Press Briefing by Scott McClellan (Text Only)

MR. McCLELLAN: Good afternoon. I'm pleased to be joined today by Ambassador Zoellick, our United States Trade Representative. I want to begin with an opening statement by the President of the United States. And then I will turn it over to Ambassador Zoellick, who will provide some additional comments on the decision the President has reached today. And he will be glad to take your questions on that issue. And then at the end of the briefing, I'll come back for whatever other questions you all may have on other topics.

"Today I signed a proclamation ending the temporary steel safeguard measures I put in place in March 2002. Prior to that time, steel prices were at 20-year lows, and the U.S. International Trade Commission found that a surge in imports to the U.S. market was causing serious injury to our domestic steel industry. I took action to give the industry a chance to adjust to the surge in foreign imports, and to give relief to the workers and communities that depend on steel for their jobs and livelihoods.

"These safeguard measures have now achieved their purpose. And as a result of changed economic circumstances, it is time to lift them. The U.S. steel industry wisely used the 21 months of breathing space we provided to consolidate and restructure. The industry made progress, increasing productivity, lowering production costs, and making America more competitive with foreign steel producers.

"Steel producers and workers have negotiated new groundbreaking labor agreements that allow greater flexibility and increased job stability. The Pension Benefit Guarantee Corporation has guaranteed the pensions of eligible steel workers and retirees, and relieved the high pension cost that burdened some companies. My jobs and growth plan has also created more favorable economic conditions for the industry, and the improving economy will help further stimulate demand.

"To keep the positive momentum going, we will continue our steel import licensing and monitoring program so that my administration can quickly respond to future import surges that could unfairly damage the industry. We will continue negotiations with our trading partners through the Organization of Economic Cooperation and Development to establish new and strong disciplines on subsidies that governments grant to their steel producers. We will continue to pursue economic policies that create the conditions for steel producers, steel consumers who rely on steel to produce goods ranging from refrigerators to auto parts, and other U.S. manufacturers to succeed.

"I strongly believe that America's workers can compete with anyone in the world, as long as we have a fair and level playing field. Free trade opens foreign markets to American products and creates jobs for American works. And an integral part of our commitment to free trade is our commitment to enforcing our trade laws.

"I am pleased the steel industry seized the opportunity we provided to regain its competitiveness and assist steel workers and their communities. As a result, U.S. steel companies are now once again well-positioned to compete both at home and globally."

And with that, I'm going to turn it over to Ambassador Zoellick for some comments. Thank you.

AMBASSADOR ZOELLICK: Thank you. Good afternoon. One and one-half years ago, the President acted to provide America's steel industry and workers an opportunity to respond to increased competition from surging imports due, in part, to global overproduction. And the industry has used that breathing space well, to the benefit of many families and communities around the country.

Trade is an important engine of economic growth and job creation. To help very open economies like ours to adjust to rapid and sharp changes, we sometimes provide temporary safeguards from imports. Such relief is an accepted principle of global trade rules.

In March 2002, after a nine-month investigation, the independent U.S. International Trade Commission found that 10 steel industry products had been injured by a surge in imports that warranted relief. Based on that finding, the President decided that America's steel industry needed this breathing space. The industry was facing tremendous pressures. Thousands of jobs were at stake, and many steel firms were at or facing bankruptcies. The industry had been seeking help following a rush of low-priced imports in the aftermath of the Asian financial crisis. This President acted.

The President imposed temporary safeguards, "To help give America's steel industry and its workers the chance to adapt to the large influx of foreign steel." To do so, he exercised his authority under Section 203 of the 1974 Trade Act. Now, these safeguards consisted principally of tariffs, ranging from 8 to 30 percent on the 10 categories of steel products identified by the ITC. And in order to minimize the impact of these tariffs on U.S. consumers, some steel products were excluded. In addition, exports from our free trade partners and most exports from developing countries were excluded, as well.

In September of this year, the ITC provided a follow-up report, a midterm assessment of the impact of the safeguard. That assessment provided an important basis for the President's deliberations of whether to maintain, modify, or end the safeguard.

Now, there are three key elements that inform the President's review. First, the ITC's analysis clearly demonstrated that the safeguard worked. It provided the steel industry with a breathing space they needed to regain its competitiveness. Jobs have been saved; steel businesses have been given another chance to compete.

Since the safeguard has been in place, the industry has undergone major restructuring and consolidation. More than half of the steel production capacity is owned by firms that merged or restructured. And they cut about 4 million tons of inefficient capacity. Overall productivity has increased sharply. The ITC found that in the safeguard's first year, productivity increased 12.5 percent for the critical flat-rolled products, and by between 5.5 to 26 percent for the range of products.

Prices have stabilized, and prices today are about 15 to 30 percent higher than in February 2002, the month before the safeguard. Workers' pensions have been saved and taken off steel industry books. The U.S. Pension Benefit Guarantee Corporation has assumed guaranteed pension underfunding of 14 steel producers, totaling $8.2 billion.

