Steel Ruling Puts Squeeze On Bush

President George Bush could decide as early as today what to do about the struggling steel industry. 020305, GD.
A global trade ruling against U.S. steel tariffs puts the White House in a political and economic squeeze as President Bush weighs the sanctions' fate —and his re-election prospects.

The White House was pummeled from both sides Monday after a World Trade Organization panel in Geneva declared the sanctions illegal. The European Union has threatened $2.2 billion in retaliatory sanctions if the tariffs, imposed March 2002, are not lifted immediately.

"The decision undoubtedly confronts Mr. Bush with a test of wills," said Leo W. Gerard, international president of the United Steelworkers of America, which wants the tariffs to remain. "Will he exercise his sovereign right as president to protect the jobs and survival of the entire American steel industry, or will he knuckle under to the threat of economic blackmail being leveled by the European Union?"

Any decision by the president appears to involve political risks. If he decides to defy the WTO ruling, Mr. Bush will presumably pick up political support in a number of important battleground states where the steel industry is strong. These states include Pennsylvania, Ohio and West Virginia.

But a decision to ignore the ruling would make it more difficult for Mr. Bush to obtain new global trade agreements. And the $2.2 billion in retaliatory sanctions pack a political punch.

The Europeans, for example, are planning to impose punitive tariffs on citrus fruit from Florida, a state vital to Mr. Bush's re-election chances.
In addition to citrus products, the EU is seeking tariffs on textile products, Harley-Davidson motorcycles and other goods.

The president also faces pressure from U.S. companies that have benefited from cheaper imported steel, including the auto industry.

The tariffs have angered owners and employees of small manufacturing companies who comprise part of the president's GOP base in Michigan, Minnesota and Wisconsin. They contend the tariffs have driven up steel prices and forced small manufacturing businesses to close.

Collectively, all those states rank high on Bush's must-have list, accounting for almost one-third of the 270 electoral votes he needs to win back the White House.

The Bush administration has criticized the WTO decision. While agreeing with some of the decision's details, "we disagree with the overall appellate body findings," said Richard Mills, spokesman for U.S. Trade Representative Robert Zoellick.

In South Carolina on Monday, Mr. Bush was promoting the virtues of free trade even as the WTO hammered the tariffs that he ordered. Critics have said the tariffs display Mr. Bush's abandonment of free-trade principles.

White House spokesman Scott McClellan told reporters on Air Force One that "we disagree with the overall WTO report" and said the administration was studying the ruling. He offered no timetable for a decision whether to keep the tariffs in place.

"The steel safeguards the president imposed were to provide our domestic steel industry an opportunity to adjust to import competition ... to give our domestic industry an opportunity to restructure and consolidate and become stronger and more competitive," McClellan said.

The WTO's full body is not expected to implement the appellate decision until the end of the month at the earliest. The European Union must wait five days after the final WTO ruling is issued to impose its retaliatory sanctions.

The tariffs, from 8 percent to 30 percent on certain kinds of imported steel through March 2005, were imposed, after 41 companies had declared bankruptcy since 1997, to give the battered domestic steel industry breathing space to regroup and consolidate.

"For the sake of the U.S. manufacturing sector, it's time to end the tariffs now," said William E. Gaskin, chairman of the Consuming Industries Trade Action Coalition steel task force, which wants to eliminate the tariffs.

The chairman of the Congressional Steel Caucus, Rep. Phil English, called the EU's retaliation threats groundless, and urged the Bush administration to stand firm against international pressure.

English, a Pennsylvania Republican, urged the White House to strike back at the EU by removing all tariff exceptions protecting imported steel from any of the 15 nations that make up the continental governing body.

"The European Union has consistently made groundless threats of retaliation in an inappropriate attempt to influence" the WTO ruling, English said.

Rep. Bob Ney, a Republican from the steel state of Ohio, said it was "absolutely unconscionable for the WTO to target needed American tariffs on foreign steel while nations such as China are manipulating its currency, paying its workers pennies per hour and flooding the marketplace with their cheap goods."