[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
STEEL TRADE ISSUES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TRADE
of the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
FEBRUARY 25, 1999
__________
Serial 106-6
__________
Printed for the use of the Committee on Ways and Means
U.S. GOVERNMENT PRINTING OFFICE
57-306 CC WASHINGTON : 1999
COMMITTEE ON WAYS AND MEANS
BILL ARCHER, Texas, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
BILL THOMAS, California FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York SANDER M. LEVIN, Michigan
WALLY HERGER, California BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana JIM McDERMOTT, Washington
DAVE CAMP, Michigan GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania KAREN L. THURMAN, Florida
WES WATKINS, Oklahoma LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
A.L. Singleton, Chief of Staff
Janice Mays, Minority Chief Counsel
______
Subcommittee on Trade
PHILIP M. CRANE, Illinois, Chairman
BILL THOMAS, California SANDER M. LEVIN, Michigan
E. CLAY SHAW, Jr., Florida CHARLES B. RANGEL, New York
AMO HOUGHTON, New York RICHARD E. NEAL, Massachusetts
DAVE CAMP, Michigan MICHAEL R. McNULTY, New York
JIM RAMSTAD, Minnesota WILLIAM J. JEFFERSON, Louisiana
JENNIFER DUNN, Washington XAVIER BECERRA, California
WALLY HERGER, California
JIM NUSSLE, Iowa
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
version. Because electronic submissions are used to prepare both
printed and electronic versions of the hearing record, the process of
converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
__________
Page
Advisory of February 12, 1999, announcing the hearing............ 2
WITNESSES
U.S. Department of Commerce, Hon. William M. Daley, Secretary.... 63
Office of the U.S. Trade Representative, Hon. Charlene Barshefsky 67
______
American Wire Producers Association, H.O. Woltz III.............. 140
Barnette, Curtis H., Bethlehem Steel Corp........................ 86
Becker, George, United Steelworkers of America.................. 116
Berry, Hon. Marion, a Representative in Congress from the State
of Arkansas.................................................... 47
Bethlehem Steel Corp., Curtis H. Barnette........................ 86
Buyer, Hon. Stephen E., a Representative in Congress from the
State of Indiana............................................... 40
Cardin, Hon. Benjamin L., a Representative in Congress from the
State of Maryland.............................................. 19
Carpenter Technology Corp., Robert W. Cardy...................... 112
Cato Institute, Daniel T. Griswold............................... 151
Co-Steel Raritan Steel Co., George Mischenko..................... 136
Doyle, Hon. Michael F., a Representative in Congress from the
State of Pennsylvania.......................................... 45
Economic Strategy Institute, Greg Mastel......................... 158
English, Hon. Phil, a Representative in Congress from the State
of Pennsylvania................................................ 15
Glyptis, Mark, Independent Steelworkers Union................... 123
Greenwood, Hon. James C., a Representative in Congress from the
State of Pennsylvania.......................................... 34
Griswold, Daniel T., Cato Institute.............................. 151
Independent Steelworkers Union, Mark Glyptis..................... 123
Insteel Industries, Inc., H.O. Woltz III......................... 140
Jenson, Jon E., Precision Metalforming Association.............. 146
Klink, Hon. Ron, a Representative in Congress from the State of
Pennsylvania................................................... 37
Kucinich, Hon. Dennis J., a Representative in Congress from the
State of Ohio.................................................. 50
Mastel, Greg, Economic Strategy Institute........................ 158
Mischenko, George, Co-Steel Raritan Steel Co.................... 136
Precision Metalforming Association, Jon E. Jenson................ 146
Regula, Hon. Ralph, a Representative in Congress from the State
of Ohio........................................................ 21
Specialty Steel Industry of North America, Robert W. Cardy....... 112
Specter, Hon. Arlen, a U.S. Senator from the State of
Pennsylvania................................................... 11
Stupak, Hon. Bart, a Representative in Congress from the State
of Michigan.................................................... 43
Traficant, Hon. James A., Jr., a Representative in Congress from
the State of Ohio.............................................. 30
United Steelworkers of America, George Becker.................... 116
Visclosky, Hon. Peter J., a Representative in Congress from the
State of Indiana............................................... 24
Woltz, H.O., III, Insteel Industries, Inc., and American Wire
Producers Association.......................................... 140
SUBMISSIONS FOR THE RECORD
American Iron and Steel Institute, statement..................... 166
Costello, Hon. Jerry F., a Representative in Congress from the
State of Illinois, statement................................... 170
Dewey Ballantine, Thomas R. Howell, and Brent L. Bartlett,
statement and attachments...................................... 171
Murtha, Hon. John P., a Representative in Congress from the State
of Pennsylvania, statement..................................... 172
Ney, Hon. Robert W., a Representative in Congress from the State
of Ohio, statement............................................. 174
Quinn, Hon. Jack, a Representative in Congress from the State of
New York, statement............................................ 175
STEEL TRADE ISSUES
----------
THURSDAY, FEBRUARY 25, 1999
House of Representatives,
Committee on Ways and Means,
Subcommittee on Trade,
Washington, DC.
The Subcommittee met, pursuant to notice, at 1:10 p.m., in
room 1100, Longworth House Office Building, Hon. Philip M.
Crane (Chairman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
SUBCOMMITTEE ON TRADE
CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
February 12, 1999
No. TR-3
Crane Announces Hearing on
Steel Trade Issues
Congressman Philip M. Crane (R-IL), Chairman, Subcommittee on Trade
of the Committee on Ways and Means, today announced that the
Subcommittee will hold a hearing on steel trade issues. The hearing
will take place on Thursday, February 25, 1999, in the main Committee
hearing room, 1100 Longworth House Office Building, beginning at 1:00
p.m.
Oral testimony at this hearing will be from both invited and public
witnesses. Invited witnesses will include United States Trade
Representative Charlene Barshefsky and Secretary of Commerce William
Daley. Also, any individual or organization not scheduled for an oral
appearance may submit a written statement for consideration by the
Committee or for inclusion in the printed record of the hearing.
BACKGROUND:
During the first 10 months of 1998, U.S. steel imports grew at
record levels, rising 30 percent over the same period in 1997.
Increases were particularly high in key products such as hot-rolled
sheets and coils, where imports rose 66.3 percent in the first 10
months of 1998 versus the same period in 1997. Overall, import
penetration grew from 24.2 percent in the first 10 months of 1997 to
29.5 percent during the same period of 1998. Steel imports from Japan,
Russia, and Korea together accounted for 78 percent of the increase. At
the same time, U.S. steel production for 1998 was at near record
levels, and steel demand in the United States during 1998 was the
strongest in history.
Preliminary U.S. Department of Commerce figures for December 1998
indicate a decrease of 1.1 million metric tons in steel imports
entering the United States. The November-to-December change in steel
imports, based on metric tonnage, reflects decreases primarily in hot-
rolled sheets, plates in coil, and blooms, billets and slabs. The
source of the decrease is primarily Russia, Japan, and Korea.
In response to the increase in steel imports, segments of the U.S.
industry have sought relief under U.S. trade laws. Most recently, U.S.
steel producers and workers filed antidumping petitions at the Commerce
Department on September 30, 1998, on U.S. imports of hot-rolled steel
from Japan, Russia, and Brazil, and a countervailing duty petition on
imports from Brazil. The U.S. International Trade Commission (ITC)
issued a preliminary affirmative injury determination on these
petitions on November 13, 1998. On November 23, 1998, the Commerce
Department issued a preliminary ruling of critical circumstances with
respect to hot-rolled steel imports from Japan and Russia. Based on
this finding, importers may be retroactively assessed dumping duties
reaching back 90 days before the preliminary determination to November
14, 1998, if an antidumping order is issued. As a result of the
critical circumstances finding, importers have been put on notice of
potential antidumping duty assessments.
On February 12, 1999, the Commerce Department issued a preliminary
affirmative determination of dumping with respect to Japan (margins
ranging from 25.14 to 67.59 percent) and Brazil (margins of 50.66 to
71.02 percent). In addition, Commerce made an affirmative preliminary
subsidy determination with respect to Brazil, with margins ranging from
6.62 to 9.45 percent. The determination with respect to Russia is
expected shortly. Commerce final determinations are due April 28,
unless extended, and the ITC final determinations are due June 2,
unless extended.
On December 30, 1998, another segment of the U.S. steel industry
filed a petition for relief with the ITC under section 201 of the Trade
Act of 1974 on imports of steel wire rod, alleging that imports of the
product are a cause of substantial injury to the U.S. industry. An
injury determination on that petition is due mid-May.
In the 106th Congress, four pieces of legislation have been
introduced in the House of Representatives in response to the increase
in U.S. steel imports. On January 19, 1999, Congressman Aderholt
introduced H.R. 327, a bill to provide for the assessment of
antidumping duties on entries of steel products made prior to the
effective date of any antidumping order issued in the current
investigation. On the same day, Congressman Regula introduced H.R. 412,
the ``Trade Fairness Act of 1999,'' to amend the injury test for a
safeguard action by eliminating the requirement that imports be a
``substantial'' cause of injury to U.S. industry in order for the ITC
to recommend industry relief to the President. In addition, H.R. 412
would establish a steel import permit and monitoring program to permit
the U.S. Government to receive and analyze import data in a more timely
manner by requiring the use of a permit to import steel into the United
States.
On February 2, 1999, Congressman Traficant introduced H.R. 502, the
``Fair Steel Trade Act,'' to impose a three-month ban on imports of
steel and steel products from Japan, Russia, South Korea, and Brazil.
Also on February 2, Congressman Visclosky introduced H.R. 506, a bill
to require the President to take steps, by imposing quotas, tariff
surcharges, negotiated enforceable voluntary export restraint
agreements, or other methods, to ensure that the volume of steel
products imported into the United States during any month does not
exceed the average volume of steel products that was imported monthly
into the United States during the 36-month period preceding July 1997.
H.R. 327, H.R. 412, H.R. 502, and H.R. 506 were all referred to the
Committee on Ways and Means.
On January 7, 1999, the Administration issued its own plan to
address the steel crisis.
In announcing the hearing, Chairman Crane stated: ``There is no
question that the U.S. steel industry is facing competition from
foreign producers that has intensified since the onset of the global
financial crisis. I believe that the United States should strongly
enforce its existing trade laws, which are designed to deal with such
competition. I look forward to this opportunity to examine the impact
of the increase in steel imports on the U.S. industry and the U.S.
economy, as well as the legislation that has been introduced to address
the rise in steel imports. I intend to examine whether proposed
legislation is consistent with our WTO obligations and whether it runs
the risk of sending messages to our trading partners that erecting
trade barriers is an appropriate response in these circumstances.
Finally, I am concerned about U.S. downstream users of steel, who are
dependent on competitively priced inputs to maintain their own
competitive stance in the global market.''
FOCUS OF THE HEARING:
Witnesses should address the impact of the increase in steel
imports on U.S. steel producers and workers and on the U.S. economy, as
well as the legislation addressing this issue which has been introduced
in the 106th Congress. In addition, testimony presented should address
the effectiveness of U.S. trade remedy laws and the effect on
downstream steel users in the United States to restricting access to
foreign produced steel. Finally, witnesses should address ways to seek
greater foreign consumption of excess steel and the possibility of
retaliation against U.S. exports in response to action that would
restrict the access of foreign steel to the U.S. market.
DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:
Requests to be heard at the hearing must be made by telephone to
Traci Altman or Pete Davila at (202) 225-1721 no later than the close
of business, Friday, February 19, 1999. The telephone request should be
followed by a formal written request to A.L. Singleton, Chief of Staff,
Committee on Ways and Means, U.S. House of Representatives, 1102
Longworth House Office Building, Washington, D.C. 20515. The staff of
the Subcommittee on Trade will notify by telephone those scheduled to
appear as soon as possible after the filing deadline. Any questions
concerning a scheduled appearance should be directed to the
Subcommittee on Trade staff at (202) 225-6649.
In view of the limited time available to hear witnesses, the
Subcommittee may not be able to accommodate all requests to be heard.
Those persons and organizations not scheduled for an oral appearance
are encouraged to submit written statements for the record of the
hearing. All persons requesting to be heard, whether they are scheduled
for oral testimony or not, will be notified as soon as possible after
the filing deadline.
Witnesses scheduled to present oral testimony are required to
summarize briefly their written statements in no more than five
minutes. THE FIVE-MINUTE RULE WILL BE STRICTLY ENFORCED. The full
written statement of each witness will be included in the printed
record, in accordance with House Rules.
In order to assure the most productive use of the limited amount of
time available to question witnesses, all witnesses scheduled to appear
before the Subcommittee are required to submit 200 copies, along with
an IBM compatible 3.5-inch diskette in WordPerfect 5.1 format, of their
prepared statement for review by Members prior to the hearing.
Testimony should arrive at the Subcommittee on Trade office, room 1104
Longworth House Office Building, no later than Tuesday, February 23,
1999. Failure to do so may result in the witness being denied the
opportunity to testify in person.
WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE:
Any person or organization wishing to submit a written statement
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch
diskette in WordPerfect 5.1 format, with their name, address, and
hearing date noted on a label, by the close of business, Monday, March
8, 1999, to A.L. Singleton, Chief of Staff, Committee on Ways and
Means, U.S. House of Representatives, 1102 Longworth House Office
Building, Washington, D.C. 20515. If those filing written statements
wish to have their statements distributed to the press and interested
public at the hearing, they may deliver 200 additional copies for this
purpose to the Subcommittee on Trade office, room 1104 Longworth House
Office Building, by close of business the day before the hearing.
FORMATTING REQUIREMENTS:
Each statement presented for printing to the Committee by a
witness, any written statement or exhibit submitted for the printed
record or any written comments in response to a request for written
comments must conform to the guidelines listed below. Any statement or
exhibit not in compliance with these guidelines will not be printed,
but will be maintained in the Committee files for review and use by the
Committee.
1. All statements and any accompanying exhibits for printing must
be submitted on an IBM compatible 3.5-inch diskette in WordPerfect 5.1
format, typed in single space and may not exceed a total of 10 pages
including attachments. Witnesses are advised that the Committee will
rely on electronic submissions for printing the official hearing
record.
2. Copies of whole documents submitted as exhibit material will not
be accepted for printing. Instead, exhibit material should be
referenced and quoted or paraphrased. All exhibit material not meeting
these specifications will be maintained in the Committee files for
review and use by the Committee.
3. A witness appearing at a public hearing, or submitting a
statement for the record of a public hearing, or submitting written
comments in response to a published request for comments by the
Committee, must include on his statement or submission a list of all
clients, persons, or organizations on whose behalf the witness appears.
4. A supplemental sheet must accompany each statement listing the
name, company, address, telephone and fax numbers where the witness or
the designated representative may be reached. This supplemental sheet
will not be included in the printed record.
The above restrictions and limitations apply only to material being
submitted for printing. Statements and exhibits or supplementary
material submitted solely for distribution to the Members, the press,
and the public during the course of a public hearing may be submitted
in other forms.
Note: All Committee advisories and news releases are available on
the World Wide Web at `HTTP://WWW.HOUSE.GOV/WAYS__MEANS/'.
Chairman Crane. Will everyone please take their seats?
Good afternoon and welcome to this hearing on the topic of
steel trade issues. This hearing provides us with an
opportunity to examine the underlying causes of the state of
the steel industry today and the role of imports.
I believe that we must strongly enforce U.S. trade remedy
statutes and it appears that the administration is doing so
with preliminary antidumping and countervailing duty margins
announced by the Commerce Department in the past few days.
At the same time, I believe that we must make sure that any
actions taken against steel imports in our market do not
violate our obligations in the World Trade Organization or send
the wrong signals to countries recovering from the global
financing crises about the steps they should take in their own
economies. We must also be concerned about the impact of any
changes to the law on U.S. industrial users and their
employees, as well as U.S. consumers.
[The opening statement follows:]
Opening Statement of Hon. Philip M. Crane, a Representative in Congress
from the State of Illinois
Good afternoon. Welcome to this hearing of the Subcommittee
on Trade on the topic of steel trade issues. This hearing
provides us with an opportunity to examine the underlying
causes of the state of the steel industry today and the role of
imports.
I believe that we must strongly enforce U.S. trade remedy
statutes and it appears that the Administration is doing so
with the preliminary antidumping and countervailing duty
determinations and margins announced by the Commerce Department
in the past few days. At the same time, I believe that we must
make sure that any actions taken against steel imports in our
market do not violate our obligations in the World Trade
Organization or send the wrong signals to countries recovering
from the global financial crisis about the steps they should
take in their own economies. We must also be concerned about
the impact of any changes to the law on U.S. industrial users
and their employees, as well as U.S. consumers.
I would now like to yield to Mr. Houghton, who serves as
Chairman of the Ways and Means Oversight Subcommittee, to make
a brief opening statement.
I would now like to recognize Mr. Levin, the Ranking
Member of the Trade Subcommittee, for an opening statement.
We have a very full witness list today and I would like to
inform all of our witnesses that we will be strictly enforcing
the five minute rule. Longer written statements will be made a
part of the hearing printed record of the hearing.
Because of the length of the hearing, and the number of
Members interested in testifying, we are using special
procedures. We will ask the first Member panel to testify and
then retire to the witness chairs located directly behind the
witness table. After the second Member panel has finished,
there will be a question and answer period for both panels.
Should you be called upon to answer questions, please move to
the chair located to the left of the panel table. Please
identify yourself for the hearing record before responding. The
remaining panels will proceed as usual.
With that, I would like turn to our first panel of
witnesses and ask that our Colleagues testify in the order
printed on the witness list. We will begin with Senator
Specter.
Chairman Crane. And, I now would like to yield to Mr.
Levin, who is the Ranking Member of the Trade Subcommittee, for
an opening statement.
Mr. Levin. Thank you, Mr. Chairman. I am glad we decided
last month that it would be useful to hold this hearing. Since
then, the steel issue has become even more important.
As we are all aware, over the last year low-priced imports
of steel have flooded the U.S. market. Although our U.S. steel
companies and workers are among the most modern, efficient,
low-cost producers in the world, they have not been able to
withstand this deluge. Over 10,000 hard-working steelworkers
have lost their livelihood as companies have reduced their work
force, engaged in production cuts, and, in some cases, declared
bankruptcy.
Over the last few weeks, the administration has taken some
important steps to address this problem, including aggressively
enforcing U.S. trade laws. Most recently, the Department of
Commerce preliminarily decided that Japanese, Brazilian, and
Russian producers were dumping hot-rolled steel into the United
States. The Department also announced this week that it has
reached two agreements with Russia to curb steel imports.
One immediate step we can take to address further the
current crises is to ensure that the U.S. Government has
adequate resources. To that end, I am proposing today that
Congress make supplemental appropriations to the Department of
Commerce as soon as possible to ensure that it has adequate
resources to address this problem.
Last week, 14 additional petitions were filed to address
imports of dumped and subsidized steel plate products. This
supplemental appropriation would ensure that the Department of
Commerce has the resources it needs to process these cases
swiftly.
While this step and the Russian agreements and the
antidumping determinations against Japanese and Brazilian steel
will provide some relief to the U.S. industry, the vital
question remains--and we will address it today--whether they
will be enough to resolve the problem. As I see it, there are
three reasons why they are not.
First, for workers, relief is too little, too late. In
important respects, U.S. law is unable to provide U.S.
producers with expeditious relief. To make an effective case
under the antidumping laws, U.S. producers must wait until the
damage is imminent or has already been done. Once a case is
filed, it takes a significant amount of time for relief to be
provided, even with such steps as the critical circumstances
finding which was invoked by the administration. Further,
section 201 has not been used effectively for rapid response to
import surges, even where anticipated.
Second, the response largely has been ad hoc. We now have
provisional measures in place against three countries covering
one group of products, except for the broader agreement with
Russia. While these measures appear to have at least
temporarily stemmed the import surge of these products from
these countries, other countries may step in to fill the gap.
Moreover, with respect to Japan and Brazil, the new dumping
orders cover only specific products; nothing precludes
producers in other countries from shifting production into
other product areas.
Third, the solutions that have been proposed thus far fail
to tackle the broader dilemma facing Congress and the
administration with respect to U.S. trade policy. That dilemma
is whether our existing rules for trade can be applied to and
reconciled with the new environment in which trade operates.
The existing rules for trade in competition were conceived to
address trade among industrialized nations, such as the United
States and Japan. Antidumping and other U.S. trade remedy laws
were designed to respond to factors distorting trade flows
between industrialized nations.
Amo Houghton and I, with others, fought successfully in
Geneva to safeguard U.S. antidumping laws. But, as shown in the
steel crisis, they do not address the more systemic problems of
structural overcapacity, now exacerbated by the increasing
involvement of industrializing nations in informal,
anticompetitive restraints to global steel trade.
Indeed, our existing rules for trade and competition do not
provide an overall workable framework for conducting trade with
industrializing nations. These are countries with very
different capital and labor markets and very different
regulatory environments than our own. With these nations,
differences in producer costs are not attributable mainly to
efficiency but rather to governmental policies and other
factors unlikely, for example, to be captured in an antidumping
analysis.
Nonmarket economies--such as Russia--provide a more extreme
version of the problem of assessing what constitutes fair trade
between countries with divergent market structures. The steel
issue underlines the need for us to work our way through to a
new consensus on trade.
In closing, I would note that there are those who would
characterize taking action on the surge in steel imports and
other broader trade issues as starting down a ``slippery
slope'' to protectionism. They are dead wrong. The danger is
the opposite, that inaction will bring a slide into economic
nationalism. Economic globalization is the wave of the present
and the wave of the future. What we need is not a mindless
internationalism that accepts passively whatever occurs as
automatically better, but an active internationalism that works
to help shape increasing globalization to benefit our standard
of living that, as the President has put it, levels up not
levels down.
[The opening statement follows:]
Opening Statement of Hon. Sander M. Levin, a Representative in Congress
from the State of Michigan
Mr. Chairman, I am glad we decided last month that it
would be useful to hold this hearing. Since then, the steel
issue has become even more important. As we are all aware, over
the last year low-priced imports of steel have flooded the U.S.
market. Although our U.S. steel companies and workers are among
the most modern, efficient low-cost producers in the world,
they have not been able to withstand this deluge. Over 10,000
hard-working steel workers have lost their livelihood as
companies have reduced their workforces, engaged in production
cuts, and in some cases, declared bankruptcy.
Over the last few weeks, the Administration has taken some
important steps to address this problem, including aggressively
enforcing U.S. trade laws. Most recently, the Department of
Commerce preliminarily determined that Japanese, Brazilian and
Russian producers were dumping hot rolled steel into the United
States. The Department also announced this week that it has
reached two agreements with Russia to curb steel imports into
the United States. One immediate step we can take to address
further the current crisis is to ensure that the U.S.
government has adequate resources. To that end, I am today
proposing that Congress make supplemental appropriations to the
Department of Commerce as soon as possible to ensure that it
has adequate resources to address this problem. Last week, 14
additional petitions were filed to address imports of dumped
and subsidized steel plate products. This supplemental
appropriation would ensure that the Department of Commerce has
the resources it needs to process these cases swiftly.
While this step and the Russian agreements and the
antidumping determinations against Japanese and Brazilian steel
will provide some relief to the U.S. industry, the vital
question remains whether they will be enough to resolve the
problem.
As I see it, there are three reasons why they are not.
First, for workers, relief is too little too late. In
important respects, U.S. law is unable to provide U.S.
producers with expeditious relief. To make an effective case
under the antidumping law, U.S. producers must wait until the
damage is imminent or has already been done. Once a case is
filed, it takes a significant amount of time for relief to be
provided even with such steps as the critical circumstances
finding which was invoked by the Administration. Our Section
201 has not been used effectively for rapid response to import
surges even where anticipated. We need to promptly analyze and
learn from this experience with steel.
Second, the response largely has been ad hoc. We now have
provisional measures in place against three countries covering
one group of products, except for the broader agreement with
Russia. While these measures appear to have at least
temporarily stemmed the import surge of these products from
these countries, other countries may step in to fill the gap.
Moreover, with respect to Japan and Brazil, the new dumping
orders cover only specific products. Nothing precludes
producers in those countries from shifting production into
other product areas.
Third, the solutions that have been proposed thus far fail
to tackle the broader dilemma facing Congress and the
Administration with respect to U.S. trade policy. That dilemma
is whether our existing rules for trade can be applied to and
reconciled with the new environment in which trade operates.
The existing rules for trade and competition were conceived to
address trade among industrialized nations, such as the United
States and Japan. Anti-dumping and other U.S. trade remedy laws
were designed to respond to factors distorting trade flows
between industrialized nations. Amo Houghton and I, with
others, fought successfully in Geneva to safeguard U.S. anti-
dumping laws. But, as shown in the steel crisis, they do not
address the more systemic problems of structural overcapacity,
now exacerbated by the increasing involvement of
industrializing nations, and informal anti-competitive
restraints to global steel trade.
Indeed, our existing rules for trade and competition do
not provide an over-all workable framework for conducting trade
with industrializing nations. These are countries with very
different capital and labor markets, and regulatory
environments than our own. With these nations, differences in
producers' costs are not attributable mainly to efficiency, but
rather, to government policies and other external factors
unlikely, for example, to be captured in an antidumping
analysis. Non market economies such as Russia present a more
extreme version of the problem of assessing what constitutes
fair trade between countries with divergent market structures.
The steel issue underlines the need for us to work our way
through to a new consensus on trade. This new consensus must
address both the harder to define barriers to trade that plague
our relations with our traditional trade partners, as well as
the special problems that arise in the context of trade with
developing nations.
In closing, I would note that there are those who would
characterize taking action on the surge in steel imports and
other broader trade issues as starting down a slippery slope to
``protectionism.'' They are dead wrong. The danger is the
opposite--that inaction will bring a slide into economic
nationalism. Economic globalization is the wave of the present
and of the future. What we need is not a mindless
internationalism that accepts passively whatever occurs as
automatically better, but an active internationalism that works
to help shape increasing globalization to benefit our standard
of living...that as the President has put it, ``levels up, not
levels down.''
Mr. Levin. I would now like to yield briefly, if I might,
to the gentleman from Pennsylvania, our good friend,
Representative Coyne.
Mr. Coyne. Thank you very much. First of all, I want to
thank Chairman Crane and Chairman Houghton and yourself, Mr.
Levin, for having given us the opportunity to examine the steel
dumping problem in this hearing today. Few trade issues rise to
the importance of steel dumping for the United States. The
surge in foreign steel imports has seriously damaged the U.S.
steel industry and put thousands of American steelworkers out
of work.
Today's hearings are being held because of the dramatic
increase in steel imports since July 1997. Imports of steel
mill products increased by more than 32 percent between 1997
and 1998 and imports of hot-rolled steel products increased by
nearly 75 percent over that 1-year period. Commerce Department
figures released on January 28 indicated that steel imports
declined dramatically in December 1998. Those preliminary
figures indicated that steel imports dropped 32 percent from
November's levels. Hot-rolled steel products, apparently,
dropped even more between November and December.
But, that begs the question of whether there has been a
dumping problem and whether that dumping has hurt American
steelworkers and steel producers. Today, I hope we will hear
more about the problems associated with dumping steel into the
United States and also hear about some proposed solutions.
Thank you very much.
Chairman Crane. I now would like to yield to Mr. Houghton,
who serves as Chairman of the Ways and Means Oversight
Subcommittee, to make a brief opening statement.
Mr. Houghton. Thank you very much, Mr. Chairman. I also
want to thank you very much for having this hearing.
I am not going to dwell on my own particular feelings and
philosophies here but I would like to make just a couple of
points.
We certainly don't want to abrogate our responsibility with
the WTO, World Trade Organization, and we certainly don't want
to give a signal to other people that we are sort of drawing
back into ourselves. But, at the same time, as we all know,
freedom is only freedom as we are willing to give up some of it
and that means to have some discipline. And that means that
there is sort of a quid pro quo and the concept of free trade
is that it doesn't always have to be in balance but it has to
be nearly in balance and we don't want to have the totally
``beggar thy neighbor'' philosophy.
Second, I guess we all know--because we live here--the most
important asset we have is our market and we have got to
protect that market. And, if we don't, nobody else is because
other people are protecting their markets.
The third point is, this morning, Mr. Coyne and I had a
hearing here on the oil patch problem. It's not identical but
it is almost similar. Here is an industry of independent
producers doing a great job. The costs are low, the service is
good, the quality is fine, they are producing lots of jobs and,
all of a sudden, they are just closing down one after the other
after the other. Now, do we have a responsibility here? I
really think we do.
One of the things that has always bothered me--and we can
talk to Ambassador Barshefsky later on--is that there hasn't
been a single 201 case filed recently. This is not a 301 or a
dumping case. This is the industry that is going out. Now, you
can say, well, in a sort of macro sense, intellectual sense,
that really isn't important because there is sort of a forced
obsolescence here. Not so. I don't believe that at all.