Profitability has been returned. After losing nearly $5 billion in the 24 months before the safeguard was initiated, the flat-rolled industry posted profits of $400 million during the first 12 months of relief. And financial markets are reflecting the growing optimism for the steel market. U.S. Steel Corporation stock is currently at a 52-week high. Through November 21, the S&P index of steel stocks rose 24.4 percent, as compared with a 13.9 percent increase for the S&P 500. And U.S. Steel exports are at historic levels, too. Through August exports are 49 percent above the prior year, and that accounts for about 8.4 percent of total U.S. shipments.

Now, this safeguard definitely provided the industry and workers with needed breathing space. And to its credit, much of the industry has used this time well. The bulk of the reconstructing that was necessary to make the industry more competitive has now taken place.

Second, not only is the industry much stronger today than it was 21 months ago, but the economic circumstances that justified the safeguard have changed. Imports are no longer depressing U.S. prices. On an annualized basis, imports to date are at their lowest levels in a decade, even including the exclusions from the safeguard. Demand in Asia and Russia has rebounded. China's steel consumption has increased 22 percent a year since 2001, and it's forecast to increase even more next year. Changes in relative prices have lowered import pressures and increased export opportunities.

But last, but importantly, safeguards unavoidably impose some additional costs on consumers. The aim, of course, is to make sure that the benefits of the safeguard outweigh the costs. Fortunately, as the ITC report demonstrated, the cost to the United States economy imposed by the safeguards were limited.

Now, the purpose of the midterm review has been to determine whether economic circumstances have changed, such that the cost of maintaining the safeguard outweigh the benefits. In the first 21 months of the safeguard, the benefits to the industry outweighed the marginal cost to consumers. Going forward, however, this is not the case. For these reasons, the President has concluded that the safeguard has done its job and can now be lifted.

We will continue to use our steel import licensing and monitoring system so that we can identify potential import surges quickly in order to respond.

This President has worked hard with the Congress and with other countries around the world to open markets for product and services for American businesses, farmers, workers, and to help consumers stretch their hard-earned dollar to go further. At the same time, he has recognized that we need to help Americans adjust to change, through safeguards like this one, worker retraining, better education. And safeguards are not supposed to be permanent. They provide a helping hand in extraordinary circumstances.

So we're pleased with the steps that the industry has taken to make the most of this breathing space provided by the safeguard. And we look forward to working with them and with other U.S. businesses to continue to grow the economy, to create jobs, and to expand opportunity.

Q Ambassador Zoellick, the steel industry says, certainly they have gone through a lot of the reconstructing and consolidation that was needed, but that they still have more to do and now is not the time to be lifting these tariffs. Furthermore, they say that while foreign imports are not the same type of damaging competition that they were 20 months ago, a rise in the dollar could turn all of that around very quickly. Are those concerns not founded?

AMBASSADOR ZOELLICK: At this point, no. The whole point of the safeguard, as I mentioned, was not to be permanent, but was to take the time necessary to get the industry back on its feet.

And from the very start of the safeguard, this midterm review was built into the process, the ITC report was built into the process. And as I've outlined, what have you seen -- you've seen profitability go up; you've seen prices go up somewhat and stabilize. They went up and came down, but have stabilized above earlier levels. The restructuring that's taken place in these companies, as I mentioned, is enormous, including labor contracts that have changed the overall picture, going forward. And one of the best indicators is look at what financial markets are telling you in terms of the future earning stream.

So the key about this safeguard, and it's an important part about our overall trade policy, is sometimes industries really go through a tough spot. And in this case, this industry really started to get hit very hard after the '97 financial crisis. And if you look at their overall statistics, they were really crying for help in the late '90s. This President came in, asked the ITC to do the investigation, and he acted. But he also believes that after that period is done, the industry is stabilized, has an opportunity to move forward, that's what we should do, because a safeguard is always a balance.

Q Ambassador, the retaliatory tariffs that the European crafted were meant to inflict maximum political pain on the President's reelection. How did that factor into your decision?

AMBASSADOR ZOELLICK: This decision was independent of that, in that what we did and what we did from the start of this process was to ask for this ITC review, and we were always going to measure the benefits and costs, to try to get a sense of whether the industry was coming back, what the circumstances were, in terms of it, and as I said, profitability, the restructuring in terms of capacity, dealing with some of their contractual arrangements -- removing $8.2 billion from their pension guarantees and making sure that's protected through the Pension Benefit Guarantee Corporation, another important thing. So whether you look at any of the statistics, imports, imports -- all that is on the positive side.

Now, of course, it's good that we now don't have retaliation. So in my view, this has been a win-win proposition. You give an industry a chance to get on its feet; the ITC showed it didn't have much effect in terms of the past couple of years with some of the consumers -- some effect, but not overwhelming effect; and there's also no retaliation.

Q If it was independent of the WTO decision or the EU retaliation, why did it take you so long to make a decision after the ITC report? It's been several months since the ITC report.

AMBASSADOR ZOELLICK: I've been in government for so many years, a couple of months after an ITC doesn't strike me as too long. Look, this is an important -- it was clearly an important issue. It is a clearly important industry. And the President wanted to take the time, do the analysis. We relied on the ITC report. A lot of different offices looked at this. We also got imports -- or sort of inputs looking at financial sectors. And so that was the basis of the decision.

And so going forward, obviously, we think we've got a much stronger industry. But obviously, we're pleased that we've avoided retaliation, as well. But for us, the key from the start is to give breathing space, but not give permanent protection.

