Bush to Lift Steel Tariffs, Mulls Pension Protection (Update1)
Dec. 3 (Bloomberg) -- President George W. Bush will announce tomorrow he's lifting U.S. tariffs on steel imports, yielding to threatened retaliation from Europe and Asia after 20 months of protection for companies such as U.S. Steel Corp. and Nucor Corp., White House officials familiar with the plans said.
Bush will try to mollify steelworkers by promising to impose targeted tariffs should steel imports surge from any particular nation, said two aides who asked not to be identified. Bush may also seek federal help to cover pension and health costs for companies hurt by the removal of import duties, they said.
``There needs to be a strong feeling in the marketplace that if these surges return, the administration will respond quickly,'' said Alan Wolf, a lawyer for U.S. Steel. Licensing and monitoring of imports could be ``improved, broadened and deepened,'' he said.
The European Union and Japan threatened $2.3 billion in sanctions against U.S. goods unless the steel tariffs are dropped. The three-year tariffs, initially set to expire in March 2005, were declared illegal by the World Trade Organization.
Bush could also help U.S. steelmakers by pledging to bring anti-dumping cases on an expedited basis if there are cases of quickly increasing, and cheaply priced, imports, Wolf said.
Bankruptcies
Bush had promised during the 2000 presidential campaign to help the steel industry, which has witnessed 44 bankruptcies since 1997. That helped him gain support in Congress for expanded powers to negotiate trade agreements.
The steel-producing states of Ohio, Michigan, Pennsylvania and West Virginia are critical in presidential elections, accounting for 63 of the 270 Electoral College votes needed to win.
The duties of as much as 24 percent on steel led the EU, Japan, China, South Korea and other nations to complain to the WTO, the global trade arbiter. The duties also sparked protests from U.S. companies such as General Motors Corp. and Caterpillar Inc., which operate in Illinois and Michigan.
Those manufacturers indicated that they could accept the compromise measures Bush was proposing in order to soften the blow for steel producers.
``It certainly seems like something we could live with,'' said Brian Duggan, director of international programs at the Motor & Equipment Manufacturers Association. ``Increased monitoring would not have a large commercial impact.''
Since imposing the tariffs, Bush has reduced them to cover about $3 billion in annual imports.
Usher's Appeal
The EU warned it would levy record sanctions on Dec. 15. Targeted products include citrus fruit, produced in Florida, which Bush won by 537 votes in 2000 after a recount, and apparel made in such states as North Carolina, which has a contested Senate seat.
Thomas Usher, chief executive at U.S. Steel and a co-sponsor of a Bush campaign fund-raiser yesterday, urged him at the Pittsburgh event to keep the tariffs in place, said Scott McClellan, chief spokesman for the president.
Repealing the tariffs ``is going to doom his chances of winning Pennsylvania,'' Ike Gittlen, Pennsylvania coordinator for the Stand Up for Steel Coalition, an industry and workers' group that backs the tariffs, said earlier this week.
Bush's decision was made easier by rising steel prices. They are up more than 40 percent since the start of 2002, before the tariffs were put in place. Imports fell to $7.8 billion through September of this year, a 10 percent drop from the same period last year.
Acquisitions
The bankruptcy process and tariffs induced larger companies to buy up weaker, smaller ones.
U.S. Steel, the largest North American steelmaker, bought the assets of National Steel Corp., Nucor bought Birmingham Steel Corp.'s plant. U.S. Steel's stock price rose more than 90 percent this year, soaring in recent weeks even as White House officials indicated that the tariffs would be lifted early.
U.S. Steel, which hasn't gone bankrupt, hasn't been able to pass off its pension costs to the government and so could benefit from a new federal program to assume pension obligations.
The assets of bankrupt Bethlehem Steel Corp. and LTV Corp. were bought by financier Wilbur Ross, and formed into the second largest U.S. steel company, the International Steel Group, earlier this year. Ross, who passed off pension costs to a government-backed agency, plans an initial public offering of the company in the coming weeks in order to raise $360 million.
Still, advocates for the steel companies said that the administration, instead of ending the tariffs, should fight back against the EU. For example, the U.S. could still challenge the EU's pledge to impose sanctions this month, said Peter Morici, the former chief economist of the International Trade Commission and a consultant to Nucor.
``I'm baffled about why the U.S. let the EU bully them on this,'' Morici said. ``Bush should have tried to take back the moral high ground from the EU.''
Last Updated: December 3, 2003 17:44 EST |
