Bush Team Signals Help Is on the Way for Steel Industry

The Bush administration signaled Thursday it is leaning toward measures that would protect the beleaguered steel industry from foreign competition, a decision that could save U.S. jobs but hike the cost of a variety of goods.

Officials said President Bush was sympathetic to the complaints of steelworkers and the major U.S. steel companies that low prices charged by foreign producers are undercutting them.

Bush has until Wednesday to decide whether to impose tariffs of up to 40% on imported steel, the recommendation of a majority on the International Trade Commission, an independent U.S. agency.

Administration officials, talking Thursday about Bush’s readiness “to go to bat for American workers facing undue pressure” from abroad, indicated he was in favor of imposing some level of quotas or tariffs, though probably not at the 40% mark.

The officials spoke on the condition of anonymity.

The decision looms as one of the most complex challenges Bush faces in the trade arena. It puts his free-trade policies to a steep political test in which the economy, foreign policy and national security come into play.

The steel industry and politically important steelworkers--thousands of whom rallied near the White House on Thursday--favor the tariffs to lessen foreign competition and protect U.S. jobs.

Rejecting a tariff could cost Republicans a handful of House seats this November, as well as damage Bush’s chances of carrying states seen as potentially key to a reelection bid, among them Pennsylvania, Ohio and West Virginia.

But manufacturers that use steel for their products and groups representing steel purchasers generally oppose them, arguing they would make domestic goods ranging from toasters to tractors more expensive.

“He’s in a terrible dilemma,” says Susan Ariel Aronson, an expert on trade and politics at the National Policy Assn., a Washington think tank.

“He should come up with a solution that doesn’t require us to pay higher prices for toasters and automobiles in the interest of saving jobs,” she said.

That appeared less than likely on Thursday, although White House Press Secretary Ari Fleischer said Bush had made no final decision.

The president told a bipartisan delegation of lawmakers from steel-producing states that met with him Thursday that he is still mulling the issue.

Still, a senior administration official, in comments Thursday, said the problems the U.S. steel industry was facing more than justified action.

“You have 30 companies in bankruptcy and you’re facing the lowest prices you’ve seen in 20 years and you still have these [trade] distortions out in the worldwide market,” said the official, speaking on the condition that he not be identified by name.

Among other issues troubling the industry in addition to low prices of imported steel are a history of inefficient production in the old steel mills of the East Coast, an excess capacity of steel production around the world and the towering costs of meeting the pension and health-care commitments once-healthy companies made to now-retired or laid-off workers.

That so-called legacy cost is holding up potential mergers that would reduce production capacity and, the industry argues, lead to more efficient operations.

In a sign of the complexity and importance of the tariff issue, various administration discussions on it have involved not only Bush, but Vice President Dick Cheney; Trade Representative Robert B. Zoellick; Commerce Secretary Don Evans; Treasury Secretary Paul H. O’Neill; Secretary of State Colin L. Powell; Condoleezza Rice, the president’s national security advisor; Labor Secretary Elaine Chao; and Atty. Gen. John Ashcroft.

The presence of Rice and Powell reflects concerns that the nations of the European Union are wary of any souring of trade relations.

Karl Rove, senior advisor to Bush, and other White House political aides also have been part of the debate.

Opting for tariffs, said Thomas Mann, a political scholar at the Brookings Institution, would be “an abrupt departure from Bush’s free-trade philosophy and it threatens to make even more difficult our relations with other countries when their noses are decidedly out of joint” over several festering trade disputes.

“It is one of those really knotty problems,” said Mickey Kantor, who as trade representative during the first Clinton administration completed the negotiations that led to the North American Free Trade Agreement and the establishment of the World Trade Organization.

Kantor said that for both political and trade reasons, a tariff was necessary to help the U.S. steel industry. But he recommended a three-pronged approach:

* Imposing a low tariff initially “to meet the legitimate concerns” over low-priced imports.

* Telling foreign steel companies higher tariffs would be imposed if they do not help deal with the import issue.

* Getting Congress to help meet steelworker health-care and retirement costs, to allow modernization of the U.S. industry.

“These decisions in trade are always multifaceted and require one to be a fairly adroit high-wire walker,” Kantor said.

The domestic political pressure surrounding the steel issue is demonstrated by the prominence the Weirton steel plant in West Virginia has played in two recent campaigns. As a presidential candidate in 1992, Clinton stopped at the plant to pledge to keep foreign companies from selling cheap steel in the United States. He won the state.

Then as a president promoting free trade, he fought pressure for protectionist tariffs. In the 2000 campaign, Cheney visited the same city on behalf of the GOP ticket and declared: “If our trading partners violate trade laws, we will respond swiftly and firmly and enforce our laws.”

The Bush ticket carried West Virginia--typically a Democratic-leaning state--with a 40,000-vote margin.

After their no-votes-to-spare-victory in the 2000 race, Bush and Cheney are paying sharp heed to the needs of other key states where steelworkers are a potent political force.

The industry and workers have not been shy about using their muscle.

The “Stand Up for Steel” rally on the Ellipse south of the White House on Thursday was preceded by a radio and television advertising campaign reminding Bush of his promises to protect the industry, while presenting the need for a strong domestic steel industry as a national security issue.

On the other side is the argument that obstacles to trade--tariffs or quotas--have been used to try to help the domestic steel industry for roughly three decades.

“It seems obvious more protection won’t solve the problem,” said David Phelps, president of the American Institute of International Steel Inc., which represents companies in the international steel trade.