Q The last few weeks you've talked about how this has been the President's decision, and you've deflected a lot of your own comments about that. Yet today, you come back to make the announcement, and the President seems to be averse to going on camera to really talk about this. Can you talk a little bit about the political implications of his own owning up this decision, and secondly, the political implications of getting TPA, versus some of the electoral states in the presidential election?

AMBASSADOR ZOELLICK: Well, I've known this President very well since 1988, and I haven't seen him shrink from difficult decisions, whether policy or political. So I think the reason I'm presenting it is, given the technical nature of this, they thought that it might be useful to have me explain some of the basis that went in to the overall decision as part of interagency process.

In terms of the politics of trade, what I've emphasized to you, and what I would emphasize again today is that we have a very open economy. Our average trade-weighted tariff is about 1.6 percent. We have a large current account deficit, a lot more exports coming into this country than exports that we send out. If you're going to run an open economy, you have to have means to try to help people that come under extraordinary stress.

And as I said, this is an industry that got hit very, very hard, starting in '97, '98. And the purpose of safeguards -- and these are not -- this is not something only the United States has done. There's about 50 safeguards in place around the world today. There were safeguards that we inherited during the course of the '90s. And in terms of trying to deal with the politics of trade at home, you have to give industries a chance to get back on their feet. But to go back to your question, it doesn't mean that it's a permanent situation. And industries may always want more, but if you look at the picture of this industry, we think that they're not only stabilized, but heading forward.

Q You mentioned that they were starting to get hard in the late '90s -- '97, '98 I think you just said. Are you saying that there should have been action earlier than there was, that the steel industry could have received and should have received the same benefits, two, three, four years earlier than it did?

AMBASSADOR ZOELLICK: I wasn't here, I wasn't in a position to make that judgment. All I can say is, is that I knew a number of the steel industry executives, including, at that time, the head of the United Steel Workers, because we served on a commission together, and they were pushing very much for this type of help. And all I can say is that President Bush came in, looked at the situation, consulted his advisors, and asked the ITC to do an analysis of whether the claims were justified. The ITC came back with that analysis. That's a bipartisan, independent commission. They didn't say for all products, but they said for these 10 products. And the President devised this remedy.

And now, as part of that remedy, we always said we'd do this midterm review. We have. The industry is much better off; we're not facing retaliation. That strikes me as a good combination.

Q Certainly this is a very positive spin on a policy that you believe worked. But what about the criticism out there that this President simply caved, that the European Community was very shrewd in targeting retaliatory tariffs that could have hurt him in a re-election bid; that a policy that was, in part, designed to help the steel industry in battleground states was doing more damage to consumers of steel in other battleground states; and at a time that the economy was improving, that you were at risk of a trade war? So, again, how is it that the President didn't cave on this?

AMBASSADOR ZOELLICK: Well, look, the best thing that -- people are always going to come up with their interpretations of a policy. The best thing that I believed in many years of being in the government is to set out what you're trying to do from the start, which we did when we had the ITC investigation, the ITC results, the President setting up the safeguard, the President setting up this review. And now, I guess you and others have to judge the facts. Does the industry look like it was much healthier in terms of profits and productivity and the import situation, the export situation? The President looked at those numbers and felt that it was much healthier.

Now, as you properly point out, people say, well, what was the effect of this on other industries, when you raise tariffs? The ITC looked at that, as part of the midterm review, and something called a Section 332 review. They found the net dollar effects on the economy were $30 million. Okay, now, whenever you use net, that means some people paid more prices, there were some effects on some industries. Part of that was an offsetting effect in terms of the tariffs that we collected from the public side versus the private side. So it's certainly our view that while these decisions are never easy, a key part of free trade -- and part of the message has been from the start, if we're going to go to Congress and get support for free trade, if we're going to promote free trade around the world, you've got to help people that are knocked off their feet. And it doesn't mean you give them permanent protection, but it means you give them a breathing space. And in that way, this thing worked.

Q Was it the President's determination that at this point in time, a trade war was just not worth the risk at this juncture for the U.S. economy?

AMBASSADOR ZOELLICK: Well, I don't think this President would ever seek a trade war. But this determination was made on another basis. This determination was made on the basis of the fact that in this independent review, in this process, the decision of the benefits of costs independently were the basis that we should lift the safeguards.

Now, look, obviously, if you can avoid tariff retaliation -- we have other issues where we're retaliating against countries, countries are retaliating against us. Wherever you can, you try to work out those problems, because the goal is to try to open markets, not to close them. But that's part of the WTO process, we accept that process.

So, again, to me, if we can begin a situation where we've helped this industry get back on its feet -- a lot of people now have jobs that wouldn't have had jobs if they were left with the policies that we inherited. A lot of people have pensions, through the Pension Benefit Guarantee Corporation. A lot of people were stockholders, and now are better off. And it's part of a broader approach, in terms of the strengthening economy. That obviously helps us, too.

