November 19, 2003 News ¢ theother press © US Loses Steel Battle— Can They Survive the War? Ted Morrison OP Contributor In British Columbia, the main source of free-trade friction has been forest products. But another trade fight has been going on that could affect the Canadian economy just as much—the fight to sell steel. The World Trade Organization (WTO) on Monday determined that the US, by imposing duties of almost 30 percent on imports of ingot steel, was violating both the letter and the spirit of its international trade commitments. This could have a significant impact in Canada, which exports huge quantities of steel and manufactured steel products to the States every year. The WTO’s decision does not mean that the unfair duty will softly and silently vanish away. However, it allows other nations trading in steel to levy duties of their own on US imports in order to redress the imbalance. The enormous tariff was imposed by the Bush administration, in contravention of current agree- ments, due to claims by US manufacturers that Canada, the European Union (EU), Japan, and other nations were dumping steel on the US mar- ket. Manufacturer’s further claimed that their industry required special protection in order to make the price of their products competitive. Unfortunately for US consumers, they got high- er prices anyway. The duties raised the price of foreign steel by such a wide margin that America’s coddled and uncompetitive steel industry was nev- ertheless able to raise prices on its own product, thus raising the price of manufacturing goods. Canada was not so severely hit by the tariffs as the EU and Japan. Companies wishing to avoid the duty on ingot (unprocessed) steel began work- ing in Canada to complete initial industrial pro- cessing, avoiding the extra cost by importing the steel to America as manufactured goods, most of which are exempt from the levy. It has been suggested that George W. Bush imposed the tariffs to shore up support for the Republican Party in places such as Pennsylvania and Ohio. But if this was Bush’s objective, it may cost him dearly. While steel production is a major, but non-viable industry in its current form, the manufacture of steel products employs far more voters. Some of these people have now been laid off, due to the higher costs of raw materials. Worse, the retaliatory tariffs that the US may now face in other countries, particularly Europe, may cost export-related jobs that would have gone unaffected had the steel import tax not been implemented. In July, Pascal Lamy, the EU’s Trade Commissioner, presented the WTO with a list of products that the EU intended to tax if the World ‘Trade Organization’s panel found the duties to be illegal. These duties could eventually total almost $4 billion. At the heart of the issue is the WTO’s Safeguard Agreement, which allows certain exemptions to taxation and duty rules where a given country’s industry may suffer serious ill effects from fair competition. Under this agreement, certain limit- ed and temporary duties are permitted to shore up reorganizing industries or reduce economic harm to a nation. However the EU and other plaintiffs argued successfully that imported steel was not the prime threat to US steel producers. Rather, they said, the primary ill effects were due to an out- moded and cumbersome industry's refusal or inability to change to meet modern economic demands. In August, the US filed their appeal against the panel's initial decision—not an usual move for countries in this situation—which could effective- ly delay sanctions abroad until May. Most coun- tries fear that the tariff will remain in place for as long as possible—at least until the next presiden- tial elections, and possibly even longer. US steel has been slowly and painfully changing over the past several decades, reluctantly sacrificing thousands of jobs in the process. The European steel industry has already undergone just such painful reorganization, allowing it to compete effectively on the international market. But in the US, the powerful steel unions sup- ported the Bush candidacy on the premise that a Bush White House would impose protection duties. To dismantle the tariff now would cost Bush huge political capital in Illinois, West Virginia, and other steel production states. On the other hand, the resulting increase in the prices of both domestically-produced and foreign steel will be passed on to the manufacturing sector and con- sumers, particularly car buyers—further jeopardiz- ing an already-sputtering domestic auto industry. http://www.otherpress.cae Eyeluswe tudor Oller! 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