I have been in an industry where the same thing almost
happened to me and when people are going out of work and they
are doing the best they can, that is when the U.S. Government
has got to step in to help.
And I think the thing, Mr. Chairman, just in final, is that
we have got to be sure we don't end up in this country--
particularly in areas like steel--as the warehouse for a good
we can't even afford to buy. So, I thank you very much and I
appreciate the opportunity to let me talk.
Mr. Levin. Mr. Crane, if I might yield briefly to Mr.
McNulty?
Chairman Crane. Certainly.
Mr. McNulty. Thank you, Mr. Levin, Mr. Chairman, and my
colleagues. I want to express my deep concern about the crisis
facing the American steel industry.
The continued dumping of steel is causing tremendous harm
to the industry and forcing huge layoffs of hard-working U.S.
steelworkers. Over 10,000 steelworkers had been laid off in the
past year as a result of the flood of underpriced steel coming
into the United States.
As we all know, America was built on the backs of laborers.
We cannot turn our backs on them now. Although the actions
taken by the steel industry and the administration have caused
the amount of dumped steel to drop, more needs to be done. We
need to be firm and make it very clear to our competitors that
we will not tolerate illegal dumping of any kind.
American steel companies and organized labor have worked
very hard over the last decade to restructure and to restore
the integrity of this important industry. We cannot allow these
sacrifices to be in vain.
Mr. Chairman, I am a cosponsor of Representative
Visclosky's bill to reduce steel imports to 25 percent of the
U.S. market. That is the level that prevailed in July 1997
before the illegal dumping began. I hope that this Subcommittee
will adopt this measure in the near future.
Given the Nation's strong economy, now is the time to
deepen our commitment to ensuring that working families keep
the well-paying jobs they deserve. Thank you, Mr. Chairman and
thank you, Mr. Levin.
[The opening statement follows:]
Opening Statement of Hon. Michael R. McNulty, a Representative in
Congress from the State of New York
Mr. Chairman, I want to express my deep concern about the
crisis facing our American steel industry. The continued
dumping of steel is causing tremendous harm to the industry and
forcing huge lay-offs of hard-working U.S. steel workers. Over
10,000 steel workers have been laid off in the past year as the
result of the flood of under-priced steel coming into the
United States.
As we all know, America was built on the backs of
laborers. We cannot turn our backs on them now.
Although the actions taken by the steel industry and the
Administration have caused the amount of dumped steel to drop,
more needs to be done. We need to be firm and make it very
clear to our competitors that we will not tolerate illegal
dumping of any kind.
American steel companies and organized labor have worked
very hard over the last decade to restructure and to restore
the integrity of this important industry. We cannot allow these
sacrifices to be in vain.
I am a co-sponsor of Rep. Visclosky's bill to reduce steel
imports to 25 percent of the U.S. market. That is the level
that prevailed in July 1997--before the illegal dumping began.
I hope this committee will adopt this measure in the near
future.
Given the Nation's strong economy, now is the time to
deepen our commitment to ensuring that working families keep
the well-paying jobs they deserve.
Chairman Crane. Thank you all.
We have a very full witness list today and I would like to
inform all of our witnesses that we will be strictly enforcing
the 5-minute rule. Longer written statements will be made a
part of the printed record of the hearing.
Because of the length of the hearing and the number of
Members interested in testifying, we are using a special
procedure today. We will ask the first Member panel to testify
and then retire to the witness chairs, located directly behind
the witness table. After the second Member panel is finished,
there will be a question and answer period for both panels and,
should you be called upon to answer questions, please move to
the chair located to the left of the panel table. Please
identify yourself for the hearing record before responding and
the remaining panels will proceed as usual.
And, with that, I would like first to turn to Senator
Specter for his presentation and let me remind all the
witnesses that that little light out there gives you a reading.
When it turns green, that means proceed. When it turns yellow,
that means be on your guard. When it turns red, that means wrap
it up. Any of your printed statements will be made a part of
the permanent record. The lights help you stay on schedule and
I know Senator Specter can't stay for questions and answers
because he has another commitment and so we shall proceed with
you, Senator.
STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM THE STATE
OF PENNSYLVANIA
Senator Specter. Thank you very much, Mr. Chairman. I
commend you and this distinguished Subcommittee for focusing on
this critical problem.
Within the tight time limits, I shall not review the crisis
being caused by dumped steel but would focus solely on a
legislative remedy for which I have been pressing since I
introduced legislation in the Senate some 17 years ago on March
4, 1982, which provides for a private right of action in the
Federal court to get judicial relief where there is a violation
of our trade laws.
There is no doubt that the steel coming in from Russia,
Korea, Brazil and other countries violates U.S. trade laws and
violates GATT, the General Agreement on Tariffs and Trade. The
procedures which are available within the executive branch are
much too slow. Cases filed in September will not be heard for
months and then there may be some retroactive application to
duties and, even there, it is subject to change, as, for
example, with the proposed agreement with Russia where even
that meager remedy is not being enforced.
We know that the administration focuses on foreign policy
and on defense policy and it is an open secret that American
industry has been sacrificed for those objectives. Judicial
remedies, however, would provide for legal enforcement and I
refer to the opportunities to go into a court of equity. If you
file a legal action in Federal court on affidavit, it is even
possible to get ex parte relief. If that is done on the
application of one side without the other even being present,
then there has to be a hearing on a preliminary injunction
within 5 days. And there is an opportunity to present evidence
and for the defense to present evidence.
You may be able to get a preliminary injunction in a matter
of days. From then, there is a hearing on a permanent
injunction. And then, if the dumpers are found against, there
are very stiff bonds which have to be filed pending appeal so
that instead of having a very long process administratively--
which takes months--it is possible to have judicial enforcement
in a matter of days through equitable procedures.
The original legislation which I have produced called for
injunctive relief and there is some opinion to the effect that
that is not consistent with GATT. But, there is no doubt that a
court of equity could impose duties, which is entirely GATT-
consistent. And, my idea of picking a remedy--which has been
proposed by Senator DeWine in different legislation--is that
those duties ought to be paid to the damaged parties, to the
steelworkers who have lost their jobs and to the steel
companies which, after enormous capital investments, have been
pilloried by this dumped steel.
It is absolutely insufficient to have procedures which take
months where steelworkers lose jobs which they cannot reclaim,
where markets are lost which cannot be reclaimed, and I ask
you--while my yellow light is still pending--to take a very
close look at this equitable relief which would provide an
immediate answer--not from what the executive wishes to do
motivated by the collateral considerations of foreign policy
and defense policy but judicial relief to enforce the law.
Thank you very much.
Chairman Crane. Thank you, Senator, and out of deference to
your schedule, unless you are willing to accept some quick
questions here before we bring forward the rest of our first
panel----
Senator Specter. I would be glad to, Mr. Chairman, and I
would even commit to quick answers.
Chairman Crane. All right.
Mr. Houghton.
Mr. Houghton. Well, so, how would this work? What you are
trying to do is to substitute a 301 action or a super-301
action----
Senator Specter. Correct.
Mr. Houghton [continuing]. Or something in the private
right of action? Just spell it out. What happens, how is it
GATT-consistent, and how long does it take?
Senator Specter. It would work by having the injured
party--steelworkers or the company--file a case in equity. A
similar case has been filed by Wheeling, Pittsburgh in the
State courts of Ohio, since removed to the Federal courts.
When an equity action is filed, you can ask for what is
called ex parte relief--that means on one party even without
the defendant being present where there is an emergency on the
filing of affidavits. If that relief is granted, there has to
be a preliminary injunction hearing within 5 days. You might go
straight to an injunction hearing without ex parte relief and
that can be done in a matter of days. Then, the judge hears the
evidence and the evidence of dumping is overwhelming--there
really is no defense--and then an injunction would be issued.
When we come to GATT, the opinions differ as to whether you
can get an injunction which says, no more steel. It stops at
that point. But, it is consistent with GATT beyond any question
to impose a duty so the Federal judge would find dumping and
then would find the remedy to impose a duty on any steel which
comes in after that finding. And those funds, instead of going
to the Treasury, would go to the damaged parties--the
steelworkers or the company.
Mr. Houghton. Can I ask just one other question?
It is a very appealing motion because when you go through a
301 proceeding, it's years and years before you get anything
accomplished. I don't know whether it is true or not but the
question is, don't you lay yourself open to a problem with
other countries being able to create their own laws, their own
standards in doing the same thing for products such as ours
moving in on an export basis into that country?
Senator Specter. Do we raise the risk of having other
countries----
Mr. Houghton. Fine.
Senator Specter [continuing]. Retaliate? Yes, but so far,
the Japanese are the past masters at closing their markets in a
variety of ways, as are the other countries. And, free trade
seems to be only the province of the United States to allow
other countries to come in and dump in the United States. I
think that is a risk but a minimal risk compared to the damage
which is currently being sustained by the dumping.
Mr. Houghton. I think I am a good, straight man, Mr.
Chairman. Thanks very much for----
Chairman Crane. Thank you----
Mr. Houghton. OK.
Chairman Crane [continuing]. Congressman Houghton.
Mr. Levin.
Mr. Levin. Senator, your proposal has been around a long
time but it's more cogent, I think, than ever. The
administration acted quickly under our present laws and
aggressively and, indeed, I think that shows there is an issue
of timeliness that your proposal seeks to address. The horse is
too long out of the barn--the steel horse, in this case.
So, I hope we can work together to see if we can find a
way--and yours is one alternative--to be able to move faster
before thousands of jobs are lost and companies are in
bankruptcy because you can't revive them. And, you also put
your finger on the problem of where these duties go and I think
we need to address the issue of why don't actions that we take
accrue to the benefit of those people who were most hurt. So,
I, for one, welcome your reraising your proposal and let us
dedicate ourselves to addressing the issue that you discussed
and I discussed in my opening statement, one of the issues
here, timeliness.
Senator Specter. Well, thank you very much, Congressman
Levin, for your comments. This legislation had been pressed. We
came as close to a 51-to-47 vote in the eighties on this
legislation but it has never been pursued successfully because
of administration opposition. But, with the crisis which is
present now I think the scene is set to get it done and the
administration has other weapons at its disposal which they are
not willing to activate because of concern for the economy of
Russia and the economy of Brazil, and so forth.
I do not believe in criticizing the administration because
it sounds political coming from a Republican but I can tell you
we had a steel caucus hearing in Pittsburgh on Thursday. I
chair the caucus on the Senate side, Congressman Regula is here
from the House side, and Senator Rockefeller is the vice
chairman and I would only have to quote Senator Rockefeller in
his denunciation of what the administration has done. We really
need to take it out of the hands of executive discretion--which
is concern about foreign policy, defense policy, and
international issues--and put it in the courts where you get
enforcement of the laws.
Mr. Levin. To finish, I am not sure what process will allow
us to be expeditious. We may well need a process that takes
into account all factors. But, the problem is that even when
there is action under present law, it's very likely. So, let us
work together to see if we can find an approach that will be
timely.
Senator Specter. I will be delighted to do that,
Congressman Levin.
Chairman Crane. Thank you very much, Senator Specter. We
appreciate your testimony, we are sorry for your schedule and--
--
Senator Specter. Well, thank you very much for
accommodating the schedule. Thank you----
Chairman Crane. Well, you are more than welcome----
Senator Specter [continuing]. For conducting the hearing.
Chairman Crane [continuing]. And let me now, then, call the
remainder of our first panel to collectively come up and take
seats. And that's Hon. Ben Cardin, Hon. Phil English, Hon.
Ralph Regula, Hon. John Murtha, Hon. Peter Visclosky, Hon. Jim
Traficant, and Hon. Jim Greenwood.
And, if you gentlemen will please take seats, we will
proceed in the order that I called you up. I think you may have
names--well, I guess the name tags are going up now.
But, I would remind everyone again to keep your eye on the
lights there and keep your presentations, please, to 5 minutes
or less, and any printed remarks will be made a part of the
permanent record. With that--let us see, is Ben here?
Well, then, we will start with Phil English.
STATEMENT OF HON. PHIL ENGLISH, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF PENNSYLVANIA
Mr. English. Thank you, Mr. Chairman. I want to thank the
fellow Members of the Ways and Means Committee, and especially
you, Mr. Chairman, for the opportunity to testify here today
and your prompt willingness to schedule this hearing at our
request.
I will leave the bulk of my comments to be printed in the
record but I would like to make a few points while I may.
Mr. Chairman, American steel is facing a crisis which,
without immediate action from the Federal Government, is
threatening to devour a significant part of the industry. The
domestic steel market has been flooded by imported products
pouring in from Asia, Russia, and Latin America, swamping more
efficient American producers and drowning thousands of jobs.
This tsunami threatens to wash away a strategic industry that
has been a keystone of our manufacturing sector for
generations, and nowhere more so than in my part of western
Pennsylvania, where the Bessemer process was first perfected in
the last century.
Today, American steel jobs are threatened by illegal
foreign imports as our trade competitors attempt to unload the
consequences of their failed economic policies on American
companies and workers. I predict the bad news will get
increasingly worse, as other manufacturing sectors face similar
unfair competition as foreign producers target lucrative U.S.
markets, causing rolling depressions that sweep away industry
after industry. The time has come for Washington to stand up
for steel, and insist on a level playingfield for American
producers.
Mr. Chairman, the question before us today is this: What
can Congress do to stop the current steel crisis and reduce the
possibility of another crisis that could be devastating to the
industry and its workers? I firmly argue that we need
legislative action. There are several major areas that can be
effectively addressed by legislation if we act quickly.
We need to start by strengthening our ability to deal with
import surges. By bringing U.S. standards in line with the WTO
``Safeguards Agreement,'' we can make laws which have been on
the books for years--such as section 201 of the Trade Act--more
effective and easier to use.
Second, we need to establish a strong tracking system to
monitor imports. Many of our trading partners already have
systems for this purpose in place. I suggest a steel import
notification and monitoring system that would allow the U.S.
Government to receive and analyze critical import data in a
more timely manner and allow industry to determine more quickly
whether unfair imports are disrupting the market.
We should consider strengthening our antidumping and
countervailing duty laws and, given the current situation, I
believe the United States needs to put pressure on our trading
partners to curb their exports into our market. Negotiated
Voluntary Restraint Agreements are one possible method the
administration can use to accomplish that result.
I believe that we should also take a look at legislation
similar to what Representative Visclosky has introduced to
consider providing quotas under certain circumstances. In
addition, we should look for ways we can limit the effect that
foreign cartels of steel producers have on our ability to
export U.S.-made steel products. It is apparent that cartel
activity in foreign countries is not only creating an unlevel
playingfield for our producers but may, in fact, be leading to
increasing instances of dumping into the U.S. market. We should
also strengthen Trade Adjustment Assistance.
Mr. Chairman, in closing, any time an American loses their
job, it's a tragedy. But, in the steel valleys and mills across
our country, this tragedy has been replayed thousands of times
in just the past few months. The administration has been
unwilling to act. No wonder our communities are demanding
action from us--strong action necessary to stop this tragedy
and prevent the theft of our jobs by illegal imports.
Let me make it clear. The choice we face today is not
between free markets on the one hand and protectionist barriers
on the other. The choice today is whether we have the will to
take appropriate action--such as I have outlined here--to
prevent the victimization of our economy by predatory exporters
determined to pursue a mercantilistic economic policy at the
expense of our workers. We need to take action now and I
appreciate the opportunity to testify today.
[The prepared statement follows:]
Statement of Hon. Phil English, a Representative in Congress from the
State of Pennsylvania
Introduction
America's steel industry is the most efficient, competitive
and technologically advanced in the world. Our domestic steel
producers have long since shed the inefficiencies that plagued
the industry in decades past. American steel companies are
capital intensive and internationally competitive.
Nevertheless, American steel is facing a crisis which,
without immediate action from the federal government, is
threatening to devour a significant part of the industry. The
domestic steel market has been flooded by imported products
pouring in from Asia, Russia and Latin American, swamping more
efficient American producers and drowning thousands of jobs.
This tsunami threatens to wash away a strategic industry that
has been a keystone of our manufacturing sector for
generations, and nowhere more than in my part of western
Pennsylvania, where the Bessemer process was first perfected in
the last century.
Today, American steel jobs are threatened by illegal
foreign imports as our trade competitors attempt to unload the
consequences of their failed economic policies on American
companies and workers. And I predict the bad news will get
worse. Increasingly, other manufacturing sectors face similar
unfair competition as foreign producers target lucrative U.S.
markets, causing rolling depressions that sweep away industry
after industry.
The time has come for Washington to stand up for steel, and
insist on a level playing field for American producers.
Background
The American steel industry is facing a crisis due to an
immense surge of illegally dumped and subsidized foreign steel
imports. Since mid 1997, many foreign markets have been rocked
by economic and financial crises. One consequence of these
financial crises has been the significant drop in demand for
steel products in foreign markets. When combined with
preexisting overcapacity and subsidized foreign producers, the
drying up of foreign demand for steel has led many countries to
attempt to illegally unload their excess steel onto the U.S.
market.
Since the 1980s the American steel industry has reinvented
itself as one of the most efficient, most competitive in the
world. Through sacrifice by the industry and its workers,
streamlining and investments, the U.S. steel industry has
nearly tripled productivity. The new U.S. steel industry can
compete against anyone in the world. The sad part of this story
is that our industry plays by the rules and has restructured
itself to be a model of economic efficiency. It is only through
illegal and unfair trading practices that foreign producers
have been able to undercut U.S. producers.
Import volumes in 1998 reached record levels, surging 33
percent over 1997. And 1997 was itself a record year for steel
imports. Imports have surged over a wide variety of product
lines. We have recently seen, in response to trade cases filed
by the industry and unions, a decline in certain products that
are subject to duties that would be imposed by the final
disposition of the cases. But steel is still flowing in massive
quantities from countries not covered and in the form of
products not listed by the cases. Also it is entirely possible
that imports have declined temporarily because we're simply out
of storage space at U.S. ports.
This crisis is precisely the reason why the Congressional
Steel Caucus, Republicans and Democrats together, have been
urging the Administration to use all of the tools at its
disposal under our trade laws to take decisive action to
address this crisis. So far, we have all been disappointed by
the Administration's general lack of concrete, effective
action.
Mr. Chairman, the question before us today is this: What
can Congress do to stop the current steel crisis and reduce the
possibility of another crisis that could be devastating to the
industry and its workers?
I firmly believe that we need legislative action. There are
several major areas that can be effectively addressed by
legislation if we act quickly.
Section 201
We need to start by strengthening our ability to deal with
import surges. By bringing U.S. standards in line with the WTO
``Safeguards Agreement,'' we can make laws which have been on
our books for years, such as Section 201 of the Trade Act, more
effective and easier to use. U.S. standards for proving injury
are currently more strict than required by the World Trade
Organization. With these changes, the industry or the
Administration will be able to challenge unfair trading
activities by foreign competitors in a more timely fashion.
Import Monitoring
Secondly, we need to establish a strong tracking system to
monitor imports. Many of our trading partners already have
systems for this purpose in place. I suggest a steel import
notification and monitoring system, which is modeled on similar
systems currently in use by our largest trading partners,
Canada and Mexico, that would allow the U.S. government to
receive and analyze critical import data in a more timely
manner and allow industry to determine more quickly whether
unfair imports are disrupting the market.
Anti-dumping
We should consider strengthening our anti-dumping and
countervailing duty (AD/CVD) laws. We can bring the injury
thresholds in line with international standards to allow
workers and companies adequate remedies when it is proven that
our trading partners are trading unfairly. One aspect of the
AD/CVD laws that can be improved is the consideration of
currency devaluations. Currency devaluations can have the
effect of ``robbing'' the value of sanctions imposed and allow
dumpers to avoid the penalties they should legally face.
Voluntary Restraint Agreements (VRAs)
Given the current situation, I believe that the United
States needs to put pressure on our trading partners to curb
their exports into our market. Negotiated Voluntary Restraint
Agreements (VRAs) are one possible method the administration
can use to accomplish this result.
We need to be careful, however, that we do not end up
rewarding destructive and illegal actions by our trading
partners. For an example of how this might happen, think of a
horse thief who sneaks into a barn which has 10 horses in it. I
am concerned that in some instances, VRAs are being used to
limit the theft to just 3 horses once he is caught in the act
of stealing.
It is critical to allow the anti-dumping suits which have
been filed in accordance with our trade laws to run their
course and come to fruition. Only then can we expose illegal
dumpers to the full weight of the law. The concept of a level
playing field and our ``rules-based trading system'' depends on
this. VRAs should be used as an additional tool which can
supplement the remedies allowed for under our anti-dumping
laws, NOT as an alternative that weakens anti-dumping
sanctions.
Russian Agreement
In this light, the recently announced agreement with Russia
gives reason for concern. In addition to short-circuiting the
legal process of proving dumping and imposing sanctions against
violators of the trade laws, the agreement would cede a large
part of our market to one of the most inefficient steel
producers in the world.
H.R. 412 as the basis
To those of you who have been following the introduction of
steel related legislation in this Congress, you will probably
recognize the first two points of my suggested legislative
action as the components of a bill introduced by my colleague,
Rep. Ralph Regula, who has most ably led this fight as Chairman
of the Congressional Steel Caucus. I believe that his bill,
H.R. 412 should be the basis for legislation that should be
considered by the House of Representatives. The strengthening
of our ability to enforce our trade laws and effectively
monitor our imports is critical to ensuring that this crisis
does not worsen and that a similar future crisis can be
forestalled.
Rep. Regula's bill would make it easier for the President
to impose duties, impose a tariff-rate quota system, or impose
quantitative restrictions under section 201 in a way that is
fully consistent with our WTO obligations and the WTO
``Safeguards Agreement.''
This approach is completely ``WTO compliant'' and can
hardly be colored as sending any sort of protectionist
signal(s) to our trading partners.
To this base legislation we should seriously consider
adding several other elements:
H.R. 506
I am a cosponsor of H.R. 506, introduced by Congressman
Peter Visclosky and cosponsored by over 170 members of the
House. Language similar to Rep. Visclosky's bill reducing the
burden of imports into our market to pre-crisis levels will
help to limit the damage done to communities, workers, and
firms in the U.S. steel industry in the short term.
Cartels
Additionally, we should look for ways we can limit the
effect that foreign cartels of steel producers have on our
ability to export U.S. made steel products. It is apparent that
cartel activity in foreign countries is not only creating an
unlevel playing field for our producers but may in fact be
leading to increasing instances of dumping into the U.S.
market.
TAA
Finally, I think that it is important that the
certification requirements for steel industry workers applying
for benefits under the Trade Adjustment Assistance program be
relaxed to parallel the requirements for the NAFTA transitional
adjustment assistance program. This small change would be a big
help in allowing workers whose jobs were disrupted by surges in
imports to obtain benefits under this valuable program.
Closing
Anytime an American loses their job it is a tragedy. But in
the steel valleys and mills across our country this tragedy has
been replayed thousands of times over in just the past few
months. The Administration has been unwilling to act. No wonder
our communities and districts are looking to Congress to take
the strong action necessary to stop this tragedy and prevent
the theft of our jobs by illegal imports.
I want to be clear. The choice we face today is not between
free markets on the one hand and protectionist barriers on the
other. The choice today is whether we have the will to take
appropriate action, such as I have outlined here, to prevent
the victimization of our economy by predatory exporters
determined to pursue a mercantilistic economic policy at the
expense of our workers. Unfortunately, nations sometimes try to
take unfair advantage of their trading partners. Companies may
attempt to benefit--at the expense of their legitimate
competitors--from unfair and often disguised subsidies. When
that happens it is the job of government to step in and ensure
a level playing field where competition--which benefits us
all--can survive. Now is such a time for government action. I
hope this committee will answer our call and restore fairness
for American steel producers. Thank you.
Chairman Crane. Thank you, Mr. English, and now, Mr.
Cardin.
STATEMENT OF HON. BENJAMIN L. CARDIN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MARYLAND
Mr. Cardin. Thank you, Chairman Crane and Mr. Levin and the
other Members of the Subcommittee. I appreciate this
opportunity of testifying before this Subcommittee.
I would ask that my full statement be made part of the
record.
Chairman Crane. Without objection, so ordered.
Mr. Cardin. I have the honor of representing the 3d
Congressional District of Maryland. I represent many of the
steelworkers who work at Bethlehem Steel at Sparrow's Point.
They are amply represented by their locals--2610, 4727, and
9084--and many of them have been to visit with you. You know
firsthand their problems.
Let me underscore what has happened. Now, I understand the
last month or two might have shown some improvements on steel
imports. But what we saw between 1997 and 1998, for example,
was an increase of 162 percent--going from 7.4 percent of the
U.S. market to 15.8 percent of the U.S. market in 1 year. That
occurred because of illegal dumping of steel. There is no
question about that.
Now, Mr. Chairman, I have been in government long enough to
remember the problems of U.S. steel production. We were not
competitive internationally during the seventies and the
eighties and the steelworkers and the steel companies made the
adjustments necessary to become competitive. At Sparrow's
Point, we can compete on a level playingfield with any steel
producer in any country in the world. We couldn't do that in
the seventies, but we can do it today if we have a fair
playingfield.
What's happening right now is not fair. The steelworkers
are losing their jobs and we are losing our capacity in this
country to produce steel. That is not right. It is time for
action. There are those who say: Well, just wait and let the
normal trade process work. If we do that, we are going to lose
steel production in the United States unfairly. It is time for
us to move legislation now.
I support the Visclosky bill, H.R. 506, as a way to move
this issue forward. It is time for us to help the distressed
steelworkers in this country. It is time for us to help the
steel companies in this country maintain their production. When
they are competitive and on a level playingfield, they will be
able to do that.
So, I urge the Subcommittee to act soon. Let us bring a
bill to the floor and let us move legislation. Thank you, Mr.
Chairman.
[The prepared statement follows:]
Statement of Hon. Benjamin L. Cardin, a Representative in Congress from
the State of Maryland
Mr. Chairman and distinguished members of the Ways and
Means Subcommittee on Trade:
I applaud your efforts here today on steel dumping and look
forward to an open debate on this troubling issue.
I represent many of the 4,600 men and women who work at
Bethlehem Steel's Sparrows Point Division in Baltimore. They
are very ably represented by locals 2610, 4727, and 9084. I say
that because I, like many of you, have had the chance to meet
with many of these workers and their union leaders in the last
six months--in my office and around the district. They have
painted a compelling and disturbing picture of the state of the
industry in the wake of these unfair dumping practices.
Mr Chairman, these people are frightened and frustrated.
Although no jobs have been lost yet at Sparrows Point, there
has been a slowdown at the plant and the fourth quarter
financial report from the company was especially bleak.
Bethlehem Steel, as my friend Hank Barnette will attest, is
clearly hurting.
And, to be blunt, the workers who have taken time to visit
my office are furious. They are furious at the inaction of
their government in the face of a foreign invasion. They are
furious that 10,000 fellow steelworkers are already out of
work. They are furious because they realize they're next. They
are furious but they won't go quietly. And I think the House
Steel Caucus has made it clear that Congress won't sit quietly
either.
It is hard to argue with this fury when you consider the
numbers and the facts. U.S. imports of steel from Japan jumped
nearly 162-percent from 1997 to 1998. In 1998, Japan exported
to the US a staggering 385-percent more steel mill products
than it did in 1997, according to new statistics from the
Commerce Department. It is no surprise that Japan's share of
the US market for imported steel also jumped dramatically--from
7.4 percent to 15.8 percent.
At Sparrows Point in Baltimore, they experienced a 20-
percent drop in hot-and cold-rolled steel from June 1997 to
November 1998. During that same time, the plant weathered a 25-
percent decrease in realized prices. Although they have avoided
layoffs, plant officials say they can't operate at these levels
for too long without them.
I contend that the American steel industry took the lumps
it deserved in the 1970s and 80s and managed to reemerge
stronger and more profitable because of it. Since 1985, there
has been a $1 billion investment in the Sparrows Point
facility. I began my career here in Congress just as this
revitalized plant and industry returned to the fore in 1988.
But I also remember the darkness before the dawn. As
Speaker of the House in the Maryland General Assembly
throughout the 1980s, I remember that painful process for Beth
Steel and the steel industry as a whole. Between 1977 and 1987,
45 million tons of steelmaking capacity was lost due to
bankruptcies, plant closures, and partial closures. Employment
dropped 57-percent from 442,000 to 188,000 jobs, and the wages
and benefits of those workers who survived were substantially
cut as well.
The industry had let itself lag behind other countries,
failing to adopt new techniques and practices until these
techniques and practices themselves were out of date. The
industry needed to change and a revitalized international steel
industry did just that.
But, Mr. Chairman, we can't blame the US steel industry for
the problems it faces today. And one month declines in the
levels of steel imports are nice; but I fear them to be the
streaks of a false dawn.
