In persuading President Bush, a self-proclaimed free trader, to take steps this week aimed at restricting imports of steel, lobbyists for the U.S. steel industry used the threat that thousands of retired steelworkers in key states would lose their health insurance if their companies closed.
The specter of an uprising by steel retirees, who substantially outnumber active steelworkers, provided a potent political argument for the industry's case that Bush should take drastic action to protect U.S. steel companies from a worldwide glut even at the cost of tarnishing his free-trade image.
The argument was advanced by two top Republican lobbyists, Edward W. Gillespie and Vin Weber, each of whom has been receiving $45,000 a month from an industry-union coalition called Stand Up for Steel.
The coalition scored a smashing victory Tuesday, when Bush announced that his administration will file a case with the U.S. International Trade Commission seeking to win authority to set quotas on steel imports. And although many factors went into the White House's decision, industry sources and other participants pointed to the concerns raised by Gillespie and Weber as a classic demonstration of how a highly motivated constituency can sway an administration that barely won the electoral college and lost the popular vote.
"From a political perspective, this was not a hard case to make to a government as closely divided as this one is," said Weber, a former congressman, in an interview. Eighteen steel companies are "in one stage or another of bankruptcy. All those retirees are facing loss of benefits."
Only about 150,000 people now work in U.S. steel facilities, but at some of the biggest integrated steelmakers -- which are in the worst trouble financially -- there are about six retirees for every active worker. (The total number of retirees is slightly more than 300,000, according to industry officials).
Adding to the political punch behind the Gillespie-Weber argument was the fact that many of these retirees live in Rust Belt states that were hotly contested in the last presidential election, including Pennsylvania, Illinois, Ohio and West Virginia. The most fiercely contested state of all -- Florida -- is among the top eight states in number of retirees.
A lobbyist who worked against the steel industry, Lewis Leibowitz of the law firm Hogan & Hartson, ruefully gave credit to his opponents' political skill. Leibowitz represents the Consumer Industry Trade Action Coalition, which consists of companies that favor free trade on the grounds that import competition helps keep costs low.
"They did a lot, obviously," Leibowitz said, referring to Gillespie and Weber. "This is an industry that has something like 160,000 workers, and the market [value] of all the companies is smaller than that of Amazon.com, and they've turned this town upside down. So my hat is off to them."
The administration took other considerations into account, to be sure, including the need to win support from steel state Democrats for congressional authority to negotiate new trade agreements.
Jim Dyke, a spokesman for Commerce Secretary Donald L. Evans, asserted that his boss was particularly moved by the pleas of union leaders who recalled how their companies had shed workers and restructured in the 1980s only to find themselves devastated anew by imports. Foreign steel shipments, which account for about 20 percent of the U.S. market, reached record levels after financial crises in Asia, Russia and Brazil in the late 1990s.
"Factories are closing, and people are losing their jobs, because there's not a level playing field," Dyke said, repeating the administration's argument that a major reason for the oversupply of steel on world markets is the subsidies that many foreign countries provided when they established their national industries. "This fits in with the president's free-trade strategy."
Capitalizing on the administration's decision, Evans joined in a news conference/rally yesterday with such top labor leaders as John Sweeney, president of the AFL-CIO, and Leo Gerard, president of the United Steelworkers of America, both of whom backed Democrat Al Gore in the 2000 presidential race.
"You can trust that we will be with you every step of the way until the problem is fixed," Evans told the cheering crowd, which was reminded by other speakers that the Clinton administration had balked at filing a case like the one Bush intends to bring before the International Trade Commission. (The Clinton administration, along with a number of industry lawyers, feared losing the case at the time, but industry experts said another factor was the staunch free-trade stance of the Treasury Department.)
The Bush administration itself has balked at taking action that would directly protect the benefits of steel retirees. The steelworkers union has called for the government to create a fund that would help cover these "legacy costs," but administration officials said their moves to block imports should help protect benefits by aiding the industry's revival.
The White House will now have to contend with the ire of U.S. trading partners, which have reacted with a mixture of indignation and restraint. Long Tong Yu, China's top trade official, told a news conference at a trade meeting in Zhouzhuang yesterday that although "China is concerned with any protectionist practices or measures," it would wait to see whether the U.S. action conformed with the rules of the World Trade Organization.
Akira Chihaya, president of Nippon Steel Corp. and the head of Japan's Iron and Steel Federation, lashed out at the United States, saying he fears the administration's move "will encourage protectionism, which has been spreading globally."
But U.S. steel industry sources were crowing over the importance of a professed free-trade president putting his imprimatur on an ambitious initiative to save the industry. "He must be choking, but he wants to win elections," one industry official said.
Correspondent Clay Chandler in Shanghai contributed to this report.