Some critics say Bush violated World Trade Organization code by implementing a 30-percent tariff on steel imports from certain nations Tuesday. The United States’ struggling steel industry stands to benefit from the new duties.
Bush made a powerful domestic statement, reacting to heightened political pressure from steel-state lawmakers and workers to aid the struggling domestic industry, setting the stage for a trade war as the world’s major steel producers vowed to fight back.
The European Union said it would file an immediate complaint at the World Trade Organization and take “whatever measures are necessary” to prevent a surge in steel imports into its own market as a result of the U.S. restrictions.
“The U.S. decision to go down the route of protectionism is a major setback for the world trading system,” EU Trade Commissioner Pascal Lamy said in a statement.
Although UW-Madison graduate student and member of the UW Greens John Peck said the import tariff is hypocritical for an administration that “pushes free trade.” He said the tariff could also be seen as blatantly illegal under WTO rules.
But Bush defended the three-year “safeguard” action as legal under WTO rules, citing the safeguard agreement, which provides that increased tariffs are legal under certain circumstances.
Bush said the market had been badly distorted by 50 years of foreign government intervention and subsidies.
“We’re a free-trading nation, and in order to remain a free-trading nation we must enforce law,” Bush told reporters.
Bush exempted imports from Canada and Mexico because of their partnership with the United States in the North American Free Trade Agreement. Also exempted were Israel and Jordan, which have free-trade agreements with the United States. But developing nations Brazil and Russia will both have notable harm to industry, which could spur widespread protests, said UW assistant law professor Gregory Shaffer.
“This action is certainly not good for the Russian or Brazilian steelworkers,” he said. “But with it, Bush made a powerful political statement that domestic relief is important to the administration.”
Under WTO rules, Bush spared imports from about 80 developing countries that account for less than 3 percent of total imports for individual steel product lines. “This relief will help steelworkers, communities that depend upon steel and the steel industry adjust without harming our economy,” he said in a statement, adding that WTO rules recognize “sometimes imports can cause such serious harm to domestic industries that temporary restraints are warranted.”
Peck said the UW Greens have opposed the U.S. free-trade policy throughout the Bush administration. He said current policy aimed at boosting internal industry will have global ramifications.
“Sure, Bush must have been feeling a lot of pressure from the labor groups to make this big change, but the [United States] always makes up the rules for itself,” Peck said. “Only this time, other countries are just going to follow suit.”
The new duties cover 10 steel product categories and range from 8 percent to 30 percent. They take effect March 20 and cover flat-rolled steel and other steel imports from a bevy of countries including Brazil, South Korea, Japan, Taiwan, Russia, Germany, Turkey, France, China, Australia and the Netherlands.
The tariffs will be ratcheted down over three years, so the 30 percent duty on flat steel, which accounts for about 60 percent of U.S. imports, will fall to 24 percent in year two and 18 percent in year three.
Bush aides said it was hard to say whether the curbs actually would cut U.S. steel imports, which totaled 27.35 million metric tons in 2001, since the U.S. economy is recovering from a slump and demand for steel could rise.
However, costs faced by steel consumers could rise by 8 to 10 percent from current 20-year lows, they said.
While it enraged foreign steel producers, the import relief plan fell short of the four-year, 40 percent across-the-board tariff sought by the U.S. steel industry, which blames low-priced imports for 31 bankruptcies since 1997.
Senate Majority Leader Tom Daschle, a South Dakota Democrat, applauded Bush for the decision, although “it wasn’t everything many of us had hoped for.” Rep. Phil English, a Pennsylvania Republican who chairs the House of Representatives Steel Caucus, called the announcement “a clear win.”
Sen. Jay Rockefeller, a West Virginia Democrat who has pressed hard for import relief, said the action was a “good first step,” but urged Bush to address retiree health care and pension costs that have stymied industry consolidation.
Industry reaction split along predictable lines.
The American Iron and Steel Institute, which represents major steel firms, called it a “courageous decision,” even though it fell short of the industry’s request.
Companies that import and consume steel blasted the decision, which they said violated Bush’s pledge not to raise taxes and would cost more jobs than it saves.
Reports of the looming decision fanned global outrage to a fever pitch even before the official announcement came out of the White House, a vocal proponent of freer trade. Along with the EU, Russia, Japan, South Korea and Brazil all vowed to fight back if Washington set up the levies.
However, U.S. Trade Representative Robert Zoellick said countries such as Russia and Brazil might not fare as badly as they fear under the curbs. He told reporters that the EU, Japan, China, Taiwan and South Korea would be most affected.
–Reuters contributed to this report
