Bush Lifts 20-Month-Old Tariffs on Steel

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    Facing the threat of a trade war, President Bush on Thursday lifted 20-month-old tariffs on foreign steel, a move that will hurt steelmakers in states critical in next year's election. To soften the blow, the Bush administration announced a beefed-up monitoring program to guard against a sudden flood of foreign steel entering the country.

    Within minutes of the announcement, the 15-nation European Union announced in Brussels that it was lifting its threat of sanctions on $2.2 billion of U.S. products that would have taken effect in mid-December based on a ruling from the World Trade Organization that the tariffs violated global trade rules.

    "These sanctions ... were there as a tool for compliance," EU Trade Commissioner Pascal Lamy said. "They've complied and the sanctions will disappear."

    However, lawmakers from steel states expressed disappointment at Bush's decision, charging that he had reneged on promises to help the steel industry and caved in to foreign pressure.

    "The president gave his word we would have three years of relief from illegal imports. But in the face of pressure from the WTO and the European Union, he walked away from that pledge," said Rep. Ted Strickland, D-Ohio.

    Bush said the tariffs had been imposed to give the domestic industry critical time to modernize and to protect jobs.

    "These safeguard measures have now achieved their purpose, and as a result of changed economic circumstances, it is time to lift them," Bush said in a statement.

    The tariffs, covering a wide range of steel products, were originally scheduled to remain in effect for three years, until 2005, to give U.S. steelmakers protection from foreign competition.

    The president acted after the European Union and other trading partners threatened to impose billions of dollars in sanctions on a wide range of U.S. products made in states considered to be critical in next year's presidential race.

    While those states - ranging from Florida to California - will escape foreign retaliation on their products, other key states, including West Virginia, Ohio and Pennsylvania, are home to domestic steel makers who will now face greater foreign competition.

    The steel tariffs pitted the Midwest states against the Rust Belt - two regions where the margin between Bush and Democrat Al Gore was slim in 2000, and where the president is determined to prevail in 2004.

    Bush scored points with the sanctions in states such as Pennsylvania, Ohio and West Virginia - which hold 46 of the 270 electoral votes at stake in 2004. But the tariffs angered small manufacturers and their workers in Michigan, Minnesota and Wisconsin, which account for 37 electoral votes.

    Bush said the tariffs had enabled U.S. steel companies to compete both at home and globally. He said the administration would continue to monitor foreign steel imports to make sure that U.S. companies are not again faced with unfair foreign competition.

    He said that U.S. negotiators would continue to push America's trading partners to put in place "new and strong disciplines on subsidies" that foreign governments provide to their domestic steel producers.

    "I strongly believe that America's workers can compete with anyone in the world as long as we have a fair and level playing field," Bush said in the statement read by White House spokesman Scott McClellan.

    U.S. Trade Representative Robert Zoellick said that the situation facing the U.S. steel industry has improved greatly since Bush imposed the tariffs. Sales of domestic steel and company profits are up dramatically.

    "Not only is the industry much stronger today than it was 20 months ago, but the economic circumstances ... have changed," Zoellick said.

    The 15-nation European Union had vowed to retaliate against $2.2 billion of American products by mid-December unless the United States removed the steel tariffs, which were ruled illegal by the World Trade Organization. Japan and South Korea have also said they were considering retaliation.

    The EU carefully chose its target list to cover a range of products from oranges to pajamas that would inflict maximum political pain in key swing states that Bush is hoping to win in next year's presidential race.

    Bush's original tariff decision in March 2002 had unleashed a barrage of criticism from steel-consuming industries that claimed the higher prices they were forced to pay cost more jobs than were saved at U.S. steel plants.

    To ease the impact, Bush announced he was continuing early reporting requirements that had been imposed when the tariffs were levied in 2002 to detect any big influx of steel into the United States.

    The reporting program requires steel importers to apply for import licenses, giving the government a quicker way to detect possible import surges than waiting for Customs Service data when the steel arrives at U.S. ports.

    The administration also pledged aggressive use of U.S. antidumping laws should imports surge once the tariffs are lifted, and to continue pursuing global negotiations aimed at reducing subsidies.

    Those talks, under way since 2002, so far have yielded little, and many trade experts don't hold out much hope that other countries will agree to U.S. demands in this area, given the political power their own steel industries wield.

    Brink Lindsey, a trade expert at the Cato Institute, a Washington think tank, said the administration's package amounted to little more than a fig leaf for the domestic industry.

    "The existence or nonexistence of an import monitoring system is not going to make that much difference," he said. "And the pledge on more international talks is lip service as well. The talks haven't gone very far and they are not likely to go very far."


    Associated Press writers Scott Lindlaw and Lara Jakes Jordan contributed to this report.

    Copyright 2003 Associated Press. All rights reserved.