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. Last Updated: 07/27/2016

Bush Mulls Moves to Stem Foreign Steel

WASHINGTON -- U.S. President George W. Bush's top economic advisers have presented him with proposals to aid the domestic steel industry that would most heavily penalize China, Japan, Germany, Taiwan and South Korea but exempt most poor nations -- and Mexico and Canada -- from punishing export taxes.

With Bush facing a deadline that requires him to announce a decision by Wednesday, the advisers are seeking a way for him to argue that he is making good on his campaign promises to ailing steel makers and workers.

But the proposals Bush is considering fall well short of what some of the United States' largest steel makers and union workers have demanded: a 40 percent tax on virtually all steel products from abroad.

That would raise the price of steel by 10 percent, saving jobs in a long-beleaguered industry in which bankruptcy filings have become common, but also pushing up the cost of cars, washing machines and other consumer goods. Some Bush advisers have warned that the high taxes on imported steel would have the same effect on the economy as higher individual income taxes.

Bush appears set to reject industry efforts to have the government assume the pension and health liabilities of failed steel makers, a move that U.S. Steel Corp. has urged to speed mergers that would consolidate the industry. Bush will, however, leave the door open for Congress to bail out those workers so that they keep their retirement benefits.

As word trickled out that the administration was looking for ways to soften the higher taxes on steel imported to the United States, the chief executive of U.S. Steel, Thomas Usher, warned in an interview this weekend that now was not the time for timidity -- even if Bush risks angering countries critical to his anti-terrorism coalition.

"If there are a lot of holes in the president's plan, if you exclude the developing nations and Canada and Mexico and maybe Russia, then we will end up with a weak solution," Usher said. "And a weak solution won't save the industry or the jobs."

Rarely has Bush faced such a delicate economic decision. He is weighing the costs of keeping Americans employed against the inevitable charges from conservatives that he is violating free-market ideals. European leaders have left no doubt that they will immediately challenge his decision as a violation of world trade rules and try to have the World Trade Organization overturn it.

Bush has been sympathetic to the argument that U.S. security hinges on preserving the steel industry. Advocates of strong presidential action are trying to use that sentiment to their advantage.

"Our weapons are made of steel," Senator Carl Levin, a Democrat from Michigan and chairman of the Senate Armed Services committee, told a crowd of steelworkers Thursday before going to the White House to make another appeal. "We go to war with what you make."

To achieve Bush's political objectives while minimizing the impact on some influential industries that use steel, the president's advisers are recommending an array of import taxes after a careful examination of what countries they would hurt and what companies they might help. Most options fall short of steel makers' demand for a 40 percent across-the-board tax on steel imports.

Bush must decide by Wednesday to meet a deadline set by the U.S. International Trade Commission. In recent rulings, the commission found that a surge in steel imports had threatened U.S. industry. But statistics show that the surge tapered off after the 1998 Asian economic crisis, even though a continuing glut of steel has kept prices low.

The issue is so complex -- pitting steelworkers against makers of other goods, steel-making states against steel-importing states and representatives of workers against free-trade advocates -- that the arguments have crossed party lines.

Bush's trade experts say that an important element of building support for free trade is showing that he will use all legal tools to stop surges of foreign goods that eliminate U.S. jobs.

"To promote open trade, an administration has to be willing to seriously consider using the trade laws available," Bush's chief trade adviser, Robert Zoellick, said in an interview. While it may not be possible to stop the slow decline of old-line industries, he said, "if you've got tools to help people get back on their feet, you should try to do so."