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End of steel tariff yield economic relief Original Source Link: (May no longer be active)
http://www.forbes.com/markets/newswire/2003/12/04/rtr1169977.htmlhttp://www.forbes.com/markets/newswire/2003/12/04/rtr1169977.html
End of steel tariff to yield U.S. economic relief
Reuters, 12.04.03, 4:17 PM ET
By Lesley Wroughton
WASHINGTON (Reuters) - The premature death of steel tariffs set by President Bush should yield some relief for the U.S. economy, but more importantly it should ease fears of growing American protectionism, economists said.
They said 20 months of steel duties, imposed to help the bankruptcy-hit steel industry to restructure and lifted on Thursday, had a net drag on the U.S. economy and forced steel-consuming industries to shed jobs as higher steel prices pushed up costs.
The tariffs also caused friction with U.S. trading partners accused of flooding the American market with cheap steel, and sparked fears the United States was backing away from the push for global free trade.
Lifting the tariffs will spare Bush having to deal with retaliation by Europe in the midst of a presidential campaign, said Gary Hufbauer, trade economist and steel commentator at the Washington-based Institute for International Economics.
"Removing the tariffs has a far more symbolic value on where this administration is going in terms of its international trade policy than it does in terms of the economic impact," said Hufbauer.
He said the duties did the economy more harm than good -- steel users lost more business and jobs as a direct consequence of the safeguards than steel producers gained.
Hufbauer and associate Ben Goodrich calculated that safeguards raised the average domestic price of steel by about 3.3 percent. Steel producers added between 3,000 to 5,000 jobs, while steel consumers lost about 40,000 jobs, they said.
Ken Rogoff, former International Monetary Fund chief economist and now a Harvard professor, said the real damage was to the United States' image as a champion of free trade.
"People looked to the U.S for leadership and it wasn't a good thing within developing countries for people who promote free trade to suddenly change positions," Rogoff said.
He added that lifting the tariffs "puts the spotlight back on the Europeans and the Japanese where it belongs because their behavior is much worse across the board."
Jim Panyard, chief executive of the Pennsylvania Manufacturers' Association in a steel-making state and industrial stronghold, said while the tariffs had cost the U.S. manufacturing sector, lifting them meant the government was capitulating to pressure from trading partners.
"What's at stake is America's security and our sovereignty is definitely in question if we are bowing to all the demands of the European Union or the Chinese," he told Reuters.
"The future of America is at stake here and we may be trying to close the barn door after the horses have left."
U.S. Trade Representative Robert Zoellick, in announcing the lifting of the tariffs, denied that the move was linked to retaliation threats or a World Trade Organization ruling in November against the duties.
In a plus for the steel industry, the decision comes as the U.S. economic recovery is gaining strength.
Tom Usher, chairman and chief executive of United States Steel Co. , said the upturn should help business.
"Most people have a little more optimism. They are looking at their business being better in 2004, so I don't think this decision will have a big impact on that moving forward," he said in a telephone interview.
United Steelworkers of America President Leo Gerard accused Bush of abandoning steelworkers, both active and retired.
He said 240,000 retired steelworkers once at the 43 steel companies forced into bankruptcy as the steel price hit a 20-year low were now without pension and health benefits.
"The elimination of tariffs is once again robbing a quarter of a million retirees of an opportunity get some health care at the bottom of their years," he said.
Copyright 2003, Reuters News Service
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