Steel Tariffs Have Serious Political Ramifications

WASHINGTON – With a tight re-election bid next year, political experts say President Bush already faces a classic political conundrum: deciding which constituency in key rust belt and Midwestern states he can afford to alienate — those who produce steel or the ones who build with it.

Those constituencies are battling over whether the president's steel tariffs should be rescinded or extended. And while recent reports suggest that Bush may consider some sort of compromise in the prickly issue, the lines have already been drawn, with both sides charging that anything short of their way could set the president on the highway in 2004.

"If the president decides to change the tariffs in any way — compromising it, watering it down with a thousand exclusions, or if he just shortens it — anything would be considered a betrayal of his commitment," said Gary Hubbard, a spokesman for the Steelworkers of America (search), which insists the tariffs have helped to stem the bleeding of steel jobs over the last 18 months.

"I think the loss to the president, if he were not to rescind the tariffs, would be of substance," said Rep. Joseph Knollenberg, R-Mich., who has authored a bill that would lift the current tariffs on steel imports imposed by Bush 18 months ago.

Knollenberg represents the suburbs of Detroit, an area that includes about 1,500 manufacturers that produce tools, cars and other products dependent on steel. He warns that if tariffs remain in place, Bush risks this crucial swing state, one of several that could prove to be the lynchpin to a second term.

"I can say [that Bush not rescinding tariffs] would cause a disruption and that would be a problem for him," Knollenberg told Foxnews.com. "These steel consumer folks never had a reason to organize. They are together now."

Steel consumers hail from the so-called rust belt of Michigan and Illinois — states with concentrated auto industries — as well as Wisconsin and Minnesota, home to smaller manufacturers hit by higher steel prices. Collectively, they have lost nearly $680 million in capital and labor returns since the tariffs were put into place, according to International Trade Commission numbers.

These four states share a total of 47 electoral votes in the 2004 election and have hosted Bush no less than 36 times since his inauguration. In 2000, Bush lost all four states to Al Gore by varying measures — Michigan by 5 percent, Illinois by 12 percent, Minnesota by 2 percent and Wisconsin by only about 5,700 votes.

"Obviously, these are key states for him," said Rich Carter, spokesman for Rep. Donald Manzullo, R-Ill., who recently started the bipartisan Congressional Manufacturing Caucus (search), in part to see the tariffs lifted.

"I know [Bush] is taking it all into consideration," said Carter. "It's a difficult situation."

The situation is even more difficult because Bush also faces the prospect of angering the massive steel producing industry, which lobbied hard for the tariffs. Supporters say before the tariffs were imposed, foreign steel companies dumped cheap products on the U.S. market, resulting in the loss of thousands of jobs and bankruptcies of at least 42 major companies since 1998.

Like the steel consumer ranks, the steel producing lobby does not adhere to party lines and crosses Pennsylvania, West Virginia, Indiana and Ohio — states with a big industry presence and a combined 57 electoral votes. The steel producers enjoy the staunch support of the House and Senate Steel Caucuses and the Steelworkers of America.

"Steelworkers would be highly upset if the president modified the tariffs downward. That would not be a good move — it would do nothing to bolster his standing among them," said Cliston Brown, spokesman for Rep. Peter J. Visclosky, D-Ind., who co-chairs the House Steel Caucus.

Critics say the steel union already backs tariff supporter Rep. Dick Gephardt, D-Mo., so Bush doesn't have much to gain by getting in their corner. But the steel producing states are for the most part pro-Bush, supporting the president by six points in West Virginia, four points in Ohio and 16 points in Indiana in 2000. Pennsylvania, which Bush lost by 5 percentage points, is expected to be a big battleground state in 2004 — Bush has already visited there 22 times.

Hubbard said that if Bush back off from his earlier pledges, union members would be motivated to campaign against him and fence-sitters to vote Democratic.

"It could be what throws the election one way or the other," Hubbard said.

A poll released by Public Opinion Strategies on Oct. 30 shows that 74 percent of registered voters in Michigan, Pennsylvania and West Virginia favor keeping the tariffs in place.

It also shows that 69 percent of voters in Michigan favor the tariffs, suggesting that the state — which has steel producing interests as well as automakers — can't be second-guessed in the upcoming election.

But the speculation may be all for naught. The World Trade Organization (search) has ruled that the tariffs violate international trade rules. The Bush administration appealed the May ruling, but the WTO is widely expected to confirm its initial decision on Nov. 10.

According to a study released by the Institute for International Economics (search), if the U.S. does not lift the tariffs despite the WTO scolding, countries that made the original complaints — including the European Union, Japan and China — could strike back with retaliatory tariffs on U.S. imports and create an even greater disruption to domestic manufacturers.