So if you look at forecasts for steel prices, some of them are actually to go up a little bit more. Why is that? Consumers are buying more, auto companies are big steel purchases. So you -- look, it's -- one can't forecast with precision the exact aspect of a market economy. But, to me, this is a very important part of trying to keep markets open. And probably all of you know, to varying degrees I spend a lot of my time on the Hill, trying to work with people. You've got to put together coalitions to support things. And I'm pretty much as much a free trader as they come, but I know that being able to get those coalitions together, you've got to be able to help people when they're knocked down. And I think that's a good thing.

Q The World Trade Organization did find these tariffs to be illegal. And there's a school of thought out there that with the United States of America engaging in protectionism, as it was found to be, it undermined efforts to liberalize trade. That's something else you do around the world. But what do you say to the notion that when the President of the United States slapped these protectionist tariffs on, it hurt efforts at Doha and elsewhere to promote free trade?

AMBASSADOR ZOELLICK: Yes, I know that's a point that's often raised. I haven't found it. And the best thing I can do, again, is give you facts. You know, in this administration we've moved three free trade agreements through the Congress. I'm in the processes of negotiating free trade agreements with 12 more countries; a number I'm trying to finish this month. The President has announced moving forward with seven more. Obviously, a lot of countries are eager to move ahead with trade with the United States.

During this time, we not only managed to regain the President's trade negotiating authority from the Congress, as part of the Trade Act of 2002, something that slipped for eight years, but we launched the Doha Round, which had been failed in Seattle. So trade negotiations -- and I know this as well as anybody -- have their ups and downs. But I find no shortage of countries willing to come forward and wanting to negotiate free trade agreements, or in the other negotiations, try to deal with the issues that we need to deal with -- whether they be agricultural subsidies, where we put forward very aggressive proposals to cut our subsidies and cut our tariffs if we can get other countries to try to do it. We put forward a proposal to eliminate all tariffs in goods globally.

So, again, the other key point is -- and many of you who cover this sporadically may not be aware of this part -- but safeguards are part of the international system. As I said, there's 50 in place now. I double-counted, or I counted before I came over here, because I thought someone might ask this; I think India has about eight in place now. Philippines has five in place now. These sometimes get reviewed by the WTO, as they do. One of our unhappinesses is I think the WTO panels are a little tougher on safeguards than they should be. It is useful to know that they did not challenge our underlying safeguard law, what's called Section 201. They challenged its application in this case.

Q Just to be clear on this, are you saying that the WTO ruling and the threat of retaliatory tariffs had no impact on this decision? And if that's the case, what does that say about the effectiveness of the WTO in these kinds of disputes?

AMBASSADOR ZOELLICK: What I'm saying is, this process was independent. In other words, the decision that the President made was on an independent analysis that we started from the beginning in terms of this midterm review. And again, I suppose people could look at these numbers and come to some different conclusion, but you see a much stronger industry. And given the President's inclinations where he wants to try to open markets and have fewer tariffs, he thought it was time to lift the safeguards.

As for your other question about the WTO, look, this administration has done a lot to promote the WTO. Frankly, Commissioner Lamy of the EU and I were probably the moving forces to get the Doha negotiation launched after its failure in Seattle in 1999. We put forward these very aggressive proposals in agriculture and goods. We had a setback in Cancun. But, as those of you that cover the trade agenda know, we were the first country that suggested, well, as a way of coming back, why don't we work off the Cancun draft text? And when the President was at the APEC meeting, we got all the other countries of the APEC economies to agree to that. In the past week or so, the European Union has finished its review, and it hasn't said exactly that's what it would do, but I think it's moving in that direction.

So we're very committed to the global trade round, the WTO process. Look, again, in the past couple of weeks, we've won cases with Canadian dairy. We've won cases with Mexican telecom. We've won cases with Japanese apples. And these have important issues for our agriculture -- the sanitary and phytosanitary standards. This telecom case is the first one under these telecommunications rules that were developed in 1997. So we have a big stake as a major trading economy. But this decision was based on the benefits and costs independent of that.

Q Do you still dispute the WTO finding on steel? And I've also got a question about health benefits. But if you could answer the first one. Do you still dispute that finding, the WTO finding now?

AMBASSADOR ZOELLICK: Well, we certainly disagreed with it. Well, we disagreed with it, and so we appealed it. The appeal changed some of the findings. I don't want to get too technical with you on this, but they changed some aspects of how the first-level ruling about ITC decisions, whether concurring opinions, how they can count. And so we have some continuing disagreements. But we accept those rules, as other countries accept those rules, as we go forward. But again, this decision was based independently on this assessment.

Q And the steel workers have cited as one of their major concerns the fact that their -- the retiree health benefits could be cut -- they're linked directly to industry health. And as the tariffs are lifted, that reduces the funds available for health benefits. How do you address that concern?

AMBASSADOR ZOELLICK: Well, the best way to have a health benefit or anything else is to have a job. And the most --

AMBASSADOR ZOELLICK: And I was going to say, in addition, we've also passed legislation that gave a 65 percent subsidy of steel pensioners ability to pay for their health care if they lose their health care through these changes -- through the changes of the industry restructuring. So that's something that actually we helped get through legislatively that makes a special benefit for health care for steel workers.

