Advisers to Bush seek steel-tariff rollback

Say US companies harmed by move

By Bloomberg News, 8/26/2003

WASHINGTON -- Treasury Secretary John Snow, Commerce Secretary Donald Evans, and other economic advisers want President Bush to roll back the tariffs he imposed on $3 billion in steel imports, people familiar with the matter said.

Bush's economic team will argue that the tariffs ended up hurting US manufacturers such as Caterpillar Inc. and auto-parts maker Metaldyne Corp. more than they helped steel makers such as U.S. Steel Corp., said administration officials and outside advisers who requested anonymity.

"They understand they've done more political and economic harm than good," said Stephen Moore, president of the Washington-based Club for Growth, the second-biggest funding source for Republicans after the party itself. "It's really damaged the administration's free-trade credentials."

It hasn't been decided whether the team will recommend that Bush eliminate or just trim the tariffs, which are as high as 24 percent and are scheduled to run through March 2005, an official said. And when the tariffs were first imposed in 2002, Bush took the advice of his political advisers, such as Karl Rove, over that of his economic team, analysts say.

Bush approaches the November 2004 election with 2.6 million lost manufacturing jobs on his watch. Opponents of the tariffs blame higher steel prices that resulted from the duties for keeping 200,000 people out of work last year.

The president's decision will ultimately depend on whether he accepts that analysis or one by steel producers that the tariffs have saved more than 10,000 jobs, including ones in key electoral states such as Ohio, West Virginia, Pennsylvania, and Michigan, advocates both for and against the tariffs say.

European nations are also threatening to impose sanctions on US exports after an expected ruling by a World Trade Organization appeals panel in November. An initial WTO ruling already deemed the tariffs violate global trade rules.

Administration officials say Bush hasn't decided whether to lift the tariffs and is waiting for a midterm report due Sept. 19 from the International Trade Commission, an independent US government agency.

"We look forward to looking at the ITC report when it comes out," said White House spokesman Scott McClellan. After getting the report, Bush can decide to lift the tariffs, reduce them, or take no action at all.

It's "too early" to comment on the economy team's stance toward the tariffs while different government agencies are still discussing the issue, said John Taylor, the Treasury Department's undersecretary for international affairs, in an interview Friday with Bloomberg News.

"The steel tariffs have different kinds of effects which are being assessed and estimated now," Taylor said. "There is a conversation going on about how to get to the heart of those estimates and make a policy decision."

Snow, Evans, Council of Economic Advisers chairman Gregory Mankiw, White House economic policy chief Stephen Friedman, and other advisers want the tariffs removed or reduced in part because they're concerned the European Union may impose sanctions on the United States after the WTO panel's ruling in November, according to people familiar with the process. The advisers met this month with Bush in Crawford, Texas, to discuss the economy.

Commerce spokeswoman Lisa Camooso said she had no comment because a decision hadn't been made, and Treasury spokesman Rob Nichols declined to comment. Phil Swagel, chief of staff of the president's Council of Economic Advisers, didn't return calls seeking comment.

The share price of Nucor Corp., the largest maker of steel from scrap, fell 44 cents to close at $51.44 on the New York Stock Exchange. U.S. Steel's stock rose 21 cents to $17.36, after initially falling 25 cents to $16.90 on the news.

The EU has drawn up a list of $2.2 billion in goods that will be targeted with tariffs, ranging from fruit juice to T-shirts. The United States just last week submitted its appeal to the WTO of a July ruling against the tariffs, which originally were set as high as 30 percent.

When the tariffs were first imposed, Bush followed the advice of political strategists rather than economic advisers such as Paul O'Neill, then Treasury secretary, who said the duties risked undermining his free-trade agenda and hurting employment. Political adviser Rove advocated helping the steel industry to boost Bush's popularity in West Virginia and other states important to his reelection, analysts say. Since the tariffs were imposed, the United States has collected $400 million in duties on covered steel imports, according to US Customs data. The tariffs apply to a quarter of US steel imports.