ddfridd_007 - WTO proposed tariffs likely won't have any impact on the markets tomorrow as they wouldn't take effect until mid December at the earliest. That leaves plenty of time for negotiations to take place which would alleviate imposing such sanctions, IMO.
EU Sanction Threat Raises Stakes For Bush's Steel Tariffs
By ELIZABETH PRICE
Of DOW JONES NEWSWIRES
WASHINGTON -- A showdown with the European Union over U.S. tariffs on steel imports should force President George W. Bush to decide quickly if they are worth keeping for the next 18 months.
On Monday, a World Trade Organization appellate panel is expected to rule against Bush's tariffs on imported steel. Bush imposed the "safeguard" tariffs in March 2002 to protect the ailing U.S. steel industry from foreign competition.
The E.U. has said it will inflict up to $2.0 billion worth of import duties on U.S. goods by mid-December if Bush doesn't remove the tariffs. Other countries that took part in the WTO complaint - Japan, China, Norway, Switzerland, Brazil, and South Korea - may also impose their own sanctions.
Countering that international pressure are U.S. steel companies and labor unions, who argue the tariffs have saved U.S. jobs and allowed the U.S. industry to restructure and become more competitive.
"The progress we've made so far could be jeopardized if the tariffs are prematurely removed," said Daniel DiMicco, president and CEO of Nucor Corp. (NUE) in Charlotte, N.C.
When Bush imposed the tariffs, which were opposed by his economic team, it was widely viewed as a move to win over voters in steel-producing states. Pennsylvania, West Virginia, Ohio and Michigan have a combined 63 electoral college votes.
As the November 2004 election draws nearer, these considerations have only grown in importance. For this reason, it is the political advisors, rather than economic policymakers, who will hold most sway in the decision, said analysts.
"The steel tariffs are going to play well in places the president needs to win in November," said James Gimpel, a professor of government at the University of Maryland.
Gimpel said these steel-producing states are home to a large number of conservative Democrats that Republicans have a shot at winning over to their side. "One way (for Bush) to undercut the inclination of these registered Democrats to support their party's nominee is to support their industry," Gimpel said.
"The politics of eliminating the tariffs are going to be difficult," said Nau Matsukata, a former USTR official under Robert Zoellick, now an international trade advisor at Hunton and Williams. "Members of Congress and their constituents don't feel the steel industry recovered because so many jobs were lost."
The steel decision will be viewed as a proxy for Bush's views on trade and manufacturing in general, Matsukata said. This comes at a time of elevated unemployment and broad public mistrust of international trade.
Thomas Usher, chairman and CEO of United States Steel Corp. (X) of Pittsburgh, had a similar view.
"The president imposed the tariffs because he recognized that a level international playing field did not exist then, and does not exist now," Usher said.
"It is not just steel employees that will be watching President Bush," he said. "All the millions of those employed in manufacturing and their families will be watching."
Meanwhile, representatives of industries dependent on imported steel are arguing that the tariffs are costing more jobs in their factories than exist in the steel industry.
"They are not worth keeping, regardless of the WTO , because they are hurting American manufacturers more than they are helping," said Lewis Leibowitz, council for the Consuming Industries Trade Action Coalition.
Gary Hufbauer, an expert on the steel industry at the Institute of International Economics, said the tariffs probably saved 3,500 steel-producing jobs. However, the tariffs and resulting higher steel prices also destroyed many more jobs in the steel-consuming industries, he said.
"Bankruptcy is what drives restructuring in this industry," Hufbauer said. Financial pressure has put many inefficient producers out of business, leaving those left standing in a healthier position, he said. Continuing the tariffs just prolongs the process.
Should Bush decide to lift the tariffs, he can argue the restructuring that has taken place so far has fulfilled the purpose of the safeguard action, Hufbauer said. Meanwhile, lifting the tariffs would help get trade negotiations, both global and within the western hemisphere, back on track, he added.
Earlier in the week, Commerce Under Secretary for International Trade, Grant Aldonas, said Bush faces a "stark choice" between dropping or keeping the tariffs. Analysts said this indicated the White House isn't considering some sort of compromise, like keeping the tariffs but exempting more products, or keeping the tariffs at lower rates.
The E.U.'s Pascal Lamy said more exemptions won't head off trade sanctions anyway.
Regards,
Naz
AI