I am a supporter of HR 506 and congratulate Rep. Peter
Visclosky for his work on its behalf. The bill is simple
because the problem is relatively simple. An avalanche of steel
dumping began last summer; HR 506 would return import levels to
what they were pre-July 1998. Let's all go back to the same
level field we were all competing on. Let's get off this tilted
track before it's too late.
I appreciate the complexity of the financial crisis in Asia
which many agree prompted this glut of imports. I appreciate
the work of Treasury Secretary Rubin in minimizing the effects
of global economic problems on the US. I appreciate the
distress of steel workers all over Asia, South America and
Russia. But quite frankly I am concerned about the effects of
steel dumping on our economy. A recent report from the Economic
Strategy Institute makes it clear that the long term negative
effects of steel dumping--lost production, investment and high
wage jobs--easily outweigh the short term benefits of cheaper
steel.
And I am most concerned about the distressed steelworkers
at Beth Steel and all over the US. They are my primary
responsibility--they are our primary responsibility--and we
have to do more for them. I am equally concerned about the
future capacity to produce steel in the US.
This industry has been sending us SOS signals for months. A
full hearing on this bill and its consideration by the full
House would help us convince them and the American public that
we hear their calls.
Thank you.
Chairman Crane. Thank you, Mr. Cardin.
Mr. Regula.
STATEMENT OF HON. RALPH REGULA, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF OHIO
Mr. Regula. Thank you, Mr. Chairman. First of all, I would
like to ask unanimous consent to enter the statement of Jack
Quinn in the record. He cannot be here today. So, I will submit
that and also ask unanimous consent to put my statement in the
record and I will summarize that statement.
I know that you have a lot of witnesses. I will try to keep
my remarks very brief.
It goes without saying that there is a problem. We all
agree on that. The issue is how to solve the problem. You have
a number of options that will be available to you.
I have one option that I think is constructive and that is
H.R. 412. We have approximately 50 sponsors for this bill. It
is important in that it does not violate our international
trade agreements. It is totally compatible with the WTO
requirements. I think that is an important element.
Second, it would permit the establishment of something
comparable to the VRAs, Voluntary Restraint Agreements, that
worked so effectively in the eighties. Congressman Murtha and I
were very involved in getting the VRAs put in place and, as a
result of the VRAs--which this Subcommittee supported--we have
allowed the steel industry in the United States to become
probably the most efficient, the most quality-conscious, and
the most productive in the world today. And, in the process,
labor, management, and government worked as a team.
One result of this modernizing effort was significant
downsizing. Jobs in the steel industry have gone from 440,000
to 180,000. Industry and labor have worked together on this
modernizing effort. Industry invested $50 billion in new plants
and equipment. So, it's not a case that the management and
labor have not worked together as a team and, likewise,
government was a party to the effort in establishing the VRAs.
Now we are faced with a crisis again--not because we don't
have quality, not because we are not competitive, not because
we don't have the most efficient steel industry, but because
product is being dumped in our marketplace to get access to
hard currency and to export unemployment in other countries to
us. That's not fair.
In the President's report of January 7 produced as a result
of a congressional request, it says ``free and fair rules-based
trade is essential for both global economic recovery and for
U.S. prosperity.'' I think that establishes the benchmark that
we want to achieve.
What H.R. 412 does is change the standard on section 201.
It eliminates the term ``substantial'' because if you look in
the dictionary, ``substantial'' is very large. So, what we have
proposed to do is to make the standard compatible with WTO
rules. We want an effective tool for the President to deal with
the current crisis that has resulted in a loss of 10,000 jobs,
and 3 companies in bankruptcy.
And, I would point out that the other feature of this bill
is that it does establish an import permit and monitoring
program. Such a program was suggested earlier as something that
would be very important in receiving timely import data.
So, I think this bill--maybe combined with elements that
are in other bills before this Subcommittee--will provide
effective tools to address a very serious threat to the steel-
producing unions, the management and to the United States. This
crisis is a threat even to our defense capability because a
viable steel industry is an important asset of any nation.
I thank you, Mr. Chairman, for holding the hearing and I
look forward to action by your Subcommittee.
[The prepared statement follows:]
Statement of Hon. Ralph Regula, a Representative in Congress from the
State of Ohio
Mr. Chairman, Congressman Levin and Members of the
Subcommittee, I want to thank you for scheduling this important
hearing on steel trade issues. As Chairman of the Congressional
Steel Caucus, I became concerned about the serious impact that
the dramatic surge of steel imports was having on the steel
industry and steel workers last September when the Steel Caucus
held two days of briefings on this subject. The Caucus heard
from CEO's from the large integrated companies, from the
President of the United Steelworkers, and from CEO's
representing the mini-mills, the specialty steel companies, and
pipe and tube manufacturers.
The message from all, at that time, was that steel imports
were pouring into the U.S. at unprecedented levels and that
prices of these imports were extremely low. This surge of
imports at very low prices was threatening the health of the
industry and the jobs of its workers.
This became a fact after the following data was finally
made available to the public. Steel imports from July through
November 1998 were at all-time record levels:
in July 4 million net tons of steel entered the
U.S.;
in August 4.4 million net tons;
in September 3.8 million net tons;
in October 4.1 million tons;
and, in November 4 million net tons.
Although imports did decline somewhat in December of 1998
because of the impact of the preliminary determinations in the
hot-rolled steel trade cases, the level of December steel
imports was still 30 percent higher than a year before. And we
ended 1998 with the highest level of imports ever--41.5 million
net tons of steel mill products, which represents a 33 percent
increase over 1997, which was also a record year.
These unprecedented levels of steel imports continue to
threaten the health of an industry and the well-paying jobs of
its workers. Since the import crisis began, over 10,000 steel
jobs have been lost according to the Administration's steel
report. Three companies have filed for bankruptcy protection.
Other workers find themselves subject to short work weeks and
on temporary lay-off. Suppliers and community businesses in the
affected communities are also feeling the impact of these lost
steel jobs.
As you know, the steel industry and steel workers went
through a painful restructuring in the 1980s which saw
employment drop from over 440,000 to around 180,000. The
industry invested $50 billion in new plant and equipment and to
develop new production techniques. The U.S. steel industry is
today a world-class competitive industry. Steel workers have
become the world's most productive in terms of man-hours
producing steel and the industry is among the world's low-cost
and most environmentally sound industries.
Why are these steel imports surging into the United States
and threatening a highly competitive industry? Other nations
have pursued industrial policies over the years that have built
up a steel industry using trade protection and subsidies. This
has resulted in a distorted steel market world-wide, and also
in tremendous over capacity in steel production world-wide.
Then you have the financial collapse in Asia, and economic
crises in Russia and Brazil. These nations can no longer afford
to buy steel or no longer have use for the quantities of steel
they once did.
Because the U.S. continues to have an open market for
steel--with low tariffs on steel and no substantial non-tariff
barriers--the steel that was once sold in Asia, in Russia and
in Brazil is now surging into the U.S., even though U.S. steel
companies and steel workers are among the world's most
efficient producers. In order to obtain hard currency, foreign
companies continue to ship to the world's most open market.
We were told by the Administration, and I quote from the
January 7th report on steel: ``Free and fair rules-based trade
is essential for both global economic recovery and for U.S.
prosperity.'' But what we have seen since July 1997 when the
Asian financial crisis began and the Russian economic crisis
flared up has certainly not been ``fair rules-based trade.''
This is confirmed by the overall steel import figures and by
recent preliminary decisions in dumping cases that have found
substantial dumping margins.
In view of this steel import crisis, I ask the Subcommittee
to reexamine our overall trade policy. I would like to pose the
following questions: As we provide nations in financial and
economic turmoil with international monetary aid, should these
nations be allowed to export their way our of their troubles,
thereby threatening a basic industry in the United States? Why
should an industry, such as the steel industry, which has
modernized and down-sized to become world-competitive, now be
put at risk because of outside factors over which it has not
control? And, do we want to become a nation without any basic
manufacturing capability, totally dependent on foreign supply
for such basic materials as steel? Do we want to subjugate U.S.
manufacturing jobs to foreign policy objectives when those
objectives could be reached by other means? I believe that
these are questions that we must address and which have been
brought to the forefront by this steel import crisis.
I continue to urge the Administration to take additional
and immediate actions to stop unfair steel imports under their
existing authority. The Administration could self-initiate a
Section 201 case and provide a comprehensive solution to this
import crisis.
I also believe that it is time for Congress to reexamine
this existing authority and ensure that the appropriate tools
are available to the industry, to labor and to Administration
officials. I have introduced legislation, H.R. 412, the Trade
Fairness Act of 1999, which lowers the injury standard to bring
it in accordance with the World Trade Organization (WTO)
Safeguards Agreement. I would like to emphasize that this
change is consistent with our WTO rules. Why should the U.S.
law contain a higher injury standard that is required by
international law?
Section 201 of the Trade Act of 1974 is the appropriate
current law remedy accepted under our international obligations
to stop import surges that injure a domestic industry. It
allows a comprehensive approach to solving the problem. Under
current law, if the International Trade Commission determines
that an article is being imported into the United States in
such increased quantities as to be a ``substantial cause of
serious injury'' then the President can take appropriate action
to ensure a positive adjustment to import competition.
Current law requires that imports are a ``substantial cause
of serious injury'' to U.S. industry. Our WTO obligations
require only that imports be a cause of serious injury.
Therefore my bill would delete the term ``substantial'' from
the causation standard in Section 201. Under current law
``substantial cause'' is defined as a cause that is important
and not less than any other cause. My bill clarifies that in
order to gain relief there only needs to be a causal link
between imports and injury.
H.R. 412 also would include in U.S. law the factors to be
considered by the International Trade Commission, as set forth
in the WTO Safeguards Agreement, to determine whether the U.S.
industry has suffered serious injury. These factors include:
the rate and amount of the increase in imports of the product
concerned in absolute and relative terms; the share of the
domestic market taken by increased imports; changes in the
levels of sales; production; productivity; capacity
utilization; profits and losses; and, employment.
I am proposing these changes to Section 201, to restore the
effectiveness of Section 201 and to once again make it a viable
remedy against import surges. With this change to Section 201,
the Administration could join with the Congress, industry and
labor to rekindle the partnership that was so effective during
the 1980's in rebuilding this vital industry, and come up with
a comprehensive solution to stop this import surge. The remedy
could encompass all countries that have been exporting large
quantities of steel and all products that are affected. I
should also make the point that these changes to Section 201
would be applicable to any industry that is being injured by
import surges.
H.R. 412 has a second section which establishes a steel
import permit and monitoring program. In order to gain relief
under U.S. trade laws, domestic industries must demonstrate
that unfairly traded imports have caused injury. This requires
complex factual and economic analysis of import data. Under
normal procedures, such data is not available to the public
until at least 45 days after the data has been collected for a
particular month. The Commerce Department has been making steel
import data available recently within three to four weeks after
the end of a month. But in both cases, the data is not
available until well after the imports have already arrived in
the U.S. The steel import and monitoring system I propose,
which is modeled after similar systems now in use in Canada and
Mexico, would allow the U.S. to receive steel import data on a
``real time'' basis. This would allow the Administration and
the industry to determine more quickly whether unfair imports
are disrupting the U.S. market.
As you know, I have also been a long-time proponent of
other trade law changes. In particular, I reintroduced a bill
yesterday, the Continued Dumping and Subsidy Offset Act, that
seeks to stop continued dumping of foreign goods after an
antidumping order is in place.
Again, I thank you for holding this hearing and I urge you
to take action to ensure that the Administration and our
domestic steel industry and steel workers have effective tools
to ensure that they can protect themselves against import
surges and unfair imports. H.R. 412 in no way is a
protectionist bill. It simply brings our laws into conformity
with WTO standards and allows us to respond to import surges
without having one hand tied behind our back. We cannot put a
highly efficient domestic industry and the jobs associated with
this industry at risk because of outside factors that are not
under their control.
Chairman Crane. Thank you, Mr. Regula.
Let me see, Mr. Murtha is not with us. Mr. Visclosky.
STATEMENT OF HON. PETER J. VISCLOSKY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF INDIANA
Mr. Visclosky. Thank you, Mr. Crane, Mr. Levin and the
other Members of the Subcommittee. I understand that my
prepared statement will be entered into the record.
Mr. Chairman, I am here to ask your Subcommittee to
favorably report to the Full Committee and to the House of
Representatives, H.R. 506. I ask because since noon, when many
people sat down for a comfortable lunch in the last hour and a
half, one steelworker somewhere in the United States of America
was told, don't come to work tomorrow.
I have never been told not to show up for work because I
have been fired. I cannot imagine the devastation that causes a
family. But, pursuant to the numbers that you received from
Dave Cantor, the steel analyst for the Congressional Research
Service, today, the average job loss for a U.S. steelworker is
every 90 minutes since this crisis started in July 1997.
Why has that steelworker lost his or her job in the last 90
minutes? Because people have violated U.S. trading statutes.
They have broken our laws.
I appreciate that others have problems, particularly in the
Asian Basin. That's why I testified before the House Banking
Committee last year with George Becker, president of the United
Steelworkers of America, to ensure that reforms took place at
the IMF, International Monetary Fund, to help those in need.
I appreciate that there have been reductions in foreign aid
and to supplement that loss of explicit aid we are providing
aid indirectly through trade policy. But, I think it is wrong
that jobs are used to supplement that trade policy.
The role of government is to not hurt one person to help
another. This is not a zero-sum game we are all involved in
here today. Government should add to the lives of its people.
Why is H.R. 506 necessary? The administration has acted and
I do believe that Ambassador Barshefsky, Secretary Daley, and
others have an absolute commitment to help those in our
country. However, the very nature of our trade laws, as
reiterated by the number of members that the panel spoke about
during their opening remarks, is reactive. We are reacting to a
problem the cause of which is discovered after the fact. I
would like to suggest that we should help the administration by
taking what the gentleman from New York and the gentleman from
Michigan characterized as ``a global approach.''
The administration has acted against three countries:
Japan, Russia, and Brazil. But, given trade figures that were
given to the Subcommittee at 11 o'clock this morning, I would
point out that exports from Indonesia are up 890 percent in
January 1990 from July 1997. I would suggest that it has only
dealt with some products, and that the price set for steel
imports, as far as the Russian agreement is concerned, is
inadequate to protect those in this country. Moreover, people
will shift product lines if we do not take that global
approach.
I think we should enact H.R. 506 to alert our trading
partners that we are serious, the problem is urgent, Europe
should be engaged, and we must give the administration
flexibility, within a specific timeframe, to solve this
problem. We need to be global and we need to act now. I also
support the suggestion of the gentleman from Michigan that we
ought to make sure that the financial resources are available
to the administration to pursue the path that we can draw for
them.
Thank you very much, Mr. Chairman.
[The prepared statement follows:]
Statement of Hon. Peter J. Visclosky, a Representative in Congress from
the State of Indiana
Thank you, Mr. Chairman, for inviting my testimony on the
crisis facing the American steel industry. I am grateful to you
and to Mr. Levin for giving me this opportunity to discuss with
you the unique place steel has in America's economy, its
current challenge, the inadequacy of the Clinton
Administration's response to the problem, and a proposed
solution.
Steel's Special Role in American Industry
Steel occupies a unique place in the American economy. It
is the most basic and widely used material in industry. Without
it, no car would be made, no building would be constructed. A
$70 billion industry in the United States, it occupies 8
percent of worldwide steel production, employs more than
170,000 Americans, and ships nearly 80 million tons of steel
every year.\1\ Furthermore, it is the most recycled material in
North America.\2\ Steel's singular importance to our nation's
economic security is undisputed.
A strong domestic steel industry is also a key to the
national security of the United States. The steel industry's
present and future competitiveness has long been a priority of
the Department of Defense because of the importance of a
sufficient wartime steel supply.\3\ During the Cold War, steel,
like aircraft and ship manufacturing, was essential to our
ability to defend ourselves if the need arose.\4\ We could not
then count on imports from the Soviet Union, Brazil or Japan,
nor could our allies.
As recently as the Gulf War, the U.S. Army relied on
American steel in 5,000 tanks, Bradleys, and other Armored
Personnel Carriers.\5\ At the peak of the conflict, the U.S.
Navy deployed 120 ships made almost exclusively from American
steel, including the aircraft carrier U.S.S. Nimitz and the
battleship U.S.S. Missouri, to the Persian Gulf.\6\ As the crew
of the Nimitz likes to say, she represents 95,000 tons of
diplomacy that carries 4.5 acres of sovereign U.S. territory
anywhere in the world--that diplomacy stands on 95,000 tons of
American steel.\7\
Corporate leaders from the aerospace, vehicle, and
shipbuilding industries successfully argue that production
lines for equipment, such as submarines and F-16s, must remain
open, if for no other reason than to ensure that the means and
skills to produce those ships, tanks, and planes remains
ready.\8\ The line of reasoning goes that our defense
industrial base must maintain the capacity to increase
production within a reasonable amount of time. Obviously, a
domestic steel industry that cannot provide the millions of
tons of steel necessary to make ships and tanks would have a
devastating impact on America's ability to respond to a threat
to our national security.
Steel stands strong among America's industries in boasting
of the significant role it played in winning and securing our
freedom.
In the second half of this century, the United States
increasingly dedicated itself to open trade and the principles
of the free market for every sector of our economy.
Unfortunately, other nations did not follow our example.\9\ The
European Union, while closely patterning their trade laws after
ours, built high market access barriers to steel. Russia's
industry is state-owned and geared more toward keeping Russians
employed than responding to market needs.\10\ During the Cold
War, the Soviet steel industry supported its military; now,
Russia floods the U.S. market with steel to prop up its failing
economy.\11\ Japan, Korea and Brazil also use government
subsidies and government ownership to control their domestic
steel industries.\12\ Subsidies are the rule, the United States
is the exception. No other industry so integral to our economic
freedom and national security can make that claim. We are the
sole player in the global marketplace that has not intervened
on behalf of its steel industry.\13\ According to the
Department of Commerce, the United States has low tariffs on
steel products and no material non-tariff barriers to
imports.\14\
The Current Steel Crisis
The story of the American steel industry is almost
Dickensian. For them, it truly is the best of times and the
worst of times. It is a tale of two industries. One industry,
steel in the 1970s and 1980s, was bloated and inefficient.
Consequently, it increasingly lost market share to less
expensive foreign steel imports (which accounted for 26 percent
of the U.S. market in 1984).\15\ However, the industry reformed
itself through pain, hard work, and struggle. By 1992, steel
imports fell to only 18 percent of the market.\16\ The other
industry, the New Steel, is the most productive,
environmentally sound, and competitive in the world. It takes
fewer hours of labor for steel workers in the United States to
make a better quality of steel, and with less pollution, than
in any other country. Yet, in 1998, foreign imports shattered
the record by grabbing 35 percent of the U.S. market share.\17\
American steel has failed, struggled, and reformed, and still
it suffers at the hands of others.
Because of America's openness, our steel industry has been
subjected to periodic surges in imports from these countries.
The most recent round has left steel companies and their
workers reeling. In 1998, more than 41 million tons of cheap,
foreign steel flooded our shores, 33 percent more than the
record.\18\ The 1998 numbers are 77 percent higher than the
annual average of imports since 1990.\19\ The fourth quarter of
1998 showed a dramatic increase over the same period in 1997:
Imports from Japan were up 141 percent, Russia was up 162
percent, Korea was up 102 percent, and Brazil was up 65
percent.\20\ Imports from Russia, Japan and Brazil cost 10 to
27 percent below that of domestic producers, causing total
market share of imports to skyrocket from 23 percent to a new
high of 35 percent.\21\ By November 1998, foreign steel was
coming into the United States as low as $195 a ton, $130 a ton
less than it would cost to produce here.\22\
On February 12, 1999, the Commerce Department officially
recognized what the steel industry and unions have been
concerned about when it announced that Japan and Brazil were
selling hot-rolled steel at ``unfairly low prices'' in the U.S.
market.\23\ Commerce Secretary William Daley declared, ``The
situation here cries out for action because of the abuse.''\24\
On the same day, the Commerce Department stated that they are
in talks with Russia about dumping.\25\ One week later, Brazil
announced that it, too, wanted to enter into a discussion over
steel imports.\26\
By every measure, and recognized in every quarter, the
United States steel industry is suffering. The backbone of the
industry--hot-rolled steel--fell $50 a ton (18 percent) in
price, in 1998 to reach a record low of $200.\27\ Consequently,
the steel industry's profits plummeted 50 percent in 1998 and
net income was down almost 60 percent.\28\ Stock prices of the
biggest firms, such as U.S. Steel, LTV, and National Steel, hit
the floor.\29\ Salomon Smith Barney issued a report estimating
that up to 30 percent of the steel industry's 170,000 jobs are
endangered.\30\ More than 10,000 steelworkers have either been
laid off, had their hours cut, or lost their jobs completely
because of bankruptcies in the industry (Laclede Steel in St.
Louis and Acme Metals in Riverdale, Illinois).\31\
Critics have argued that the numbers belie an uncompetitive
industry bowing to free market pressures. Fifteen years ago
that might have been true. In 1982, domestic production fell to
75 million tons, 49 percent lower than in 1974.\32\ Then it
took 10 hours of labor to produce one ton of steel.\33\ Steel
companies lost their market share to imports. Steel imports
rose to capture 26 percent of the domestic market in 1984.\34\
The Reagan Administration was forced to negotiate Voluntary
Restraint Agreements (VRAs), mainly with the European Union and
Japan, to protect the industry and buy time for it to modernize
and restructure.
The steel industry had its own painful role to play. The
Reagan Administration required that it modernize mills that
polluted the air and invest in worker training.\35\ By 1987,
the industry had closed 462 facilities, shed 273,000 jobs and
decreased by 42 million tons of capacity.\36\ It invested $50
billion in upgrading its mills and equipment.\37\ The
productivity of the average steelworker rose 4 percent every
year, dropping the hours of labor it took to make one ton of
steel from 9.3 hours of labor in 1980 to 4.8 hours of labor in
1993, a 94 percent improvement.\38\ In 1999 it takes 2 hours of
labor to produce one ton of steel. Recent reports now cite the
American steel industry as the most competitive, efficient, and
least polluting in the world.\39\
Moreover, the steel industry's renaissance showed dramatic
improvements in its environmental record. The industry invested
$7 billion alone in new environmental technologies since
1980.\40\ It annually recycles millions of tons of steel scrap
that is remelted to produce new steel.\41\ The steel industry's
overall recycling rate is about 65%--higher than any other
industry.\42\ This saves more than $2 billion in annual
landfill charges.\43\ In fact, each new steel product contains
some amount of recycled material.\44\ The industry's
competitiveness and quality increased although environmental
operating costs account for 10 percent of total operating costs
(which often exceeds industry profits).\45\
By the time the Bush Administration let the VRAs expire in
1992, foreign imports had fallen to less than 18 percent of the
U.S. market.\46\ Compared to 1980, the industry had 68 percent
fewer workers and 35 percent less capacity.\47\
The cause of the current domestic steel crisis is not a
steel industry that cannot measure up to others in the global
marketplace. Quite to the contrary, if foreign governments did
not own and subsidize their steel manufacturers, and erect
trade barriers that closed markets, American steel could
succeed on a firm and fair footing. The ability to compete on a
level playing field is what free trade is all about. However,
foreign governments, as illustrated in the aforementioned
figures, are charging lower prices for the steel they export to
the United States than they do at home. Dumping is illegal
under American law and grounds for punitive action under the
rules of the World Trade Organization. Companies can engage in
dumping only if their governments help them. The consequences
of selling products lower than the production cost are simply
too great to maintain over the long-term without trade barriers
or subsidies.\48\
Antidumping Laws
Dumping--the practice of importing steel that cost less
than its price in the home market or less than its cost to
produce--has been against the law in the United States since
Congress passed the Antidumping Acts of 1916 and 1921. The
world recognized dumping as an unfair trading practice through
the General Agreement on Tariffs and Trade (GATT) in 1948.\49\
Based on principles articulated by Adam Smith and Alexander
Hamilton, who were concerned with predatory trade tactics,
antidumping laws were established as an extension of antitrust
laws.\50\ Modern antitrust laws differ from antidumping laws in
several key respects. First, antitrust laws target private-
sector actions while prohibitions on dumping are directed to
actions taken by foreign governments. Second, antitrust laws
are aimed at protecting consumers while antidumping laws seek
to protect domestic producers (since they are the injured
party).
More recently, the World Trade Organization (WTO), GATT's
successor, rewrote Article VI, the Anti-Dumping Agreement, that
authorizes member states to take unilateral steps to address
dumped imports that harm domestic industries.\51\ The WTO also
provides a multilateral system of settling disputes if a member
country violates trade rules. The typical case normally takes
more than one year from initial investigation through appeal
and final adjudication.\52\ The U.S. has prevailed on 19 of the
21 cases decided by the WTO so far.\53\ Other complaints, on
bananas, beef hormones, and magazines, have been vigorously
pursued by the United States. In fact, the United States
brought an antidumping complaint against Mexico over high-
fructose corn syrup that has remained active since September 4,
1997.\54\
The Clinton Administration's Response
In 1997, Asian economies that were deeply intertwined--
Indonesia, South Korea, Thailand and Malaysia--began to slow
and were pressed to repay huge loans to struggling Japanese
banks, and other international investors. Many factors,
including government corruption, poor banking practices, and a
host of others made the situation worse. The contagion soon
spread as governments in Eastern Europe and Latin America
devalued their currencies and raised interest rates. Country
after country lined up at the door of the International
Monetary Fund (IMF) asking for emergency loans to pay their
debts.
Russia's economy fell drastically in the summer of 1998
when the ruble lost more than twice its value and the
government defaulted on its foreign debt. Brazil soon looked
like it would follow suit. In each country the story was the
same--markets dried up, unemployment rose and investment
capital either fled for safer pastures or disappeared
altogether.
The IMF faced a crisis of its own. Its commitments to help
struggling economies depleted its treasury and caused it to
look to its donor states, the United States chief among them,
for help in filling its coffers. As members of Congress, each
of us was concerned about the impending peril facing world
markets and were eager to find a responsible means of stemming
the tide of economic collapse. The only question facing
Congress was which avenue to take. Domestic fiscal
considerations and changes in policy led to a marked decrease
in appropriations for foreign operations. This clearly limited
the Clinton Administration's ability to deal with international
economic problems. The Administration had to find a way to go
around Congress and keep troubled economies afloat.
Treasury Secretary Robert Rubin found such a way: America
would use the strength of its own economy to provide a
stabilizing force for countries encountering financial
difficulties. Nations such as Korea, Japan, Russia, and Brazil
could trade cheap steel for jobs. This indirect foreign aid can
be measured in the value of each American steel job lost. A
dollar out of a steelworker's pocket is a dollar used to prop
up an ailing foreign economy. Therefore, the Administration has
been very hesitant to enforce our antidumping laws lest it send
the wrong message to other countries about America's economic
strength.\55\ Secretary Rubin has stated publicly, in response
to a question about the surge of steel into the American
market, that ``[O]ur country has benefitted greatly from having
relatively open markets. I think it has contributed to lower
prices, greater choice and a more efficient economy.'' \56\
However, as Secretary Daley has said, ``Enforcing our trade
laws is not protectionist.'' \57\ U.S. Trade Representative
Charlene Barshefsky echoed this view when she stated, ``U.S.
trade laws are also a vitally important means of ensuring
respect for U.S. rights and interests in trade.'' \58\
Secretary Rubin went on to say that ``the appropriate
people at the right time'' would deal with the surge of foreign
steel that is undercutting our domestic industry.\59\
Apparently, the time is not yet right. Instead of taking direct
action in the face of mounting evidence of the damage already
done, the Administration, in a report mandated by Congress,
responded with $300 million in proposed tax breaks to the steel
industry (that the industry neither solicited nor desired) and
stated that it would continue to work through the WTO-approved
framework to deal with the problem.\60\ Part of this approach
included the Commerce Department's recent announcement that
antidumping duties would be imposed on hot-rolled steel from
Japan and Brazil, and the tentative agreement it has reached
with Russia to limit their imports.\61\
Unfortunately, the Administration's action has done nothing
to address the fundamental problems faced by the American steel
industry. Unlike direct foreign aid, which each American
taxpayer shares equally, our domestic steel industry bears the
entire burden of indirect foreign aid through the sacrifice of
their jobs. The supposed long-term benefit of making a
particular sector of the economy absorb the impact of the
world's financial woes should not obscure the inherent
unfairness and long-term damage done to thousands of individual
steel workers. The Administration should be explicit in its
efforts to provide overseas assistance. Instead, it hides
behind the mounting casualties--in the form of lost jobs,
slowed production, and shrinking capacity--in the American
steel industry. While the Commerce Department investigates and
the U.S. Trade Representative negotiates, steel workers
continue to be laid off. Furthermore, the Commerce Department's
action against Japan and Brazil applies only to one product
from those two countries. Further discussions with Brazil are
merely that--discussions.\62\ The recent agreement with Russia
does not go far enough. Instead of continuing to talk and
monitor import data, as Ambassador Barshefsky has stated, the
Administration should aggressively pursue negotiated agreements
with countries to achieve a global, comprehensive resolution to
the surge of cheap steel imports.\63\ As a stick in their
negotiations, the Administration can point to one bill that
provides a quantitative solution to the matter--H.R. 506, the
Stop Illegal Steel Trade Act (SISTA).