But, in addition, I wouldn't underestimate the fact of the role that the PBGC -- the Pension Benefit Guarantee Corporation -- has played in this. When -- they pick up on average -- because it depends on your age of retirement and other things -- about 90 percent of somebody's retiree benefits. And $8.4 billion of retiree liabilities means a lot of pensions for a lot of people.

And then the other thing is, these restructuring arrangements, including the one that led to a lot of the labor contracts to be adjusted is one -- a company called ISG -- it's International Steel Group. It used to LTV. And as part of the new sort of labor rules, they also changed how they will contribute not only to current workers, but some of the retirees' benefits.

And the reason this contract is very, very important is because, look, for an industry to compete in the global economy they had to do some things that also reduced some of the costs. But, frankly, one of the things that was impressive about this, they also cut supervisory layers from about seven to three, and, frankly, built in incentives for the steel workers to be able to get more benefits if the company does well -- which is the direction you want to go. That contract was then picked up in basic nature by U.S. Steel. And it was also applied to the Bethlehem workers, including the ones out here at Sparrow Point. And so that's exactly the sort of thing that we wanted to have happen, and, frankly, wouldn't have happened if you didn't have the safeguard.

Q Are you taking any steps today, or planning to take any steps to mitigate the effects of this action on the steel industry? Any specific new steps?

AMBASSADOR ZOELLICK: Well, first off, the mitigation has been over the course of the past 21 months, where you've had a much stronger steel industry. Going forward, as I mentioned, the Department of Commerce has put in a monitoring system that basically requires a weekly adjustment in terms of any imports coming in, that is on the Internet. And it will get close to real time, at least for economic and trade statistics, in terms of learning about overall import actions.

There are, as you know or may know, there's other ongoing trade remedies that private parties or the government could use. But at this point, with this safeguard, we feel this industry is much stronger. And again, part of this is the overall economic climate. Growth in China, as I mentioned, bringing in a lot, a lot of steel exports from around the world. And it's a good sign that our steel exports are up.

Q When did the monitoring system go up, the Commerce monitoring system? Has that just started, or is that --

AMBASSADOR ZOELLICK: No, we've had that in place before. And we're going to be keeping it as a way to try to make sure that we keep on top in a weekly fashion on data.

AMBASSADOR ZOELLICK: Let me make sure I get people who didn't ask a question. You didn't.

Q Okay. Is it going to be any type of a phasing-out? Or is it going to be a complete lifting?

AMBASSADOR ZOELLICK: No, it lifts -- tonight at midnight. Just to give you -- without getting to technical on this, the safeguard itself had a phasing process. So the highest of the tariffs were 30 percent. That was lowered to 24 percent at the end of a year. So there's already been --

and the ones that were at lower levels were also reduced a similar percentage during the time. So there has already been a phasing of this, and that was built into the process along with the midterm review.

Q Does the White House have any estimate of how many American jobs were lost as a result of the tariffs? The steel consuming industries say that they've been hurt a great deal. Can you speak about that?

AMBASSADOR ZOELLICK: I'd like -- if I had some better information -- mainly because a lot of numbers are thrown out. You've obviously got people on both sides of this issue that will come up with economists studies as numerous as economists. But the best thing that we can point to was that the ITC tried to do an analysis of the dollar effects, as I mentioned. And as I said, they came up with a $30 million net dollar effect. That was based on about a $600-million-plus loss to the private economy, but an increase in the tariff benefits.

Now, they also surveyed people in terms of jobs. And they really did not get very large numbers in terms of the job loss. But it's hard to tell with an overall survey of this. And the other thing is it's hard to isolate out other conditions in terms of what affected the economy. So my own sense is that the estimates of job losses have been far expanded beyond what any reality would have been.

But here's another job number. You've got about 150,000 steel workers in this country, and they can thank this President for having a chance to compete in the future.

Q Many analysts of the industry say that it was poised for a restructuring even before the tariffs were laid in place. I'm interested in what your assessment is of the marginal impact of the tariffs on that, beyond what would have happened without any action.

AMBASSADOR ZOELLICK: Well, look, the industry certainly needed a restructuring. If you look at what I've talked about here in terms of -- when you have about half of an industry merger in terms capacity production, merge, restructure, change their labor contracts, get some help on the pension side, get some help on the health care side in terms of retirees, obviously, there were a lot of different aspects going on here. It was always my belief, looking at this industry before we came and when we came in, they needed something like this to give them the breather. And that was certainly the message that they were sending before we took office and now.

Now, how much of that are other forces here? Of course, as I said, we are part of a world economy. Demand has picked up; relative prices have changed. There's a lot of other variables in this process. And so that is one reason why the President built in a midterm review. We couldn't say for sure how this would work, whether the industry would do what they needed to do, and what the external conditions are. I'm, frankly, just very pleased that those have come together.

And, look, going back to your question early on, industries have to compete. There's nothing that's secure for people forever. But the purpose of a safeguard was to allow them to do that restructuring, and taking, more specifically -- I mentioned ISG as a case. Well, ISG is a executive that came from outside the industry. He bought into a bankrupt company. He did a different labor agreement. That labor agreement has spread. Sometimes industries that need change need to get somebody from the outside. And, frankly, it starts a process.

