World trade officials said Friday they had agreed to give President Bush another week to decide what to do with his steel tariffs, a move interpreted by analysts as a strong signal that the protective levies would be scrapped.
A World Trade Organization panel had been scheduled to meet Monday to ratify an earlier ruling that the protective tariffs imposed by Bush last year were in violation of global trading rules. The European Union is set to impose $2.2 billion in retaliatory tariffs five days after the WTO ratification.
But under an agreement hashed out Thanksgiving Day, the WTO panel will delay its final action until Dec. 10, giving the Bush administration more time to come up with a compromise that would head off European retaliation and, if possible, appease U.S. steel makers who want the tariffs left in place.
Although the White House has said the president has not yet made up his mind, industry insiders and independent analysts say it appears virtually certain that Bush will either eliminate the tariffs or substantially scale them back.
"I don't know of anybody who predicts that he's going to keep the tariffs," said Lewis Leibowitz, legal counsel for the Consuming Industries Trade Action Coalition, which represents steel purchasers who want the tariffs removed. "The domestic steel guys ... are resigned to them being terminated. I don't know of a single presidential advisor who's come out in favor of keeping the tariffs."
Even so, the decision carries considerable political risk for Bush. The tariffs are popular in steel-producing states such as Pennsylvania, Ohio and West Virginia, all of which are considered up for grabs in next year's presidential election. Some steel makers have predicted a political backlash if Bush removes the tariffs.
The president imposed the tariffs in March 2002 in an effort to prop up the price of steel in domestic markets so U.S. producers would have more breathing room to restructure their industry. The tariffs were supposed to remain in effect for three years, but the program called for a midpoint review by the White House.
Although the tariffs are given partial credit for an ongoing consolidation of domestic steel manufacturers, they contributed to a severe financial squeeze for steel-consuming industries, which have experienced significant job losses since the levies were put in place.
The tariffs also antagonized other steel-producing countries, many of which joined together to challenge the president's program before the WTO. Besides the EU's planned retaliation, Japan, China and Norway have said they too would impose tariffs on U.S. goods once the WTO ruling was ratified.
The threats raised the prospect of one of the biggest trade wars in decades, increasing pressure on the Bush administration to end the program ahead of schedule.
The nine-day delay requested by the Bush administration was widely viewed as a sign that the White House was putting the final touches on another program that would either end or scale back the tariffs, and perhaps replace them with a milder protective scheme more acceptable to U.S. trading partners.
One potential substitute being discussed in industry circles is a "surveillance" system that would closely track steel imports to detect any sudden surges and possibly trigger protective action should they occur.
Some analysts said the date change might also reflect a desire on the part of the administration to delay the announcement until sometime after a Tuesday fund-raising appearance by the president in Pittsburgh, a major steel-making center, and possibly until Congress wraps up most of its work for the year.
"If they were going to take the hit on retaliation, they wouldn't have bothered to move the date," said Gary Hufbauer, a steel specialist at the Institute for International Economics in Washington.
"That was a negotiated delay. What that says to me is it's a setup for an announcement next weekend for withdrawing the tariffs."