The tentative agreement the Commerce Department reached
with Russia, if it is finalized, is a good example of what the
Administration might accomplish when Congress pushes it into
action with strong steps of our own. Through its use of quotas
and bans that apply to all steel products from Russia, rather
than just one or two, the Administration is following the
Visclosky-Traficant approach to end this crisis.\64\ However,
the Russian steel deal is only one step in the right direction.
Its sets quotas that are too high and minimum prices that are
too low. It is clearly not a solution that is fair to the steel
industry or to steel workers.
H.R. 506, the Stop Illegal Steel Trade Act (SISTA)
SISTA, bipartisan legislation cosponsored by over 170
members of Congress, requires that the Administration return
steel imports to the pre-surge levels of July 1997. How the
Administration gets there is entirely up to the President and
his advisers. The bill explicitly provides for tariff
surcharges, VRAs, and quotas. These measures, arguably, violate
the WTO's general prohibition on unilateral antidumping
measures without first meeting certain established
criteria.\65\ However, the House of Representatives is already
on record as supporting measures to end the steel crisis that
do not comply with the WTO.\66\ H.Res. 598, sponsored by
Congressman Traficant, expressed the sense of the House that
the Administration should ban steel imports from countries who
are not abiding by our trade agreements with them due to
illegal dumping.\67\ The measure passed overwhelmingly in the
105th Congress, 345 to 44.\68\ Furthermore, neither Russia nor
Ukraine, both of whom are major participants in the steel
surge, are members of the WTO. Consequently, such measures do
not apply, even theoretically, to those countries. For WTO
members whose flood of exports will be stemmed by this bill,
the WTO's dispute settlement system is well-equipped to deal
with their complaints. Meanwhile, America's market and, most
important, steel workers' jobs, will no longer be threatened.
Ambassador Barshefsky was right when she said we should not
stop imports for reasons other than unfair trade.\69\ If the
Administration wishes to avoid meeting other nations before a
WTO hearing panel, it can find a way that is WTO-compliant to
bring this crisis to a close. SISTA gives the Administration
permission to ``otherwise'' ensure that the volume of steel
imports does not exceed pre-surge levels.\70\ Personally, I
would welcome any action by the President that made SISTA a
moot issue because that would mean we have reached an end to
the crisis facing tens of thousands of American steel workers.
Until that time, SISTA stands by to do what the Administration
cannot--defend an industry vital to our national security, and
tens of thousands of American jobs, from attack by a tidal wave
of illegally dumped, cheap foreign imports.
Thank you, Mr. Chairman.
Endnotes
1. Department of Energy, Office of Industrial Technologies, Steel
Industry Profile.
2. American Iron and Steel Institute, ``A Few Facts About Steel.''
3. American Metal Market, ``Defense Ponder's Steel's Wartime
Readiness,'' March 14, 1994.
4. U.S. Senate Steel Caucus hearing on the impact of foreign steel
on the U.S. market, November 30, 1998.
5. Information from the House Army Liaison Office, February 22,
1999.
6. Paul Barton, ``Getting Troops Home a Challenge Itself,''
Arkansas Democrat-Gazette, May 21, 1991.
7. U.S.S. Nimitz Public Affairs Office, January 28, 1999.
8. Vago Muradian, ``Douglass to Industry: Start Planning for the
Next Century,'' Defense Daily, September 24, 1998.
9. Greg Mastel, ``Leveling the Playing Field: Antidumping and the
U.S. Steel Industry,'' Economic Strategy Institute, February 1999.
10. Ibid.
11. Greg Mastel, ``Russia, Steel, and U.S. Policy,'' The Journal of
Commerce, January 4, 1999.
12. Mastel, February 1999.
13. Ibid.
14. Ibid.
15. Chimerine, June 1994.
16. Ibid.
17. American Iron and Steel Institute Press Release, February 19,
1999.
18. Ibid.
19. Ibid.
20. Ibid.
21. Ibid.
22. Mike Boyer, ``AK Steel Rolling Against Trend,'' Cincinnati
Inquirer, November 7, 1998.
23. Paul Blustein, ``Steel From Japan, Brazil Facing Punitive
Damages,'' Washington Post, February 13, 1999.
24. Ibid.
25. Ibid.
26. Michael Kepp, ``Brazil Seeks Steel Deal with U.S.,'' American
Metal Market, February 22, 1999.
27. Leslie Wayne, ``American Steel at the Barricades,'' New York
Times, December 18, 1998.
28. Michael Lelyveld, ``U.S. Steelmakers Go on the Import
Offensive,'' Journal of Commerce, October 26, 1998.
29. Len A. Costa, ``U.S. Manufacturers Propose a Steely Ban,''
Fortune, February 15, 1998.
30. ``Suit Alleging Steel Dumping on Commerce Dept. Fast Track,''
Legal Intelligencer, November 12, 1998.
31. Testimony of George Becker before the U.S. Senate Committee on
Finance, January 27, 1999.
32. Chimerine, June 1994.
33. Congressional Research Service.
34. Chimerine, June 1994.
35. Chimerine, June 1994.
36. Ibid.
37. Mastel, January 4, 1999.
38. Chimerine, June 1994.
39. Mastel, February 1999.
40. Department of Energy, Talking Points for Steel Vision Press
Conference, May 2, 1995.
41. Steel Recycling Institute, Recycling Fact Sheet.
42. Ibid.
43. DOE Talking Points, May 2, 1995.
44. Recycling Fact Sheet.
45. DOE Talking Points, May 2, 1995.
46. Chimerine, June 1994.
47. Ibid.
48. Greg Mastel, ``Antidumping Laws and the U.S. Economy,''
Economic Strategy Institute, 1998.
49. Arlene Wilson, ``Antidumping and the Uruguay Round: An
Overview,'' CRS Report for Congress, January 25, 1995.
50. Mastel, 1998.
51. World Trade Organization, Agreement on Implementation of
Article VI of the General Agreement on Tariffs and Trade, 1994.
52. World Trade Organization, ``Settling Disputes: The WTO's `Most
Individual Contribution','' 1997.
53. Testimony of U.S. Trade Representative Charlene Barshefsky
before the U.S. Senate Committee on Finance, January 26, 1999.
54. World Trade Organization, Overview of the State-of-Play of WTO
Disputes, February 17, 1999.
55. Costa, February 15, 1999.
56. Jack Lucentim, ``Rubin Defends Imports as Steel Trade Surges,''
Journal of Commerce, December 9, 1998.
57. Blustein, February 13, 1999.
58. Barshefsky, January 26, 1999.
59. Ibid.
60. Report of the President to Congress on the Steel Crisis,
January 7, 1999.
61. Department of Commerce, Press Release, February 22, 1999.
62. Kepp, February 22, 1999.
63. Barshefsky, January 26, 1999.
64. H.R. 506 and H.R. 502.
65. WTO, Article VI of GATT, 1994.
66. H.Res. 598, Roll Call #532, October 15, 1998.
67. Ibid.
68. Ibid.
69. Blustein, February 13, 1999.
70. H.R. 506, Section 1.
Chairman Crane. Thank you, and our next witness is Mr.
Traficant.
STATEMENT OF HON. JAMES A. TRAFICANT, JR., A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OHIO
Mr. Traficant. Thank you, Mr. Chairman. I would ask that my
statement be incorporated into your record.
Chairman Crane. Without objection, so ordered.
Mr. Traficant. I would like to talk about this in a little
bit of a different vein, talking about GATT and the World Trade
Organization. Our policy so far I think has been misguided and
it's hurt our industry.
America has taken Europe to GATT over beef and over
bananas. GATT ruled in our favor. Europe laughed in GATT's
face. GATT referred us to WTO. WTO ruled in both cases in our
favor. Europe laughed at WTO's ruling, then later appealed it.
In the process is now a reference back to GATT which will be
about a 3-year malaise over bananas and beef.
For every head of cattle we export, we are importing 11. We
exported 44,000 hogs and imported a half a million. Hogs are
selling for 8 cents a pound.
I am talking about GATT. The dilemma bananas and beef posed
were nonmilitary, so we didn't have much of a choice. Now, in
October, we passed a ban in the House as a nonbinding
resolution. Japan's exports to American steel dropped 22
percent. I recommend you bring out the Visclosky bill but you
allow the Traficant amendment to be offered on the floor, which
is simply a 3-month ban.
I want to read this to you. In article 21 of GATT, it
states, ``nothing in this agreement shall be construed to
prevent any contracting party from taking any action which it
considers necessary for the protection of its essential
security interests relating to the traffic in arms, ammunition
and implements of war and to such traffic in other goods and
material as it carried on directly or indirectly for the
purpose of supplying a military establishment.''
Steel is not styrofoam. We are clearly in our rights to
take a stand legally in the world and my bill just calls for a
90-day ban. I don't care what the final workout is because I
know in 90 days this problem will be solved. You do not
regulate illegal trade, you do not manage it, coordinate it, or
massage it with international bodies. You ban it.
That is my feeling very strongly here. And I believe we
have delegated the role of Congress, constitutionally mandated
with the power to regulate commerce with foreign nations, and
given it to the White House. And they are playing politics with
it. As a Democrat, I will say that. They have been weak.
But, I want to let this panel know that in the negotiated
voluntary agreement with Russia there is a 6-month moratorium
on this steel--too little, too late. My legislation speaks
right to the core. I want an opportunity for an amendment to
whatever vehicle you bring out to present this argument. I
think it needs to be heard on the floor of the House.
I thank you.
[The prepared statement follows:]
Statement of Hon. James A. Traficant, Jr., a Representative in Congress
from the State of Ohio
Mr. Chairman, Mr. Vice-Chairman and Members of the
Committee. I ask that my written statement be submitted for the
Record.
The Impact of Steel Dumping on U.S. Steel Producers, Steelworkers and
the U.S. Economy
U.S. steel companies have transformed themselves. I believe
that statement is of utmost importance in understanding. The
U.S. steel industry is no longer the inefficient, uncompetitive
entity it was in the 1970s. I am not here today to ask for
special favors to save a dying American industry. The truth is,
the U.S. steel industry underwent a painful restructuring in
the 1980s--losing hundreds of thousands of jobs and investing
over $50 billion into new technologies, equipment and
facilities. Millions have been expended to retrain
steelworkers. As a result, U.S. steel companies are
technologically-advanced, remarkably competitive, and employ
some of the most highly-skilled workers in the world today.
The question is, Mr. Chairman, why are we here today? If we
have a world-class steel industry and world-class workers, why
is the U.S. steel industry not turning out so much as a simple
profit during a time of record steel demand and consumption in
the United States?
The answer is simple. Our foreign competitors have been
dumping steel in America below market value for well over a
year. This practice, which has been allowed to continue
unencumbered by the Clinton Administration, has had a
devastating effect on the U.S. steel industry and U.S.
steelworkers.
The numbers are incredible. In 1997, imports of hot-rolled
carbon steel flat products averaged approximately 525,000 tons
per month. In 1998, monthly imports averaged almost 1 million
tons per month. The surge was concentrated in the last half of
the year, which led to sharply falling prices and shipments by
domestic producers. Similarly, hot-rolled steel imports
averaged 676,000 tons per month from January to June, but then
exploded to an average monthly rate of 1.3 million tons from
July to November. November 1998 imports reached an all time
record of 1.6 million tons, capturing over 55 percent of the
American market that month.
Japan alone accounted for 41 percent of the import surge in
the first 11 months of 1998. Russia and Korea accounted for
another 38 percent. By product group, hot-rolled sheet and
plate-in-coil accounted for almost 50 percent of the volume
surge in 1998. However, import surges are clearly not limited
to the three countries and two products that are on everyone's
lips. Steel dumping has become a global event. For example, in
the first 11 months of 1998, steel imports were up 167 percent
from Japan, up 60 percent from Russia, and up 112 percent from
South Korea. But during that same time period, steel imports
were also up 68 percent from the Ukraine, up 150 percent from
Australia, up 105 percent from South Africa, up 114 percent
from Brazil and up a whopping 586 percent from Indonesia.
Dumping is dumping, Mr. Chairman. Our laws should be enforced
across the board. Why isn't the Administration looking at all
potential violators?
What impact has steel dumping had on an industry vital to
U.S. national security? It's not just that U.S. steel companies
aren't turning a profit during a time of record demand and
consumption--U.S. steel companies are posting devastating
losses. For example, Bethlehem steel reported a $23 million
loss for the fourth quarter of 1998, compared to the net income
of $42 million for the same quarter in 1997. Bethlehem is just
a snapshot of a widespread problem. Ongoing unfair trade
practices have cost 10,000 steelworkers their jobs and
threatened the job security of many thousands more. Ten
thousand lost jobs over two months translates into 860,000
hours of lost earnings. With an average hourly wage rate of
$18.25, that's $16 million in lost wages. That's not just a $16
million loss to the U.S. economy. How much will the federal
government pay out in unemployment compensation and job
retraining, or worse--welfare, housing vouchers, and Medicaid?
These men and women aren't hopeless or helpless. They are
highly-skilled, well-trained, hard-working, law-abiding,
taxpaying citizens.
The Effectiveness of U.S. Trade Laws
U.S. trade laws have been of little help in resolving the
ongoing import surges quickly, or with any sense of urgency.
While the Administration has taken action to expedite the
antidumping petitions, the process continues to be multi-
leveled, complicated and exceedingly slow. I have been told
that the entire process is expected to persist a minimum of
nine months, from start to finish. However, a lengthy
investigative process is only one facet of our trade law
effectiveness problem.
There is one overreaching problem that the U.S. steel
industry, steelworkers amd Members of Congress have run into
like a brick wall: it is the Administration's unwillingness to
enforce the law.
First, the steel dumping investigation has been focused on
three countries: Japan, Russia and South Korea. Granted, these
three countries are responsible for approximately 79 percent of
the steel dumping. But what about the other 21 percent? Why are
we not pursuing these violators--violators that account for
one-fifth of all steel dumping?! Similarly, just as steel
dumping is not limited to three countries, it is not limited to
two products. If all but a few countries and products are
ignored with respect to steel dumping, what does this say about
the quality of enforcement? It seems clear that our trade laws
are not equally enforced and violators not ardently pursued.
Second, if enforcement of our trade laws is inconsistent
and uneven at best in an officially-requested investigation and
highly-publicized case, what is the quality of enforcement when
an a antidumping petition has not been filed? In other words,
is the U.S. steel industry case purposely being mishandled, or
is this the best the federal government is capable of when
called upon? Not much of a choice, is it?
Let's look at a similar case, to illustrate my point. While
the White House continues to drag its feet on steel, U.S. Trade
Representative Charlene Barshevsky said the United States is
going to the mat with the European Union--over bananas. That's
right, the Administration has drawn up a list of goods--from
cashmere sweaters to pork and pasta--on which to impose 100
percent additional tariffs totaling $520 million a year, to
force the EU's hand on bananas. Think about it. While Uncle Sam
is prepared to wage a trade war over bananas, 10,000
steelworkers are receiving unemployment compensation.
Finally, and most importantly, this Administration would
rather negotiate empty promises than enforce our trade laws.
U.S. trade laws were designed by Congress to protect our
economic and national security and our sovereignty. However, it
has become obvious to me that this Administration is unwilling
to take the type of definitive action necessary to deal with
this serious crisis. The voluntary restraints the
Administration has asked of Japan is like putting a kid in a
candy store and asking him not to eat. No disincentives, no
repercussions--it's strictly voluntary. Promises won't help the
10,000 steelworkers who have lost well-paying jobs and promises
won't stop industry giant Bethlehem steel from closing the
doors on two of its plants, and neither will $300 million in
tax relief.
While I support relief for the steel industry, I am livid
that the President expects the American taxpayer and the
steelworkers who have lost their jobs to pay for the illegal
actions our foreign competitors. Perhaps if the Administration
enforced our trade laws for a change, and penalized dumping, we
would collect enough revenue to pay for tax relief for our
domestic steel industry.
H.R. 502/FASTA, the ``Fair Steel Trade Act''
The time for negotiating, monitoring and litigating are
long past. Tax breaks and retraining will not bring back good-
paying manufacturing jobs and industries vital to our national
security. It's time to stop the feet dragging and do something
FASTA!
My bill, H.R. 502, the ``Fair Steel Trade Act'' (FASTA),
would force the Administration to impose swift and severe
penalties on those countries that have flagrantly and
repeatedly violated our trade laws. Specifically, FASTA will
impose a three-month ban on imports of steel and steel products
from Japan, Russia, South Korea and Brazil.
FASTA is strong, fast and to-the-point. Our trade laws are
exceedingly slow and not equitably enforced by the
Administration. Negotiations are at best a drawn-out process,
and at worst, a handshake of empty promises. America's steel
industry and steelworkers need our help now. The message FASTA
sends is the Congress of the United will not tolerate illegal
trade practices.
On the one hand, FASTA's moratorium has been criticized as
being unreasonable and in violation of the General Agreement on
Tariffs and Trade (GATT) by free traders. On the other hand,
the ban has been challenged by pro-steel supporters for being
too short, and therefore, ineffective. I would like to address
both criticisms.
First, a total, but temporary ban on steel is not an
unreasonable action. FASTA calls for a three-month ban on
steel. I found it interesting that the Clinton Administration
recently negotiated a six-month moratorium on hot-rolled steel
products--twice the length of the FASTA--in its agreement with
Russia. That is precisely the type of action I and many in
Congress have been advocating for months.
Second, some Members of Congress are worried that FASTA
will violate the principles of GATT. The truth is, Japan, South
Korea, Brazil \1\ and numerous other cosigners of GATT have
violated GATT by dumping steel in America below market value.
As such, FASTA is not a precedent-setting measure. Our trading
partners have restricted U.S. imports based upon national
security or health and safety principles for years. In fact,
Section XXI of GATT, entitled Security Exceptions, makes
exceptions for trade measures taken in the interest of national
security. Specifically, Article XXI of GATT states, ``Nothing
in this Agreement shall be construed...(b) to prevent any
contracting party from taking any action which it considers
necessary for the protection of its essential security
interests...(iii) relating to the traffic in arms, ammunition
and implements of war and to such traffic in other goods and
materials as is carried on directly or indirectly for the
purpose of supplying a military establishment [emphasis
added].'' The U.S. steel industry, a direct and indirect
supplier of materials used in maintaining implements of war--
unarguably--is an industry vital to U.S. national security. If
our trading partners want to challenge FASTA's national
security claims, they are welcome to do so at the WTO.
---------------------------------------------------------------------------
\1\ Russia is a special case. Since Russia is not a co-signor of
GATT or a member of the World Trade Organization (WTO), the United
States and Russia are not violating the principles of GATT.
---------------------------------------------------------------------------
Third, FASTA is not meant to start a trade war, hence the
three-month ban. It is merely a tool to allow the U.S. steel
industry to recover while giving the Administration time to: 1)
expedite these antidumping petitions through the investigations
process, and 2) negotiate import agreements on steel. FASTA
also gives Congress an open window of opportunity to propose
and enact substantive trade reform legislation. In fact, FASTA
is part of my two-pronged approach toward ensuring that U.S.
trade laws are more responsible and accountable to U.S.
industry. Within a month, I plan to introduce a comprehensive
trade reform bill that will have a positive, long-term effect
on American industries and American workers.
Finally, FASTA's three-month moratorium has been criticized
by some as not being long enough to have any effect. I strongly
feel that FASTA is a wake-up call to countries that continue to
engage in unfair and illegal trade activities, without causing
undue financial hardship. I believe that the United States and
our trading partners can reach an understanding in three months
time. Anything longer is protectionist. In terms of long-term
effectiveness, it is imperative that Congress enacts
comprehensive trade reform legislation and stops patching the
holes with band-aid-type measures.
Conclusion
In his Presidential campaign, Bill Clinton spoke of using
U.S. trade policy to build a bridge to the 21st century for
American workers. Mr. Chairman and Members of the Committee,
that bridge is crumbling under the weight of millions of tons
of illegally dumped foreign steel. I say to you today: If
Congress does not take extraordinary and decisive action,
hundreds of American communities and thousands of American
families will enter the 21st century in poverty.
Thank you.
Chairman Crane. Thank you. We want to make sure that
``traffic can't come in,'' right? [Laughter.]
Mr. Traficant. Just allow it as an amendment and you can
bring out whatever you want, Mr. Chairman.
Chairman Crane. OK.
Mr. Greenwood.
STATEMENT OF HON. JAMES C. GREENWOOD, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF PENNSYLVANIA
Mr. Greenwood. We want to make sure the traffic can't come
in as long as it doesn't come in ``by crane.'' [Laughter.]
Thank you, Mr. Chairman, for giving me the opportunity to
testify. The first several pages of my testimony spell out the
problem and you don't need to hear that from me. You have heard
it enough and you will hear it a lot more. Instead, I want to
just focus briefly on solutions.
Mr. Chairman, I am a fair trader, I am not a free trader. I
have supported NAFTA, the North American Free Trade Agreement,
strongly, I have supported GATT, I am a supporter of fast
track, and year after year, as the union members from my
district have visited me in my office, they have argued against
these policies. I have defended these policies, explaining the
importance of America being an exporter and the number of jobs
created because of our openness to trade. But I can't look my
300 laid-off steelworkers in the eyes anymore and tell them
that there is nothing wrong with the system. I can't defend the
system as working for them.
We don't need to throw it out but we need to make some
changes. I am a cosponsor of the Regula bill. I think that bill
ought to be brought straight to the floor. It does improve the
system and it improves it significantly.
I also today, after a lot of anguish and a lot of research,
became a cosponsor of Mr. Visclosky's bill, H.R. 506, because I
believe the foreign countries have broken our trade laws and
they have caused American steelworkers to lose their jobs.
I would, however, like to work with the sponsors of the
legislation to clarify the intent of the legislation to ensure
that it does not violate WTO safeguard regimes and I think that
that's possible. In its present form, the bill could be
interpreted to leave that opportunity open--to be inconsistent
with WTO--but I believe that the bill could be amended slightly
to make sure that it does not violate the safeguards of WTO.
That's a possibility.
I also would like to add that under section 201 of the
Trade Act of 1974, the International Trade Commission may
conduct an investigation upon receipt of a petition from
numerous sources, including a resolution of the House Ways and
Means Committee. I think it was Mr. Houghton who wondered why
201 had not been invoked. This Committee can invoke it, the
administration can invoke it, the requisite Committees of the
Senate can invoke it. I am not clear on why the industry or the
unions have not invoked the protections that are available to
them under 201. Following an affirmative injury determination,
the Commission may recommend a duty, a tariff rate quota, or
other appropriate remedy in a way that does not run afoul of
the procedures set forth by the International Trade Commission.
I believe that the administration must be more aggressive
in its discussions with our trading partners, they must
understand that our patience and forbearance are not
inexhaustible and that the continued practice of dumping steel
into our market in violation of bona fide trading agreements
risks bringing a less measured and a more protectionist
response from this Congress and from the American people. I
urge this Subcommittee to impress upon the administration the
need to make illegal dumping a priority in any bilateral or
multilateral discussions we have with our trading partners
around the world.
While I appreciate the administration's reluctance to be
overly harsh with emerging democracies--most notably, Russia--
suffering from a cash-starved and a troubled economy, the time
has come to make it clear to Russia that membership in the WTO
will not come until it commits itself fully to responsible
trading practices.
And finally, I believe we in Congress have an opportunity
in the new round of trading talks in Seattle to send a strong
message to our negotiators that the issue of ending the
practice of illegal dumping must be one of our highest
priorities. And I thank you again for the opportunity to come
forward and I yield back.
[The prepared statement follows:]
Statement of Hon. James C. Greenwood, a Representative in Congress from
the State of Pennsylvania
Good Afternoon, Mr. Chairman, distinguished members of the
Ways and Means Subcommittee on Trade. Thank you for convening
this hearing.
Today, you will hear from an array of witnesses on the real
and present danger our domestic steel industry faces from the
unfair trading practices of countries in South America, Europe
and Asia.
These practices are no longer in dispute. They are well
documented by the International Trade Commission and the U. S.
Department of Commerce. In fact, just last Friday, Commerce
issued a preliminary determination against Brazil and Japan,
finding high dumping margins for both these nations.
Significant subsidization of imported steel products was also
identified in Brazil.
This was not a surprise to anyone participating in or
observing the U.S. steel market. Last November, President
Clinton noted that our country had just experienced a one-year
300 percent increase in imports of hot-rolled steel from Russia
and a 500 percent increase in hot-rolled steel from Japan.
Five days later--one day before Thanksgiving--the impact of
this unprecedented dumping of steel hit my district.
Three hundred of the men and women employed by U.S. Steel
at the Fairless Works were notified that they would be laid-off
indefinitely. Altogether, an additional thousand Fairless jobs
will be at risk if this crisis is allowed to continue unabated.
Ironically, the seeds of this crisis were sown over the
past decade and a half, as our domestic steel industry
undertook the most expansive restructuring in the history of
any basic industry. In the early 1980's, suffering huge losses
from aging plants and equipment, big steel nearly surrendered
its competitive edge to foreign producers and thousands of
American steelworkers left the mills forever.
But domestic producers fought back. By the middle of this
decade, with billions invested in new plants, equipment and
employee training, our domestic steel producers recaptured
their place as the world's most competitive steel
manufacturers. In product quality, customer service and
productivity, no one ranks higher.
Yet, while our steel producers were bringing new and
environmentally compliant steel facilities on-line, many of our
trading partners continued to retain excess capacity through
government subsidies. They relaxed environmental standards for
older plants on the one hand and imposed import barriers on the
other. Today, the amount of excess capacity worldwide may be as
great as 300 million tons. That is roughly one-third more steel
making capacity in any year than world markets could possibly
absorb.
Due to the current growth in the U.S. economy, demand for
steel is strong and there has been no shortfall in the ability
of our domestic steel industry to provide high quality products
for its customers in the quantities needed. Still, the volume
of imported steel reached historic proportions in 1998, even as
prices for imported steel plummeted nearly $100 per ton last
year.
The effects at home have been devastating. Thousands of
layoffs, families and communities shattered, and an increasing
number of bankruptcy filings have come in the wake of this
import tsunami.
Equally disturbing to me is the time it takes to identify
and punish these steel-making predators. In the case being
reviewed by the Administration--one that was brought last
September--a final injury determination is not expected until
June, nearly three quarters of the business cycle.
Before WWII, when President Franklin Roosevelt first
explained why the Lend-Lease program was important in the fight
to save Europe, he used the analogy of the ``good neighbor.'' A
good neighbor, he observed, would certainly lend a hose to a
neighbor whose house was on fire, even if he himself didn't
join in to extinguish the fire. I wonder what President
Roosevelt would have thought of a neighbor who responded to the
urgent call by remarking that he would first have to undertake
a lengthy six-step investigation to determine if his neighbor's
house were actually on fire and then develop an appropriate
form of relief.
Sadly, we are the reluctant neighbor under existing trade
laws. To me, it seems unfair to our vital interests.
Instead of rewarding American industries that have met the
challenge of global markets by becoming leaner, environmentally
cleaner and more competitive, we punish them and ourselves by
allowing subsidized products, produced under questionable
environmental standards, to flood our markets while our
government painstakingly crosses its bureaucratic ``t's'' and
dots its regulatory ``I's.''
Our basic industries cannot hope to remain strong if our
trading partners are allowed to dump their excess capacity on
our shores at prices that fail to reflect the genuine cost of
production. We need to remind our partners that our commitment
to free and fair trade rests on the innate sense of fairness in
the American people. If these kinds of unfair practices go
unchanged, the American people may decide they have seen
enough, risking retaliatory measures and trade barriers that no
reasonable person wants.
The Regula bill, of which I am a cosponsor, is a
responsible first step to providing timely relief to our
domestic steel producers. By harmonizing injury standards with
the World Trade Organization (WTO) rules, we will significantly
strengthen our ability to address these dumping cases. The
development of a steel import-monitoring program, envisioned in
the proposed legislation, is also an important new tool in our
efforts to fight illegal steel dumping.
Further, the Administration must be more aggressive in its
discussions with our trading partners. They must understand
that our patience and forbearance are not inexhaustible and
that the continued practice of dumping steel into our market,
in violation of bonafide trading agreements, risks bringing a
less measured and more protectionist response from this
Congress and the American people.
