Steel decision is key

Removal of tariff could damage state's economy

Karin Fischer, Daily Mail, November 17, 2003

WASHINGTON -- If President Bush lifts tariffs on imported steel ruled illegal by the World Trade Organization, the ripples could be felt throughout West Virginia's economy, political and business leaders fear.

But some economists say a rebounding international steel market suggests that removal of the tariffs could be far less detrimental to domestic producers than originally believed. Risking at least $2.2 billion in retaliatory sanctions from the European Union, Japan and other countries could be far more costly to the American economy, they say.

The World Trade Organization announced last week that the tariffs, of up to 30 percent on steel imports, violate international trade laws. Almost immediately, the retaliatory action was announced.

The European Union could vote to impose their own set of tariffs -- on steel products, as well as textiles, citrus fruits and farm equipment -- in early December if the United States does not back down.

The Bush administration has given no indication of whether it will lift or maintain the tariffs, but speculation here suggests the president, who ran as a free trader, will remove the tariffs he authorized 18 months ago.

"We're hearing there seems to be agreement between key advisers that they need to lift them," said Dan Ikenson, a trade policy analyst at the libertarian Cato Institute.

That would be bad news for West Virginia, state Chamber of Commerce President Steve Roberts said.

"Those are 15,000 very good paying manufacturing jobs," Roberts said, referring to the West Virginians employed in primary metals sector. The average manufacturing wage is about twice the pay of the retailing job in the state.

"We're fighting hard for manufacturing jobs that employ the most people at the best wages."

West Virginia's two largest steel companies, Northern Panhandle-based Weirton and Wheeling-Pittsburgh, each have filed for bankruptcy protection and qualified for federal loan guarantees as they struggle to right themselves. Wheeling-Pittsburgh exited bankruptcy in August.

George Hammond at West Virginia University's Center for Business and Economic Research said the closure of state steel mills could have a significant impact regionally and erase any of the job gains projected for next year.

Weirton Steel is the state's fifth largest employer, he noted.

"It would be a major macroeconomic shock to lose several thousand jobs all in one swoop," he said.

The state's $2 billion exporting sector is keeping an eye on the retaliatory tariffs. So far, only the European Union has released a list of targeted goods. With the exception of steel products, the tariffs aren't aimed at West Virginia's leading exports, like chemicals and coal.

"It's still a little early in the game to know how it will affect West Virginia exports," Don Gallion of FCX Systems in Morgantown said. He supports the American tariffs because of the home state industry.

The substantial penalties proposed will cost American jobs, says William Gaskin, chairman of the Consuming Industries Trade Action Coalition steel task force.

"You notice the job losses at larger companies, but they're just as costly at the small ones," Gaskin said.

Steel consuming jobs outnumber steel-producing jobs by more than 50-1 nationally, and 9-1 in West Virginia, he said.

With the manufacturing sector suffering a long-term contraction, continuing the tariffs "would be like adding insult to injury," Gaskin said.

What's more, Ikenson says, the worldwide demand for steel is projected to go up in 2004. Producers -- the healthy ones, at least -- may be scrambling to match demand, he says.

"This Chicken Little rhetoric just isn't true," Ikenson said.

That's small comfort to struggling workers, said Dave Gossett of the Independent Steelworkers Union, which represents Weirton employees. "Two thousand and four is supposed to be a great year for steel, but if there are cheap imports, 2004 may not mean much to us," he said.

Many integrated mills across the country are "operating on razor thin margins with major capital needs and substantial operating costs," said Senate Steel Caucus co-chairman Jay Rockefeller, D-W.Va. "They've been pounded for years by high volumes of imports and trade violations. These tariffs have been a partial equalizer -- and we still need them."

Steel state lawmakers have been working largely across party lines to encourage Bush to retain the tariffs. Rep. Shelley Moore Capito, R-W.Va., says she has talked recently with several administration officials to press steel's case, but has received little hint of the president's leanings.

If the economic stakes are high, so too are the political ones. Many of the goods targeted for retailiatory tariffs are produced in politically sensitive regions of the country, such as Florida. And steel consumers say they plan to use their muscle in states across the country if the tariffs are continued.

Bush, however, ran for office on a pledge to help the steel industry. With the election a year away and critical swing states like West Virginia hanging in the balance, Rep. Alan Mollohan, D-W.Va., said Bush can't afford to forget that promise.

"This decision is going to be about the political calculus," Mollohan said. "It's very important for the steel community to let the president know he's going to be held accountable."