updated 9/19/2003 5:52:41 PM ET 2003-09-19T21:52:41

Steep tariffs on imported steel imposed 18 months ago have not significantly hurt small steel-consuming businesses, a federal trade panel concluded in a report released Friday that could reinforce President Bush’s re-election strategy.

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MANY STEEL consumers “had difficulty distinguishing between the effects of the (tariff) safeguard measures and other changes in market conditions,” the U.S. International Trade Commission stated in its report.

Steel distributors and product producers “generally reported that they expected no change or positive results from continuation of the safeguards and no change or negative results from termination of the safeguard measures,” the report said.

The review outlines the tariffs’ impact on domestic steel industry and steel consumers halfway through the three-year program. It will be critical in resolving a White House debate pitting the president’s political interests against economic realities over whether to keep or eliminate the tariffs.

Bush imposed the tariffs, from 8 percent to 30 percent on certain kinds of foreign-made steel, in March 2002 to give the domestic industry respite from foreign competition to regroup and consolidate. Thirty-one steel producers have declared bankruptcy since January 1999, eliminating more than 50,000 jobs.

Bush’s economic team has been pushing to drop the tariffs in the face of a July ruling by the World Trade Organization that they violate global trade laws. The European Union is threatening to impose $2.2 billion in retaliatory sanctions on U.S. exports.

BUSH SEEN AS HOLDING FIRM

Presidential political advisers, however, believe rolling back the sanctions would harm Bush’s 2004 goal of winning key Rust Belt swing states, mainly Pennsylvania, West Virginia, Ohio, Indiana and Illinois, where steelmaking remains an important industry.

The Bush administration declined to comment specifically on the findings, which were made public shortly before 9 p.m. EDT — hours after the report was promised. Within minutes of its release, tariff supporters hailed its conclusions. “To turn back now would be to snatch defeat from the jaws of victory,” said Terrence Straub, vice president of Pittsburgh-based U.S. Steel.

“This is a vindication of the president’s program,” said Steelworkers legislative director Bill Klinefelter. “It clearly says that we should continue on the course that was laid down by this administration.”

The ITC concluded that demand for most steel products has been weak since the tariffs were enacted but that raw production is beginning to rise. In the last 18 months, the report found, steel producers have undergone major restructuring and the United Steelworkers of America labor union negotiated “groundbreaking” collective bargaining agreements that were, according to the ITC, “designed to reduce fixed costs, improve productivity and protect retiree welfare.”

While steel consumers have charged that the tariffs contributed to 200,000 job losses, the ITC found that “in many cases, employment fell by a greater amount (and percentage) in the year before the safeguard measures were implemented than in the first year after.”

But the review also said that the tariffs resulted in a $680 million net loss to U.S. businesses and that nearly half the consumers surveyed by the ITC reported significant declines in the availability of steel, said Lewis Leibowitz, an attorney for the Consuming Industries Trade Action Coalition.

“This indicates (consumers) were hurt a lot more than the steel industry was helped — which is what we’ve been saying all along,” Leibowitz said.

“As these reports make clear, the steel tariffs are a tremendous burden to steel consumers, the companies that comprise the bulk of American manufacturing,” said Rep. Joe Knollenberg, R-Mich. “Now is the time to take the foot of the steel tariffs off steel consumers’ throats.”

The ITC review is only a fact-finding report and does not recommend any course of action. The president is not expected to make a decision on the tariffs’ fate any time soon and could wait until November, when the WTO will decide on a U.S. appeal to its July ruling.

They tariffs are set to expire March 6, 2005.

“We will begin a thorough review and analysis of these reports today, and will use them as a part of our ongoing review of developments in the steel industry, and the economy more generally,” said Richard Mills, spokesman for U.S. Trade Representative Robert Zoellick.

Said U.S. Sen. Robert C. Byrd, D-W.Va.: “With such progress, I hope that the president will not short-circuit this effort.”

© 2003 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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