I urge this Committee to impress upon the Administration
the need to make this issue of illegal dumping a priority in
any bilateral or multilateral discussions we have with our
trading partners around the world.
If we do not get an adequate response from the WTO and our
bilateral negotiations, then we will be forced into unilateral
steps to protect American interest.
And while I appreciate the Administration's reluctance to
be overly harsh with emerging democracies suffering from a
cash-starved and troubled economy, the time has come to make
clear that the membership in the WTO will not come until they
commit themselves fully to responsible trading practices.
Finally, I believe we in Congress have an opportunity in
the new round of trading talks to send a strong message to our
negotiators that the issue of ending the practice of illegal
dumping must be one of our highest priorities.
This November, when all our families gather to give thanks
to God and our nation for our prosperity, I want the
hardworking men and women at the Fairless Works, and at steel
mills across this country, to be able to give thanks that we in
this Congress took the wise and responsible actions needed to
enable them to return to their jobs.
Again, thank you for this opportunity to testify before
your Committee this afternoon.
Chairman Crane. Thank you very much, Mr. Greenwood.
And now, if you folks would retire to the row behind you, I
would like to call our next panel to testify.
Hon. Ron Klink, Hon. Jack Quinn, Hon. Bart Stupak, Hon.
Stephen Buyer, Hon. Michael Doyle, Hon. Marion Berry, and Hon.
Dennis Kucinich.
And I will remind all of you to please keep your oral
presentations to 5 minutes or less. You can watch the light in
front. When it turns red, that's 5 minutes and any printed
statements will be made a part of the permanent record. And, I
would ask that you proceed in the order I presented you.
Mr. Klink will go first.
STATEMENT OF HON. RON KLINK, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF PENNSYLVANIA
Mr. Klink. Thank you very much, Mr. Chairman. I would ask
again for unanimous consent that my entire statement be put
into the record and I be able to talk extemporaneously for
further----
Chairman Crane. All of it.
Mr. Klink [continuing]. Or less if it's your pleasure.
Let me just say that, rather than adding to a lot of what
was said, I would like to associate myself with the remarks
that many of you made on the panel--and thank you for being
here--and also a lot of the comments that were made by the
previous panel.
I just wanted to focus in on a couple of points. Number
one, I agree and want to just expand upon what was said
earlier. We need not try to mix foreign policy and defense
policy with trade policy and my sense is that there are some
people in this administration who have been trying to do that
and I think that they may have influenced the President wrongly
on some of these issues.
We have seen, throughout the last several decades, a
tremendous downturn in the number of people who are employed in
core industries in our Nation--in southwestern Pennsylvania, in
the Midwest, in the Great Lakes, and across America. The steel
industry has been bashed, steelworkers have been laid off by
the tens of thousands, and communities have fallen apart. I
watched it in Pittsburgh, which, at one time, was known as the
``Steel City.'' It's not the ``Steel City'' anymore and when
those workers are laid off in those numbers and you go into a
town like Aliquippa, Pennsylvania and 13,000 workers are laid
off in 1 day and the steel mill is leveled, the town is
leveled. Families are torn apart. Violence occurs both in the
community and among family members. People commit suicide.
What we are talking about here is a diminishment of a core
industry and a prolonged period of time where this is just
getting a lot worse. And, what we have heard is, well, we will
make more trade adjustment assistance available. What does that
do? The horse has been stolen. What are we going to train him
to do?
We have heard, well, we are going to give the steel
industry more tax writeoffs. They don't need tax writeoffs.
They need us to enforce the trade laws.
I would say, gentlemen--and I know that, from your
statements, most of you agree--the people that we are talking
about, the 10,000 that have been laid off, occur at a time when
we have not recovered from those tens of thousands that were
laid off in the seventies and eighties. Those communities
haven't recovered yet. These are people that work very hard. It
used to take 10 man-hours to produce a ton of steel, now it
takes 2 man-hours. That is how much better they have gotten
just since 1970. They work hard, they play by the rules, and
now the Federal Government fails to enforce those rules. What
kind of a message do we send to those workers that are out
there in the workplace?
We have had a record trade deficit of $168.6 billion last
year. Steel is the tip of the iceberg. As it has been said, we
have gone bananas over bananas, we have got a beef with beef
but when are we going to stand up for steel, a core industry?
If this country finds itself in a defense dilemma, we will need
steel. We can put blueberries on our cereal. The heck with
bananas. We can live without them.
I agree. We have to have the Visclosky bill. I am a
cosponsor of the Regula bill. I think that Mr. Traficant is
right, we need a 3-month moratorium, just to have time to
figure out where it is that we are and where we need to be. We
have watched the textile industry go away, the shoe industry go
away, so many of our industries we have chased away. Don't make
the steel industry the next industry.
Mr. Crane, Mr. Levin, Mr. Coyne, the rest of you and Mr.
Becerra, thank you for being here, thank you for putting time
in this. It is, I would say in closing, Congress that shall
regulate commerce. It is not the President, it is not the
Supreme Court, it is not the WTO, it is the Congress that our
Constitution says will regulate commerce. And thank you for
holding this hearing and taking the first step toward putting
Congress back in that role again. It is an honor to be with
you.
[The prepared statement follows:]
Statement of Hon. Ron Klink, a Representative in Congress from the
State of Pennsylvania
Thank you, Chairman Crane, Ranking Member Levin, and
Members of the Trade Subcommittee for holding this hearing. The
United States has become the international dumping ground for
the glut of steel on the worldwide market. As a result of that,
our steel companies have had to reduce their operating capacity
to 74% and lay off 10,000 steelworkers. Your Committee has the
jurisdiction to bring legislation to the Floor to send a firm
signal that we will not tolerate steel dumping. But before I
turn to legislation, I ask that we put ourselves in our
steelworkers' shoes.
In return for lost jobs, the Administration offered to give
Trade Adjustment Assistance to displaced steelworkers. What
good will that do? We need to fight to save steelworkers' jobs
in the first place rather than catering to foreign nations'
unfair trade practices. Trade Adjustment Assistance will not
guarantee them new jobs.
Back in the 80's when I was a TV reporter in Pittsburgh, I
saw thousands of steelworkers lose their jobs when their plants
closed. Now, here we go again. Over the past year 10,000 of our
American steelworkers have lost their jobs because of steel
dumping. In the Pittsburgh area alone, we lost 1,000
steelworkers' jobs in just four months.
I've seen the devastation caused when a plant shuts down.
Whole towns disappear or become shells of what they once were.
In the early eighties, I saw the pain on the faces of the
steelworkers in Aliquippa, PA when it was announced that more
than 10,000 of them would lose their jobs due to plant
closings. I will never forget the feeling of despair and loss
that set in immediately. To this day Aliquippa has never
recovered and the sad fact is there are hundreds of cities just
like Aliquippa all across this country. I ran for Congress
because I was tired of standing by while no one did anything
for these people and my message today is that once and for all
we must do something to protect this vital American industry
from being destroyed by illegal foreign dumping.
We have every reason to be proud of our American steel
industry. Twenty years ago the steel industry may not have been
the most efficient or competitive, but since then it has worked
hard to modernize and update its processes. Now we have the
most efficient steel producers in the world. They have reduced
the amount of time it takes to make a ton of steel from 10 man-
hours to just 2 man-hours. Regarding workplace safety, U.S.
steel makers have cut their injury and illness rates by 40% in
the past 10 years and under the scrutiny of government
regulators they have cut pollution discharges by 90% since
1970. In contrast, foreign competitors who dump cheap steel
into this country are subsidized by their governments and are
completely unburdened by tough environmental regulations.
What have the American steel companies gotten in return for
providing good jobs, stimulating the economy, contributing to
our tax base, and being good environmental citizens? An offer
of a $300 million tax break to try to make up for their losses.
What good will that do? Tax breaks for the steel companies
won't put food on the table for our displaced steel workers.
Nor will tax breaks bring the steel companies back to operating
capacity so the workers can get their jobs back. The only
answer is to stop the flood of cheap foreign steel being dumped
on our nation.
We must consider our trade deficit and the ripple effect
the steel dumping crisis will have on our economy. Last
Saturday, February 20, an article in the Washington Post
emphasized that the U.S. trade deficit hit a record $168.6
billion last year, ``and may well go higher...thanks to
continuing economic troubles overseas.''
Other industries worry about the negative ripple effect
unfair trade has on our economy. For example, every Member of
Congress got copy of a letter the American Foundrymen's Society
wrote to President Clinton a few days ago saying that the
metalcasting industry also competes in a global marketplace.
They urged the President ``to take all action necessary to
enforce our trade laws'' because they also face tough foreign
competition. Overseas foundries are often subsidized, pay lower
duties than U.S. foundries in order to export products, and do
not have to meet environmental and safety regulations as our
businesses do in this country.
Congress must take immediate action. Mr. Chairman, I am an
original co-sponsor of several bi-partisan bills to help our
workers and our industries get relief from unfair trade. Each
bill has been referred to the Committee on Ways and Means. Mr.
Regula has introduced HR 412, the Trade Fairness Act of 1999,
which will allow the President to provide relief to an industry
which has been seriously injured by imports. This bill also
would start a steel import monitoring program to determine
whether unfair imports are disrupting the market.
Mr. Traficant has introduced HR 502, a bill to ban imports
of steel and steel products from Japan, Russia, South Korea and
Brazil for three months.
Mr. Visclosky has introduced HR 506, a bill that would
require foreign nations to limit their steel exports to the
United States back to the levels preceding July of 1997, when
the current steel dumping crisis started to heat up.
I want to see any one of these bills come to the Floor for
a vote. I've heard that some Members are reluctant to sign on
to these bills because they do not want to be perceived as
anti-free trade. The question is not about free trade, but
about fair trade. Last month, every Member of Congress received
a letter from Kevin Kearns, president of the United States
Business and Industry Council, which represents 1,500
conservative business leaders. Mr. Kearns encouraged Members to
co-sponsor the Visclosky bill, because the Council recognizes
that the U.S. steel industry receives no government subsidies,
but does stimulate our economy. If we lose our American steel
industry, then once it is gone, it will not be brought back.
The Committee on Ways and Means has jurisdiction over all
of the bills I just mentioned. I urge you to consider them and
send them to the Floor for a vote. I ask you to do that for our
displaced American steel workers, so they can rebuild the
financial security they were fighting hard to achieve; for the
steel companies, who have worked to be the best steel producers
in the world; and for the workers and industries from broad
segments of our economy who need to see us get tough,
permanently, with foreign countries who have betrayed our good-
faith effort to promote open and fair trade.
Thank you Chairman Crane, Ranking Member Levin, and Members
of the Subcommittee.
Chairman Crane. Thank you, Mr. Klink.
Mr. Buyer.
STATEMENT OF HON. STEPHEN E. BUYER, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF INDIANA
Mr. Buyer. Thank you, Mr.----
Chairman Crane. Excuse me for my earlier mispronunciation.
Mr. Buyer [continuing]. Chairman, Mr. Levin, Members of the
Subcommittee, I also join with our colleagues thanking you for
this hearing today and I am sure all of you understand the
importance of the steel industry to this country. I also
appreciate your willingness to accommodate many of the
different Members and to hear their views at this hearing.
This Subcommittee, over the years, has taken steps to
support American competitiveness in world markets. This
Subcommittee has worked very hard to put into our trade laws
steps that can be taken to support our industries, our workers,
when other countries do not play by the rules. I thank you for
your hard work and dedication.
The steel industry has invested billions of dollars in
modernizing itself and, at the same time, improving
environmental compliance. It has learned the hard way of the
benefit of cutting-edge technology. The industry has seen a 5.5
percent annual gain in productivity. American steelworkers are
the most productive in the world.
I have met with these steelworkers. I have toured the
modern facilities in Indiana. I have spoken with these workers,
who like their fathers and their grandfathers, have worked the
mills in northern Indiana. Generations have contributed to
America's growth to become a world power.
I doubt there is one person in this room who disagrees on
the objective, and that is to ensure a free trade policy is, in
fact, fair trade. Nobody in this room supports illegal
subsidies or illegal dumping of steel products or any other
products or commodities from foreign sources into this country.
The disagreement arises over the methods and the tactics that
lead us to this objective.
I respect the efforts of Pete Visclosky and Jack Quinn, who
are not only my friends but colleagues. Mr. Visclosky's
district and my district border each other. We share Lake and
Porter counties in Indiana. We have cooperated on many issues
for the benefit of our constituents in Indiana. Pete and Jack
have introduced legislation to impose quotas on steel products
coming into this country. They have done this with the best of
intentions and, I surmise, out of a level of frustration felt
by all of us when our trading partners take advantage of the
U.S. open market and the slow wheels of our bureaucracy.
But, my view is that this legislation and the imposition of
quotas should always be the solution of last resort. I would
prefer that this administration, working with Congress and this
Subcommittee, in particular, make sure that the laws already on
the books are enforced and utilize the tools that this
Subcommittee has given the executive branch to do so.
This industry and labor can petition the government to take
action. They have done so in the case of hot-rolled steel
products and those cases are being pursued. I believe the
administration has operated in good faith to expedite these
investigations, for which I applaud them.
The administration could take unilateral action on the
dumping and unfairly subsidized products coming into the
American market and they should do such action. I regret the
administration has not done that today.
If we utilize our current trade laws and prove that another
country is unfairly trading, we bring credibility to our laws
and to our determination to see them enforced and to our policy
of encouraging other countries to play by the rules. If we
impose quotas without these findings, we lose the moral high
ground.
I am also concerned that taking a hasty action would bring
retaliation from our trading partners. Take the case of Japan.
Japanese steel is not going to evaporate if the United States
hastily imposes quotas. It might return to the United States in
the form of automobiles, trucks, or other vehicles. The
Japanese could make their market even more restrictive than it
has already done so to our agricultural products, for example.
The price for a fully operating steel industry and full
employment for its workers should not be hardship in the
automotive market or other industries.
Nonetheless, we cannot foot-drag. The administration must
give this situation the highest priority, and the cases must be
pursued expeditiously. I would encourage the Subcommittee to
hold the administration's feet to the fire. However, if the
administration does not move swiftly and does not listen to
Congress, then perhaps it may be necessary to further consider
what Pete Visclosky and Jack Quinn have offered as a solution.
I am on Mr. Regula's bill but I am hopeful that we don't
need to move to quotas. I would ask that the rest of my
statement be submitted for the record.
[The prepared statement follows:]
Statement of Hon. Stephen E. Buyer, a Representative in Congress from
the State of Indiana
Mr. Chairman, Congressman Levin, Members of the
Subcommittee. I first want to express my appreciation for
holding this hearing today. I am sure you realize the
importance of the steel industry, its workers and communities
for many of us in Congress. I also appreciate your willingness
to accommodate Members who wished to present testimony in
person.
This Subcommittee, over the years, has taken steps to
support American competitiveness in world markets. This
Subcommittee has worked very hard to put into our trade laws
steps that can be taken to support our industries and our
workers when other countries do not play by the rules. I thank
you for your hard work.
The steel industry has invested billions of dollars in
modernizing itself and at the same time improving environmental
compliance. It has learned the hard way of the benefit of
cutting-edge technology. The industry has seen a 5.5% annual
gain in productivity. American steelworkers are the most
productive in the world.
I've met with steelworkers. I've toured the modern
facilities that have made Indiana the number one producer of
steel in the world. I've talked to workers whose fathers and
grandfathers worked in the mills--generations who have
contributed to America's growth into a world power.
I doubt there is one person in this room that disagrees on
the objective--that is to ensure that free trade is fair trade.
Nobody in this room supports illegal subsidies and illegal
dumping of steel products, or any other products or
commodities, from foreign sources into this country.
The disagreement arises over the methods and tactics that
lead us to the objective. It is my honor to call Pete Visclosky
and Jack Quinn my friends. Pete's district and my district
border each other. We share Lake and Porter Counties. We've
cooperated on many issues for the benefit of our constituents
and Indiana. Pete and Jack have introduced legislation to
impose quotas on steel products coming into this country. They
have done this with the best of intentions and, I surmise, out
of a level of frustration felt by all of us when our trading
partners take advantage of the United States' open market, and
the slow wheels of our bureaucracy.
But my view is that the legislative imposition of quotas is
a solution of last resort. I would far prefer that this
Administration, working with the Congress, and this
Subcommittee in particular, enforce the laws already on the
books and utilize the tools that this Subcommittee has given to
the executive branch to do so.
Industry and labor can petition the government to take
action. They have done so in the case of hot-rolled steel
products and these cases are being pursued. I believe the
Administration has operated in good faith to expedite these
investigations, for which I applaud them.
The Administration could take unilateral action on dumping
and unfairly subsidized products coming into the American
market. I regret that the Administration has not taken this
step and I have encouraged them to do so.
If we utilize our current trade laws, and prove that
another country is unfairly trading, we bring credibility to
our laws, to our determination to see them enforced, and to our
policy of encouraging other countries to play by the rules. If
we impose quotas without these findings, we lose the moral high
ground.
I am also concerned that taking hasty action would bring
retaliation from our trading partners. Take the case of Japan.
Japanese steel is not going to evaporate if the United
States hastily imposes quotas. It might return to the United
States in the form of automobiles, trucks and SUVs. The
Japanese could make their market even more restrictive than it
already is to American agricultural products. The price for a
fully operating steel industry and full employment for its
workers should not be hardship in the automotive market and its
workers or bankruptcy for American farmers or other industries.
Nonetheless, we cannot foot drag. The Administration must
give this situation its highest priority. These cases must be
pursued expeditiously. I would encourage this Subcommittee to
hold the Administration's feet to the fire. However, if the
Administration does not move swiftly and forcefully to enforce
our trade laws, it will be necessary for Congress to consider
quotas.
Any tools that could be given to the Administration to
strengthen the ability to enforce our trade laws would be
helpful. To this end, I have cosponsored Mr. Regula's bill,
H.R. 412, to address the injury standard that must be showed
under Section 201. This legislation would help any industry in
the future that might find itself in the same position the
steel industry is now. I encourage the Subcommittee to take
action on this measure.
Finally, there is a national security aspect to this
problem that must be factored in the equation. The defense of
our nation depends on steel. Our aircraft carriers, cruisers,
tanks, HUMMVEES, are all made of steel. We cannot become
dependent on foreign sources for this material so vital to our
national defense. The United States is the only superpower in
the world. We cannot project our force around the globe, which
from time to time is necessary, without the ability to move men
and equipment quickly. It is in our national interest to
maintain a vigorous steel industry.
I hope the Subcommittee will be vigilant on this issue and
take those steps that are necessary to see that our trade laws
are enforced and strengthened. I thank the Subcommittee for the
opportunity to testify.
Chairman Crane. Without objection, so ordered. Thank you.
Now, Mr. Stupak.
STATEMENT OF HON. BART STUPAK, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF MICHIGAN
Mr. Stupak. Well, thank you, Mr. Chairman and Ranking
Member Levin and Members of the Trade Subcommittee for inviting
me here to this critically important hearing. I appreciate the
opportunity to share my views of this crisis as it is
threatening communities in my district. I urge my colleagues on
this Subcommittee and in Congress to take aggressive action to
eliminate the illegal dumping by foreign steel producers.
Mr. Chairman and Members of this Subcommittee, I do not
have steel manufacturers in my district. I have iron ore mines.
Over the past 20 years, these mines have made very painful
changes in their manufacturing process of iron ore pellets to
become more efficient. Our community has watched in horror as
the Reagan administration did nothing to prevent the illegal
dumping during the eighties.
In 1980, we had over 4,500 people employed in the iron
mines in northern Michigan. Today, we employ less than 2,200
people. Mr. Chairman, we cannot absorb any more losses in the
mining industry. If we do not take action to prevent this
illegal activity, there will be no domestic iron ore mines, no
domestic steel industry. It can't get any smaller.
If we were to stop all illegal dumping of foreign steel
today, there would still be a large oversupply of steel. I have
heard reliable estimates that in the Minnesota and Michigan
mines there will be around 8 million tons of oversupply. This
means that there is a strong possibility that mines in my
district may need to shut down for 4 weeks or 6 weeks later
this year. I want to remind the Subcommittee that this will
occur even if we stopped the illegal dumping right now--today,
at 4 o'clock--because there is such a large volume of illegal
dumped steel in this country that it is hurting my miners now.
The Clinton administration has been slow to recognize this
concern. However, with some recent action, I am pleased to see
that the administration has taken a somewhat more aggressive
action. Still, the preliminary determinations on the
antidumping from Japan and Brazil--as well as the agreement
with Russia--are only a start--a good start, but it is a start.
It does not, however, solve the problem.
While preliminary numbers seem to show a decline in
imports, we must remain vigilant. Time and time again we have
seen foreign producers make a mockery of our trade laws by
playing cat and mouse with the Commerce Department and the U.S.
Trade Representative. If the administration stops applying
pressure, import levels will again begin to rise immediately.
We must stop the illegal dumping here and now.
I am a cosponsor of the Regula, Visclosky, and Traficant
bills. I, like all members of the steel caucus, want to work
with this Subcommittee to enact meaningful legislation to
ensure that we end the current crisis and prevent it from
occurring in the future.
We should not fiddle while Rome burns. We should not fiddle
while mines remain inactive. We must take strong and forceful
action now. Our constituents, our communities, are desperate
for our help. Mr. Chairman and Members of this Subcommittee, I
urge you to hear their plea and I pledge to work with you and
all Members to solve this crisis. Thank you.
[The prepared statement follows:]
Statement of Hon. Bart Stupak, a Representative in Congress from the
State of Michigan
Thank you for inviting me to this critically important
hearing. I appreciate the opportunity to share my views of a
crisis that is threatening communities in my district. I urge
my colleagues on the subcommittee and in the Congress to take
aggressive action to eliminate the illegal dumping by foreign
steel producers.
Mr. Chairman, I do not have steel manufacturers in my
district, I have iron ore mines. Over the last twenty years,
these mines have made painful changes in their manufacturing
process to become more efficient. Our communities watched in
horror as the Reagan Administration did nothing to prevent the
illegal dumping during the 80's.
In 1980, over 4,500 people were employed the iron mines in
Northern Michigan. Today they employ less than 2,200. Mr.
Chairman, we cannot absorb more losses. If we do not take
action to prevent this illegal activity, there will be no
domestic iron ore mines, no domestic steel industry. It cannot
get any smaller.
If we were to stop all illegally dumping of foreign steel
today, there would still be a large oversupply of steel. I have
heard reliable estimates in the Minnesota and Michigan mines
there will be around 8 million tons of oversupply. This means
that there is a strong possibility that mines in my district
will need to shut down for 1 = months later this year. I want
to remind the subcommittee that this will occur even if the
illegal dumping ceased today, because of the large volume of
illegally dumped steel that exists in this country now.
The Clinton Administration was very slow to recognize this
concern. However, I am pleased to see that the Administration
has recently taken more aggressive action on this issue. The
preliminary determinations on the anti-dumping from Japan and
Brazil, as well as the agreement with Russia, are a good start.
But they will not solve the problem.
While preliminary numbers seem to show a decline in
imports, we must remain vigilant. Time and time again we have
seen foreign producers make a mockery of our trade laws by
playing cat and mouse with the Commerce Department and the US
Trade Representative. If the Administration stops applying
pressure, import levels will begin to rise immediately. We must
stop the illegal dumping here and now.
I am a co-sponsor of the Regula, Visclosky and Trafficant
bills. I, like all members of the Steel Caucus, want to work
with this subcommittee to enact meaningful legislation to
ensure that we end the current crisis and prevent it from
occurring in the future.
We should not fiddle while Rome burns. We must take strong
and forceful action now. Our constituents, our communities are
desperate for our help. Mr. Chairman, I urge you to hear their
plea and I pledge to work with you and all members to solve
this crisis. Thank you.
Chairman Houghton [presiding]. Thank you, Congressman
Stupak.
Congressman Doyle from Pennsylvania.
STATEMENT OF HON. MICHAEL F. DOYLE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF PENNSYLVANIA
Mr. Doyle. Thank you very much, Mr. Chairman.
Mr. Chairman, Mr. Levin and Members of this Subcommittee,
thank you very much for this opportunity to speak today. I will
keep my remarks brief and ask that my written statement be
submitted for the record.
I do want to thank you all for convening this hearing on
this issue and, especially, I would like to thank my good
friend, Bill Coyne, representing the city of Pittsburgh, who
has done so much work to focus attention on this current steel
crisis.
I am testifying here today because the current steel crisis
is more than just another important issue. Those of us in
Congress who represent steelmaking communities are deeply
concerned. We are seeing an entire industry--what was a
healthy, thriving industry--begin to hollow out under pressure
from below-production cost imports. America's steel production
capacity is quickly being warehoused at an alarming rate.
To my knowledge, not a single economic analyst has
contested the fact that foreign steel producers are dumping
their product in the United States at prices that are below the
cost of production. This is not a question of traditional
competitive economic pressures forcing inefficient producers
out of business. The recent moves by the administration to
address dumping by Japan, Brazil, and Russia implicitly
acknowledge this fact.
Mr. Chairman, I am sorry to say it but it appears that the
American steel industry and American steelworkers have somehow
been caught up in someone else's economic theory. The theory
has it that export-led economic growth and unhindered exports
to the United States will allow the damaged economies of Asia
and Russia to grow their way out of this crisis.
But, this theory has taken no account of the real-world
consequences. The decision seems to have been made to just
offer the afflicted countries permanently a major portion of
America's heavy industry. Whatever theoretical economic policy
we are laboring under cares nothing for the future--for the
future of our steel industry, or for America's future in an
unstable world where tanks and planes might be guided
electronically but they will still be made of steel.
Moreover, this economic theory apparently calls for just
ignoring flagrant violations of our trade laws by continuing to
take no action to protect our domestic steel market or just
incentivizing this dumping to continue.
Mr. Chairman, steel has seen tough times before. All of us
from those areas remember the tough times and steel came back
with tremendously higher labor productivity, new equipment and
better management. But, the current crisis is different. We are
forcing a good industry to go bad. We are going to permanently
lose a good industry here, a strategic industry, that is
important to our national defense with good jobs and a good
product.
Mr. Chairman, I will just close by saying there is
something wrong with a trade policy that allows 10,000
Americans to lose their jobs before we do something. We need to
act decisively to end this crisis. We need an early warning
mechanism to deal with future violators swiftly and decisively.
I support the Visclosky bill--I am a cosponsor of that
bill. I have also cosponsored Mr. Regula's bill. I hope this
Subcommittee will report those bills up. Thank you very much.
[The prepared statement follows:]
Statement of Hon. Michael F. Doyle, a Representative in Congress from
the State of Pennsylvania
Mr. Chairman, Mr. Levin, and Members of the Subcommittee,
thank you very much for this opportunity to speak today. I want
to thank Chairman Crane for convening this hearing on this
important issue. I'd also like to thank my good friend, my
colleague representing the City of Pittsburgh, Bill Coyne, who
has done so much work to focus attention on the current steel
crisis.
I'm testifying here today because the current steel crisis
is more than just another important issue. Those of us here in
the Congress who represent steelmaking communities are deeply
concerned. In our communities we're witnessing layoffs and
plant closings spreading like wildfire. We're seeing an entire
industry, what was a healthy, thriving industry, begin to
``hollow out'' under pressure from below-production-cost
imports. The steel industry is one of the most critical
strategic industries there is, and yet America's steel
production capacity is quickly being warehoused at an alarming
rate.
This is not a question of traditional competitive economic
pressures forcing inefficient producers out of business. To my
knowledge, not a single economic analyst has contested the fact
that foreign steel producers are dumping their product in the
U.S. at prices that are below their cost of production. The
recent moves by the Administration to address dumping by Japan,
Brazil, and Russia implicitly acknowledge this economic fact--
that illegal steel dumping is occurring.
Mr. Chairman, this is an extraordinary situation. I'm sorry
to say it, but the American steel industry and American
steelworkers have somehow been caught up in someone else's
economic theory. This theory has it that export-led economic
growth, and unhindered exports to the U.S., will allow the
damaged economies of Asia and Russia to grow their way out of
their crisis. But this theory has taken no account of the real-
world consequences--such as the loss of jobs and infrastructure
in one of America's few remaining heavy industries.
Rather than submitting for consideration a comprehensive
plan for relief for the affected countries, the decision seems
to have been made to just offer them, permanently, a major
portion of America's heavy industry. Whatever theoretical
economic policy we're laboring under cares nothing for the
future, for our future steel industry, or for America's future
in an unstable world, where tanks and planes might be guided
electronically but they'll still be made of steel. And this
economic theory, whose apparent aim is to create a free and
fair world market for everyone, this economic theory calls for
just ignoring flagrant violations of trade law.
