Bush backs steel tariffs
Protection called less than industry sought; retirees' insurance bailout shunned.
March 5, 2002: 4:14 p.m. ET
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NEW YORK (CNN/Money) - The United States will impose a 30 percent tariff on steel imports over the next three years in an effort to give the nation's beleaguered steel industry breathing space to recover, the Bush administration announced Tuesday.
The tariffs, which are 10 percent lower than what the industry demanded, exclude members of the North American Free Trade Agreement, including Canada and Mexico, and developing nations, which export a minuscule amount of steel, Robert Zoellick, the U.S. trade representative, told reporters at the White House Tuesday.
"The American steel industry faces a turning point," Zoellick said. "We believe the actions the president is taking today can restore the strength and profitability of this very important American industry."
U.S. steelmakers had demanded 40 percent tariffs, which they said would be enough to stop the squeeze coming from cheap imports. About 31 steel companies have filed for bankruptcy since the Asian financial crisis of 1998 that prompted a flood of cheap steel into the United States, sending steel prices tumbling to 20-year lows, said Gerald Dickey, a spokesman for the United Steelworkers Union.
Though details were not immediately available, earlier reports suggested that developing countries such as Turkey, Argentina and Thailand could be excluded from tariffs.
The Wall Street Journal reported Tuesday that there were indications the administration also was considering a tariff-free quota system for steel slabs, according to industry officials. But the paper said the officials were worried that exempting steel slabs from tariffs would undermine the effectiveness of other tariffs because the slabs could be turned into the products facing the duties. Slabs account for about 20 percent of all steel imports by tonnage.
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United Steelworkers union President Leo Gerard, lower right, addresses a rally in support of steel tariffs and federal assistance for retirees last week in Washington. | |
The administration and industry officials told CNN it will not back a $10 billion bailout that would help hundreds of thousands of steel industry retirees and their families by covering their health-care and life insurance costs. Zoellick did not mention the bailout during the Tuesday afternoon press briefing. Instead, the administration is expected to offer more modest assistance through existing government programs and perhaps new tax credits to help pay health insurance costs.
Those insurance benefits were promised in union contracts, but companies now argue they no longer can afford the cost. Those benefits are at risk at many steelmakers now operating under bankruptcy court protections. LTV Corp., whose assets were sold in a bankruptcy auction last week, already has shed those costs.
The Bush administration faced strong political pressure to support protection from imports as well as federal assistance for the retirees, especially since so many of the retirees are from political "battleground" states such as Pennsylvania, Ohio and Illinois.
The administration signaled a willingness to impose protections for the U.S. steel industry last year when it asked the International Trade Commission, a U.S. agency, to study the issue.
But the administration also faces strong opposition to tariffs from both trading partners and major steel users, such as auto and appliance makers. The New York Times reported Tuesday that British Prime Minister Tony Blair raised the issue of steel imports in a phone call with the president last week.
British Trade Secretary Patricia Hewitt said Monday Britain would support trade retaliation by the European Union if the United States imposes imports, and European Commission President Romano Prodi has written to Bush "expressing serious concerns about the situation," according to commission spokesman Jonathan Faull.
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The Journal reported that federal assistance for retiree insurance costs is needed to complete discussions for U.S. Steel Co., the nation's largest steelmaker, to buy several other major U.S. steel companies, including Japanese-owned National Steel Corp. and bankrupt Bethlehem Steel Corp. The Journal said steelmakers are making alternative plans since the U.S. Steel merger now appears to be shelved, with Bethlehem mulling possible plant-by-plant sales. 
-- Reuters contributed to this report.
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