Now, in addition to talking to the steel executives, I talked to the union leaders along the way. They also knew they were going to be under stress. But the management's willingness to change some of the supervisory levels, give people a greater role, all those things have to come together. And that's why -- look, the process is not finished, but this industry has taken this time and used it pretty darn well to give people a chance to move forward. And that's where I think the safeguard acted as a catalyst to go forward.

Q If everything you've said is true, why isn't the industry jumping up and down? And do you actually think that people are going to think the WTO threat was not -- had no impact? Surely you must understand that your whole momentum for reaching the decision was based on that?

AMBASSADOR ZOELLICK: Well, on your first point, in terms of what people are going to say or want, look, this is an industry that wanted help for a number of years. It got help. You and I have both been around long enough to know that industries often look for more help. But this is where a balance -- this is where a balance comes in, in terms of trying to say we gave them a special breathing space; you make your own judgment of the statistics, whether they've started to use it, and whether they've gathered some strength.

Q You painted it in such a rosy way, and they don't seem to be reacting that way.

AMBASSADOR ZOELLICK: Well, you judge by the statistics. Industries often look for more help. This President makes a balance, a judgment about giving them enough help, but obviously weighing these other factors.

Now, your other question is -- be careful how I represent what I said. I said it was an independent decision. It was based on the benefits and costs. And so people are obviously aware of the fact that you've got WTO actions, okay, but that was not the basis of this decision.

Q You have already free trade agreements with Mexico, with Chile. You're almost finishing a free trade agreement with five Central American countries. Others are on the way --

Q What is the outlook of the famous dateline 2005 for a free trade agreement for a whole hemisphere? I know Brazil has some questions, Venezuela has some questions, I think Ecuador has some questions.

AMBASSADOR ZOELLICK: Well, we just had a ministerial meeting of the 34 democracies of the Western Hemisphere in Miami a couple weeks ago. And to answer that question, you really have to look at two tracks, and it really goes to the way you asked it. The United States has free trade agreements with NAFTA, with Mexico, with Canada, with Chile, moving ahead with Central America. And we have now announced free trade agreements, including one with the Dominican Republic, to add to CAFT early next year. If you take all those sort of high quality, NAFTA, Chile free trade agreements -- agriculture, goods, services, intellectual property, environment and labor issues, that covers, if you take out the United States, 68 percent of the Western Hemisphere's GDP.

So we're well on our way to creating that hemispheric free trade. But the Free Trade Area of the Americas, the venture launched in 1994 -- or the ALCA, for Spanish speakers -- is something that we also want to try to move forward, and that would really need to add the four countries of MERCOSUR -- Brazil, Paraguay, Argentina, Uruguay -- as well as a number of the 14 Caribbean economies.

And what we did in Miami was to take that process and move it in a much more practical step in terms of what we'll try to accomplish in the negotiations over the course of the next year to try to keep that on track. But our logic -- and this goes to some of the other questions -- has always been to use what we call a competition liberalization. The President wants to achieve free trade in the Americas. It's something the United States has talked about since the 1820s and Henry Clay. We're well on our way doing it, in terms of these individual agreements, but our goal would be to complete the Free Trade Area of the Americas. And we made a good step in Miami, but there's a lot of tough work to do still.

Q Can I ask one more question? This comes from people who I've talked to who know this issue backwards and forwards, because they're involved with it. They say that what happened was that for all of your tough talk over the last couple of years, you allowed the Europeans to put you in a box, and that because this was never a popular tariff at the USTR office, and to preserve U.S.-EU relations, you just decided, I'm not going to fight this, let's just walk away from it.

AMBASSADOR ZOELLICK: Look, I know there's lots of speculation on this topic. I'll say, in total honesty, I've always supported this safeguard, from the start. And I can remember talking with former Secretary O'Neill, who had a good background in the aluminum industry, on inauguration day about how we needed to try to help this industry. This goes to some of the other questions. This industry was in such bad shape, you had a reaction in Congress where you had over half the members of the House of Representatives willing to sign a bill that would impose total quotas.

Frankly, my judgment was, going back to my belief in safeguards, what happened was people didn't listen to the need of an industry that really was getting hammered. And so that's where you need to use a safeguard -- not forever, but for a breathing space. We used it; it built support; we got trade act authority; we've given the industry a chance to recover, and its done pretty well, and there's been no retaliation. So if that's the sort of box you end up being in, I could take that a little bit more often.

Q Can I try and just pin you down on one other point? Each time we've asked you about --

Q I'm going to try. Each time we've asked you about the impact of politics here, the role of the retaliatory tariffs, you've said it was independent. Yes or no, did politics play a role here? Did the threat of retaliatory tariffs factor into the President's decision?

AMBASSADOR ZOELLICK: Those are two different questions, in that -- that's why I try to answer about the politics of trade. The whole belief in safeguards is one that you have to -- you can't have trade policy in a vacuum. You've got to help people adjust. And that's why part of the Trade Act of 2002 included $12.5 billion of worker retraining funds. I believe this goes to the education system in our country. If you're going to have a pretty open economy, and we've got one of the most open economies in the world, you can't ignore people's need to adjust and change. You've got to help them do it. And there are tools that we have as a society to do that -- worker retraining, safeguard, so on and so forth.