Mr. Chairman, one of the stated tasks of the Committee
today is to examine whether the proposed steel legislation, the
Visclosky, Traficant, Regula, and Aderholt bills--whether these
bills are consistent with our obligations under the WTO. But
how can the United States enforce, and support, a system of
international trade law that other countries are ignoring?
That's no way to build a free and fair international economic
framework. Dumping of steel at below-production-cost is simply
illegal. By continuing to take no action to protect our
domestic steel market, we're just incentivizing this dumping to
continue.
In our steel industry, 10,000 jobs have been lost
nationwide. Hundreds of mills and plants have closed in the
past year and a half. Steel has seen tough times before, as all
of us here remember. In the 1980s, the American steel industry
went through a serious and difficult restructuring. And steel
came back, with tremendously higher labor productivity, new
equipment, and better management. But the current crisis is
different--a foreign economic crisis, and illegal and wrong
foreign trade practices, are forcing a good industry to go bad.
As I grew up in Pittsburgh, my father and grandfather were
steelworkers; and these days, both steelworkers and clerical
workers at the steel companies in my district, my constituents,
my friends, and friends of my family, have lost their jobs. So
I see the damage firsthand. It is wrong to stand by and witness
the wrecking of the steel industry by illegal foreign business
practices.
I'm urging you, my colleagues, some of you whose
communities are farther removed from the steel crisis, please
listen to our concerns and work to stop steel dumping before
it's too late. We're going to permanently lose a good industry
here, a strategic industry, important to our national defense,
with good jobs and a good product. The idea that America can be
a pure service economy is not true, it's always been an
unproven economic theory--America makes things, America makes
steel, and we're going to continue making steel. I urge the
Committee to continue its investigation of this crisis, and I
urge the Members to do everything in their power to resolve
this situation so that a powerful sector of the American
economy is not permanently knocked out for the sake of this
temporary crisis.
Chairman Houghton. Thank you very much.
Congressman Berry.
STATEMENT OF HON. MARION BERRY, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF ARKANSAS
Mr. Berry. Thank you, Mr. Chairman, Mr. Levin. I appreciate
the chance to speak with you today, although I am not here to
give you a good report about what is happening in the districts
that I represent.
Unfortunately, I am here to share with you the pain of a
small community, the Blytheville area of Arkansas. I don't
represent one of the traditional steel districts that you hear
about. Actually, I represent a part of the country where
farming is much more common. I grew up on a farm and so did a
lot of the men and women who now work in the steel plants.
Before the steel industry came to the Blytheville area,
there was a U.S. Air Force base located there. It was closed in
the early nineties. If any of you have lived through the
closing of a military base, you know how devastating it can be
to a local economy and a community. These are hard-working
folks who had the rug yanked by the Federal Government less
than a decade ago. Jobs were lost and money just disappeared
from the community.
I am proud to say that this town has rebounded in a
remarkable way. The Nucor Steel Company came in and built a
ministeel plant that created hundreds of high-paying jobs for
the whole region. Passlode and Maverick and, since then, others
have joined Nucor in either expanding or building new
facilities in the area that has resulted in many good jobs.
These Nucor jobs were averaging about $60,000 a year. In
the Arkansas Delta, that is a remarkable sum--the median family
income for the district that I represent is only about $18,000
per year. That is low, I know, but think about this: the per
capita income is less than $10,000. That is poverty.
The steel industry rescued many, many families from living
at a subsistence level. The residents finally were getting
properly rewarded for their hard work. These are farmers turned
steelworkers. They know how to work long, hard hours and get
the job done. This happens to be a good fit. The way it works
in this company is that the more steel it has produced, the
more money the employees take home. I can tell you that, until
last year, these folks were making an unbelievable amount of
steel and, for that part of this country, an unbelievable
living for their families.
That was before last year. I would like to run through a
couple of figures that really illustrate what this surge of
imports has done to one small town in America. As I have said,
much of the income of the steelworkers in Arkansas is directly
related to the amount of steel that is produced. If American
steel is not able to compete with dumped foreign steel,
obviously there is going to be less steel produced at these
factories.
The two main steel producers have about 1,200 employees
and, as I have said, they average $60,000 a year. Other steel-
related industries in the region employ about a thousand people
and they average about $30,000 a year. All of these employees
have seen their incomes go down by 30 percent as a result of
the unfair trade practices of the foreign steelmakers and our
government's inaction on their behalf.
A quick calculation shows that we have seen $30 million
disappear from this community. I consider that this $30 million
was stolen from the constituents of the 1st Congressional
District of Arkansas by the foreign companies. This is not fair
and it is not right.
I know that this is not a result of poor performance. The
plants in Arkansas are some of the most efficient in the world.
People there had every reason to believe that they were putting
out the best product at the best price that it could be
produced. Under normal economic circumstances, this is a
guarantee of success. Normal circumstances don't include
illegal action that our government permits to continue.
This dumped steel should alarm everyone in Washington. I
have lost a lot of faith in our country's commitment to its
citizens and that faith can only be restored by taking the
strongest possible steps to end this dumping. I have met many
times over the last several months with Representatives from
the USTR on this issue and continue to hear the same thing--
they are working on the problem. So far, the administration
that has promised to work on the problem has done nothing for
the people in the Blytheville area who has lost their jobs and
continue to suffer because of financial crises overseas.
We have seen the reports. We know the numbers. We have been
promised action. But, unfortunately, nothing has been done and
steps have not been taken to fix the problem. What the
steelworkers in the district that I represent and all over the
country need are solid, immediate plans to end the flow of
underpriced steel that is flooding our markets, not empty
promises. We simply cannot solve the world's financial crises
on the backs of the steelworkers of the United States of
America.
Mr. Chairman, I know that some of these bills before this
Subcommittee are rather aggressive in solving this crisis. Some
have been labeled protectionist. I want to address that very
briefly. I have always advocated free trade. I worked hard for
the passage of fast track. I supported NAFTA and GATT in my
previous position with the administration. I do not come before
you recommending this legislation lightly.
My belief in free trade is rock solid but it is predicated
on fairness. Given a level playingfield, our industry can
compete with any in the world. But, I would challenge anyone to
look at these export figures and tell me with a straight face
that our antidumping laws have not been egregiously violated.
Illegal actions deserve stern punishment.
It is my hope that this Subcommittee will look favorably on
the various bills that have been introduced to address this
crisis and act quickly to bring them to a vote. Only the most
aggressive action by the United States will ensure that our
trading partners do not continue their illegal actions which
are harming our citizens and our communities. The time has long
since passed to evaluate and commiserate. The time now is for
action--strong and decisive action. That is what the
constituents deserve. This is what I will work to achieve. And,
again, I thank you, Mr. Chairman, for this opportunity.
[The prepared statement follows:]
Statement of Hon. Marion Berry, a Representative in Congress from the
State of Arkansas
Thank you, Mr. Chairman and Mr. Levin (Ranking Dem).
I appreciate the chance to speak today, although I am not
here to give you a good report about what's happening in the my
District. Unfortunately, I am here to share with you the pain
of a small community in the Blytheville area of Arkansas.
I don't represent one of the traditional steel districts
that you hear about. Actually I represent a part of the country
where farming is much more common. I grew up on a farm, and so
did a lot of the men and women who now work in steel factories.
Before the steel industry came to the Blytheville area, there
was a U.S. Air Force base located there. It was closed in the
early 90's. If any of you have lived through the closing of a
military base, you know how devastating it can be to a local
economy and the community. These are hard working folks who had
the rug yanked out by the federal government less than a decade
ago. Jobs were lost and money just disappeared from the
community.
I'm proud to say that this town has rebounded in a
remarkable way. The Nucor steel company came in and built a
mini-mill steel plant that created hundreds of high paying jobs
for the whole region. Since then, another Nucor plant has been
built nearby, and numerous other steel jobs have emerged as a
result. These Nucor jobs were averaging $60,000 per year. In
the Arkansas Delta, that's a remarkable sum--the median family
income for my Congressional District is only about $18,000 per
year. That's low, I know, but think about this--the per capita
income is less than $10,000. That's poverty. The steel industry
rescued many, many families from living at a subsistence level.
The residents finally were getting properly rewarded for their
hard work. These are farm-folks, turned steel workers. They
know how to work hard, long hours to get the job done. This
happens to be a good fit. The way it works in this company is
that the more steel that's produced, the more money the
employees take home. Let me tell you: until last year these
folks were making an unbelievable amount of steel, and for that
part of the country, an unbelievable living for their families.
That was before last year. I'd like to run through a couple
of figures that really illustrate what this surge of imports
has done to one small town in America. As I have said, much of
the income of the steel workers in Arkansas is directly related
to the amount of steel that is produced. If American steel is
not able to compete with dumped foreign steel, obviously
there's going to be less steel produced at these factories. The
two main steel producers have about 1200 employees, and as I've
said they average $60,000 a year. Other steel related
industries in the region employee another 1000 people and they
average about $30,000 a year. All of these employees have seen
their incomes go down by 30% as a result of the unfair trade
practices of foreign steel makers--and our government's
inaction on their behalf. A quick calculation shows that we
have seen $30 million dollars disappear from this community. I
consider this $30 million dollars stolen from my constituents
by foreign companies. This is not fair, and it's not right.
I know that this is not a result of poor performance. These
plants in Arkansas are some of the most efficient in the world.
People there had every reason to believe that they were putting
out the best product at the best price that it could be
produced. Under normal economic circumstances, this is a
guarantee of success. Normal circumstances don't include
illegal action that our government permits to continue. This
dumped steel should alarm everyone in Washington. I have lost a
lot of faith in our country's commitment to its citizens and
that faith can only be restored by taking the strongest
possible steps to end this dumping. I have met many times over
the last several months with representatives from USTR on this
issue and continue to hear the same thing-that they are working
on the problem. So far, the Administration's promise to ``work
on the problem'' has done nothing for the people in the
Blytheville area who have lost their jobs and continue to
suffer because of financial crises overseas. We have seen
reports. We know the numbers. We have been promised action. But
unfortunately, nothing has been done and steps have not been
taken to fix the problem. What the steel workers in my District
and all over the country need are solid, immediate plans to end
the flow of underpriced steel that is flooding our market, NOT
empty promises. We cannot solve the world's financial crises on
the backs of our steel workers.
Mr. Chairman I know that some of the bills before this
committee are rather aggressive in solving this crisis. Some
have labeled them protectionist. I want to address that
briefly. I have always advocated free trade. I worked hard for
the passage of Fast Track. I supported NAFTA and GATT and in my
previous position with this Administration, I helped negotiate
some of the GATT provisions for agriculture. So I do not come
before you recommending this legislation lightly. My belief in
free trade is rock solid--but it is predicated on fairness.
Given a level playing field, our industries can compete with
any in the world. But I would challenge anyone to look at these
export figures and tell me with a straight face that our anti-
dumping laws have not been egregiously violated. Illegal
actions deserve stern punishment.
It is my hope that this Committee will look favorably on
the various bills that have been introduced to address this
crisis and act quickly to bring them to a vote. Only the most
aggressive action by the United States will ensure that our
trading partners do not continue their illegal actions which
are harming our citizens and communities. The time has long
since past to evaluate and commiserate. The time now is for
action--strong and decisive action. This is what my
constituents deserve, and this is what I will work to achieve.
Thank you again Mr. Chairman. I yield back and will answer
any questions the Committee may have.
Chairman Crane [presiding]. Thank you, Mr. Berry.
And, our final witness in the panel is Mr. Kucinich.
STATEMENT OF HON. DENNIS J. KUCINICH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OHIO
Mr. Kucinich. Thank you, Mr. Chairman, Members of the
Subcommittee.
We are here because the policy of the administration on
international finance and trade is contributing to a crisis for
American workers and industries. Much of the rest of the world
is experiencing a severe recession, if not depression. Many of
these countries have witnessed a dramatic devaluation of their
currencies, which makes their products very cheap when sold in
the United States.
Steel is a case in point. Even if the Department of
Commerce and the International Trade Commission had not made
preliminary determinations that foreign nations were illegally
dumping steel in the United States, foreign steel would still
underprice American steel because of the devalued currencies of
those nations.
This is why section 201 and 301 trade cases are important
but not adequate. Cheap, foreign steel will continue to
underprice and take away market share from American steel
companies and American steelworkers. As this process continues,
it is reflected statistically in a growing trade deficit. The
administration's policy response to the global economic crisis
has been to encourage foreign producers to keep manufacturing
for sale in the United States. In other words, the centerpiece
of the administration's policy is to widen the U.S. trade
deficit. This is contributing to layoffs in many U.S.
industries and it has reached a crisis level in steel.
There is no question that the U.S. trade deficit is growing
at a rapid pace. The goods and services trade deficit grew
nearly 54 percent last year over the preceding year, according
to figures compiled by the Economic Policy Institute, and
reached a level of $169 billion, according to the U.S.
Department of Commerce. Cheap, foreign steel is flooding the
American market. Last year, a record amount of foreign steel
came to the United States. In the third quarter, 54 percent of
foreign steel was brought to the United States. More steel was
brought than in the third quarter of the preceding year.
At the same time, American workers in industries affected
by foreign imports are losing their jobs. We are here today
because the steelworkers have been dramatically affected by the
import of foreign steel made cheap by currency devaluation.
An estimated 10,000 American steelworkers have already lost
their jobs. Steelworkers are not losing their jobs because the
American steel industry is inefficient. In fact, American steel
is the world's most efficient. The reason American steelworkers
are losing their jobs is that the price of foreign steel is so
much cheaper--due to the devaluation of the currencies of those
countries.
Steelworkers are not the only workers losing their jobs to
cheap imports. According to the Economic Policy Institute,
285,000 American workers lost their manufacturing jobs between
March 1998 and January 1999. The inflow of foreign products
made cheap by currency devaluation is having and will continue
to have a profound, negative effect on the U.S. economy. The
Financial Times wrote in an editorial on February 1 that the
U.S. trade deficit is ``unsustainable''--unsustainable because
record levels of consumer debt combined with mounting American
job loss and resulting loss of wages and benefits will make it
impossible for Americans to continue to spend record amounts on
foreign products.
Nothing the administration has done to date recognizes that
only comprehensive action to stem the inflow of foreign steel
made cheap by currency devaluation will, in effect, work to
resolve this. On the contrary, members of the administration
have counseled that America ``stay the course'' and continue
importing cheap foreign imports at record levels.
When the administration announced an agreement with Russia
on Monday, February 22--which shows that the administration can
do something when it wants to--I am concerned that is the limit
of what the administration response will be to directly curb
the inflow of cheap foreign steel. Left at that, this response
will be inadequate. Similar agreements are needed with Brazil
and Japan and I am concerned the administration will be
deterred from taking effective action because of the World
Trade Organization. Of course, an agreement with Russia is not
subject to the WTO because Russia is considered a ``nonmarket
economy.'' Brazil and Japan are full members of the WTO.
I want to address the objection that our remedy for the
steel crisis conflicts with the World Trade Organization. I do
not believe that the WTO is a legitimate reason for the
administration or this Congress to fail to limit steel imports.
When Congress passed the WTO Implementation Act in 1994 and
gave the administration negotiating authority for the WTO in
1988 and again in 1994, Congress did not do so knowing that the
cost would be the American steel industry.
I defy anyone to show me that any congressional committee
discussed and accepted the demise of the steel industry as an
acceptable and foreseeable cost of passing fast track and the
WTO. It simply did not happen because Congress did not
anticipate that the WTO would prohibit appropriate, quota-based
limits on imported steel made cheap by currency devaluation. If
you feel the WTO does not permit America to take effective
steps to preserve the steel industry from the import surges
caused by currency devaluation, then it is a clear signal that
the Uruguay round Agreement was inadequate.
Why should that stop us? Congress has always and routinely
refined and amended laws based on experience. In conclusion, we
should treat the question of the WTO no differently. This
Subcommittee hopefully will report and Congress should pass the
Visclosky-Quinn-Kucinich-Ney steel import bill. If the WTO is
deemed the problem, Congress should choose to preserve the
steel industry and change the WTO Agreement just as it would
any other inadequate, defective law.
Thank you, Mr. Chairman.
[The prepared statement follows:]
Statement of Hon. Dennis J. Kucinich, a Representative in Congress from
the State of Ohio
We are here because the policy of this Administration on
international finance and trade is contributing to a crisis for
American workers and industries.
Most of the rest of the world is experience a severe
recession, if not depression. Many of these countries have
witnessed a dramatic devaluation of their currencies, which
makes their products very cheap when sold in the United States.
Steel is a case in point. Even if the Department of Commerce
and the International Trade Commission had not made preliminary
determinations that foreign nations were illegally dumping
steel in the U.S., foreign steel would still underprice
American steel because of the devalued currencies of those
nations. This is why Section 201 and 301 trade cases are
important but not adequate. Cheap foreign steel will continue
to underprice and take away market share from American steel
companies and American steel workers. As this process
continues, it is reflected statistically in a growing trade
deficit. The Administration's policy response to the global
economic crisis has been to encourage foreign producers to keep
manufacturing for sale in the U.S. In other words, the
centerpiece of the Administration's policy is to widen the U.S.
trade deficit. That is contributing to lay-offs in many
American industries, and it has reached a crisis level in
steel.
There is no question that U.S. trade deficit is growing at
a rapid pace. The goods and services trade deficit grew nearly
54 percent last year over the preceding year, according to
figures compiled by the Economic Policy Institute, and reached
a level of $169 billion, according to the U.S. Department of
Commerce. Cheap foreign steel is flooding the American market.
Last year, a record amount of foreign steel came to the U.S. In
the third quarter, 56 percent more foreign steel was brought to
the U.S. than in the third quarter of the preceding year.
At the same time, American workers in industries affected
by the foreign imports are losing their jobs. We are here today
because the steel workers have been dramatically affected by
the import of foreign steel made cheap by currency
devaluations. An estimated ten thousand American steel workers
have already lost their jobs. Steel workers are not losing
their jobs because the American steel industry is inefficient.
In fact, the American steel industry is the world's most
efficient. The reason American steel workers are losing their
jobs is that the price of foreign steel, though more
inefficient, is so much cheaper due to the devaluation of the
currencies of those countries. Steel workers are not the only
workers losing their jobs to cheap imports. According to
Economic Policy Institute, 285,000 American workers lost their
manufacturing jobs between March 1998 and January 1999.
The inflow of foreign products made cheap by currency
devaluation is having and will continue to have a profound,
negative effect on the U.S. economy. The Financial Times wrote
in an editorial on February 1 that the U.S. trade deficit is
``unsustainable.'' Unsustainable because the record levels of
consumer debt, combined with mounting American job loss, and
resulting loss of wages and benefits, will make it impossible
for Americans to continue to spend record amounts on foreign
products.
Nothing the Administration has done to date recognizes that
only comprehensive action to stem the inflow of foreign steel
made cheap by currency devaluation is necessary. On the
contrary, in recent statements to Congressional committees,
members of the Administration have counseled that America
``stay the course'' and continue importing cheap foreign
imports at record levels. While the Administration announced an
agreement with Russia on Monday, February 22, which shows what
the Administration can do when it wants to, I am concerned that
it is the limit of what the Administration will do to directly
curb the inflow of cheap foreign steel. Left at that, the
Administration response will be completely inadequate. Similar
agreements are needed with Brazil and Japan, and I fear that
the Administration will be deterred from taking effective
action because of the World Trade Organization. Of course, an
agreement with Russia is not subject to the WTO, because Russia
is considered a ``non-market economy.'' Brazil and Japan are
full members of the WTO.
The Administration's policy response to the worldwide
economic recession is unsustainable. The U.S. cannot continue
as an ``oasis of prosperity'' while the rest of the world
experiences economic depression of a magnitude in some
countries that greatly overshadows our own Great Depression of
the 1930's. The extent of the economic crisis around the worked
is so great that even if the U.S. doubles its record trade
deficit, it will not be enough to pull the rest of the world
out of its troubles. But it will be enough to send thousands
more Americans out of work and send the U.S. into a recession
of our own.
I want to address the objection that our remedy for the
steel crisis conflicts with the World Trade Organization. I do
not believe that the WTO is a legitimate reason for the
Administration or this Congress to fail to limit steel imports.
When Congress passed the WTO implementation act in 1994 and
gave the Administration negotiating authority for the WTO in
1988 and again in 1994, Congress did not do so knowing that the
cost would be the American steel industry. I defy anyone to
show me that any Congressional committee discussed and accepted
the demise of the steel industry as an acceptable and
foreseeable cost of passing Fast Track and the WTO. It simply
did not happen, because Congress did not anticipate that the
WTO would prohibit appropriate, quota-based limits on imported
steel made cheap by currency devaluation. If you feel that the
WTO does not permit America to take effective steps outlined in
the Visclosky-Quinn-Kucinich-Ney bill to preserve the steel
industry from the import surges caused by currency devaluation,
then it is a clear signal that the Uruguay Round Agreement was
inadequate. Why should that stop us? Congress always and
routinely refines and amends laws based on experience. We
should treat the question of the WTO no differently. This
Committee should report and Congress should pass the Visclosky-
Quinn-Kucinich-Ney steel import bill. If the WTO is deemed a
problem, Congress should choose to preserve the steel industry
and change the WTO agreement, just as it would any other
inadequate, defective law.
Chairman Crane. Thank you.
And now we shall commence questions. Ralph, could you take
a seat at the end of that dias for a question from me, please?
Ralph, H.R. 412 deletes the word ``substantial'' from
section 201 but does not include WTO replacement language,
which requires that increased imports cannot be the cause of
injury when factors other than increased imports are causing
injury at the same time.
To me, it seems that, although the WTO does not use the
word ``substantial,'' it still imposes requirements that mean
the same thing. Therefore, it appears that H.R. 412 may impose
an easier standard than the WTO. Under this standard, imports
can be blamed for injury caused by unrelated factors, which is
not consistent with the WTO. How do you square your bill with
the WTO? Do you believe that imports should be blamed for
injury if other factors are causing the serious injury?
Mr. Regula. Well, I think the bill very clearly changes the
text by removing the word ``substantial.'' It is generic so it
would apply to any product that would substantially injure the
U.S. economy. That test is more severe that required by WTO.
My contention would be that the removal of that word does
not make H.R. 412 inconsistent with the standards that we are
signed on to as a party to the GATT Agreement.
Chairman Crane. So, in your estimation, you are not
weakening any of the existing----
Mr. Regula. No, I think H.R. 412 is consistent with the
agreement that we have under international law. I think that
the present 201 requirement is more severe than that required
by virtue of our membership in the WTO and part of the GATT
Agreement.
Chairman Crane. Commerce has recently implemented a program
where it releases steel trade statistics on an expedited basis
and the information is released only 2 weeks later than it
would be under H.R. 412. What do you think that Commerce
Department might be lacking that the monitoring program
provides and do you think that the Commerce program can be
modified to meet those needs?
Mr. Regula. I think it would be and I think that they are
removing--in response to not only my legislation but Mr.
Visclosky's and others'--to be more responsible, more
responsive to the impact of imports and I believe that we have
the mechanisms in today's world to monitor the inflow and the
surges. That's a part of the problem, these surges.
And, therefore, that is the reason we have this requirement
in the bill to provide a system that gives us real-time, quick
information on surges because otherwise the excessive dumped
imports are here before people know. For that matter, right now
there is steel piled up in warehouses that goes back prior to
the imposition of tariffs on Brazil and Japan.
Chairman Crane. Thank you very much and next I would like--
is Peter Visclosky still here?
Peter, if you could jump up there. If we pass your
legislation, aren't we improving the condition of the steel
industry on the backs of our downstream users who employ U.S.
workers, our exporters and our consumers.
Mr. Visclosky. Absolutely not, Mr. Chairman. The fact is,
that hot roll today costs less per ton in real hard dollars
than they did in 1990. As many of the panels suggested, as well
as people on the dias earlier in the day, the integrated U.S.
producers are world class and are cutthroat relative to the
competition against one another.
Some of those integrated facilities are U.S. domestic
companies. Some are wholly owned subsidiaries of foreign firms.
That competition is real. Additionally in the United States of
America, you also have very tough competition between those
integrated firms, that in many instances along this table, are
in States like Ohio, Pennsylvania, Michigan and Indiana, that
are competing with firms in States like Arkansas, as Mr. Berry
testified. Those steel prices for hot roll today wouldn't be
less 9 years later in real dollars if that competition wasn't
real. So we have got to get over this idea that this is going
to be inflationary and we are going to hurt someone.
I would also point out that under the Visclosky-Quinn bill,
you also still provide a level of imports that represent one
out of every four tons of steel sold in the United States. So
you still, on top of all of that very real hard competition
have a quarter of that still represented by the export market
that is fairly traded. Nobody here today that I heard
complained about that other 25 percent of the steel coming in,
36 percent of which is bought by the steel companies
themselves.
Chairman Crane. H.R. 506 proposes a quota on U.S. steel
imports. How much of a decrease would this be in the amount of
steel available in the U.S. market? Would U.S. production be
able to make up the difference in all product categories?
Mr. Visclosky. Yes, sir. Because what we are simply asking
is that the levels return to where they were when steel was
fairly traded in July 1997. Figures indicate that capacity
utilization today is down from where it was and that our
domestic firms can meet that competition.
Chairman Crane. There has been no increase in demand.
Mr. Visclosky. Oh, we can meet an increase in demand. I can
take you to five mills in northwest Indiana, and every Member
on this panel can take you to mills in their congressional
districts where there is underutilized capacity and also steel
that is onsite in those plants that cannot be sold because of
unfairly traded steel.
So as far as increased demand, we have inventories in all
of our plants that we would love, the steelworkers would love
that steel sold. We will make all the steel you need, we'll
make all the steel the auto producers need, we'll make all the
steel anybody in this country needs in these U.S. plants.
Chairman Crane. Mr. Levin.
Mr. Levin. Thank you, Mr. Chairman. To all of you, this has
been an unusually broad and impressive array. Most of you come
from areas with steel production or related industries. I think
one message we need to send forth is that the issues you raise
relate vitally to steel, but also to other areas actually or
potentially in this country, because most districts do not have
much steel production in them, but they have production related
to it or areas of activity where there have been or could be
similar problems.
I think, Mr. Regula, your response to the Chairman was as
important as Mr. Visclosky's. I think clearly our 201 standard
is more stringent than allowed by the WTO. Also, I think
whether your technique is the exact one or not, we need a much
better monitoring system. There have been proposals for
licensing, for example, which would clearly bring about a
better information flow.
We have other panels. Maybe we should therefore go on so we
finish. Yesterday we didn't finish or the day before until 8
here. I don't think we want to do that today. But let me just
say one other thing to each of us.
I am not sure we can devise a system where foreign policy
or foreign economic policy or defense considerations are made
irrelevant to trade considerations. That may not be workable or
wise, but the problem has been that those considerations often
dominate and snuff out considerations of trade and economic
impact in this country.
But one other thing. Even if there weren't a defense or
security issue here or foreign policy issue, there are numerous
people within our midst who would still say we should do
nothing about this surge of steel imports. We need to talk
through that issue because there are lots of people who would
argue that any action against this kind of a surge will hurt
much more than it will help. Then they automatically roll out
the label that we know.
So we have this original barrier to get over, whether this
kind of a predicament isn't worthy of action, which I think it
is.
Mr. Buyer.
Mr. Buyer. I want to associate myself, Mr. Levin, with some
of your comments. There is such synergy between our domestic
policy, our trade policy, our national security policies, that
we cannot treat them each in its own department. So when it's
the responsibility of the President to lay out the national
security interests of this Nation, he then lays out a national
military strategy to accomplish those objectives, whether it is
protecting our own trade routes or in the enforcement of our
alliances and agreements around the world.
But if we are going to maintain the status of a world
superpower, we have to ensure that when there is a vital
industry that is important to achieve those objectives, we have
to take some special caution in order to protect that industry.
So take steel as the example. It is so vital to our defense and
being able to have power projection capabilities around the
world to rapidly respond to whatever crisis. So long as we
maintain a two major regional conflict scenario, we have to be
able to have force projection, whether it is by air or by sea,
let alone when our soldiers hit the ground, be able to have the
proper equipment to fight and win the Nation's wars. That is
why I associate myself, Mr. Levin, with your comment.
Mr. Levin. Let me just respond quickly, because we have
been through this for 15 or 16 years, where foreign policy
considerations or national security considerations prevent our
looking at the economic impact within the United States, even
if that product, say machine tool or automobile or textiles, or
whatever it is, doesn't have any direct defense connection.
I don't think we can have a system where defense foreign
policy considerations are made irrelevant. But we must have a
system where they don't automatically predominate and end the
need for us to take action.
Mr. Kucinich. Mr. Levin, I would like to state that we have
to make sure our priorities are straight here. That is, that we
can help the world as long as the United States is strong,
which means our steel, automotive, and aerospace industries are
strong. When we see trade adversely affecting our national
defense and our national economy, I believe it is our job to,
in the historic sense, to promote the common welfare and
provide for the common defense, and correct our trade policy
accordingly.
