Tax Cuts America

Between 1997 and 2002, America's steel industry was under attack. Foreign companies had allegedly dumped large amounts of cheap steel into the American market, sending 35 companies into bankruptcy and costing 54,000 industry employees their jobs. Dumping is the practice where a product is exported to another country at a low price, sometimes below the cost of production.

Recognizing that the domestic steel industry faced a crisis that threatened its very existence, President Bush asked the U.S. International Trade Commission (ITC), an independent, bipartisan government agency, to investigate whether the U.S. steel industry had been injured by the unprecedented surge of foreign imports. After a seven-month analysis, the ITC made a unanimous determination that the industry had suffered serious injury as a result of the surge of imports and strongly encouraged President Bush to take significant steps to remedy this situation.

In 2002, President Bush proposed a 30 percent tariff, an import tax, on most steel sold in the United States by foreign companies for three years. The outcry in reaction to Bush's plan was immediate. From Beijing to London, governments threatened a serious international trade fight and retaliatory action. The European Union said the tariffs would cost European steel makers as much as $2 billion a year in lost trade. Russia computed its losses at $500 million annually. Officials in South Korea and Brazil also expressed their dismay at the proposed tariffs, but made it clear that they had little desire to pick a fight with the United States over this issue.

The European Union accounted for approximately 37 percent of all steel affected by the tariffs, and thus the EU response was viewed as the most critical in determining if Bush's plan would succeed. Other significant steel exporters to the United States included South Koreas, Russia, and Japan. Bush did not have to wait long for a response from the international community. Less that two months after Bush's tariff proclamation, the EU threatened retaliatory actions against $300 million of U.S. goods within two months as a political counterattack to impost additional costs on U.S. exports to the EU if Bush did not withdraw or seriously modify his tariff plan. The next day Japan joined the EU by announcing its intentions of slapping tariffs on some imports of U.S. steel. The Japanese action would be imposed the same day that the EU tariffs on U.S. products took effect.

A few weeks later, President Bush began to back down from his aggressive plan. He excluded 136,000 tons of annual steel imports from the tariffs, representing about 1 percent of the steel that would have been affected. Two months later the administration excluded an additional 178 products from the tariff proposal. The last exclusion was mainly aimed at reducing barriers to steel exports from the EU and Japan.