Bush to end steel import tariffs to avert trade sanctions, aide says

Decision to be announced after campaign trip to Pa.

December 02, 2003|By BLOOMBERG NEWS

WASHINGTON - President Bush may announce as early as this week that he plans to repeal tariffs on imported steel after the European Union and Japan threatened sanctions on $2.3 billion in U.S. goods, a White House official said yesterday.

Bush plans to comply with a ruling by the World Trade Organization after accepting counsel from advisers that trade disputes would do more harm than good, said the official, speaking on condition of anonymity.

A decision won't be announced until after Bush travels to Pittsburgh today to raise money for his re-election campaign, the aide said.

"The earlier the better, and the cleaner the better," said Christian Mari, a director at Eurofer, a confederation in Brussels, Belgium, that represents companies that produce 95 percent of European steel.

Bush's decision may be made easier by the strengthening U.S. economy and steel industry consolidation. Steel prices are up 40 percent since the start of 2002 and labor costs are down.

Imports have eased and the government has assumed pension costs of bankrupt steelmakers such as Bethlehem Steel Corp.

At the same time, demand for steel has grown with the U.S. economy, which expanded at an 8.2 percent annual rate in the third quarter, the fastest since 1984.

U.S. manufacturing surged in November to the highest level in almost two decades, the Institute for Supply Management said yesterday, and economists expect that U.S. companies added jobs during the month.

"In the short term, there are positive things going in our direction," said Thomas J. Usher, the chief executive of U.S. Steel Corp., the largest North American steelmaker.

"Lifting the tariffs would create an uncertainty going forward."

Bush backer

Usher, who is a sponsor of Bush's fund-raiser today, said in a conference call that the administration hasn't told him of any plans to end the tariffs.

The issue "remains under review," White House spokesman Scott McClellan said as the president traveled to Michigan yesterday for a speech on the economy.

"We continue to consult with producers, users, consumers, members of Congress and others."

The threat of retaliation has created political pressure for the president as he begins his bid for re-election next year.

Ending the duties before they're set to expire in March 2005 risks alienating steel companies and workers in states that are important for his re-election.

If he doesn't, a broad range of U.S. products could face retaliatory sanctions from Europe and elsewhere, angering other voters.

Ignoring a WTO judgment that the tariffs are illegal may escalate tensions between the United States and its trade partners and hurt U.S. industries that buy steel and depend on exports.

General Motors Corp. and other manufacturers have lobbied the White House to end the tariffs, which they blame for raising steel prices and forcing them to cut U.S. jobs.

Key political states

The steel-producing states of Pennsylvania, Ohio, West Virginia and Michigan account for 63 of the 270 Electoral College votes needed to win the presidency.

In 2000, Bush won West Virginia by 6 percentage points and Ohio by 1 point, and lost Pennsylvania and Michigan. No Republican has won the presidency since 1900 without carrying Ohio.

Bush has made a priority of reversing the loss of 2.64 million factory jobs since he took office in 2001.

With the support of political adviser Karl Rove, the president imposed tariffs of as much as 30 percent on imported steel in March 2002 to give producers time to restructure after falling prices contributed to the bankruptcy of 42 U.S. steel companies since 1997.

"Now is not the time to pull the rug from under their feet, setting back these efforts that have so far been successful," wrote John J. Sweeney, president of the AFL-CIO, the largest U.S. labor organization, in a letter yesterday urging Bush to keep the tariffs.

`Disturbing signal'

"Bowing to international pressure" to end them "would send a disturbing signal that the United States is unwilling to defend its domestic workers and industries besieged by heavily subsidized foreign competitors," Sweeney said.

The administration last month imposed limits on imports of Chinese knit fabric, robes and brassieres. China signaled it might retaliate by purchasing goods elsewhere.

Wilbur L. Ross Jr., chairman of International Steel Group, said in a Nov. 19 interview that ending the tariffs may cost as many as 50,000 jobs at steel companies now in bankruptcy.

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