Bush faces decision in difficult steel trade case

Wednesday, February 20th 2002, 12:00 am

By: News On 6

WASHINGTON (AP) _ When President Bush started action last summer to provide import protection for the beleaguered U.S. steel industry, it seemed a political no-brainer _ save thousands of American jobs by limiting competition from cheap foreign steel.

What the administration didn't count on, however, was a strong backlash from steel-consuming industries. The businesses contend that for every steel job Bush saves with higher trade barriers, eight jobs will be lost in other American industries, among them automakers and appliance manufacturers.

Congress and the administration have been hearing from people like Gary Hill, the president of National Metalware of Aurora, Ill., a company with 250 employees that shapes steel into such products as lawn mowers and school desks.

``We feel we would be at a strong disadvantage from any offshore manufacturers if the higher tariffs go into effect. Steel is a critical item in our cost structure,'' said Hill. He estimated that steel accounted for about 50 percent of his company's cost of doing business.

Both sides have been intensifying their lobbying efforts in advance of a March 6 deadline for Bush to make a decision on the case he set in motion with a filing before the U.S. International Trade Commission last June.

The ITC ruled late last year that the domestic steel industry was entitled to temporary protection from imports although the six-member panel could not agree on what level of tariffs would be appropriate.

``The administration is in a no-win situation politically,'' said Brink Lindsey, a trade expert at the libertarian Cato Institute, a Washington think tank. ``Whatever it does will be extremely unpopular with some very vocal group of people.''

Many observers believe the administration will try to split the difference, agreeing to tariffs but at a level far below the 40 percent across-the-board duties being demanded by the steel industry. Some trade experts are guessing the duties could be in the range of 20 percent.

And to further dilute the impact on steel consuming industries, the protective tariff would only be imposed after a quota _ a pre-determined amount of steel in each category _ was shipped into the country.

Steel companies and their supporters in Congress bluntly say such an outcome would be unacceptable.

``The industry would very strongly object to a tariff rate quota. It would be an administrative nightmare,'' said Robert Lighthizer, a Washington attorney representing integrated U.S. steel companies.

To make their case against tariffs, the Consumer Industries Trade Action Coalition, a group of steel users, commissioned a study that found imposition of tariffs of 20.7 percent would raise costs to consumers by $4 billion annually. It also would wipe out 74,500 jobs in steel consuming and related industries. The study said only 8,902 jobs in the steel industry would be saved.

The steel industry counters that government protection is critical to save an industry battered by a flood of cheap imports that began with the Asian financial crisis of 1997.

Steel supporters point to stark figures showing that the U.S. industry has already dwindled to just 142,000 workers, down by more than two-thirds since 1974. Since the start of the Asian crisis, 29 U.S. steel companies have entered bankruptcy proceedings with 21 of those bankruptcy filings occurring in just the past 14 months.

During the 2000 presidential race, Bush pledged to do more than the Clinton administration to assist the domestic industry, a promise that played well in such critical swing states as Ohio, Pennsylvania and West Virginia.

Also entering the mix are huge so-called legacy costs, pension benefits and health care costs for retirees of steel companies, that are keeping consolidation from occurring because viable companies don't want to assume these heavy burdens.

Another factor complicating Bush's decision is the impact higher duties will have on U.S. trading partners.

The European Union is already threatening to take the United States to the World Trade Organization over the issue. Other steel producers that could be hurt include Russia and Turkey, two key allies in Bush's fight against terrorism.

``The administration is in an absolute box,'' said Gary Hufbauer, trade expert at the Institute for International Economics. ``They may figure out a way to thread the needle and deal with all of these issues, but it is going to be difficult.''