United States steel tariff 2002
Encyclopedia
The Section 201 steel tariff is a political
issue in the United States regarding a tariff
that President
George W. Bush
placed on import
ed steel
on March 5, 2002 (took effect March 20). The tariffs were lifted by Bush on December 4, 2003.
The temporary tariffs of 8-30% were originally scheduled to remain in effect until 2005. They were imposed to give U.S. steel makers protection from what a U.S. probe determined was a detrimental surge in steel imports. More than 30 steel makers had declared bankruptcy
in recent years. Steel producers had originally sought up to a 40% tariff. Canada
and Mexico
were exempt from the tariffs because of penalties the U.S. would face under the North American Free Trade Agreement
. Additionally, some developing countries such as Argentina
, Thailand
, and Turkey
were also exempt. The typical steel tariff at the time was usually between zero and one percent, making the 8-30% rates seem exceptionally high. These rates, though, are comparable to the standard permanent US tariff rates on many kinds of clothes and shoes.
Both the issuing and the lifting of the tariffs caused controversy in the U.S. Some of the president's political opponents, such as Representative
Dick Gephardt
, criticized the plan for not going far enough. For some of the president's conservative
allies, imposing the tariff was a step away from Bush's commitment to free trade
. Critics also contended that the tariffs would harm consumer
s and U.S. business
es that relied on steel imports, and would cut more jobs than it would save in the steel industry. Supporters of the tariffs believed that U.S. steel producers were being harmed by a 'surge' of steel imports endangering the viability of American steel companies.
There was a widespread belief on all sides of the debate, confirmed by top Bush administration officials, that politics played a role in the decision to impose tariffs. Namely, the large and important Rust Belt
swing state
s of Pennsylvania
and West Virginia
would benefit from the tariffs. The placement of the tariffs was an odd one for Bush, who has signed numerous free trade agreements during his term in office. This was widely believed to be a calculated political decision, insofar as the localities that stood to benefit were marginal ones. On the other hand, both the earlier Bush I administration and the Reagan administration had also imposed import limits on steel.
The tariffs ignited international controversy as well. Immediately after they were filed, the European Union
announced that it would impose retaliatory tariffs on the U.S., thus risking the start of a major trade war
. To decide whether or not the steel tariffs were fair, a case was filed at the Dispute Settlement Body
of the World Trade Organization
. Japan, Korea, China, Taiwan, Switzerland, Brazil and others joined with similar cases.
On November 11, 2003, the WTO came out against the steel tariffs, saying that they had not been imposed during a period of import surge — steel imports had actually dropped a bit during 2001 and 2002 — and that the tariffs therefore were a violation of America's WTO tariff-rate commitments. The ruling authorized more than $2 billion in sanctions, the largest penalty ever imposed by the WTO against a member state, if the US did not quickly remove the tariffs. After receiving the verdict, Bush declared that he would preserve the tariffs. In retaliation, the European Union threatened to counter with tariffs of its own on products ranging from Florida oranges to cars produced in Michigan, with each tariff calculated to likewise hurt the President in a key marginal state. Faced with the threat, the U.S. backed down and withdrew the tariffs on December 4.
The early withdrawal of the tariffs also drew political criticism from steel producers, as well as supporters of protectionism
, but was cheered by proponents of free trade and steel importers. When he lifted the tariffs, Bush said, "I took action to give the industry a chance to adjust to the surge in foreign imports and to give relief to the workers and communities that depend on steel for their jobs and livelihoods. These safeguard measures have now achieved their purpose, and as a result of changed economic circumstances it is time to lift them."
Politics
Politics is a process by which groups of people make collective decisions. The term is generally applied to the art or science of running governmental or state affairs, including behavior within civil governments, but also applies to institutions, fields, and special interest groups such as the...
issue in the United States regarding a tariff
Tariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....
that President
President of the United States
The President of the United States of America is the head of state and head of government of the United States. The president leads the executive branch of the federal government and is the commander-in-chief of the United States Armed Forces....
George W. Bush
George W. Bush
George Walker Bush is an American politician who served as the 43rd President of the United States, from 2001 to 2009. Before that, he was the 46th Governor of Texas, having served from 1995 to 2000....
placed on import
Import
The term import is derived from the conceptual meaning as to bring in the goods and services into the port of a country. The buyer of such goods and services is referred to an "importer" who is based in the country of import whereas the overseas based seller is referred to as an "exporter". Thus...
ed steel
Steel
Steel is an alloy that consists mostly of iron and has a carbon content between 0.2% and 2.1% by weight, depending on the grade. Carbon is the most common alloying material for iron, but various other alloying elements are used, such as manganese, chromium, vanadium, and tungsten...
on March 5, 2002 (took effect March 20). The tariffs were lifted by Bush on December 4, 2003.
The temporary tariffs of 8-30% were originally scheduled to remain in effect until 2005. They were imposed to give U.S. steel makers protection from what a U.S. probe determined was a detrimental surge in steel imports. More than 30 steel makers had declared bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
in recent years. Steel producers had originally sought up to a 40% tariff. Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
and Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
were exempt from the tariffs because of penalties the U.S. would face under the North American Free Trade Agreement
North American Free Trade Agreement
The North American Free Trade Agreement or NAFTA is an agreement signed by the governments of Canada, Mexico, and the United States, creating a trilateral trade bloc in North America. The agreement came into force on January 1, 1994. It superseded the Canada – United States Free Trade Agreement...
