Bush Steel Tariffs CasePresented By:

Kultara Vongsumedh Rob Miller Michelle Vine Brendan Gibbons

Background

• What are tariffs?

• What events triggered the dispute over imported steel?

• Why impose tariffs on foreign steel producers?

Industry Concerns•25 Steel Companies bankrupt or out of business

•Cheap imports

•Losses in the billions

•Worldwide drop in steel prices

Section 201 Investigation Background

• Lobbying

• Industry wanted President to initiate Investigation

• Politics

– President formed cabinet

– Cabinet skeptical about grounds for 201 Investigation

– Senate Finance Committee-Controlled by Democrats

– President acts

Steel Section 201 Goes Public

• On June 5, 2001, President

Bush announces comprehensive

initiative

• Initiative includes: 201

Investigation and multilateral

negotiations to follow

• Real search for a solution

USTR Letter

• 22 June, 2001 USTR Zoellick officially requests ITC to start investigation of 4 steel product groups

• Says there is a 50 Year

problem

• Says U.S. Steel industry hurt

Goals of 201 Investigation:

1. Give producers temporary relief.

2. Ultimately restore market forces and free trade

3. Evaluation would give U.S. ammo in negotiations w/ trading partners

ITC Investigation Results

4 Product groups subdivided into 33 sub-groups

12 Product categories found to produce injury to U.S.

Commission divided over 4 categories

17 categories found not to produce injury to U.S.

President Bush’s Actions

• Proclamation on March 5, 2002 imposed tariffs

• Tariff rates from 13-30%

• Excludes NAFTA Countries

Reactions

• U.S. Steel Industry-CEO’s, Unions, and Representatives of Steel States

• E.U.

Economic Impact

• Prices of Hot-Rolled Steel as Example:

$270/ton now$400/ton immediately

post tariff implementation

$220/ton previous to tariffs

• Supporters of Tariffs: Claim 1.1 million jobs preserved

• Non-Supporters of Tariffs: Estimate 200,000 jobs lost

• Prices for almost anything with steel are going up

The Bush Steel Tariffs Case before the WTO

Here’s what happened...

I. 3 June 2002: EU submitted complaint

II. 14 June - 29 July 2002: other countries filed complaints

III. 11 July 2003: Panels ruling submitted

WTO DSP

The Panel found that...

the US was in violation of several articles of the WTO

was inconsistent with the Agreement on Safeguards and the GATT 1994

Aftermath of WTO decision

US appeals ruling

The WTO Appellate Body rules that the US is in violation of the WTO rules

which means...

EU and others can now impose sanctions

What does the future hold?

Expectations

The Bush steel tariffs have given the U.S. steel industry much needed relief, which has allowed it to re-structure.

There will be further consolidation within the domestic steel industry in the United States.

A new Federal guarantee of steelworkers pensions has removed the major impediment to earlier efforts to improve its competitive position.

Political Fallout

Bush is clearly in a difficult position if he lifts the steel tariffs before 2005.

Pennsylvania, Ohio, Indiana and West Virginia are very much in play for the 2004 election.

The electorate in these states, as well as the politicians, are sounding increasingly protectionist.

International Implications

The US faces an estimated $2.2 billion in economic sanctions from EU alone.

Japan, Korea and Brazil are also exploring whether or not to impose economic sanctions on the United States.

Is the WTO capable of insuring that countries both implement and comply with its rulings?