White House faces steel dilemma

By Rachel Clarke BBC News Online in Washington

Arguments about tariffs imposed by the United States on steel imports could soon spill over to affect orange growers, cotton farmers and motorcycle manufacturers.

Florida oranges could be frozen out of European markets

The Bush administration has not yet announced its response to the outlawing of its duty on steel imports by the World Trade Organization (WTO).

But with threats of retaliatory measures from Europe and Asia, it is not a matter that can be ignored.

And even inside the US there are political and economic costs to both fighting the WTO and abiding by its ruling.

The introduction of steel tariffs by President George W Bush in March 2002 was never a simple issue.

It was portrayed as a temporary measure to protect a battered domestic industry, while giving it an opportunity to modernise.

Up to 30% was slapped on imported steel by tariffs scheduled to expire in 2005.

That allowed US producers to increase their prices while remaining cheaper than competitors from, say, China or Brazil.

Election emphasis

Many saw the tariffs as an attempt to win support in steelworker states such as Ohio, Pennsylvania and West Virginia ahead of the 2002 mid-term elections where some Republicans were facing tough races.

Those states will also be key battlegrounds in next year's presidential elections. But that does not mean the tariffs will stay simply to bolster Mr Bush's chances.

Steel is at the heart of the row, but many other industries are involved

Even as steel companies and their employees urged the White House to retain the tariffs, firms which use steel such as car manufacturers complained that they were being hurt by the higher prices.

In practice, the politicians came up with a number of exemptions, so that safeguarding jobs in a blast furnace in Ohio would not cost other jobs on a car assembly line in neighbouring Michigan.

But the tariffs remained unpopular with some industries as well as proponents of free trade and less government interference - people who would normally support the Bush administration.

The careful balancing act itself could come crashing down now that countries opposed to US protectionist policies can retaliate against measures that have been deemed illegal by the WTO.

Trade targets

Citrus fruits, textiles and motorcycles are all on the list of items that could face sanctions in Europe and Asia.

The targeting of Harley-Davidson motorbikes would mostly be a symbolic move against a quintessentially American product, but other acts could have more political impact.

Retaliation against cotton imports could hurt the southern states that are being courted by both Republicans and Democrats.

And the citrus fruits threatened are oranges - many grown in Florida, which was so crucial to Mr Bush in 2000.

The administration finds itself torn between the need to keep support in the swing steel states and its courting of voters in other key areas, as well as free-trader and small-government Republicans.

And that may give some clue as to the lack of immediate action.

White House spokesman Scott McClellan only reiterated opposition to the WTO view, while saying the decision had to be studied.

President Bush did not even referring to the tariffs even though he was visiting a steel-using car plant the day the WTO verdict was released.

Waiting game?

One view is that the administration is hoping to keep the support of as many people as possible.

It was known for some time that the WTO was almost certain to rule against the US on the tariffs.

Washington could have cancelled its tariffs earlier to avoid the censure, but that could have looked like giving in to European and Asian demands.

By waiting for the WTO's verdict, the White House could now find an opportunity to back away from the tariffs that has perhaps become a liability, while still saying it has fought to the end.

But even if the US does decide to hold on to its import duties and a trade war is sparked, it will not simply be a case of the US against the rest.

The political as well as economic fall-out across the country will have to be considered.