Bush to impose steel tariffs of 20-30 percent to help ailing steel industry

By Ron Fournier

Associated Press

WASHINGTON – President Bush will impose tariffs of up to 30 percent on steel imports in a bid to aid the ailing U.S. steel industry, White House officials said Tuesday of a move certain to draw opposition from American allies.

The long-awaited decision was to be announced in a White House statement later Tuesday. It was described by advisers as a compromise approach designed to provide trade protections to the U.S. industry while minimizing backlash from foreign leaders defending their own markets and American manufacturers that rely on cheap steel.

The officials spoke on condition of anonymity.

“The president understands how many sides there are on this issue,” White House spokesman Ari Fleischer said Monday. He compared Bush’s task to unscrambling a Rubik’s Cube.

Sen. Arlen Specter, R-Pa., who has pushed the White House for high tariffs, said he was satisfied that Bush’s split-the-difference approach would work.

“I think it’s a significant improvement for the American steel industry. It will give the steel industry the ability to restructure,” Specter said after a White House meeting.

More than 30 steel makers have declared bankruptcy in recent years and the price of basic steel has fallen dramatically. How to protect the industry without hurting the economy with steep price increases is a question that could sway congressional races in November, and even affect Bush’s prospects for re-election in 2004.

Officials said Bush turned aside requests by the steel industry to impose 40 percent tariffs. Instead, he approved staff recommendations for tariffs, ranging from 20 percent to 30 percent, on about 16 steel products.

They said two of America’s biggest trading partners, Canada and Mexico, would be exempt from the product-by-product tariff changes. Developing countries such as Argentina, Thailand and Turkey also would be exempt.

Nations hit hardest by the tariffs include China, Japan, South Korea, Ukraine and Russia, officials said.

Bush gave aides the go-ahead to announce the tariffs in an Oval Office meeting Monday, but also gave them leeway to adjust the plan in hopes of easing criticism from the steel industry and union leaders before Tuesday’s announcement.

The details were still being modified Tuesday morning, aides said.

Officials said a variety of specialized parts made from steel would be subjected to quotas, tariffs or a mix of both.

Steel slab used by West Coast companies and steel flanges favored by Detroit automakers would be subjected to modest tariffs. Those companies lobbied for low or no tariffs to avoid an increase in production costs, which are passed along to consumers.

Officials indicated that the slab-steel recommendation would impose tariffs on imports beyond a specific cap. Steel industry lobbyists said they feared Bush would set the cap so high that no meaningful tariffs would be implemented. That issue was still being debated Tuesday.

The industry wants high tariffs that generate money to pay for retirement benefits and other “legacy” costs of failing steel firms. Bush stood ready to reject that plan, officials said, though Specter said he was told that the White House would keep the issue under serious consideration.

Even as Bush sealed his decision in Oval Office meetings, America’s trading partners cautioned against restricting trade.

“The British government has made clear to the highest levels of the U.S. administration the dangers involved in introducing restrictions on steel imports,” said British Trade and Industry Secretary Patricia Hewitt.

Making the opposite case, United Steelworkers of America President Leo Gerard said in a telephone interview that failing to impose punishing tariffs “would lead to the meltdown of the steel industry. We can’t afford a Swiss cheese approach.”

Bush’s political team, led by Karl Rove, pushed for high tariffs to court favor with union members and voters in the industrialized Midwest. Bush’s economic team cautioned Bush not to stray from the GOP’s anti-tax, anti-tariff theology.

Political strategists say the steel issue could play a major role in as many as six House races, enough to determine control of the thinly divided chamber.

Aides tailored the package in some ways to protect steel interests in key presidential election states such as West Virginia.

White House officials predicted that Bush’s announcement will anger interests on both sides of the issue.

They are relying on a communications strategy that helped Bush ride out last summer’s decision on stem cell research: Publicly agonize over the choice, display great willingness to hear all sides of the debate and announce a complicated conclusion that seeks to hew a middle path between disputing interests.

Bush has until Wednesday to act on an International Trade Commission call for tariffs.

Copyright ©2002 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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