The divisive lobbying war over the future of U.S. steel tariffs escalated this week as EU retaliatory sanctions loom ever closer on the Atlantic horizon. But much of the economic struggle over the issue is taking place within the borders of the United States, itself.

This issue stems from a decision this week by the World Trade Organization against U.S. steel tariffs, saying they violate trade laws.

Leading in U.S. domestic strife are a legion of trade groups, public relations campaigns, and unions clamoring in support of either the steel producing or steel using industries. Both sides, eager to showcase their industrial sob stories, regularly spin identical points in opposite directions. The announcement from the EU that it intends to impose $2.2 billion in sanctions on Dec. 15 has provided further ammunition for the consumers and given the producers something else to complain about. Caught in the crossfire are neutral industry groups such as the National Association of Manufacturers. As the largest U.S. industrial trade group, they represent some 14,000 companies from both sides of the conflict; as one spokesman put it, "excruciatingly so."

And in much of the issue the conflict has been excruciating. Steel-consumer industry leaders are incensed over broken contracts leading to dramatic domestic steel price spikes to just below the tariff-induced inflated foreign prices. The manufacturers have reported supply shortages in steel since the tariffs were installed in March 2002.

For their defense the steel makers often blame consumer-industry incompetence and point to the general manufacturing recession which industry was in even before the tariffs were imposed. They also say there is no turning back, that cutting the tariffs mid-way through their prescribed three-year term would be "devastating."

Bearing the standards in the battle are select groups of congressmen and public relations companies serving in the same role and sometimes working in tandem. The PBN Company, a Washington, D.C. public relations firm, represents one of the largest and most vocal lobbying groups, the year-old 10,000 member Consuming Industries Trade Action Coalition Steel Task Force (CITAC STF). Recently they staged a rally in front of the capitol, complete with congressional speakers, billionaire businessmen, and a giant steel press used in manufacturing.

PBN admits to how they refocused the debate internally. "The debate used to be [domestic] steel producers versus foreign steel producers. Now it's [domestic] steel producers versus [domestic] steel consumers. We've already brought a whole new equation into this debate," said PBN spokesman Paul Nathanson.

Perhaps unintentionally, this has muddled the debate. By pitting domestic producers and consumers against each other, U.S. industrial interests as a whole have been drowned out in factional concerns. Now, steel producing defenders disregard the effects of $2.2 billion in sanctions, arguing obtusely that the U.S. should not be beholden to Europe. Rep. Ted Strickland, D-Ohio, when lobbying for steel mills in Ohio and Pennsylvania last month, did not even know what products the sanctions would affect. For their part, steel consumers, such as the American Institute for International Steel, welcome the WTO decision, even though it may lead to an overall economic bruising.

The proposed EU sanctions appear to have a political as well as an economic intent. Beginning with 100 percent tariffs on many U.S. steel products, the list moves on to include clothing, industrial machinery, farm produce, paper, and even brooms, pens, and juice. Of the 1,866 items on the list, the majority are common consumer products. Harmful effects on American merchandise companies will likely trickle down to price increases for American consumers. Disgruntled American consumers will take their angst to the polls.

There are a variety of reports that indicate the European Commission may have intended just this political heat. If Bush holds firm on the tariffs and the EC enacts sanctions next month, even the steel producers may find themselves suffering, but for unexpected reasons. The imbroglio of debaters on the steel issue may actually find unified ground -- in shots against the President.

Email Paul: paul.nathanson@pbnco.com

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