So if you're an ardent believer in opening markets -- and I am; our tariffs are pretty low and I want to open other people's markets -- you've got to listen to people in terms of the need to give them a chance to get back on their feet. And obviously that helps you with congressional politics, in terms of trying to get support for trade. Because, remember, under the Constitution, the authority for trade negotiation belongs to the Congress. We get to borrow the authority. I have to give it back regularly, and they get very concerned about the condition it's in.

So, look, my job involves international politics, the domestic politics, economics. That's the whole integration of the system. So, sure, in that sense, the politics are part of trying to accomplish an agenda. And, as I said, you make your own -- your own analysis. But this one worked out pretty darn well. We avoided any retaliation. We gave the industry a chance to be back on its feet. And in terms of trade negotiations, I didn't find it any effect. People, of course, use excuses for whatever their position. But it didn't stop us from going ahead.

AMBASSADOR ZOELLICK: Not any meeting that I was in, no. And then on your other point about independence, again, the key point I'm trying to emphasize is, look, we needed to make the analysis in terms of the benefits and cost of the safeguard. And we did that, and I think the facts are pretty stark and striking. But, finally, in terms of the bottom line, then, is that is it good to avoid retaliation, too? Sure.

Q Ambassador, based on all that you were just saying in terms of the President's rationale that he was right, would you say that he would be comfortable doing this again for the steel industry as long as he was President and they made a case that they needed it?

AMBASSADOR ZOELLICK: I've worked for three or four presidents, and one thing I've learned is never to preempt a president's decision. So that's probably a good point to end. (Laughter.)

MR. McCLELLAN: No, no, Norah gets the first one; she out-yelled you. (Laughter.)

Q Scott, you promised us more information about the Air Force One sighting. Was it a British Airways plane?

MR. McCLELLAN: Yes, I'm actually -- I'm going to give you a copy of a release that was put out by the National Air Traffic Services, which is the London-area control center. Let me just read that to you first, and then I'll be glad to get into any follow-up you have.

"NATS has now concluded its investigations and can confirm that a conversation between the crew of an aircraft belonging to a non-U.K. operator and its control center took place around 9:30 GMT, on Thursday, the 27th of November, 2003.

"The pilot of the aircraft asked whether the aircraft behind it was Air Force One. After consulting the flight plan of those aircraft in the sector at that time, the center responded that the aircraft was a Gulfstream V. NATS notes reports that U.S. officials have said that for security reasons, Air Force One had filed a flight plan which stated that the service would operated by a Gulfstream V."

So as they pointed out, it was a non-U.K. operator. What Colonel Tillman and the pilots on board Air Force One believed at the time when they heard the conversation was that it was a British Airways plane, because there had been a British Airways plane that had been in the vicinity of Air Force One on the way across. And Colonel Tillman -- and, in fact, they knew it was there because they had been using the call sign that British Airways uses when they communicate with the control center. Colonel Tillman and the pilots then heard the conversation, and to them the conversation sounded like it was coming from a pilot with a British accent. And so that's why they had concluded that it was a British Airways plane.

Q Why then did the White House, repeatedly, in two different versions, tell reporters that it was British Airways? How could the White House be so wrong?

MR. McCLELLAN: For the reasons I told you. Colonel Tillman and the pilots in the cockpit believed that it was British Airways for the reasons I just stated. And what we always try to do for you all in the press corps is to provide you a little color of important events, because we believe that's helpful to you for your stories, and to do your reporting to the American people. And so we reported it based on what we knew, and the conversation did take place. It was heard by the pilots on Air Force One. That was relayed to White House staff, and it was shared with you all in the media to help you keep the American people informed about what was a very important event.

Q And just finally, do you think, though, that this third revision of this story now, takes some of the shine off the President's surprise visit to the troops?

MR. McCLELLAN: Well, first of all, no, absolutely not. The President was pleased to go and visit our men and women in the military who are serving and sacrificing and defending freedom and making the world a safer and better place. And he was honored to be there and spend Thanksgiving with those men and women who are in Baghdad.

The second point I was going to make is that, again, this conversation was relayed to you all to help you all have a little more color for your stories and to keep the American people informed about an important event that occurred over the Thanksgiving weekend.

Q Scott, so -- let me just ask you a question. The other day you were saying that Tillman said -- or at least Dan Bartlett said that Tillman said he heard the call sign, Speed Bird.

Q Which is the designator for British Airways. You're now saying he didn't hear that? He just heard a British accent?

MR. McCLELLAN: No, that's what I -- in fact, that's what I -- if you listened to what I said at the beginning, there was a British Airways flight that was in the vicinity of Air Force One as it was crossing over for a good portion of that flight. And they were using the call sign, Speed Bird.

Q Oh, but he just heard another plane and thought that it was the same plane, is that what --

MR. McCLELLAN: Well, again, Colonel Tillman and the pilots in the cockpit of Air Force One heard the communications because they were off the western coast of England at the time, and heard the conversation between a pilot of the plane and the control center. And the pilot of the plane, to them, it sounded like he had -- that the pilot had a British accent. And so they -- from all the other things I told you -- believed that it was a British Airways flight.