. Additionally, some developing countries such as Argentina
Argentina
Argentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...
, Thailand
Thailand
Thailand , officially the Kingdom of Thailand , formerly known as Siam , is a country located at the centre of the Indochina peninsula and Southeast Asia. It is bordered to the north by Burma and Laos, to the east by Laos and Cambodia, to the south by the Gulf of Thailand and Malaysia, and to the...
, and Turkey
Turkey
Turkey , known officially as the Republic of Turkey , is a Eurasian country located in Western Asia and in East Thrace in Southeastern Europe...
were also exempt. The typical steel tariff at the time was usually between zero and one percent, making the 8-30% rates seem exceptionally high. These rates, though, are comparable to the standard permanent US tariff rates on many kinds of clothes and shoes.
Both the issuing and the lifting of the tariffs caused controversy in the U.S. Some of the president's political opponents, such as Representative
United States House of Representatives
The United States House of Representatives is one of the two Houses of the United States Congress, the bicameral legislature which also includes the Senate.The composition and powers of the House are established in Article One of the Constitution...
Dick Gephardt
Dick Gephardt
Richard Andrew "Dick" Gephardt is a lobbyist and former prominent American politician of the Democratic Party. Gephardt served as a U.S. Representative from Missouri from January 3, 1977, until January 3, 2005, serving as House Majority Leader from 1989 to 1995, and as Minority Leader from 1995 to...
, criticized the plan for not going far enough. For some of the president's conservative
Conservatism
Conservatism is a political and social philosophy that promotes the maintenance of traditional institutions and supports, at the most, minimal and gradual change in society. Some conservatives seek to preserve things as they are, emphasizing stability and continuity, while others oppose modernism...
allies, imposing the tariff was a step away from Bush's commitment to free trade
Free trade
Under a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...
. Critics also contended that the tariffs would harm consumer
Consumer
Consumer is a broad label for any individuals or households that use goods generated within the economy. The concept of a consumer occurs in different contexts, so that the usage and significance of the term may vary.-Economics and marketing:...
s and U.S. business
Business
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
es that relied on steel imports, and would cut more jobs than it would save in the steel industry. Supporters of the tariffs believed that U.S. steel producers were being harmed by a 'surge' of steel imports endangering the viability of American steel companies.
There was a widespread belief on all sides of the debate, confirmed by top Bush administration officials, that politics played a role in the decision to impose tariffs. Namely, the large and important Rust Belt
Rust Belt
The Rust Belt is a term that gained currency in the 1980s as the informal description of an area straddling the Midwestern and Northeastern United States, in which local economies traditionally garnered an increased manufacturing sector to add jobs and corporate profits...
swing state
Swing state
In United States presidential politics, a swing state is a state in which no single candidate or party has overwhelming support in securing that state's electoral college votes...
s of Pennsylvania
Pennsylvania
The Commonwealth of Pennsylvania is a U.S. state that is located in the Northeastern and Mid-Atlantic regions of the United States. The state borders Delaware and Maryland to the south, West Virginia to the southwest, Ohio to the west, New York and Ontario, Canada, to the north, and New Jersey to...
and West Virginia
West Virginia
West Virginia is a state in the Appalachian and Southeastern regions of the United States, bordered by Virginia to the southeast, Kentucky to the southwest, Ohio to the northwest, Pennsylvania to the northeast and Maryland to the east...
would benefit from the tariffs. The placement of the tariffs was an odd one for Bush, who has signed numerous free trade agreements during his term in office. This was widely believed to be a calculated political decision, insofar as the localities that stood to benefit were marginal ones. On the other hand, both the earlier Bush I administration and the Reagan administration had also imposed import limits on steel.
The tariffs ignited international controversy as well. Immediately after they were filed, the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
announced that it would impose retaliatory tariffs on the U.S., thus risking the start of a major trade war
Trade war
A trade war refers to two or more states raising or creating tariffs or other trade barriers on each other in retaliation for other trade barriers...
. To decide whether or not the steel tariffs were fair, a case was filed at the Dispute Settlement Body
WTO Dispute Settlement Body
The Dispute Settlement Body of the World Trade Organization makes decisions on trade disputes between governments that are adjudicated by the Organization...
of the World Trade Organization
World Trade Organization
The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...
. Japan, Korea, China, Taiwan, Switzerland, Brazil and others joined with similar cases.
On November 11, 2003, the WTO came out against the steel tariffs, saying that they had not been imposed during a period of import surge — steel imports had actually dropped a bit during 2001 and 2002 — and that the tariffs therefore were a violation of America's WTO tariff-rate commitments. The ruling authorized more than $2 billion in sanctions, the largest penalty ever imposed by the WTO against a member state, if the US did not quickly remove the tariffs. After receiving the verdict, Bush declared that he would preserve the tariffs. In retaliation, the European Union threatened to counter with tariffs of its own on products ranging from Florida oranges to cars produced in Michigan, with each tariff calculated to likewise hurt the President in a key marginal state. Faced with the threat, the U.S. backed down and withdrew the tariffs on December 4.
The early withdrawal of the tariffs also drew political criticism from steel producers, as well as supporters of protectionism
Protectionism
Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...
, but was cheered by proponents of free trade and steel importers. When he lifted the tariffs, Bush said, "I took action to give the industry a chance to adjust to the surge in foreign imports and to give relief to the workers and communities that depend on steel for their jobs and livelihoods. These safeguard measures have now achieved their purpose, and as a result of changed economic circumstances it is time to lift them."