Bush steel tariffs can win crucial 'rust belt' votes

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The decision by President George Bush to impose steel import tariffs may be a betrayal of his proclaimed free trade instinct, and a flashpoint for a possible international trade war. But in domestic political terms, they make perfect sense.

As the former House Speaker Tip O'Neill famously remarked: "All politics is local." In the case of steel, Mr Bush is less concerned with providing more fuel for foreign critics of American unilateralism, than in shoring his own and his party's prospects at elections, above all in a handful of traditional steel industry states which could hold the key for victory.

In eight months, Mr Bush's Republicans go into Congressional elections in which the stakes could not be higher. A gain of one seat will give them back control of the Senate. If they lose just six seats in the House, the Democrats would regain the majority there they lost in 1994. Analysts say at least six seats in 2002 could be decided by the steel issue in the former "rust belt", most notably in Pennsylvania, Ohio and West Virginia. In 2004 these states could decide Mr Bush's future tenure of the White House.

Last time around, Mr Bush carried Ohio, but narrowly lost Pennsylvania. Most crucial of all was West Virginia, formerly a Democratic stronghold, but whose five electoral votes gave Mr Bush his tiny electoral college majority, not least because of the local steel and coal industry's fear of the environmental policies of Al Gore.

But the lobbying has not been all one-way. The industry, battered by bankruptcies and which has lost 650,000 jobs in the past 20 years, may have been clamouring for protective tariffs for years, to counter what it considers unfair dumping. But powerful steel-consuming interests such as the car industry have long opposed the move, saying it will push up the cost of their products. And dock and port workers fear their livelihoods could suffer if steel imports are reduced sharply.

The tariffs appear a compromise tailored to satisfy competing interests. Some strip and flange steels used by carmakers were to be partially or wholly exempted from tariffs, officials said. Imports from Canada and Mexico, partners of the US in Nafta, the North American Fred Trade Agreement, will be exempt, as will Argentina and other developing countries. But for the everyone else, 16 product categories will face levies of between 20 and 30 per cent.

Another major factor in Mr Bush's calculations is his as yet unresolved struggle to regain "fast-track" trade negotiating authority, lost by President Bill Clinton, but considered crucial for America's ability to strike international trade deals. Under fast-track, Congress can merely vote a straight yes or no on a proposed agreement, with no power to introduce amendments which might torpedo the entire package. Fast track has passed the House, but it is bogged down in the Senate.

Mr Bush's advisers reckon a tough stance on steel will convince waverers that he can be trusted to stand up for US trade interests. The immediate question is whether the compromise will satisfy the industry, which had been demanding 40 per cent tariffs. Some Democratic Congressmen are likely to complain they did not get all they had been seeking.

One Congressional aide said: "The 40 per cent level was the minimum. Not meeting that doesn't help the steelworkers. It's almost even worse than doing nothing."