless.

In a statement, the Bush administration said the products were excluded "because it was determined that they are not sufficiently available from U.S. producers and that excluding these products would not undermine the effectiveness of the safeguard on steel products. ... This is part of the administration's objective of providing relief only where needed in the steel industry and to avoid burdening U.S. steel consumers."

But that's not how it was seen at U.S. Steel Corp., the nation's largest producer. It said yesterday that 104 of the 178 exclusions came over the objection of U.S. producers.

"The domestic industry only objected to those exclusion requests where we currently make or have the capability to make the product in question. Unfortunately, a number of the exclusions granted today are for products we produce every day," U.S. Steel's chairman and chief executive Thomas J. Usher said in a statement. "Unfortunately, pressure by foreign governments for unjustified exclusions from the [tariffs] has been very strong."

The USW said the exemptions were undercutting the tariffs' purpose.

"The tariffs adopted last March gave a ray of hope there might be an opportunity for the American steel industry to consolidate and assure our country will have a steel industry," USW President Leo Gerard said in a statement. "Now that end goal is threatened. The administration cannot give with one hand, while taking it away with another."

Trade officials in other countries complained bitterly about the Bush action in March to impose the tariffs for a period of three years. They said the decision violated World Trade Organization rules. However, as the exemptions have been granted, the European Union and Japan have both backed off threats to impose immediate sanctions, although they are continuing to pursue a WTO case against the U.S. action.

The administration said the latest group of exclusions was the "seventh and final" group to be granted exemptions from the tariffs this year. However, officials said they would allow steel consumers to make new requests beginning in November for further exclusions.

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