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US Steel Tariffs No Longer Needed, say Industry Analysts - 2003-12-02

The Bush administration has indicated that it is ready to rescind the punitive U.S. tariffs on steel that last month were declared illegal by the World Trade Organization. The president's decision is likely to be announced this week.

U.S. trade officials are recommending that the protective tariffs imposed nearly two years ago to safeguard the declining U.S. steel industry be dropped.

The measures, which include up to 30 percent tariffs on certain categories of imported steel, were intended to provide short-term relief to domestic steel makers and their workers who faced tough competition from lower priced foreign steel. The tariffs were also intended to buy time to permit the U.S. steel industry to restructure.

Gary Hufbauer, a steel analyst at Washington's Institute for International Economics, says there are several reasons why the tariffs are no longer needed.

"It's true that restructuring has taken place and the industry is much more efficient than it was two years ago, partly because a lot of the pension obligations have been assumed by a government agency, the pension guarantee corporation," he said. "And partly because the United Steel Workers have adopted much more reasonable and efficient work rules."

But most of all, says Mr. Hufbauer, the U.S. steel industry is stronger today because of the economic recovery that has boosted demand for steel products.

Robert Crandall, a steel analyst at the Brookings Institution in Washington, believes the tariffs should never have been imposed. However, he does concede that they may have been beneficial to the steel industry.

"Nobody knows for sure. But I think they've had some minor effect in the first few months," he said. "But that recently steel prices have been firm enough and the dollar has been declining that they probably have had very little effect."

Experts say the lifting of the punitive tariffs will greatly ease international trade tensions and diminish the threat of a destructive trade war between the United States and its trade partners in Europe and Asia.