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Bushs Steel Tariffs of 2002.

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In March 2002 President Bush placed tariffs of up to 30% on most ... We will examine what transpired in this process and what the ... Ronald Regan and ... – PowerPoint PPT presentation

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Title: Bushs Steel Tariffs of 2002.


1
Bushs Steel Tariffs of 2002.
  • Joseph Matope
  • Derek Litchfield
  • Jonathan Nelson

2
The Order of Things
  • Background
  • Technicalities
  • Climax and Analysis

3
Opening facts
  • In March 2002 President Bush placed tariffs of up
    to 30 on most steel imports from Europe, Asia
    and South America for a period of up to 3yrs.
  • The tariffs were challenged in the WTO and
    consequently removed in 2003.
  • We will examine what transpired in this process
    and what the implications were.

4
US Steel Industry background
  • Largest Steel producer in world 112 million
    tons in 2000.
  • 60 billion industry, representing 5 of
    manufacturing GDP in US Economy.
  • Employs 200,000 American production workers in
    jobs paying 55 above average for manufacturing
    jobs.

5
Why is the steel industry vital to U.S. Economy?
  • Its a major, billion-dollar industry thus
    important for economys competitiveness.
  • Important for national security since it is used
    for building bridges, skyscrapers, railroads,
    automobiles, appliances.

6
U.S. Steel Imports and Exports, 1995-2007
7
Graph trends explained
  • Dip in import and export of steel in 98/99 result
    of Asian economic crisis.
  • Upward curve after 2003 result of
  • Higher demand for steel largely fueled by
    China
  • Only slight change in imports/exports after
    tariff imposition
  • Higher demand for unfinished steel by US Steel
    makers
  • Coincided with the lifting of Steel import
    tariffs.

8
Politics and Steel Industry
  • With Steel industry Bush abandoned his free trade
    policies for a Political Economy of
    Protectionism
  • Wanted to court vote of Rust Belt states (WV, PA,
    OH) won WV OH.
  • US Steel Corp (largest producer in US) Chairman
    CEO T.J. Usher a major Bush fundraiser.
  • Despite protectionism United Steelworkers of
    America did not endorse Bush.

9
Difficulties in the Steel Industry…
  • US Steel industry was facing massive competition
    from foreign steel producers.
  • Between 1998 and 2002, 30 of steel companies
    filed for bankruptcy.
  • At end of 2001 domestic steel prices were at
    their lowest level since 2001 resulting in heavy
    financial losses.

10
Previous Protectionist Policies Aimed at
Promoting American Industry
  • Ronald Regan and Harley Davidson
  • In 1980 the company had record sales of 289
    million and pretax earnings of 12.3 million, but
    in 1982 sales slumped to just over 200 million,
    causing "substantial losses."
  • ITC Investigation
  • January, 1983 45 Tariffs on Japanese
    Motorcycles
  • Harley Davidsons rebirth

11
Process continued
  • In June 2001, President Bush asked ITC to
    investigate impact of imported steel on US Steel
    industry
  • ITC found that imports caused injury to US Steel
    industry.

12
Process continued
  • President Bush cited the safeguards were in line
    with WTO rules on protecting a domestic economy
    being harmed by imports.
  • Safeguards would give Steel industry breathing
    room to ensure its competitiveness in the long
    run.

13
March 5, 2002
  • Steel Products Proclamation
  • Memorandum for the Secretary of the Treasury,
    Secretary of Commerce, and the USTR
  • Imposition of tariffs on certain steel products -
    3 year and 1 day
  • 8 - 30
  • Under what auspices is this allowed?

14
U.S. Trade Act of 1974
  • Increased Global Competition
  • Designed to Help Ailing Industries
  • Fast Track
  • 201 Investigations, contrast to AD and CVD
    (section 337 of Tariff Act of 1930)
  • 202 Findings
  • Section 203 ACTION

15
GATT Article XIX
  • Emergency Action on Imports of Particular
    Products
  • a. Unforeseen
  • b. Serious Injury

16
Exceptions to the Rule
  • NAFTA
  • Israel, Jordan
  • Argentina, Thailand, South Africa

17
Who does this hurt the most?
  • Europe
  • Asia

18
Why?
19
Why?
20
Price Effects Inside the U.S. Economy
  • Helps U.S. Producers
  • Hurts U.S. Consumers

21
Price Effects On the World Price Level
  • Market Glut

22
Reaction
  • DSUs 248, 249, 251, 252, 253, 258, 259
  • E.C. (E.U.) - 3 June, 2002
  • Japan and South Korea- 14 June, 2002
  • China, Switzerland, Norway - 24 June, 2002
  • New Zealand - 8 June, 2002
  • Brazil - 29 July, 2002

23
Bases for Arguments
  • GATT Article XIX 1
    (unforeseen developments)
  • Safeguards Agreement Articles 2.1 and 3.1
    (increased imports)
  • Safeguards Agreement Articles 2 and 4
    (parallelism)
  • Safeguards Agreement 2.1, 3.1 and 4.2 (b)
    (causation)

