Bush administration lifts steel tariffs
EU in turn lifts threat of trade sanctions
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Members of the United Steel Workers of America protest the potential removal of steel tarrifs during a Bush fund-raising visit to Pittsburgh on Tuesday.
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CNN's John King on President Bush being advised to head off a global trade war by rolling back steel tariffs.
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SPECIAL REPORT
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WASHINGTON (CNN) -- The Bush administration announced Thursday that it is scrapping the tariffs imposed on foreign-made steel more than 20 months ago, and the European Union immediately said it is lifting its threat of trade sanctions, averting the specter of a trade war.
"These safeguard measures have now achieved their purpose, and as a result of changed economic circumstances it is time to lift them," said White House spokesman Scott McClellan, reading a statement from President Bush.
"The U.S. steel industry wisely used the 21 months of breathing space we provided to consolidate and restructure. The industry made progress increasing productivity, lowering production costs and making America more competitive with foreign steel producers."
The administration will cushion the blow by closely monitoring the industry to ensure that foreign steel is not dumped into the United States.
U.S. Trade Representative Robert Zoellick, appearing with McClellan at a news conference, said the safeguards helped the industry "get back on its feet."
He said it went through a "tough spot" after the financial crisis of the late 1990s, and the key of the tariff strategy was to give "breathing space" but not "permanent protection."
The domestic steel industry, he said, is more efficient, more competitive, and more profitable. Exports have increased and workers' pensions have been saved.
The decision is politically sensitive because of support for the tariffs in key presidential battleground states -- Pennsylvania, Ohio and West Virginia chief among them.
Sources said top presidential advisers concluded the threat of sanctions from the European Union and other trading partners left Bush with little choice but to lift the steel tariffs 16 months ahead of their planned expiration.
In Brussels, Pascal Lamy, EU trade commissioner, lifted the threat of trade sanctions.
"This is obviously good news" for Europe and its steel industry and workers, he said, adding that it is heartening that the U.S. steel industry is restructuring.
He said one lesson he has learned is that when Europe is united, as it was in opposition to these tariffs, it "can play a role in world affairs that corresponds to its weight."
The tariffs were scheduled to remain in effect for three years, until 2005.
U.S. Rep. Bob Ney, an Ohio Republican and a senior member of the Congressional Steel Caucus, said it is "very unfortunate" that the tariffs will not be kept in place for the full three years.
"Over the last 20 months that these tariffs have been in place, I have seen a true renewal in our steel industry -- companies consolidated, production grew and workers sacrificed for a better future," said Ney, whose district snakes through eastern Ohio, an area known for coal as well as steel.
Even with the strides, not enough progress has been made, he said, "to warrant a repeal of these tariffs."
Ney said monitoring of unfair trade practices "will amount to little if it is not backed-up with real action, and I will work hard to help ensure that happens."
Background: Political roots
The Associated Press reports that the administration initially imposed the tariffs in hopes of winning votes in key steel states such as Pennsylvania, West Virginia and Ohio.
But it faced a barrage of complaints from steel-consuming industries, according to the AP, who claimed the higher prices they had to pay were costing more jobs at U.S. steel companies than were being saved.
Domestic steel supporters said the president had an obligation to fulfill promises he made during the 2000 campaign, the AP reports.
"The White House knows the U.S. industry still confronts serious issues including massive global over-capacity and a whole variety of foreign subsidies that encourage this over-capacity," Alan Wolff, a Washington attorney representing U.S. steel companies, told The Associated Press.
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Associated Press contributed to this report.