I think when we start using foreign policy considerations,
where we are more worried about what is happening in other
parts of the world than we are worried about what is happening
with our own people here, we are going in the wrong direction
and we are undermining support for ourselves and what we try to
do in this Congress. The Congress loses credibility with the
American people.
Mr. Levin. I think you are wise, you are right to look at
this in the more global way, even if you and I might not come
out the same place every time. What we have failed to do is to
look at trade issues in a broader sense. We need to do that.
Thank you, Mr. Chairman.
Chairman Crane. Mr. Houghton.
Mr. Houghton. Thank you, Mr. Chairman. Strange. In the last
year, there has been one 201 filing. That was on steel wire
rod. There have been no 301s. Why is that? I mean this didn't
happen yesterday. This has been coming. We have seen it coming.
All of us who have been through situations like this totally
identify with you. Why haven't we used the government?
Now you can say well, the last person out of the Oval
Office is the Secretary of State and Secretary of the Treasury.
They are looking at the macro issues and they never listened to
the U.S. Trade Representative and the Department of Commerce,
but they are there. Other people have used that. Maybe you can
help me on the answer there.
Mr. Regula. If I may, Mr. Houghton, I think part of the
reason is that the test is so severe. That is what we are
suggesting, that we make the test consistent with WTO, that by
removing the word ``substantial,'' and then I think you would
find more filings because of course the burden of proof is
substantial even under the language as I propose in the bill.
But at least it makes it doable.
Mr. Houghton. As far as the 301 is concerned, an individual
union or a company cannot file this. It has to be filed by the
administration. However, the case could be brought by an
industry, a company, a union, and just the fact that you have
put the pressure and submitted some sort of a statement or a
brief, usually sends a shot across the bow of those people who
are violating our trade laws.
Mr. Regula. Well, I think that section 301 has been a time
problem because by the time you get action, you may be
bankrupt. In the meantime, people can't pay their mortgages.
Mr. Houghton. I understand that. I think your changing
wording is very good. I think that is great. But the point is
that we don't have it now. We have had these other things and
they haven't been used. Maybe you have got some other ideas.
Mr. Visclosky. Mr. Houghton, the only thing I could suggest
is that you have the companies as a panel later as well as the
members of organized labor, and you might ask them that
specific question because it is more or less addressed to them.
I also do think, however, we are all creatures of habit. As
Mr. Regula suggested, we can talk about a shot over the bow, we
can talk about a time delay, but where you are in a plant, you
are on a specific line, and you are making a product. It is
that product that you cannot now sell. I think, again, the
weapon of choice in these issues has been tending to go after
that specific target that has hurt you in that line, in that
product, in that plant. I think that, historically, has been
the way the industry, as well as labor, has approached the
problem.
I would simply add onto that, I think that's why, and you
and Mr. Levin earlier had talked about a global approach and a
number of people on the panel, because one statistic that I
would refer the Subcommittee to is the action against Japan,
for example, was taken on hot roll. But for the first complete
7 months of 1998, if you look at structural steel from Japan,
you already see that shifting in product line. Now you have a
35-percent increase in structural steel from Japan because you
have gone after hot roll, which I guess in a way reconfirms
your earlier point that you do have to look at this as a whole.
But they are being hurt by products.
Mr. Houghton. Yes. I guess the only, and then I'll be quiet
here, but I guess the only thing that I am suggesting is that
we have lots of different remedies. The problem is the
administration, it's not just a Democratic administration, it's
gone on for years, they don't listen very well. They are not
sensitive because they are looking at sort of hands-across-the-
sea global issues. But it's there and it's used. It may not be
the most effective and it may not be timely. People may be in
trouble if they wait too long, but it's there. I really think
we ought to use absolutely everything that is available out
there.
Thanks, Mr. Chairman.
Chairman Crane. Mr. Coyne.
Mr. Coyne. Thank you, Mr. Chairman. I just want to follow
up on what Mr. Houghton has raised. It is amazing that you
don't see any of these filings of the 201. The recommendation
of Mr. Visclosky is I think well put; why the aggrieved parties
in the steel industry have been reluctant so far to file 201
filings. With representatives of the steelworkers and the
companies coming up later on, I think that is going to be a
very interesting question to put to those people. Thank you.
Chairman Crane. Ms. Dunn.
Ms. Dunn. Thank you very much, Mr. Chairman. My questions
are generated by a visit that Alan Greenspan paid us a couple
of weeks ago in which he mentioned in response to a question on
this particular topic from somebody on our Committee, that it
would be dangerous to move toward any legislation such as
yours, Mr. Visclosky, and that because of the possibility of
starting a trade war, and that possibly the better approach
would be to provide additional adjustment assistance to the
workers in the industry.
Now I know that the administration is following this
advice. I guess I would just like to ask you what are they not
doing that you would like to see them do?
Mr. Visclosky. Ms. Dunn, I would be happy to submit to you,
as well as the Chair and every Member of this Subcommittee, a
detailed two-page memorandum that I did provide to the
Secretary of Commerce yesterday, as well as to the Trade
Ambassador, as to the very specific actions I think that they
need to take.
I would, because you have raised it in relationship to my
bill, along with Mr. Quinn and I think just about everybody at
the table is a cosponsor of it, the fact that the Japanese
exports to the United States significantly declined in December
and January from November levels, that is your evidence that
this is absolutely a controlled market. Those decisions being
made in Japan are being made in the same context that Mr.
Greenspan raises his concern.
I would further suggest that the continent of Europe, the
last time I looked, is much closer to Russia than it is to the
United States of America. Somehow, none of that illegally
traded steel has made its way into Europe. If Mr. Greenspan is
so concerned about an international global meltdown, if we all
are, he ought to go talk to the Europeans and straighten them
out, and make sure that if they want to protect the globe from
that meltdown, they should assume part of the responsibility
too. It is a sad day in this country if we have to sit here and
say we can't enforce specific statutes against specific
products that are breaking our law because of potential
retaliation or a trade war that would develop.
As far as trade adjustment, I must tell you, and I
appreciate the good intentions, I appreciate the idea that we
should improve these statutes. In the congressional district I
represent, from 1977 to 1987, 38,000 people lost their jobs so
that two steelworkers per hour could make a ton of steel, as
Mr. Klink indicated earlier. That is a real fact. I do not know
one of those 38,000 people that ever got a real job because of
trade adjustment. Every hour this Subcommittee and every hour
this administration spends on trade adjustment is an hour you
are not spending getting that illegally traded steel out of our
market.
I don't want to train somebody for a low paying, no health
insurance, no pension job. I want this Subcommittee, I want
this Congress, and I want this administration to stop that
steel.
Ms. Dunn. Let me just quickly ask another question related
to the same sort of thing to any Member on the panel. One of
the messages the United States is trying to convey to countries
who are now experiencing economic and financial crises over the
last 1\1/2\ years is the importance of open markets to create
stable economies. Wouldn't it be hypocritical for the United
States to ask countries to take steps to open their markets
while we take steps to close a sector of ours, and might it not
lead into some vice versa situation over the next few years?
Mr. Buyer. May I respond to that?
Ms. Dunn. Certainly.
Mr. Buyer. This is an issue about illegal dumping, the
violation of our present trade laws. That is why I believe that
Mr. Visclosky's bill would be the bill of last resort, that is,
quotas.
Now, in his level of frustration, he has said, ``Steve, I
have had it. We have to do it now.'' That is where I support
Mr. Regula. But if I can't take it any more, maybe it is 1 week
or days or months with the administration, then I am going to
be right here with Mr. Visclosky. So I would say, Ms. Dunn,
that is the issue.
If I can comment for a second on Mr. Houghton. Amo, I have
to agree with you. The enforcement of laws in this country
requires vigilance, not only by government, but also by
victims. Our present system though is woefully lacking of
vigilance on behalf of government, and relies upon victims to
come forward and make their filings. That is a wrong system.
So the vigilance on behalf of government, whether it is the
executive or the legislative, should lead the way, not a system
that requires on the victims to beg of their government to
enforce the laws.
Mr. Regula. I would just comment to Congresswoman Dunn that
we are not talking about closing the market. We are really
talking about having a fair level field. We are saying that we
want to have the same rules apply on imports that apply to us
as our Nation exports. I think that is only fair.
I would hope this Subcommittee would look at the laws on
illegal dumping and countervailing duties to see if they could
not have a more rapid response, because it is approximately 8
months to 1 year before there is action taken. A lot can happen
adversely to both an industry and to its work force in that
period of time.
Chairman Crane. Mr. Jefferson.
Mr. Becerra.
Mr. Becerra. Thank you, Mr. Chairman. Thank you, to each
one of my colleagues who has taken the time and actually sat
through and stayed to respond to some of the questions.
I really have only one question because I know that we do
want to move on to the other panels, and I do not want to keep
Members any longer than they have already been here. It relates
to some of the colloquy that occurred right now to the
questions asked by the gentlelady from Washington.
Mr. Visclosky, your bill would return the levels of import
to where they were as of mid-1997-July 1997. Give me a sense,
and maybe you all agree on this or maybe there is some
difference. When would we feel that our foreign partners are
responding favorably to the pressures we are applying short of
legislation? The administration I guess believes that they can
ask these countries to voluntarily curtail their exports to us,
but at what point would we feel comfortable that, in fact,
those countries are no longer intending to illegally dump their
steel in our market? Is there a level? Or do we need to get
back to the mid-1997 level before we feel comfortable that in
fact they are now intending to comply with fair trade?
Mr. Visclosky. Mr. Becerra, I would say that we have to get
back to where we were in July 1997. It was not an accident that
exports from Japan increased 141 percent, or that from Russia
they increased 162 percent, or Korea, 102 percent. Or that as
of January of this year, Indonesian exports are up 890 percent
from that month's level.
I would also point out that in the legislation there is a
3-year limitation. I would hope, and I think all of us would,
that we see real hard numbers. There is a proposal out to
monitoring, so that we have an early warning system. I am a
cosponsor of Mr. Regula's bill. That is a long-term problem.
But it is almost 3. Since noon now, you have had two
steelworkers lose their jobs today. We have to do something.
Mr. Klink. Mr. Becerra, if I could just chime in. I think
that we would know that when they stopped dumping their steel
at less than the cost of production. That is really what has
occurred here. We have to have that monitoring ability.
We were talking, and I have to agree with my dear friend
Mr. Buyer. Imagine if we ran a country of laws, where a rape
victim or a robbery victim had to go out, catch the criminal,
and prove the case against them, that we didn't have a police
department that would go out, or a Justice Department that
would go out. That is really what we have with trade laws. The
victims themselves have to go out and catch the culprits and
then prove the case. Then you have got a prolonged period,
whether it's section 201 or section 301, of year upon year. In
the meantime, you have to be sitting there as a board of
directors, as a CEO, chief executive officer, as a CFO, chief
financial officer, of that corporation saying look, I have got
payroll, I have got capital investment decisions to make, I
have got market share that I have got to worry about. In the
meantime, you are doing what it is that the Congress and the
Department of Commerce and all the trade officials of this
country should actually be doing for you.
We need to set that mechanism up so that we don't depend on
the industries themselves or the labor unions to do that
policing. That is the problem we find ourselves in.
Mr. Becerra. Actually, Mr. Klink, if I could follow up with
you on that, can we, and I don't know the answer to this, can
we ascertain whether or not a country is exporting its steel
below cost? Are we able to ascertain that?
Mr. Klink. I think that it was very evident to the
industries themselves, I think that we do have mechanisms in
place where we know it. I felt personally, and I can't speak
for all the Members of this panel, but I felt personally that
it took the Department of Commerce a prolonged period of time.
We knew well over 1 year ago. The steelworkers and the steel
industry knew, but it still took the Department of Commerce
until I think it was October or something, until they finally
made a firm determination. I don't know why it has taken that
long.
But I think that it is very evident to the industries
themselves, they know when the steel is coming in, and if it is
being sold at a price that costs less than the cost to produce
it, they know instantly.
Mr. Becerra. So we may not know the precise costs in Japan,
but we can certainly determine when they are dumping and going
beyond selling at their cost.
Mr. Klink. Absolutely. Because they know first of all the
technologies that these people have. They know what the
salaries are. They know what it costs to transport that steel,
whether it is hot roll or specialty steel, whatever it happens
to be, from point A to point B, and if they are bringing it
here. So all of those things can be figured it out. It should
not really take a prolonged period of time for us to make that
determination. We should have a mechanism where we can act a
lot quicker. I think that is what some of these pieces of
legislation are attempting to do.
Mr. Becerra. We probably need to go beyond Mr. Visclosky's
proposal. We have to be vigilant to make sure that from here on
in, we are watching so that the next time we don't have to go
after them in this way. Rather, we are ready to say to them act
now before it gets any worse.
Mr. Klink. And it's not, Mr. Becerra, it is not just steel.
I mean steel is our case in point. It has propelled us to where
we are giving it this kind of attention. But it could happen
with any other industry.
Mr. Regula. I think this makes a good point. That is, that
I would hope the Subcommittee, as a result of this hearing,
will take an overall look at our trade laws and policies in
this Nation, because this problem is not going to just be
restricted to steel. It could be any number of things. We are
the market of choice because of the hard currency that other
countries need. So I hope you will prospectively take a look at
it.
I think the other comment I would make, and I think many of
our panelists would make this, trade policy should not be
driven solely by foreign policy and military policy. It is not
fair to do those policies on the backs of American workers. So
I think there needs to be a balance. That is the responsibility
that this Subcommittee has.
Mr. Becerra. Thank you, gentlemen.
Thank you, Mr. Chairman.
Chairman Crane. Mr. Houghton has asked permission for one
final question.
Mr. Houghton. Yes. I would just like to ask Mr. Visclosky
this. I don't know whether you feel we ought to try to be World
Trade Organization compliant. I happen to think so, because if
we don't, we unravel something which we have been working for a
long time.
But in order to have your legislation acted on, as I
understand it, and I'm sure you know more about this than I do,
that you just can't submit a bill to have it passed in the
House. You must have someone submit a 201 filing. That must
then go to the ITC, International Trade Commission. That must,
if there is injury proved, which I am sure there would be, then
that must go to the President, and he can act on it. If he
doesn't act on it, then you can have the legislation.
So I hope that process, if you really believe in this, is
taking place.
Mr. Visclosky. Mr. Houghton, a couple of things. One, a
number of countries we are having a problem with are not
members of the WTO. So for them, it is a moot issue.
Mr. Traficant testified earlier that he believes under
article 21 of the GATT that as far as the necessity of a
healthy domestic steel market for the national defense, that it
would be exempted in any event.
Last, the only----
Mr. Houghton. Yes, but Mr. Traficant also suggested that we
put a total break on everything. I am not sure that is the
great signal we want for the rest of the world.
Mr. Visclosky. In a sense, the administration has done what
Mr. Traficant suggested and what the House did in a resolution
in October of last year in coordination, essentially, with the
terms of the legislation we have discussed today as far as the
agreement they have entered into with the Russians.
But the third point I would make is someone is also going
to have to file a complaint. I am old enough to remember the
black box that David Stockman had. If you were in that box, you
were stuck. What I would like to see with this legislation
passed by the House, in a sense is put everything in a box and
not let anybody out until we solve the problem. If they knew
they had 60 days, I think we are the best tool the
administration could have at their disposal for fixing this
problem now in a WTO compliant fashion.
Chairman Crane. Well, let me express appreciation to all of
our panelists, our Members, our colleagues, and appreciate your
participation and endurance.
Now, I would like to let you exit and welcome Hon.
Secretary of Commerce, our distinguished colleague from
Chicago, Mr. Daley.
I have just been informed Mr. Secretary, that our other
distinguished fellow Chicagoan has arrived. So, Charlene, if
you would be so kind as to take a seat next to Bill. Then we
shall proceed with Secretary Daley's testimony, and then yours.
If you can try and keep the verbal testimony abbreviated about
5 minutes, any written statements will be made a part of the
permanent record.
With that, will you proceed, Bill.
STATEMENT OF HON. WILLIAM M. DALEY, SECRETARY, U.S. DEPARTMENT
OF COMMERCE
Mr. Daley. Thank you very much, Mr. Chairman, and Members
of the Subcommittee. I appreciate the opportunity to appear
before you.
As you know, President Clinton and his entire
administration shares the concerns of this Subcommittee. He is
most dedicated to ensuring that America's steel industry, our
steelworkers and their families are not hurt by unfair trade
practices and import surges. The President has made this one of
his top priorities, and all of us in the administration have
been actively involved in putting together a swift and
effective response.
Before I describe to you the substantial efforts made by
the Commerce Department, I would like to announce some
encouraging news. Just this morning the Commerce Department
released the preliminary steel import statistics for January.
Let's look at how January compares with November 1998, when
steel imports reached record highs, and the last month before
our critical circumstances determination began to have an
impact.
Hot-rolled steel imports from Russia, Japan, and Brazil,
the three countries subject to the dumping investigation, fell
dramatically. Imports from Russia fell from over 600,000 metric
tons in November, 1998, to less than 11,000 tons in January
1999. Hot-rolled imports from Japan also plummeted from over
400,000 tons in November, to less than 16,000 tons. Imports
from Brazil fell from 64,000 tons to less than 16,000. These
three countries combined, fell by 96 percent from the record
levels of November. Worldwide imports of hot-rolled steel fell
by 70 percent from November to January.
These figures show that worldwide imports of all steel
products dropped by 34 percent compared with November 1998.
Total steel imports from Japan and Russia plunged from more
than 1.4 million tons to less than 425,000 tons, a drop of over
70 percent.
These numbers are encouraging. They show that tough
enforcement of our trade laws does work. However, we recognize
that 1998 was a record year for imports, and that 1 or 2 months
of good data do not make a trend. Let me assure you, Mr.
Chairman, that we will not relent in our determination to
ensure that the United States does not become the dumping
ground for unfairly traded steel.
This administration has made fast and strong enforcement of
the trade laws a key component of our steel action. First, we
established a new policy on critical circumstances, which we
applied for the first time in the hot-rolled steel
investigation. This was, in our opinion, a key factor in the
substantial decline of hot-rolled imports in December/January.
Under this new policy, Commerce can issue determinations of
critical circumstances prior to preliminary dumping
determinations in order to respond to import surges.
In November, we made preliminary critical circumstances
determination in that hot-rolled cases in Japan and Russia,
almost 3 months before the preliminary determination was due.
This put the importers on notice earlier than ever before, that
they could be liable for retroactive dumping duties. On
February 12, we issued preliminary determinations on hot-rolled
steel from Japan and Brazil, finding dumping margins ranging
from 25 to 71 percent, as well as subsidy margins for Brazil.
We made a commitment to expedite these cases and have shifted
resources within our department so we could provide relief to
the industry and workers as soon as possible. The
determinations were issued in an unprecedented 25 days early.
On Monday of this week, we reached two proposed agreements
with Russia that will significantly reduce imports of Russian
steel, and provide effective relief to the industry and
workers. The first agreement would suspend the hot-rolled steel
dumping investigation in favor of a three-part deal. First,
there will be a 6-month moratorium on imports, which is
intended to offset the recent surge. As a result, total 1999
Russian hot-rolled steel imports will be less than 345,000
metric tons, a reduction of almost 98 percent from the 1998
import levels of 3.8 million metric tons.
Second, starting in 2000, there will be an annual quota of
hot-rolled steel of 750,000 metric tons. This is equivalent to
the presurge noninjurious 1996 import levels, and represents a
78-percent reduction from 1998.
Finally, this agreement sets a minimum price for Russian
steel, high enough to ensure that U.S. prices are not forced
down. As required by law, we also issued the preliminary
dumping determination on Russian hot-rolled steel, finding
margins of 70 to over 200 percent.
The second agreement is a comprehensive agreement
restricting imports of other Russian steel products to the
United States back to 1997 levels. This agreement will provide
the steel industry and workers with additional immediate relief
from imports of other Russian steel products, covering 16 steel
products other than hot-rolled steel, such as cold roll,
galvanized sheet, wire rod, and pig iron. The comprehensive
agreement will prevent surges in other products. In addition,
it will deter circumvention of the hot-rolled agreement by
preventing the Russians from shifting to other steel products
to get around their quota. Together, the two agreements when
combined with the 1997 steel plate agreement, will reduce
overall imports of Russian steel by almost 68 percent.
Early last year in response to the Asian financial crisis,
we at the Department of Commerce established an import
monitoring system to watch for import surges and falling
prices, particularly from import-sensitive industries such as
steel. Building on this approach, the President's steel action
plan, announced in January, put into place new guidelines for
the release of preliminary import statistics to ensure that the
industry and workers had accurate information as early as
possible. The Commerce Department took the unprecedented step
of publicly releasing preliminary steel import statistics
almost 1 month before the release of their official statistics.
The release this morning of steel import data makes the second
time we have done this.
In addition, the Commerce Department is expediting the hot-
rolled steel cases and issuing a new policy on critical
circumstances. Last November, the Commerce Department issued
strong new countervailing duty regulations that strengthen our
ability to combat unfair subsidies. Overall, the Commerce
Department is currently enforcing over 100 antidumping and
countervailing duty orders on steel. We currently have 31
ongoing antidumping and countervailing duty investigations on
steel products.
Mr. Chairman, the President and his entire administration
remain deeply concerned about the recent plant closings and
layoffs in the steel industry. We are all committed to
continuing these efforts to ensure a long-term solution for our
industry, the steelworkers of America, and their families. That
is the end of my statement.
[The prepared statement follows:]
Statement of Hon. William M. Daley, Secretary, U.S. Department of
Commerce
Thank you, Mr. Chairman. President Clinton shares the
concerns raised by this Committee, and he is dedicated to
ensuring that America's steel industry, our steel workers, and
their families are not hurt by unfair trade practices and
import surges. The President has made this one of his top
priorities, and all of us in the Administration have been
actively involved in developing a swift and effective response.
Before I describe for you the substantial efforts made by
the Commerce Department, I would like to announce some
encouraging news.
January's Preliminary Steel Import Data
Just this morning, the Commerce Department released the preliminary
steel import statistics for January. Let's look at how January compares
with November 1998--when steel imports reached record highs, and the
last month before our critical circumstances determination began to
have an effect. Hot-rolled steel imports from Russia, Japan, and
Brazil, the three countries subject to the dumping investigation, fell
precipitously. Imports from Russia fell from over 600,000 metric tons
in November 1998 to less than 11,000 tons in January 1999. Hot-rolled
imports from Japan also plummeted, from over 400,000 tons in November
to less than 16,000 tons. Imports from Brazil fell from more than
64,000 tons to less than 16,000 tons. The three countries combined fell
by 96% from the record levels in November. Worldwide imports of hot-
rolled steel fell by 70% from November to January.
The January figures show that worldwide imports of all steel
products dropped by 34% compared with November 1998. Total steel
imports from Japan and Russia plunged from more than 1.4 million tons
to less than 425,000 tons--a drop of 70%.
Enforcement of Trade Laws
These numbers are encouraging. They show that tough
enforcement of the trade laws works. However, we recognize that
1998 was a record year for steel imports, and that one or two
months of good data do not make a trend. Let me assure you that
we will not relent in our determination to ensure that the
United States does not become a dumping ground for unfairly
traded steel.
This Administration has made fast and strong enforcement of
the trade laws a key component of our steel action plan. First,
we established a new policy on critical circumstances., which
we applied for the first time in the hot-rolled steel
investigations. This was a key factor in the decline of
hotrolled steel imports in December and January. Under this new
policy, Commerce can issue determinations of critical
circumstances prior to the preliminary dumping determination in
order to respond to import surges. In November, we made
preliminary critical circumstances determinations in the hot-
rolled steel cases on Japan and Russia, almost three months
before the preliminary dumping determination was due. This put
importers on notice--earlier than ever before--that they could
be liable for retroactive dumping duties.
Then, on February 12, we issued preliminary determinations
on hot-rolled steel from Japan and Brazil, finding dumping
margins ranging from 25 to 71 percent, as well as subsidy
margins for Brazil. We made a commitment to expedite these
cases, and we shifted resources within the Department so that
we could provide relief to our industry and workers as early as
possible. These determinations were issued an unprecedented 25
days early.
Russian Steel Agreements
On Monday of this week, we reached two proposed agreements
with Russia that will significantly reduce imports of Russian
steel and provide effective relief to the steel industry and
U.S. workers. The first agreement would.suspend the hot-rolled
steel dumping investigation in favor of a threepart deal:
First, there will be a six-month moratorium on
imports, which is intended to offset the recent surge. As a
result, total 1999 Russian hot-rolled steel imports will be
less than 345,000 metric tons. This is a reduction of almost 90
percent from the 1998 import level of 3.8 million metric tons.
Second, starting in 2000, there will be an annual
quota on hot-rolled steel of 750,000 metric tons per year. This
is equivalent to the presurge, non-injurious 1996 import
levels. It represents a 78 percent reduction from 1998 levels.
Finally, the suspension agreement sets a minimum
price for Russian steel, high enough to ensure that U.S. prices
are not forced down.
As required by law, we also issued the preliminary dumping
determination on Russian hot-rolled steel finding margins
ranging from 70 to over 200%.
The second agreement is a comprehensive agreement
restricting exports of other Russian steel products to the
United States to 1997 levels. This agreement will provide the
steel industry and U.S. steelworkers with additional immediate
relief from imports of other Russian steel products.
It covers 16 steel products other than hot-rolled
steel, such as coldrolled steel, galvanized sheet, and wire
rod. It also covers pig iron.
The comprehensive agreement will prevent surges in
other steel products. In addition, it will deter circumvention
of the hot-rolled suspension agreement by preventing the
Russians from shifting to other steel products to get around
the quota.
Together, the two agreements, when combined with the 1997
steel plate agreement, will reduce overall imports of Russian
steel mill products by almost 68 percent in 1999 compared to
l998 import levels.
Early Warning System to Monitor Import Trends
Early last year, in response to the Asian financial crisis,
the Commerce Department established an import monitoring system
to watch for import surges and falling prices, particularly for
import-sensitive industries, such as steel.
Building on this approach, the President's steel action
plan, announced in January, put into place new guidelines for
the release of preliminary import statistics. To ensure that
the U.S. steel industry and workers had accurate information as
early as possible, the Commerce Department took the
unprecedented step of publicly releasing preliminary steel
import statistics almost a month before the release of the
official trade statistics. The release this morning of steel
import data, which I announced earlier, marks the second time
we have done this.
Other Trade Enforcement Efforts
In addition to expediting the hot-rolled steel cases and
issuing a new policy on critical circumstances, last November
Commerce issued strong new countervailing duty regulations that
strengthen our ability to combat unfair subsidies.
Overall, the Commerce Department is currently enforcing
more than 100 antidumping and countervailing duty orders on
steel products, and we are currently conducting 31 new steel
investigations.
Bilateral Efforts
We continue to press the countries accounting for the
largest volume of imports to end unfair trading practices,
particularly Japan, which accounts for the largest share of the
recent import surge. The President put Japan on notice in his
State of the Union address and in meetings with Prime Minister
Obuchi that if Japan's exports in 1999 do not revert to their
pre-crisis levels, the Administration stands ready to take
further action. Ambassador Barshefsky and I have reiterated
this message as well in our bilateral meetings. In addition, we
have pressed Korea to end government involvement in the steel
industry.
Finally, we have also issued stern warnings to other
countries that may be tempted to sell more steel in the United
States unfairly: we are monitoring imports closely and will
enforce our trade laws vigorously.
Conclusion
Mr. Chairman, the President remains deeply concerned about
the recent plant closings and layoffs in the steel industry. We
are all committed to continue our efforts to ensure a long-term
solution for our industry and the steelworkers of America and
their families.
I would be happy to take any questions
Chairman Crane. Thank you, Mr. Secretary.
Now, Madam Ambassador.
STATEMENT OF HON. CHARLENE BARSHEFSKY, OFFICE OF THE U.S. TRADE
REPRESENTATIVE
Ms. Barshefsky. Thank you, Mr. Chairman. Last year steel
imports rose 33 percent or 9.4 million metric tons over the
1997 level. The import growth was concentrated in the April
through November period, during which imports surged
considerably. While U.S. demand for steel has been very strong,
the import surge was driven by the sharp drop in demand in
Asia, and subsequently in Russia, whose exports to Asia were
displaced and imports to the European Union capped by quotas.
The excess foreign supply was rushed into the U.S. market
at fire-sale prices. Commerce Department findings show that at
least a significant portion of this increase resulted from
dumping. Price suppression and over supply were evident in the
U.S. market by fall of last year.
In a matter of months, imports threatened the stability of
our domestic industry and the jobs of many of its employees.
Jobs and families are at stake. This administration realizes
that. We have listened and we have responded rapidly and
forcefully. The President has personally committed, as he said
in his State of the Union address, to ensure that our trading
partners act fairly, and the policy we have adopted is working.
