A weak case for tariffs.

Byline: The Register-Guard

President Bush's decision to impose tariffs of up to 30 percent on imported steel is at once excessive and inadequate. The tariffs invite retaliation by trading partners, face what promises to be a successful challenge before the World Trade Organization and do little to restore the health of the domestic steel industry. It's a surprisingly poor move by an administration that is rhetorically committed to free trade and which needs international economic and political support.

Worldwide steel production capacity exceeds demand, creating conditions in which dumping is likely to occur. The United States, as the world's largest market for steel, would be the logical dumping ground for below-cost steel products. Yet Bush did not cite dumping when he announced the tariffs last week. Instead, he imposed tariffs that would phase out over a three-year period for the purpose of giving United States steel producers time to improve their ability to compete in world markets.

WTO rules allow members to protect industries in this fashion, but they must prove that imports are the cause of their industries' distress. That will be difficult in the case of steel. U.S. steel imports have declined 25 percent from their peak in 1998. American steel producers have become among the world's most efficient, leading competitors in output per worker and per unit of energy. The WTO has rejected U.S. tariffs on steel pipe, cotton yarn and frozen lamb that were imposed for the same reason Bush now cites in seeking protection for the steel industry.

Trading partners are sure to retaliate with tariffs of their own on goods imported from the United States. They will justify these actions by pointing not just to WTO rules, but also to Bush's inconsistency. The president exempted Canadian and Mexican steel from the tariffs, even though these countries are the source of 25 percent of U.S. steel imports. Eighty developing countries were also exempted from the tariffs. Asian and European producers are already complaining about discriminatory treatment.

Any U.S. jobs the tariffs succeed in saving will come at a price. American consumers will pay more for products made of steel, ranging from automobiles to appliances. Some jobs are likely to be forced overseas, as manufacturers of steel-intensive products shift plants abroad in pursuit of cheaper raw materials. Other jobs are likely to be lost in export-dependent industries as trading partners impose tariffs or close their markets to U.S.-made goods.

The United States ought to have a strong steel industry, and it does - domestic raw steel production has increased steadily since 1985. The idea that steel can be made economically only in low-wage countries with lax environmental rules has been discredited, not only in the United States but in other leading producers such as Japan and Sweden.

The biggest problem in the United States is that steel producers, including companies that have gone bankrupt, have huge unfunded pension and health-care liabilities. These so-called "legacy costs," totaling an estimated $12 billion, date from a time when steel manufacturing was a labor-intensive enterprise - for every steelworker currently employed, there are four retirees and dependents. Bush's tariffs will not lighten this burden.

Indeed, the single long-term beneficiary of Bush's decision is likely to be Bush himself. In the 2000, campaign he criticized the Clinton administration for failing to protect steelworkers' jobs, and won in normally Democratic West Virginia as a result. The tariffs are expected to help Republican congressional candidates in Ohio, Pennsylvania and other steel-producing areas. But before Bush gains political support because of the tariffs, voters should ask whether the marginal benefits for the steel industry and the nation as a whole are worth the cost.