NYTimes.com Article: U.S. Tariffs on Steel Are Illegal, World Trade Organization Says

This article from NYTimes.com
has been sent to you by tradergroupe@....

Dear Everyone;

The article on the World Trade Organization declaration that the Bush steel import tariffs were bogus will cost US exporters about $2 billion in extra trade fees. Once again showing politically motivated tariffs only hurt the ones you try to protect. Not to mention that tariffs of any kind hurt the ones they claim to protect.

Support World Wide Free Trade for everyone.

Ron Getty
SF Libertarian


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U.S. Tariffs on Steel Are Illegal, World Trade Organization Says

November 11, 2003

WASHINGTON, Nov. 10 - The World Trade Organization ruled on
Monday that steel tariffs imposed by President Bush last
year were illegal, clearing the way for the European Union
to impose more than $2 billion of sanctions on imports from
the United States unless Washington quickly drops the

The final decision by a W.T.O. panel, which was widely
anticipated and has been discussed for weeks at the White
House, puts Mr. Bush in a difficult spot. As an election
looms, he must choose between continuing to help the steel
industry - which could bolster his electoral prospects in
crucial industrial states - or respecting international
trade laws and increasing his chances of winning new
regional and global trade agreements.

Lifting the tariffs would also please American automakers
and other steel-consuming industries, which have complained
that the tariffs have increased their costs.

The European Union has made the president's decision more
difficult by aiming its proposed sanctions at products in
states considered pivotal in the 2004 election -
threatening, for example, to impose tariffs on citrus fruit
imported from Florida.

Administration officials said President Bush had not
decided whether to lift the temporary tariffs, which
increase the cost of imported steel by as much as 30
percent and were meant to give the ailing steel industry a
three-year respite from international competition.

But the W.T.O. panel ruled that the American tariffs went
beyond the rules allowing countries to protect themselves
against sudden surges of imports. Monday's decision upheld
an original W.T.O. ruling in March on complaints brought by
the European Union.

Europe issued a joint statement with Japan, South Korea,
Norway, Switzerland, China, New Zealand and Brazil, saying
they all welcomed the decision. Those other countries could
also now seek to impose sanctions on American imports if
the steel tariffs are not removed.

News of the W.T.O's decision came as Mr. Bush headed to
Spartanburg, S.C., on a trip aimed at highlighting signs of
job growth after nearly two years of recession and to raise
campaign cash in a state critical to his re-election.

Mr. Bush spent much of the afternoon at BMW's Spartanburg
auto assembly plant, which is a major consumer of steel,
most of it domestically manufactured. Steve Thies, the
president of Spartanburg Steel, which stamps car bodies for
BMW, said in an interview that his company was able to
obtain an exemption from the tariffs for the small amount
of imported specialty steel used in the vehicles.

In fact, the administration has handed out hundreds of such
exemptions to manufacturers, to minimize harm to companies
and workers in the United States. Mr. Bush's aides have
conceded that those exemptions are part of a complex
balancing act, a process described recently by one senior
administration official as an effort to "make sure we're
not saving a steel worker in West Virginia while losing an
auto worker in Michigan."

Mr. Bush made no public reference Monday to the steel
decision, and his aides defended the president's tariffs as
perfectly legal, no matter what the highest court in
international trade law ruled.

"They are fully consistent with W.T.O. rules," said Scott
McClellan, the White House press secretary, talking to
reporters aboard Air Force One. "We will carefully review
this decision," he said, but he made no statement that the
administration would abide by it.

Some members of Congress quickly urged Mr. Bush to ignore
the W.T.O. ruling. Rep. Sherrod Brown, a Democrat of Ohio,
referred to the W.T.O. as a "secret" court and said the
president should let the tariffs run their three-year
course, now only half complete.

But Senator Charles E. Grassley, who heads the Senate
Finance Committee, urged Mr. Bush not to undercut the
organization's authority, even if he does not like its

"Complying with our W.T.O. obligations is an important sign
of American leadership," said Senator Grassley, an Iowa
Republican. "The U.S. economy has benefited greatly from
our being in the W.T.O."

Since the imposition of tariffs in March 2002, the steel
industry has invested more than $3 billion into a
streamlining effort, with smaller companies either going
into bankruptcy or being bought by bigger companies.
American steel industry officials said their
multibillion-dollar consolidation efforts would be
jeopardized if the president lifted the tariffs before the
full three years of the program. The officials accused the
European Union and its chief trade commissioner, Pascal
Lamy, of trying to "blackmail" the United States.

"It would be a big mistake to buckle under E.U.
retaliation," said Thomas J. Usher, chairman and chief
executive of U.S. Steel, the biggest American steel maker.
"The public is beginning to realize this is a very basic
manufacturing issue and they are all very concerned about
losing jobs."

With the loss of manufacturing jobs shaping up as an
important election issue, especially in states like Ohio,
Pennsylvania and West Virginia, both sides of the debate
say the tariffs are becoming a political problem for the

American manufacturing companies that use steel have urged
the president to lift the tariffs. They say the tariffs
have raised their costs, cut their profits and forced them
to delay expansion and lay off employees. If those
consequences were not reason enough to lift the tariffs,
the threatened retaliation completes the argument, said
William E. Gaskin, the head of the Consuming Industries
Trade Action Coalition Steel Task Force, a lobbying group.

"The U.S. now faces billions of dollars in retaliatory
tariffs by our trading partners," Mr. Gaskin said. "For the
sake of the U.S. manufacturing sector, it's time to end the
tariffs now."

In late September, two reports on the tariffs by a United
States government agency, the International Trade
Commission, said that the case was muddy and that it was
difficult to distinguish whether the tariffs or changing
market conditions were responsible for the problems of
steel consumers.

Calculations about the political fallout from the tariffs
could be upended by the European Union's proposed list of
sanctions. It has said that it plans to aim at agriculture
with tariffs on vegetables, fruits and nuts from Florida
and California.

Various kinds of clothing - including coats, underwear,
shirts and blouses - are also on the list, a potential blow
to Southern states with ailing textile industries. Steel
and metal products, including Harley-Davidson motorcycles,
along with paper products, furniture and games also made
the list.

Trade experts point out that the United States used similar
tactics after the W.T.O. ruled in 1997 against a European
Union quota system favoring the import of bananas from its
members' former colonies and its ban on American beef
raised with hormones.

"The U.S. made its trade sanctions even more onerous on
Europe by pinpointing certain countries and having a
constantly changing set of retaliation, spreading the pain
more broadly," said Richard Cunningham, a trade lawyer at
Steptoe & Johnson.

Even without the tariffs, some experts said, global
shortages of steel as soon as early next year could raise
prices, benefiting the American steel industry.

Trade experts said Monday that a growing demand for steel
in China could lead to shortages in the first three months
of next year.

"It is my judgment we are going to have a price spike,
perhaps a severe one, as steel buyers worry about the
availability of raw materials for the steel industry," said
Peter Marcus, a managing partner of World Steel Dynamics,
an information service based in Englewood Cliffs, N.J.

Unions have joined in the debate. Leo W. Gerard, president
of the United Steelworkers of America, said that lifting
the tariffs could lead to more bankruptcies in the steel
industry, and the loss of his members' medical and
retirement benefits.

But Gary C. Hufbauer, a senior fellow at the Institute for
International Economics, said that if Mr. Bush believed
that the steel industry needed further relief, he should
persuade Congress to provide relief for steel workers and
not continue the tariffs.