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Steel Deal Could Burn Bush

President George Bush could decide as early as today what to do about the struggling steel industry. 020305, GD.
CBS/AP
Administration officials say President Bush's decision to put aside his free-trade policies and impose heavy steel tariffs could be backfiring, and may be dumped, a newspaper reports.

However, a key senator says he expects the White House will keep tariffs on foreign-made steel in place — but tweak them to ease prices for consumers.

The heavy tariffs on imported steel were intended to help out struggling mills in Pennsylvania and West Virginia, two states crucial for Mr. Bush's reelection.

However, 18 months later, key administration officials tell The Washington Post they have concluded that the presidential order was a mistake. Some economists say the tariffs, by driving up costs for automakers and other steel users, may have cost more jobs than they saved.

In the 2000 election, Mr. Bush won West Virginia by just 6 percent and lost Pennsylvania by a mere 5 percent.

The strategy also failed to produce union endorsements and appears to have hurt Mr. Bush with workers in Michigan and Tennessee — also key states for 2004.

The steelworkers union endorsed Rep. Richard Gephardt, D-Mo., or any other Democratic hopeful over Mr. Bush.

"There have been a number of proposals that would retain the tariffs, but that would make some exclusions," said Sen. Arlen Specter, R-Pa., who spoke with Mr. Bush about the issue earlier this week, on Thursday.

Those exclusions, or exceptions to the tariffs, would probably be granted "on a case-by-case basis — but there might be some generalization as to the easing to respond to consumer complaints about the steel costing more money," Specter said.

Such a compromise would anger tariff supporters.

"This program has already been hit, and early on, with a wide number of exclusions," said Terrence Straub, vice president of Pittsburgh-based U.S. Steel. "It was punched full of holes early in the process. I don't expect, now, that we would welcome any weakening of the program."

But tariff opponents are also wary of half-measures.

"Exclusions don't solve the problem," said Paul Nathanson, spokesman for the Washington-based Consuming Industries Trade Action Coalition Steel Task Force, which represents domestic steel consumers. CITAC contends the tariffs have driven up prices and forced many small companies to close.

White House officials said the president will not make a decision until he has digested the International Trade Commission reports on the tariffs, and probably not until November, when the World Trade Organization is expected to hear a U.S. appeal to overturn a July ruling that declared the tariffs violated global trade laws.

However, The Post reports the president's top economic advisers — including Commerce Secretary Donald L. Evans, Treasury Secretary John W. Snow, chief economic adviser Stephen Friedman and N. Gregory Mankiw, chairman of the White House Council of Economic Advisers — have united to recommend that the tariffs be lifted or substantially rolled back this fall, and several administration officials said it is likely he will go along.

They reportedly feel that it would show that the administration has heard the pain of manufacturers, who account for 2.5 million of the more than 2.7 million jobs lost during this administration.

"The only reason they won't do it is if they're unwilling to admit they made a mistake," said a Republican strategist who works closely with the White House.

The European Union is considering imposing $2.2 billion in retaliatory sanctions on U.S. exports because of the duties.

Meanwhile, 96 members of the Congressional Steel Caucus have urged the president to keep the tariffs in place. The caucus letter came Thursday in the wake of a plea from eight Michigan Republicans earlier this week asking Mr. Bush to eliminate the tariffs.