Q Just one more follow-up here. So you said that the announcement from the National Air Traffic Services says that Air Force One had filed a flight plan that identified it --

MR. McCLELLAN: John, I think that the American people understand the security arrangements that are made in a circumstance like this. The American people understand the importance of not compromising security, not only for the President of the United States, but for those on board the plane, and those on the ground, as well. These are unusual circumstances. The President was pleased to go into Baghdad and pay tribute to our troops for their service and sacrifice, and show them that the American people stand fully behind them and support them in their efforts.

Q So the White House has no compunctions about having misled the American people on this trip?

MR. McCLELLAN: Well, first of all, one, I was not there, but I've gone and gathered the facts. And I'm not sure that -- again, Colonel Tillman and the pilots on board the Air Force One --

MR. McCLELLAN: -- are people that relayed this information to White House staff. And for very good reason, they believed it was a British Airways flight, for the reason I stated.

MR. McCLELLAN: But now that we know more information, we made an attempt to get you all that information as quickly as possible. And that's what we always do.

Q I'm talking about having misled the public in thinking the President was at the ranch. In other words, that there's a level of trust that has been eroded.

MR. McCLELLAN: Look, I understand, and I appreciate the question you're asking. But I think that the American people fully understand the security arrangements that were made so that the President of the United States could go and thank our troops in person, on Thanksgiving, during a very special moment for them, while they were celebrating Thanksgiving Day.

Q So did the President then -- I mean, he made a decision that it was worth telling a white lie to accomplish this policy goal -- or a political goal.

MR. McCLELLAN: I don't know exactly what you're referring -- I don't think we viewed it that way. We kept the trip a secret because of the security demands. And I think the American people fully understand that.

MR. McCLELLAN: I appreciate you asking the question, but I take exception with the premise of the question that you're asking. I strongly do, that the President of the United States -- that those security arrangements, and that the steps we went to, to make sure he could go there and that nobody's security would be compromised.

Q No, he decided all of that was worth it, all of the security arrangements and the cover story and everything, was worth it for this particular goal, which was --

MR. McCLELLAN: Absolutely, his trip to go visit the troops in Baghdad on Thanksgiving was worth it. Absolutely.

Q Were there political considerations, too, that it would be a good -- it would help build support for the mission?

MR. McCLELLAN: He is the Commander-in-Chief. He has to make difficult decisions on behalf of the country and making the country and the world a better and safer place. And, as Commander-in-Chief, he took this responsibility very seriously, and he was pleased to go there and spend Thanksgiving dinner with some of our troops in Baghdad, and to express the gratitude of the nation for all that they're doing to make America more secure.

Q Is the President, the White House planning a new space initiative that includes travel to the moon and to Mars?

MR. McCLELLAN: Let me kind of go back and refresh your memory a little bit. Several months ago, the President initiated an interagency review of space exploration to determine the appropriate future course of United States based exploration activities. The President is strongly committed to the exploration of space. That review is ongoing at this point. It has been underway, and it continues, and it is ongoing.

MR. McCLELLAN: Well, look, I think as long as this review is underway, it would be premature to get into any speculation about our space policy that has been and continues to be under review. There are no plans for any policy announcements in the immediate future, and that would include any upcoming speeches. I've seen the reports you're referring to --

MR. McCLELLAN: Those reports are not coming out of the White House. And I would encourage you -- if you want to follow those reports, that's certainly you're prerogative, but I would encourage you to not to, because the review, our interagency review of space exploration is ongoing. So it's premature to get into any speculation about some of that space policy.

Q Taking a step back from this particular story, other presidents have talked about space and sort of broadly about the ideas --

Q -- and the desires about what they want to do in terms of space exploration. In conversations, has the President talked about the fact that he would like, during his presidency, to have some kind of a situation where he can get to the moon or Mars?

MR. McCLELLAN: I think you've heard the President talk about the importance of space exploration, and the importance, too, of continuing our journey into space. He remains strongly committed to those efforts. And you can look back at his budget and his proposals that he has made. You're asking me to kind of jump ahead of an interagency review process that is going on to make recommendations, and then the President will make some decisions to determine the future direction of space exploration.

Q Is he planning to visit North Carolina, Kitty Hawk, to talk about this, on December 17th?

MR. McCLELLAN: Well, as you know, I don't announce events this far in advance. But I made it very clear to you that there are no plans to make any policy announcements on our space program at any immediate upcoming speeches.

Q One other thing, Scott. The other aircraft that you're talking about, can you identify what that was?

MR. McCLELLAN: I think I would leave that to the London control center. And I'll get you a copy of that release.

Q On Taiwan. The Chinese military has been making -- stepping up the rhetoric against Taiwan should they move forward with a referendum. Has the White House or the President been in contact with any of the Chinese leadership ahead of Premier Wen's visit?

MR. McCLELLAN: I don't have any updates on the President's calls. Obviously, he has a meeting coming up next Tuesday, I believe, with Premier Wen. But I would remind you of what I said yesterday. The United States -- and this has been our policy -- opposes any unilateral attempts to change Taiwan's status. That would apply to both Beijing's possible use of force and any moves by Taiwan, itself, that would change the status quo on independence or unification.

So we continue to urge both sides to refrain from actions or statements that increase tensions or make dialogue more difficult to achieve. And that has been our position throughout.

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