U.S. appears closer to cutting steel levy

Expectation rises as foes of tariffs delay sanctions

November 29, 2003|By James P. Miller | James P. Miller,CHICAGO TRIBUNE

CHICAGO - Speculation mounted yesterday that the Bush administration, under increasing pressure from key international trade partners, is preparing to eliminate controversial steel tariffs it imposed 20 months ago.

Such talk intensified after the European Union and other foreign opponents of the tariffs agreed to briefly hold off on punitive sanctions they plan to impose.

The World Trade Organization had been slated on Monday to formally adopt a finding that the U.S. steel tariffs violate international regulations. Such a determination would clear the way for the 15-member trading and other nations to impose - within a matter of days - retaliatory duties designed to hurt American exports.

But as Americans took off Thursday to celebrate the Thanksgiving holiday, trade officials from Europe and elsewhere agreed to a U.S. request to push back the WTO deadline by nine days, to Dec. 10.

The delay suggested to observers that the Bush administration is on the verge of dropping the politically divisive steel tariffs 16 months before the duties are scheduled to expire.

The delay in the WTO finding "is a very positive development," Paul Nathanson, a spokesman for the Consuming Industries Trade Action Coalition's steel task force, said yesterday.

CITAC represents U.S. auto companies, appliance makers and a host of other domestic manufacturers that purchase steel to make their products. It has long criticized the Bush tariffs for disrupting the domestic steel supply and needlessly boosting U.S. manufacturers' costs.

"I doubt the EU and Japan would agree" to delay their sanctions against the United States, Nathanson said, "unless they thought a revocation of the tariff was coming." Washington-based CITAC, Nathanson said, thinks the Bush Administration is likely to scrap the tariffs by Dec. 10.

The White House hasn't provided any indication of its plans, however.

"The president has said he will make a decision in a timely manner, and this [delay] will provide the president additional time in which to evaluate all the information," a White House spokeswoman told the Associated Press.

President Bush imposed the tariffs in March 2002 in an effort to help the troubled U.S. steel industry, which was staggering under the twin burdens of low global steel prices and heavy pension obligations. The tariffs, which boosted the cost of imported steel by as much as 30 percent, were designed to last three years, and to decline in severity at yearly intervals.

Steelmakers contend that the tariffs have worked, by giving the sector a breather while the U.S. industry consolidates and restructures to better compete with offshore rivals. Indeed, labor unions and steel companies have negotiated cost-cutting contracts, while bankruptcies and layoffs have slowed.

"The American steel industry is working very hard to complete the massive restructuring commitment it made to the president twenty months ago," Dan DiMicco, chief executive officer at steelmaker Nucor Corp., said in a recent statement, adding that "the only way to complete the process is by upholding the temporary safeguard" for the full three years.

Critics claim that the president imposed the tariffs in order to win votes in Pennsylvania, Ohio and West Virginia, which are expected to be key swing states in the 2004 presidential race.

CITAC and others contend that whatever benefits the steel industry has garnered from the tariff protection are more than outweighed by the damage done to domestic manufacturers that have been put at a competitive disadvantage in the global marketplace, because they are obliged to buy steel at artificially high prices.

Even as domestic steel buyers howled about the tariffs, foreign steel producers began arguing that the tariffs were improper. In July of this year, the WTO ruled that the tariffs violate international trade rules. The United States appealed that finding, but the WTO reaffirmed its original finding this month.

It was that finding that the organization was to formally adopt Monday. That now-delayed move would have allowed the EU, Japan, Norway, Brazil and a handful of smaller nations to impose more than $2 billion in tit-for-tat duties on a variety of American export products specifically targeted to tweak the Bush administration by causing financial pain in Florida and other key electoral states.

The Chicago Tribune is a Tribune Publishing newspaper.

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