U.S. Approves Last Set of Steel Tariff Waivers

WASHINGTON — The Bush administration approved a seventh and final round of steel tariff exclusions Thursday, waiving import duties on 178 products and further defusing the threat of a trade war with Europe and Japan.

The latest batch of waivers raises to 727 the number of products that have been exempted from the stiff tariffs imposed by President Bush to give ailing U.S. steel manufacturers more time to clean up their balance sheets and consolidate their operations.

Altogether, the administration has excluded 3.2 million tons of annual imports, or about one-quarter of shipments initially subject to Bush’s “safeguard” action. The protective tariffs range from 8% to 30% and will remain in effect for up to three years.

Steel companies criticized the exclusions as excessive, while steel-consuming industries said they were not extensive enough. Industry experts predicted that the effect on U.S. steel prices would be minimal but their political effect substantial.

“The primary objective of the exemptions was to assure domestic steel buyers they’re not being completely left out of the calculus, and to get foreign suppliers to abandon or forestall their threats of immediate retaliation,” said Ben Goodrich, a global steel analyst at the Institute for International Economics in Washington. “There’s not a whole lot of evidence that they applied really strict economic criteria to them.”

Many of the exclusions apply to specialty products that are not made in sufficient quantity by U.S. manufacturers to satisfy domestic demand, such as “cold-rolled steel for flux-cored welding rods” and “hot-rolled bar used for manufacture of scrap recycling knives.” Some cover imports of basic steel slab that is transformed into other products by U.S. mills.

The administration’s review of more than 1,300 waiver applications was “an extraordinarily rigorous process,” involving hundreds of meetings with steel manufacturers and consumers, said a U.S. trade official who briefed reporters on the condition he not be identified by name.

The official said the exclusions were consistent with the administration’s objective of giving U.S. steel manufacturers “a limited amount of breathing space” to regroup. “It is important that they move forward aggressively in their restructuring,” he said. “We feel they understand that.”

American steel manufacturers, particularly the big integrated producers that transform iron ore into finished sheet, bar, rod and wire, have struggled to stay afloat in an industry characterized by chronic overproduction around the world and high production costs in the United States. More than 30 U.S. steelmakers have filed for bankruptcy protection in the last five years; more than 20 mills have stopped production.

Bush imposed the temporary tariffs March 5 under a trade law provision designed to protect U.S. industries whose survival is threatened by surging imports. The tariffs were widely viewed as a bid to secure votes for Republican candidates in the Steel Belt states of Pennsylvania, West Virginia and Ohio, but they provoked howls of protest from steel-consuming industries in the Rust Belt and from steel manufacturers overseas.

Almost as soon as it imposed the tariffs, the administration began processing requests for exclusions. The damage-control strategy appears to have worked. Industry analysts said the waivers were partly responsible for a decision by the European Union to rescind threats of immediate retaliation and to await a ruling by the World Trade Organization on the legality of the U.S. tariffs.

Although they did not have exact figures, U.S. officials confirmed that most of the exclusions apply to products made in Europe and Japan, where the political opposition to the U.S. tariffs was strongest.

Response to the seventh set of waivers was mixed. A coalition of U.S. steel companies said it wished the administration had not approved the latest group of exclusions, but expressed relief that the process was over.

“We’re disappointed that a significant number of exclusions were granted over the objections of the domestic industry,” said American Iron and Steel Institute spokeswoman Nancy Gravatt in Washington. U.S. steelmakers had opposed 104 of the 178 waiver applications approved Thursday, she said.

But the exclusions, although helpful, will not do enough to protect steel-consuming firms from price increases and supply shortages caused by the president’s tariffs, said Christopher Howell, government affairs director for the Precision Metalforming Assn. in Cleveland.

“I don’t know what the intent was, but I’m afraid small businesses got the short stick again,” said Howell, whose trade group represents manufacturers of parts for auto companies and other industries. “I don’t know how much worse it can get.”

The prices of many benchmark steel products have shot up 30% or more this year, considerably more than the administration predicted when it imposed the import tariffs in March. Benchmark hot-rolled steel, for example, has jumped from $210 a ton in December to $400 a ton in the latest survey conducted by Purchasing Magazine.

Industry experts say other forces are contributing to the price hikes, but their assurances have provided little comfort to steel buyers. This month, Metaldyne Corp. Chief Executive Tim Leuliette urged fellow parts suppliers to rise up in opposition to steel tariffs and cost containment pressures, even if it meant “bringing Detroit to its knees.”