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Background: Steel Tariffs Ended

President Bush lifted tariffs on foreign steel Thursday, less than a month after the World Trade Organization's highest court ruled that they violated global trade laws.

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    Today's decision cancels as of midnight tonight tariffs imposed last year to protect the ailing domestic steel industry. Steel producers had complained that cheap imports threatened their livelihoods.

    The tariffs, which would make foreign steel more expensive, and therefore American steel more competitive, were supposed to last for three years, enough time for the industry to recover. But U.S. allies around the world called foul. China, South Korea, Japan and Russia said the tariffs were unfair and unacceptable. And the European Union, which produces 25 percent of the steel imported into the U.S., reacted this way.

    PASCAL LAMY, European Union Trade Commissioner [March 2002] (Translated ): This is a particular case where the Americans have clearly placed their domestic interests over the international laws to which they have subscribed.


    Some nations threatened retaliation, saying they'd levy their own tariffs on U.S. goods such as textiles manufactured in southern states and citrus products from Florida and California. At a meeting last month, a three-member World Trade Organization panel ruled the American tariffs on steel illegal, and said it would permit more than $2 billion in retaliatory tariffs.

    The controversy is not just abroad, but here at home. The issue of tariffs is likely to play into the 2004 presidential campaign. Steel producers, who benefit from the tariffs, are centered in the mid-Atlantic states of Pennsylvania, Ohio and West Virginia, important battlegrounds in past elections. Industries that use steel and oppose tariffs are in hotly contested Midwest states such as Michigan, Minnesota and Wisconsin.

    Of late, the tariff issue has been high on the president's agenda. On Monday, he met with small business people in Michigan who oppose the tariffs. Their firms use steel to manufacture products like car parts and appliances. And the next day, he attended a fundraiser in Pittsburgh, Pa., called Steel City. It was hosted by the CEO of U.S. Steel who had pushed for the tariffs. But the president steered clear of the hot-button issue, and instead lauded the growing U.S. economy.


    Productivity is high, business investment is rising, housing construction is strong, the economic stimulus package that we pass out of the United States Congress is working.


    Save our steel.


    Outside the hotel about 300 steel workers braved freezing temperatures to press the president to keep the tariffs. This afternoon U.S. Trade Representative Robert Zoellick justified the decision saying the tariffs had accomplished their mission during the 21 months they were in effect.


    This safeguard definitely provided the industry and workers with needed breathing space, and to its credit, much of the industry has used this time well. The bulk of the restructuring that was necessary to make the industry more competitive has now taken place.


    Zoellick was pressed by reporters on whether politics played into the decision.


    If you're an ardent believer in opening markets — and I am — our tariffs are pretty low and I want to open other people's markets. You've got to listen to people in terms of the need to give them a chance to get back on their feet, okay? And obviously that helps you with congressional politics in terms of trying to get support for trade.

    So, look, my job involves international politics, the domestic politics, economics. That's the whole integration of the system. So, sure, in that sense the politics are part of trying to accomplish an agenda.


    One key player in that political fight, the steel manufacturers, said they were disappointed. In a statement, U.S. Steel said: "This decision will only make it harder to deal with the underlying problems distorting the global steel market."

    Pennsylvania Republican Congressman Phil English also called the decision disappointing, but said he blamed the World Trade Organization, not the president.


    I understand how we got here, as disappointed as I am, and I think the real villain of the piece is clearly the WTO.


    Meanwhile, the reaction from abroad was immediate. The European Union called the decision "good news," and said it would suspend any retaliatory tariffs.