Posted on Sun, Nov. 23, 2003
Steel tariffs a prickly issue
SOMEONE GETS HURT WHETHER THEY'RE DROPPED OR EXTENDED
By Ken Moritsugu
Knight Ridder
WASHINGTON - Thousands of U.S. workers are likely to get hurt whether President Bush lifts tariffs on imported steel or leaves them in place.
That's a politician's nightmare for Bush, who faces a mid-December deadline to eliminate the tariff -- or face retaliatory levies from Europe on a broad range of American exports.
Lifting the tariffs could result in more bankruptcies and job losses in the struggling steel industry, which employs 121,000 people, many in such key election states as Ohio, Pennsylvania and West Virginia. But Europe's tariffs -- to be imposed if Bush doesn't stop protecting U.S. steelmakers -- would likely hit apple pickers in the Pacific Northwest, paper mill workers in the upper Midwest and citrus and garment workers in the Southeast.
``These penalties would be disastrous to my members,'' Kevin Burke, president of the American Apparel & Footwear Association, wrote in a letter to Bush last month.
The World Trade Organization, which regulates international trade, ruled earlier this month that the tariffs Bush imposed on imported steel in March 2002 are in violation of global trade agreements. If the WTO formally adopts the decision Dec. 10, as expected, the European Union has said it would enact retaliatory tariffs on U.S. exports on Dec. 15.
British Prime Minister Tony Blair raised the issue during Bush's trip to London last week. Bush, in an interview with a British newspaper, said he is taking a ``real good look'' at the tariffs.
``I am a fierce free trader,'' he told the Sun, a widely read tabloid. ``I know free trade is important between America and Great Britain.''
The United Kingdom is the fifth-largest importer of cherries from the Pacific Northwest and the sixth-largest importer of Washington apples. Asia, Mexico and Canada are bigger markets for those products.
``It isn't going to kill us, but it will cause pain and, to some firms, it will cause economic hardship,'' said Mark Powers, vice president of the Northwest Horticultural Council, which represents apple, pear and cherry growers and packers in the Northwest.
More imports
On the other hand, lifting the tariffs would probably lead to a rise in steel imports and could erase 3,000 to 5,000 steel jobs, estimated Gary Hufbauer, a trade expert at the Institute for International Economics in Washington, which studies global economic issues.
Even before Europe retaliates, the tariffs come with a price.
The tariffs, which range from 7 percent to 24 percent, have pushed up the price of steel for the hundreds of small and medium-size companies that make metal parts for everything from lawn mowers and cars to semiconductors and telecommunications equipment.
Higher costs squeeze profits. ``That means jobs are being lost,'' said William Gaskin, the president of the Cleveland-based Precision Metalforming Association, which represents those manufacturers.
In fact, the tariffs appear to be destroying more jobs than they're saving. A recent study by the U.S. International Trade Commission found a net loss of $386 million in labor income because of the tariffs.
That translates into roughly 12,000 jobs, according to Hufbauer, though some of the loss would have come in reduced hours rather than outright layoffs. Hufbauer thinks the ITC underestimated the income loss, and that as many as 43,000 jobs may have been lost.
But Peter Morici, a trade expert at the University of Maryland and a consultant to steelmaker Nucor in Charlotte, N.C., argues that the ITC overestimated the income loss. He puts the job loss in the 3,000 to 3,750 range.
Another dimension of the tariff debate is whether the steel industry still needs protection.
When Bush announced the tariffs in March 2002, he said they would last for three years. At the time, Robert Zoellick, Bush's top trade negotiator, said steel companies should ``use this breathing space to restructure and to regain competitiveness.''
The industry has cut costs considerably since the tariffs were imposed. Mergers and acquisitions have reduced four of the biggest players to two: Pittsburgh-based U.S. Steel Corp. and Richfield, Ohio-based International Steel Group.
Jobs slashed
New labor contracts have slashed workforces and reduced health care benefits for retired steelworkers. Pension plans, a huge cost for steel companies, have been handed off to the federal Pension Benefit Guarantee through bankruptcy proceedings.
``I imposed some tariffs in order to allow for a restructuring of the industry,'' Bush said last week. ``I'm in the process of reviewing the extent to which the industry has been restructured.''
Removing the tariffs ahead of schedule could drive some steel mills into bankruptcy, Morici said.
``They need an opportunity to restructure,'' he said. ``This was the deal that was given to them.''
Hufbauer countered that the tariffs may be delaying a needed further consolidation of the industry by keeping afloat companies that should go bankrupt.
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