President Bush's action Tuesday imposing up-to-30 percent tariffs on imports of steel products provides an opportunity for the American steel industry to put its house in order, to work itself into shape to be competitive on the world market without tariff protection.
Companies in that industry dear to Pittsburgh will now have to move fast to take advantage of the window of opportunity. The United Steelworkers will have to help, unless the union would like to see the domestic steel industry become extinct.
The new tariffs will serve as an umbrella, shielding American steel companies for a given period of time while they merge, modernize technologically and otherwise adapt themselves to the world market within which they will need to compete in the future. The tariffs are carefully crafted to serve as incentives to that process. The level of protection decreases over the three-year period, illustratively in the case of slab steel from 30 percent the first year, to 24 percent the second year, to 18 percent the third year.
American steel companies and steel workers have for the most part welcomed the new measures. They had asked for 40 percent; they got 30 percent. The administration could have put the tariffs in place for four years; it chose three years instead. Exceptions were made for imports from Canada and Mexico, signatories of the North American Free Trade Agreement, and from some 80 developing nations.
The less than full glass extended to the industry was not done out of stinginess or inattention to American steel's needs but because relief for steel creates problems of principle and practicality for the free-trade Bush administration. To mention only one complication, the United States is now going to catch it from friends and allies around the world and be served with complaints before the World Trade Organization.
A quarter of U.S. steel product imports, some 30 million tons, will be affected. More to the point, the protection extended to the American steel industry could add as much as 10 percent to the cost of cars, appliances and housing in the United States itself.
The administration took the calculated risk that this measure will not slow down the current economic recovery because it is strong enough to withstand price rises for products that use steel.
The president's action must be the beginning, not the end, of American steel's comeback. Congress should respond favorably to a plea by the industry for the government to assume some $12 billion in health and pension benefits for workers from bankrupt companies. Alterations in antitrust laws also may be necessary to foster steel-company mergers.
With the tariffs in place, the ball is now in the court of the American steel industry. It must now move fast to put forward a concrete plan to achieve competitive efficiency within the time frame provided it under the tariff umbrella.
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