Experts Assess Bush's Steel Tariff Decision

President Bush is weighing his options on the three-year initiative of 2002 imposing tariffs on foreign steel imports " risking retaliation from the foreign market if he stays with it, or political backlash in his upcoming re-election bid if he slashes it. Experts from the steel-producing state of Pennsylvania believe it's a tough call. Dr. Katarina Keller, an assistant professor of economics at Susquehanna University in Selinsgrove, Pa., feels that foreign countries will not have much influence on the decision. "It would be hard to retract the tariffs because it would appear to be a political failure," says Keller, who does academic research on foreign economies. "Also, if the Bush administration chooses to comply with the WTO (World Trade Organization) and appease the foreign market by removing the tariffs on steel, it then faces the possibility of political repercussions in the upcoming re-election. The economic team of the president is pushing to drop the tariff due to the amount of conflict it has caused. However, political advisers believe ending the program would be disastrous for the steel industry, as well as Bush's political campaign for re-election." The White House imposed the steel tariffs in 2002 to help the domestic steel industry compete with foreign imports. Foreign governments subsidize steel companies, allowing them to produce additional capacity. The excess product is then exported to the U.S., the world's largest steel importer. The surplus of steel makes it difficult for domestic steel manufacturers to compete. At least 35 American steel producers have declared bankruptcy since 1998, wiping out about 50,000 manufacturing jobs, threatening tens of thousands more, and eliminating healthcare coverage for over 200,000 steelworker retirees. Bush implemented the eight to 30 percent tariff to protect U.S. steelworkers and revive the industry. Since the start of the tariffs, steel prices in the U.S. are among the lowest in the world, and the product is readily available. But while the tariffs may be benefiting American steelworkers, the WTO has declared it in violation of international trade rules. In response, Bush lowered the original percentage and drafted exceptions to the initiative. He listed certain steel products of certain countries that could enter the U.S. without the tariff. Dr. Robert Dodge, the Linn Professor of History at Washington and Jefferson College in Washington, Pa., believes that these exceptions were included in Bush's initial plan. "Bush has a fine line to follow in regards to respecting the European Union and other foreign competitors while addressing the internal concerns of the U.S. The EU (European Union) may be grateful for the exceptions made in the original plan, but they still are adamantly opposed to the tariffs. They deny dumping steel in the U.S. and are likely to reciprocate if the WTO does indeed rule the tariffs a violation," says Dodge, who authored a paper titled "Cold War Redux: Tracing the Developments of the E.U.-Russian Relationship," which was published in European Studies Conferences " Selected papers: 1993-99, a professional journal. The EU has threatened to impose $2.2 billion in retaliatory duties if the U.S. does not comply with the WTO. Foreign countries other than members of the EU have also filed complaints about the steel tariffs, including Switzerland, Japan, China, and Russia. Many have also banned American imports in retaliation. Keller points out that Russia placed a ban on California chicken in January of this year. The country requested higher standards of chicken be imported from the U.S., but she suspects that the restrictions may be either to retaliate against the U.S. steel tariffs, or to take advantage of the trade barriers. However, both governments are denying that the ban on chicken is in relation to the U.S. steel tariffs. According to Keller, the U.S.-Russia trade rift involves protectionism and trade restrictions. "The producer in the home country gains, and the exporting industry loses, as well as the consumer, who is facing higher prices for both products," she says. "Subsidies would be a more appropriate solution. They are a better measurement and produce the same outcome as tariffs and bans. Prices would not rise, and many industries would benefit." John Hinshaw, assistant professor of history at Lebanon Valley College in Annville, Pa. agrees with Bush's steel tariffs but feels the problem lies elsewhere. Hinshaw is author of the book Steel and Steelworkers " Race and Class Struggles in Twentieth-Century Pittsburgh, which provides an account of the forces that shaped Pittsburgh, big business, and labor from the city's rapid industrialization in the mid-19th century, through its deindustrialization in the end of the 20th century. Hinshaw raises questions in the book over whether organization, power and politics proved as important to the industry as economics. "How did the U.S. system let it reach this point?" he asks. "Steelworkers need more than tariffs. The government needs to reorganize the pension plans of the workers. This is the fundamental issue at hand." According to Hinshaw, steelworkers are forced to travel to Canada to purchase prescriptions due to the high costs in the U.S. "These are the issues that are still not being addressed by Bush," says Hinshaw. "The tariff is just one step in re-establishing the American steel industry; it is not the cure." Bush's decision on steel tariffs is expected soon.