24
Panel Report
  • 2 May, 2003
  • 11 July, 2003
  • GATT Article XIX reasoned conclusion to
    unforeseen development - not met
  • SA Articles 2.1 and 3.1 U.S. failed to provide a
    reasoned and adequate explanation of how the
    downward trend at the period of the ITC
    investigation supported the determination of
    injury with respect to increased imports of these
    products

25
Panel Report (continued)
  • S.A. Articles 2 and 4 U.S. should have
    considered any imports excluded from the
    application of the measure as an other factor.
    Either Canada and Mexico, or Israel and Jordan,
    not both.
  • SA Articles 2.1, 3.1, and 4.2 USITC findings of
    injury were found faulty concerning all steel
    except stainless steel rod

26
Suspension of Concessions
  • Permission to suspend concessions on the U.S.
    in case of non-compliance if notify the WTO no
    later than 90 days after the imposition of the
    safeguard measure by 3 June 2002 for the EU in
    the case of steel upon 30 days written notice
    and approval by the WTO Council for Trade in
    Goods (Article 8.2)
  • EU Japan immediately declared their suspensions
  • Norway, China, and the rest took a more
    conciliatory stance by waiting 3 years (until
    March 2005)

27
Appellate Body
  • U.S. appealed
  • AB Report Circulated on 10 November, 2003
  • Findings Upheld all but findings of non-injury
    with respect to tin mill products and stainless
    steel wire

28
Results
  • Bush Signs repeal of Tariffs on 4 December, 2004
  • Adoption on 10, December 2003
  • But how do you claim to have complete sovereignty
    while conforming to the WTOs ruling?
  • It worked!

29
Reasons For Tariffs
  • Political strategy
  • Republican strategists advised trade assistance
    to key states in order to gain re-election
    votes in 2004
  • President Bush imposed tariffs to assist steel
    mills in Pennsylvania, Ohio and West Virginia

30
Tariff Implications
  • International pressures from Steel producers and
    markets fearing flood of cheap steel diverted
    from U.S.
  • Tariffs increased U.S. steel prices, driving up
    costs for automakers and other steel users
  • Job increases in PA and WV were negated by job
    losses in Michigan and Tennessee

31
Tariff Implications
  • Increased investment, stability and production in
    U.S. steel industry, however….
  • Tariffs alienated thousands of steel-consuming
    companies
  • Bush still did not win over Steel Unions, who
    backed Democratic Party

32
Bushs agenda
  • Succeeded The steel industry got the necessary
    boost to reclaim market share
  • Failed Bush did not gain additional political
    support
  • Failed tariffs further alienated trade partners
  • While steel industry received the boost it
    needed, overall economic and political
    ramifications were detrimental to Bushs agenda

33
Positive Impacts on U.S. Steel
  • Thomas Usher, Chairman and CEO of United States
    Steel
  • The tariffs stabilized prices, allowed the U.S.
    industry to consolidate, stopped the flood of
    bankruptcies and layoffs, and encouraged a wave
    of productivity-enhancing investment.

34
EU Targeted Retaliation
  • WTO to allow up to 2.2B in sanctions against
    U.S. if steel barrier not lifted
  • EU threatened to levy tariffs on specific
    products made in swing states key to Republican
    re-election
  • Examples
  • Harley Davidson, produced in Wisconsin
  • Orange Juice, produced in Florida

35
Tariff Implications
  • Political Result
  • WTO ruling allowed Bush to save face by lifting
    offending policy
  • Safeguard measures have now achieved their
    purpose, and as a result of changed economic
    circumstances it is now time to lift them.
    Statement by President
  • Biggest Loser
  • Consumers increase of steel prices ultimately
    fell on the American consumer

36
Summary
  • U.S. initially went against WTO by enacting
    tariffs in the first place
  • Appealed WTO ruling
  • Only upon realization of negative domestic
    political and economic effects did U.S. repeal
    tariffs
  • Thus complying with WTO and bringing offending
    policy into conformity.

37
Summary
  • Despite underlying political reasons, U.S.
    lifting steel tariffs gave WTO legitimacy and
    provided confidence in the system to ensure
    fairness and prevent trade war.

38
Latest News
  • 11 October 2007- Win for U.S. Steel
  • U.S. ITC extended tariffs on hot-rolled steel
    (used to make automobiles and appliances),
    claiming exporting countries were still giving
    unfair subsidies to their steel industries
  • Tariffs were extended on Indonesia, Taiwan,
    Thailand, Ukraine, China and India
  • Eliminated tariffs on Argentina, Kazakhstan,
    Romania and South Africa

39
Latest News Continued
  • Motor and Equipment Manufacturers Association
    protests tariff extensions-
  • Tariffs on imported steel have already cost this
    industry tens of thousands of jobs, said Ann
    Wilson, MEMA vice president of government
    affairs. The tariffs drive up costs and reduce
    the availability of steel used by the industry.
    The steel industry has moved to great
    profitability and it is time for these tariffs to
    be lifted.

40
Final Thought - Alexander Hamilton
  • There is a degree of prejudice against bounties,
    from an appearance of giving away the public
    money without an immediate consideration, and
    from a supposition that they serve to enrich
    particular classes, at the expense of the
    community.
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