Good for him. These tariffs could have driven up the prices in many industries, not counting an ensuing trade war. http://www.chron.com/cs/CDA/ssistory.mpl/business/2271586 Steel tariffs melt away Bush could suffer; Houston may benefit By BENNETT ROTH and BILL HENSEL JR. Copyright 2003 Houston Chronicle WASHINGTON -- President Bush on Thursday announced the lifting of U.S. tariffs on foreign steel, avoiding the prospect of a trade war with Europe and Japan but inviting political headaches in major steel-producing states next year. The decision to drop the tariffs 16 months ahead of schedule immediately prompted the European Union to announce it was lifting scheduled sanctions against $2.2 billion of U.S. exports that would have taken effect in mid-December. The foreign retaliation was threatened after the World Trade Organization ruled that the steel tariffs violated international trade rules. The controversy over the action, which has the potential to hurt the president politically in steel belt states such as Pennsylvania and Ohio, was underscored by Bush's decision not to announce the decision personally. Instead, White House spokesman Scott McClellan read a statement from the president, who declined to reveal his decision when he fielded questions from reporters just a few hours earlier. "These safeguard measures have now achieved their purpose," the president's statement said. "And as a result of changed economic circumstances, it is time to lift them." The tariffs, which Bush imposed in March 2002, were scheduled to be officially lifted at midnight Thursday. Texas is the sixth-largest steel-producing state, turning out 4.2 million tons last year and employing 8,500 people in 2002, according to the American Iron and Steel Institute. Houston is expected to benefit from Bush's decision, as imports likely will increase and jobs will be created. For longshoremen at the Port of Houston, the wait of nearly two years for the tariffs to be lifted has been a long and agonizing one. "It has put a lot of people out of work, and we have lost a lot of man-hours," said Victor Bass, vice president of the International Longshoremen's Association Local 24. "We are looking forward to the imported steel coming in because our steel products have been down." But some in Houston weren't so certain of the benefits. "Because we are located in Houston, and Houston has been a prime area for imports, I feel sooner or later it is going to hit us, hit the steel prices," said K.P. Wadhwani, director of marketing for Jindal United Steel. "Right now the price of steel is going up. If there is a surplus of steel, then the price goes down." White House trade representative Robert Zoellick insisted the decision to lift the tariffs was not linked to foreign trade sanctions. Instead, he said, it was based on the administration's evaluation that the steel industry had embarked on a successful restructuring and was returning to profitability. "I don't think this president would ever seek a trade war. But this determination was made on another basis," he said. To cushion any impact to the steel industry, Zoellick said the government would use its import licensing and monitoring system to detect and respond to sudden surges of steel entering the country. Despite these assurances, steel industry officials responded angrily to the decision. Leo Gerard, president of the United Steelworkers Association, didn't buy the White House argument that the decision was unrelated to foreign retaliation. "Our trading partners obviously engaged the administration in a game of guts poker," Gerard said. "Instead of telling them to `bring it on,' the president blinked." Gerard was referring to Bush's taunt earlier this year to Iraqi insurgents attacking American troops. Thomas Usher, the chairman of U.S. Steel, who lobbied Bush on the issue at a presidential fund-raiser this week in Pittsburgh, also expressed his disappointment with the decision. Usher said without the tariffs, which were supposed to run for three years, it will be harder for the United States to pressure its foreign trading partners to address subsidies and unfair trading practices. Economist Barton Smith of the University of Houston said that while the move will be "slightly positive" for Houston as a consumer of steel products, including oil pipelines and related equipment, the subsidies and unfair trading practices by other countries ultimately will have to be addressed. "The broader issue is the future of the free trade movements," Smith said. "The problem is that our trading partners right now are closing their eyes to a serious problem, and that is the continued U.S. trade deficit." Smith said the United States will have to be tough. "Other nations are engaged in a variety of types of subsidies of domestic companies that export abroad," he said. "And the original tariff that Bush put on was in response to the games some of these other nations have been playing, including subsidizing their steel industries, selling steel in the U.S. at prices below their own domestic prices." For Bush, Thursday's action could pose a political risk during his re-election bid next year if it sufficiently angers and mobilizes the 120,000 steelworkers nationwide, many of them concentrated in states that he either barely won or lost in 2002. On the other hand, the tariffs had been opposed by American steel consumers, such as automobile manufacturers, who complained that the levies drove up their manufacturing costs. When Bush announced the tariffs, conservatives slammed him for abandoning his free trade philosophy. On Thursday, a number of Democratic presidential candidates pounced on the president, saying he did away with the steel protections to please other interests. "America needs a president who will not back down to foreign pressure when American jobs are on the line and when an industry vital to our nation's economy and security hangs in the balance," said Rep. Dick Gephardt, D-Mo., who scheduled a meeting with steelworkers in Cleveland on Saturday. Rep. Kevin Brady, R-The Woodlands, said Bush made the right decision from a trade policy standpoint. "With the steel tariffs in place, the Port of Houston and the thousands of connected industries in our communities suffered economically," Brady said. "Rescinding the tariffs protects Houston jobs and keeps our economy humming." Brady is a member of the House Ways and Means Committee, which helps shapes trade policy. Port of Houston officials welcomed the news that steel tariffs were being lifted, although they did not expect to see any immediate impact. "It is good business for us, and we welcome anything that would allow for us to have more steel trade," spokeswoman Argentina James said. The port saw steel imports of 2.37 million tons in 2001, but that fell 18 percent to 1.93 million tons in 2002. Moving to offset the effect of the sanctions, the port commission lowered the wharfage rate on all imported iron and steel products. Those rates will be in place through year's end. Through October of this year, imported steel products totaled 1,191,829 tons, compared with 1,552,844 tons for the same period last year, a decrease of 23 percent. Exports for the same time totaled 145,362 tons, compared with 82,816, or an increase of 76 percent.
White House trade representative Robert Zoellick insisted the decision to lift the tariffs was not linked to foreign trade sanctions. Instead, he said, it was based on the administration's evaluation that the steel industry had embarked on a successful restructuring and was returning to profitability. I am glad that GWB is bring integrity back to the Presidency.
Bush approved the tariffs for brownie points knowing full well the consequences. It's a catch-22 situation with protecting the steel industry. At least he's able to reverse himself, albeit without the same rallying crowd when he first announced the tariffs.
He backed down because the EU was about to target products and industries that would cost him big time in swing states. They made a political calculation that the steel tariffs would help them politically even though it went against Republican Free Trade doctrine and the free trade policy pursued over the last 20 years by Presidents from both parties. Then, when the threat comes, they make the political decision that the EU actions will hurt more than the tariff will help and come out with nonsense that the steel industry is now back to a point where it's not needed. Meanwhile, back in the real world, all they've done is probably tick off a lot of steel guys who wouldn't have been too upset if the tariff was never put in place.