The steel report the President sent to Congress on January
7 is a comprehensive and forceful response. It includes four
complementary trade policy actions. First, expedited
enforcement of our laws to address dumping and subsidies.
Second, bilateral initiatives with respect to the three
countries which account for the bulk of the import surge. That
is, Japan, Russia, and Korea.
Third, strong support for the safeguards law, and a
willingness to ask for expedited ITC investigations of cases
brought under that law. Last, the creation of an early warning
system for steel import monitoring, and active review of
additional targeted actions that need to be taken.
Let me say two things about this overall approach before I
review our work on each of the elements. First is that it is
producing results, meaningful results. Import volume is down
considerably from November, reflecting a global reduction in
exports to the United States of 34 percent. Japan's total steel
exports to the United States are down 50 percent, Russia's down
93 percent, Brazil's down 70 percent.
The decline in total imports of hot-rolled sheet is even
more dramatic. There has been an overall 70-percent reduction
from November levels, with Japan's imports of hot-rolled sheet
virtually stopping. They are down 96 percent. Russia's down 98
percent, Brazil's 77 percent.
U.S. capacity utilization on the other hand has risen
slightly, from about 74.8 percent in December, to 77.2 percent
over the same months. Although this still remains substantially
below the rates of 1 year ago, this evidences at least some
progress. The market share of imports is down from 36.6 percent
in November, to 29 percent in December, and a further decline
is anticipated for January. This again is an improvement.
But most important perhaps, our steel producers have
cautiously begun to increase prices for hot- and cold-rolled
steel products. Analysts predict that the increases will likely
stick.
Second, the President's action plan operates within the
framework of domestic law and the international commitments our
country has made. Both of these are crucial. By working within
our domestic laws, we ensure a fair and transparent process. By
remaining true to our international commitments, we prevent a
cycle of protection and retaliation which would harm working
families and other sectors, notably steel-intensive
manufacturing exports, farmers, and ranchers, the latter of
whom who are also suffering as a result of the Asian financial
crisis.
Let me briefly review our actions in the four areas covered
by the President's plan. First, as Bill Daley has already
noted, the vigorous and expeditious enforcement of the
antidumping law by the Commerce Department. Expedited
investigations have brought relief to U.S. carbon producers in
record time with retroactive effect 90 days prior to the
Commerce Department announcement of preliminary dumping
margins.
Further cases are now underway. The U.S. steel industry and
steelworkers have filed additional antidumping and
countervailing duty petitions with respect to carbon cut-to-
length steel plate. Eight countries are included in that.
Second, we have made steel a focus of bilateral
initiatives, with the largest sources of import growth over the
past year, Japan, Russia, and Korea. As to Japan, last year we
informed Japan that we had expected its steel exports to revert
to precrisis levels, and that if such a rollback did not occur
in short order, the administration would self-initiate trade
action to ensure a reduction of imports and prevent further
injury to U.S. steel producers and workers.
We did not seek agreements from Japan. We simply told them
what was needed and what the consequences would be of their
failure to ensure results. We have built on statements by
Japanese officials that exports are likely to decline. We
believe we are beginning to see some impressive results.
We are, in addition, monitoring import trends closely for
each major product category from Japan. We remain determined to
act if full reductions are not achieved across the board. As to
Russia, Secretary Daley announced on Monday a set of agreements
which roll back imports to precrisis levels, and which will
ensure stability and predictability for our industry.
Second, with respect to Korea, we are somewhat concerned
about the January numbers that were announced today. I am
sending my deputy, Richard Fisher, to Korea next week. He will
discuss the steel situation with Korean officials. He will also
be in Japan and discuss the steel situation further with
Japanese officials.
In the meantime, with respect to Korea, as you may know, we
have already been successful in achieving the closure of Hanbo
steel, which is Korea's second largest steel producer. The
company has stopped production of hot-rolled sheets. We have an
agreement with Korea that the company was sold based on market
principles. That sale is being managed at arms-length by
Bankers Trust.
In addition, we are in active negotiation now with Korea
with respect to POSCO, Korea's largest steel producer, and the
world's second largest producer, for the expeditious, complete,
and market-based privatization of POSCO.
The President has also reaffirmed his strong support for an
effective section 201 safeguards provision. He has expressed
his willingness to ask the ITC to expedite any steel
investigations under this provision. U.S. industry and workers
have already filed a petition for relief on steel wire rod
under section 201 in December of this year, and the
International Trade Commission is now investigating that
petition.
Finally, as Secretary Daley has said, we have created an
import monitoring system to offer an early warning of import
trends and surges to industry and government. We will be
looking carefully at import trends and dealing with countries
on a bilateral basis to ensure that they do not fill any
perceived gap in import supply occasioned by a downturn in
imports as a result of case filings.
In summary, we believe we have been responsive to you, to
the steel industry, and to steelworkers. We intend to provide
relief from unfair trade, and to find longer term solutions to
the issues at the root of the crisis. We must ensure that steel
firms and steelworkers do not bear the full weight of the Asian
financial crisis. At the same time, we remain committed to work
within the framework of American law and international
commitments, helping us to prevent a cycle of
counterretaliation, which could harm working people and
families in other sectors.
The crisis is certainly not over yet. We still see a glut
of steel on the domestic market. Imports remain at very high
levels in a number of product categories. But we will be
vigilant in implementing our action plan, and we will continue
to work closely with the Subcommittee, with the industry, and
with the steelworkers to ensure that we are successful. Thank
you.
[The prepared statement follows:]
Statement of Hon. Charlene Barshefsky, Office of the U.S. Trade
Representative
Chairman Crane, Congressman Levin, Members of the
Subcommittee, I appreciate the opportunity to discuss with you
today the steel import surge, its impact on the U.S. market and
industry, and the Administration's response.
INTRODUCTION
Last year, as we all know, steel imports rose sharply and
rapidly, threatening, within a matter of months, the stability
of our domestic industry and the jobs of many of its employees.
In the April through November period, imports ran some 50
percent over historic levels across the industry, and at much
higher levels in several key product sectors.
This import surge occurred in the context of the larger
Asian and Russian financial crises, as a result of weakened
demand for steel in Asian and other markets. Fairness demands
that the U.S. steel industry, its workers, and their families
not be asked to carry the burden of the financial crisis alone.
Neither can the crisis become an excuse for our trading
partners to adopt predatory export policies in steel or any
other sector. Thus President Clinton is personally committed,
as he has said both here and abroad, and as he repeated in his
State of the Union Address, to ensure that our trading partners
act fairly, and will enforce our domestic trade laws to ensure
this.
The Steel Report which the President sent to the Congress
on January 7 provided a comprehensive and forceful set of
actions to deal with the steel import surge and the associated
unfair trade issues. This action plan is working and we are
seeing the first signs of recovery. The Administration is
determined to follow through until stability has been restored
to the U.S. steel market. Our efforts to solve the steel crisis
have been, and must remain, within the framework of our laws
and our international commitments. First, we can and will lick
this problem within this framework. Second, by sticking to the
established rules, we can help ensure that the Asian crisis
does not lead to a cycle of retaliation and protectionism which
would badly damage our economy as a whole, and be especially
dangerous to farmers, ranchers and manufacturing exporters who
are already suffering due to weaker demand for our products
abroad.
THE PRESIDENT'S ACTION PLAN
The President's steel action plan was developed with the
benefit of advice and suggestions from industry and labor. It
can be found on the USTR web page at www.ustr.gov/reports/
steel99.pdf. The report outlines in detail steel import trends,
their economic impact, and our response. This action plan
includes four trade-related elements:
Vigorous and expeditious enforcement of laws to
counter trade practices;
Bilateral efforts to address unfair trade
practices at their sources;
Support for a strong safeguards law and for
expeditious Section 201 investigations;
Creation of an early warning system for steel
import monitoring.
The initiatives are the foundation for a comprehensive
resolution of the steel import crisis in a balanced manner
which will not damage other U.S. industries and workers by
exposing them to retaliation or supply shortages. These
principles have been translated into specific actions which are
beginning to provide meaningful relief. We are confident that
continued vigorous implementation of the President's steel
action plan will bring about the result we all desire: a stable
and competitive U.S. steel market where U.S. and foreign
producers can compete fairly. In the days, weeks and months
ahead, we will follow through on progress being made and take
additional targeted actions where market conditions and imports
warrant, in a manner consistent with our nation's overall
economic interest.
Let me now turn to a more detailed review of the import
surge, the current market situation, the status of our efforts,
and next steps.
STEEL IMPORT TRENDS AND MARKET CONDITIONS
A. The 1998 Import Surge
I will begin by reviewing the trends in our steel trade and
market over the past year.
Last year, 1998, witnessed the largest level of steel
imports, the largest and fastest import growth, and the largest
import penetration in history. Based on recently released final
import statistics for December, our 1998 steel imports were
37.7 million metric tons (MMT)--an increase of 33.3 percent, or
9.4 MMT over 1997. Steel import penetration rose from 23.8
percent in 1997 to 30.1 percent in 1998. This level exceeded
U.S. domestic needs, causing a glut in the market and severe
price suppression. Between 1997 and 1998 U.S. steel shipments
fell 3.5 percent, from 96 to 92.7 MMT. Labor statistics show a
10,000 worker drop in steel employment, from 236,000 workers in
January 1997 and 1998, to 226,000 in January 1999; employment
levels had been steady from 1993 to 1997.
Three countries--Japan, Korea, and Russia--accounted for
the great bulk--76.4 percent--of this import surge. To update
the information from the President's January Steel Report, in
1998:
Japan was the single largest source of steel
imports at 6.1 MMT, up 163.4 percent or 3.8 MMT from 1997,
accounting for 40.3 percent of the import growth;
Russia was the second largest supplier at 4.8 MMT,
up 58.9 percent or 1.8 MMT, accounting for 18.9 percent of the
import growth; and
Korea was the third largest source of the growth,
with imports at 3.1 MMT, up 109.3 percent or 1.6 MMT,
accounting for 17.3 percent of the import growth.
While these three countries accounted for the bulk of the
steel import growth, imports from a number of other countries
also rose substantially. In 1998, the United States imported
steel from 68 countries (albeit in very small quantities from
some). Steel imports from a dozen or so ``second-tier''
suppliers reached between 100,000 and 900,000 metric tons, and
have potential to increase further. Notable import growth
occurred from: the United Kingdom, Australia, Ukraine, South
Africa, China, Indonesia, Taiwan, India, Luxembourg, Moldova,
Romania, Latvia, and Kazakstan. In addition, the European Union
as a whole remains the single largest source of U.S. steel
imports, supplying 6.6 MMT to our market in 1998, although
overall steel imports from the EU were 4 percent below 1997
levels.
By product, carbon flat rolled steel was the single largest
source of the import surge, accounting for 46.5 percent of the
overall import increase. However, sharp import increases
occurred in a range of other products, including heavy
structurals, steel piling, light shapes, reinforcing bars, line
pipe, pressure tubing, etc.
In sum, we saw import and market disruption levels of
unprecedented proportions in the U.S. steel market beginning in
April of 1998. The first tentative signs of recovery are only
now beginning to emerge.
B. First Signs of Recovery
The December 1998 steel import data provided the first
indication that market conditions may have bottomed out, and
that recovery can be anticipated.
At 2.6 MMT, December imports reflected a substantial
decline from the average monthly import levels of 3.5 MMT from
April through November 1998 import surge period. Although the
December import figure remained 13 percent above the 2.3 MMT
1997 monthly import average, it reflected a sharp turn-around.
The December decrease was concentrated in carbon flat
rolled products from Japan and Russia, which are subject to the
ongoing antidumping investigation, indicating that actions
taken by the industry, labor, and the Administration are
bearing fruit. When compared to November levels, December
imports of these products declined 67 percent. Declines were
sharpest from the three countries under investigation, with
imports from Japan down 77 percent, from Russia down 90
percent, and from Brazil down 84 percent. Imports of this
product from Japan and Russia have basically ceased. The 1998
U.S. import increase of this product was 4.4 MMT (from 5.7 MMT
in 1997 to 10.1 MMT in 1998). In 1998 U.S. imports of this
product from Russia and Japan totaled 5.9 MMT. Therefore, a
substantial reduction of imports from these two countries will
more than offset the growth which has occurred. Nevertheless,
imports of carbon flat rolled steel from a range of countries
are increasing, and are being closely watched by the
interagency import monitoring team with a view to ensuring fair
trade.
This type of short-term decline does not by any means
resolve the entire steel problem. A glut of steel products is
still evident in the U.S. market, and high import levels of
other products persist. However, the December decline is a
significant first step, and a clear indication that the steps
outlined in the President's steel action plan are beginning to
work.
Several other market indicators are also positive. Steel
demand in the United States remains strong and new orders are
reportedly improving. In late January, a number of companies
announced price increases of 5 percent to 8 percent per net ton
($20 to $30) on hot-rolled, cold-rolled, and coated sheets for
second quarter shipments. Analysts believe these increases will
likely succeed, as prices for these products are already quite
depressed (down an average of 21 percent since May 1998), and
as the import supply is being reduced due to ongoing unfair
trade cases.
In January, U.S. raw steel production rose 5.1 percent from
December while the capacity utilization rate rose to 77.2
percent from 74.8 percent over the same months. The most recent
data for capacity utilization for the week of February 20, 1999
show another improvement to 80.0 percent. Nevertheless, these
rates are still low when compared to the operating rates of 90
percent in January 1998 and 86.3 percent in December 1997.
Reflecting the drop in imports, import penetration (imports
as a percent of apparent consumption) fell to 29.0 percent in
December from 36.6 percent in November. Still, this level is
far higher than the 20.6 percent level recorded in December
1997.
TRADE ACTION PLAN
These are some initial encouraging signs that the
President's steel action plan is working. Continued forceful
pursuit of the policies and actions announced, and active
monitoring of import and market conditions with a view to
additional, targeted action, where needed, will be key in
reestablishing the health and stability of the U.S. steel
market. Following is an update on the trade related aspects of
the President's action plan.
A. Unfair Trade Laws
The first and essential element of the steel action plan is
vigorous and expeditious enforcement of the antidumping law and
countervailing duty laws by the Commerce Department.
As you know, fully one third of some 300 antidumping and
countervailing duty orders now being administered by the
Department of Commerce address steel products. This remedy is
well suited for the steel sector, in which the industry's
cyclical nature and the high level of government intervention
and support overseas have led to a high incidence of unfair
trade. The industry is a strong proponent of this trade remedy,
and has used it effectively to gain relief from unfairly traded
and injurious imports.
That has been the case in this crisis. The Commerce
Department's expedited investigations and the critical
circumstances findings have resulted in relief for U.S. carbon
flat rolled producers in record time, with retroactive effect
to 90 days prior to the Commerce Department announcement of the
preliminary dumping margins. Thus, in the case of Japan, the
antidumping cash deposit and bonding requirements became
effective only some six weeks from the joint industry and union
filing of the dumping case. The trade laws have worked
expeditiously to provide U.S. industry and workers with relief
against unfair trade. Secretary Daley will elaborate on this
element of the President's action plan.
The U.S. steel industry and workers filed additional
dumping and countervailing duty petition on February 16th with
respect to carbon cut-to-length steel plate imports from eight
more countries which may have taken advantage of antidumping
relief applied to products from Russia, Ukraine, China and
South Africa.
In sum, the combined industry, labor, and Administration
effort to pursue and implement actions to counter unfair trade
are providing relief, in a manner fully consistent with U.S.
international obligations.
B. Bilateral Action
Another key element of the President's steel action plan
provides for bilateral initiatives with countries which are the
key sources of the steel import growth: Japan, Russia, and
Korea. Substantial progress has been made on this front as
well.
1. Japan--The largest source of steel import growth last
year was Japan. As reflected in the President's Steel Report to
the Congress, in January the Administration informed the
Japanese Government that we expect steel imports from Japan to
revert to pre-crisis levels. We also informed Japan that, if
such a roll-back does not occur in short order, the
Administration would self-initiate trade action to ensure a
reduction of imports and to prevent further injury to U.S.
steel producers and workers. Thus, the roll-back will be
enforced, if necessary, through Administration trade action.
Our intent is to act forcefully if normal trade patterns are
not promptly restored.
Our interagency steel import team closely monitors and
analyzes both Japanese monthly export data and U.S. monthly
import data for all major steel categories. We are reviewing
trends, levels, and U.S. market conditions, and in consultation
with U.S. producers, we are assessing where trade action may be
appropriate. Some of the trends are encouraging, but important
concerns remain. Japan's exports of steel to the United States
in December were 363,000 metric tons, and the preliminary
export figure for January is 229,000 metric tons. This compares
to the average monthly export rate of 680,000 tons from April
through October 1998, and the peak of 908,000 tons in Japan's
September exports to the United States. Japan's December steel
exports of hot rolled sheet declined to a negligible level.
Nevertheless, exports have not fully returned to pre-crisis
levels. In particular, based on Japan's December export data,
they remain substantially above traditional levels in several
important product categories, such as structural shapes, and
pipe and tube, as well as cut plate where a dumping case was
filed on February 16.
At the same time, in our broader trade and economic
relationship with Japan, we are pressing for the creation of
domestic demand-led growth in Japan through fiscal stimulus,
broad deregulation, financial reform, and meaningful market-
opening measures. If fully implemented, these policies would
create substantial opportunities for exporters and workers in
America, other Pacific economies, and for Japanese workers and
companies. Decisive action by the Government of Japan to
implement such reforms are key to relieving global pressures
which are at the root of the steel import crisis in the United
States.
2. Russia--On February 22 Secretary Daley announced the
initialing of a comprehensive set of steel agreements with
Russia--a suspension agreement on the carbon flat rolled
dumping case, and a broader agreement under the market
disruption article of the 1992 U.S. bilateral trade agreement
with Russia. These agreements would roll back and cap steel
imports from Russia, the second largest source of our 1998
steel import surge.
The suspension agreement would ensure that: a) there will
be a zero quota--no imports from Russia of flat rolled products
covered by the investigation for a period of six months, and b)
the annual quota which goes into effect at that time, 750,000
metric tons, is 78.4 percent below our 1998 imports of this
products from Russia and 58.4 percent below our 1997 imports of
this product from Russia. The quota basically rolls back
imports from Russia to their 1996 level. In addition, there
would be minimum price and strict monitoring provisions.
The second, broad, steel agreement with Russia would cover
imports of all other steel products as well as pig iron. It
contains quotas on sixteen products which account for all of
our imports from Russia, and rolls imports back to 1997 levels
or below, reducing them by 68 percent from the 1998 import
level.
Both agreements will be subject to public comment, and all
views will be heard and considered. The key objective here is
to offset any unfair trade margins, and to help restore
predictability and stability in the U.S. market. This
comprehensive approach to the Russian issue is particularly
appropriate because the Europan Union had already negotiated a
similar agreement with the Russian government which may have
caused diversion of Russian steel to the U.S. market, something
U.S. industry was particularly concerned about. This
comprehensive approach also envisages opportunities for regular
dialogue between U.S. and Russian government and steel industry
representatives which can be used to provide technical
assistance in the transformation of the Russian steel sector to
market-based principles, and to sound environmental and
managerial practices. We welcome U.S. industry and labor
involvement in this dialogue.
3. Korea--The third largest source of our steel import
growth was South Korea. The President's Steel Report announced
that our dialogue with Korea on steel trade and policy issues
would be expanded and expedited. A Korean government and
industry steel delegation visited Washington in late January
and provided an update on government and industry efforts to
restructure and privatize Korea's steel sector. The
Administration, as well as U.S. steel industry and members of
Congress, have had a longstanding concern with the Korean
government's involvement in the steel sector through industrial
policies which have favored steel and steel-using industries,
and encouraged their growth and export-oriented capacity
expansion, through incentives and directed lending. Hanbo Steel
is the best-known example, but there are other examples as
well.
In August of 1998 USTR exchanged letters with the Korean
Ministry of Foreign Affairs and Trade which are aimed at
ensuring that the sale of Hanbo Steel, which is in bankruptcy,
is taking place through a market-driven, open, and transparent
process in accordance with international practices. Hanbo's
production of hot-rolled sheet has ceased pending its sale,
Bankers Trust has been engaged to manage the sale.
In addition, the Korean government has offered general
assurances that steel-related practices which have resulted in
excess capacity in Korea and have been the cause of
longstanding trade friction between our countries, have been
abandoned. Accordingly, we have included in our steel
discussion with Korea a set of objectives to ensure that real
and substantive progress is made toward permanently getting the
Korean government out of the steel business. Our broad
objectives in these discussions include:
a) Having the Government of Korea address anticompetitive
activity in the Korean steel sector and ensure open competition
inside Korea and in international trade;
b) Expeditious, complete, and market-based privatization of
Korea's largest steel producer, POSCO ;
c) Implementation of the Hanbo sale and operation of the
company on arms-length terms outlined in our August exchange of
letters with Korea, in a manner which will not engender
government involvement (we sent a formal Report on this issues
associated with Hanbo to Congress last December);and
d) Fair trade in steel products.
In our view, these are reasonable expectations. They are
consistent with stated policies of the Korean government, and
they must be implemented fully if we are to avoid continued
trade friction in steel.
B. Section 201 Safeguards
A third key element in the President's steel action plan is
strong support for an effective safeguards provision in U.S.
trade law, including his willingness to urge the ITC to
expedite any section 201 safeguards investigations concerning
steel.
U.S. industry and workers filed a petition for relief on
steel wire rod under Section 201 in December of last year. The
International Trade Commission (ITC) is now conducting an
inquiry to establish whether injury has occurred or is being
threatened in this segment of the industry. If the ITC reaches
an affirmative conclusion under its legal procedures, the
President will have the option to decide whether relief is
appropriate. If a remedy is appropriate, he will have wide
discretion to fashion it in a manner which is appropriate for
this industry.
Because of its scope and flexibility, Section 201 is an
extremely important and valuable trade remedy tool. As with the
unfair trade remedies, the decision on when and whether to
invoke it lies foremost with U.S. industry and workers. The
Administration has met with steel industry and labor
representatives to review market and import trends and to
review assess relief options. Additional meetings will be held
in light of the publication today of the preliminary import
statistics for January.
C. Import Monitoring and Early Warning
The fourth trade-related point in the President's steel
action plan is the decision to release preliminary steel import
data in order to create an early warning import monitoring
system. Under this unprecedented new data release program,
steel import statistics are made public almost a month sooner
than the regular release schedule, some three weeks after the
end of each month. Import trends are reviewed at senior levels
of government and discussed with industry and labor
representatives to assess their impact and options for import
relief.
These import data releases have been invaluable in
providing both the government and the industry with a real-time
sense of import trends. Each month's data are carefully
analyzed by USTR and Commerce Department experts and the
interagency import monitoring team to review trends by country
and by product category in terms of volume and per unit import
value. These trends are reviewed in light of most current
information on U.S. market and industry developments.
Our particular focus at this time is threefold: 1) to
carefully monitor imports from Japan in light of the
President's announcement that he expects imports from that
country to revert to pre-crisis levels: 2) monitoring import
trends for product categories that had been the subject of
sharp import increases, to ascertain whether meaningful
declines are underway; and 3) monitoring of imports from
second-tier suppliers and the EU.
LEGISLATIVE INITIATIVES
In summary, our action plan, and our trade laws are in
place, and beginning to provide the relief needed and deserved
by U.S. steel producers and workers. While some have proposed
that the steel import issue be resolved through the legislated
imposition of import quotas or even temporary import bans, we
believe this may not be in our national interest, nor in the
interest of our steel industry. While well intentioned, this
type of action could create additional havoc in the U.S. market
and undermine substantial progress we have made to date.
Unilateral imposition of quotas or import bans would ignore
the fact that we already have effective trade remedy tools
which are producing results. As I have discussed above, we have
seen a substantial decline in imports in December; we have
announced preliminary dumping and countervailing duties against
unfair trade in record time; we have seen a substantial drop of
imports from Japan; and, we have initialed a comprehensive set
of agreements with Russia. Additional trade cases, both under
the unfair trade laws and under the safeguards mechanism
(section 201) are pending, and the Administrations has affirmed
its support for their fair and expeditious review. Our action
plan, and our trade laws are working and they are providing the
relief needed and deserved by U.S. steel producers and workers.
The crisis is by no means over, but we are seeing signs of
recovery. Continued implementation of the President's action
plan will ensure further progress. In particular, we are
determined to carry on with our active import monitoring
program with a view to ensuring that these positive trends
continue, and that other countries do not increase their
exports to undermine progress we have made.
Legislated imposition of trade remedies for steel outside
of the established U.S. trade laws backfire by inviting trade
retaliation by affected trading partners and causing damage to
export-oriented U.S. industries and workers, some of which may
already be adversely affected by reduced demand abroad. While
trying to assist U.S. steel workers, quotas which are
legislated outside of our trade laws could harm U.S. steel
interests by prompting retaliation against export oriented US
steel-using industries, such as autos and machinery.
Finally, legislated solutions which do not arise from the
type of careful ITC analysis and interagency and industry
consultation process can create severe distortions in the
market which can add to, rather than resolve, economic
problems. When not carefully considered, quotas can create
shortages for user industries or result in excessive price-
hikes. As our economy continues to grow, demand for steel
products remains strong. Imposing quotas at this stage, when it
looks like the market is beginning to stabilize could have the
unintended effect of causing a panic in the market which could
reverberate throughout the U.S. economy and undermine our
nation's economic growth.
Other legislative proposals to improve U.S. trade laws are
being reviewed by the Administration. For example, we are
currently in the process of reviewing the proposals concerning
Section 201. Section 201 is one of our most important trade
laws and is critical for ensuring that our industries can make
a positive adjustment to import surges when they occur. We
fully support a strong, effective safeguards law which is
consistent with our international obligations.
CONCLUSION
In conclusion, let me reiterate that prompt restoration of
a stable U.S. steel market remains a top U.S. trade priority.
We believe the President's steel action plan has begun to
produce meaningful progress toward that end. Vigorous and
expedited enforcement of U.S. trade laws has resulted in
substantial relief from unfair trade. Imports from Japan have
been rolled back almost to the pre-crisis levels. A
comprehensive agreement has been initialed with Russia which
will substantially roll back imports and prevent new surges.
Progress has been made in our dialogue with Korea, and
additional results are anticipated shortly. Active import
monitoring is underway based on the unprecedented early import
data releases. And, the Administration has committed to do more
as market and import trends warrant. Prices and capacity
utilization are creeping up.
We are not ready to declare that the problem has been
solved. We are fully aware of recessionary conditions and
excess capacity abroad, and of the fact that the strong U.S.
market will continue to act as a magnet, while the temptation
to trade unfairly will persist. Nevertheless, we are pleased
that actions taken to date have resulted in improvements, and
we are committed to continue to vigorously enforce the
President's comprehensive steel action plan. Working hand-in-
hand with U.S. industry, labor, and Congress, we believe
positive results will be achieved without jeopardizing broader
U.S. economic interests.
Thank you for providing me with this opportunity to
testify.
Chairman Crane. Thank you.
Mr. Secretary, earlier this week the administration and
Russia tentatively agreed to quantitative limits on a wide
range of fairly traded Russian steel products, including
products that Russia historically has not supplied to the U.S.
market. By reducing supply, the limits could lead to price
increases in the U.S. market, which will adversely affect
domestic steel users.
I understand that the administration consulted closely with
the U.S. steel producers during the negotiations with the
Russians. To what extent did the administration also consult
with steel users in this process?
Mr. Daley. Mr. Chairman, we hear from steel users on
occasion. We have heard from a number of them over the last
number of months as the discussion of the steel crisis has
grown. We consult with them on a fairly regular basis. They
have not been heard strongly at this point. There is a public
hearing on Tuesday on the agreement that was reached with the
Russians, the comprehensive agreement. I would assume at that
hearing, we will have an opportunity to listen to those steel
users.
Chairman Crane. Ambassador Barshefsky, what is the
administration's view on the Regula bill, H.R. 412, on the
Visclosky bill, H.R. 506, Traficant bill, H.R. 502? I am
concerned that the Regula bill cherry picks. It deletes
reference to ``substantial'' in the causation standard because
it doesn't appear in the WTO language.
At the same time, the bill omits WTO language which says
essentially the same thing, that increased imports cannot be
the cause of injury when factors other than increased imports
cause the injury at the same time.
Do you agree with that?
Ms. Barshefsky. The administration has not yet taken a
position on the Regula bill, but it would certainly have to be
examined for consistency with WTO rules. We have been quite
clear that we will not support trade legislation that is
inconsistent with our international obligations.
I would note that the domestic steel wire rod producers
have already filed a trade case under the current section 201.
I would note further that the domestic carbon steel industry
successfully brought a comprehensive section 201 case in the
eighties, which is the same law as the law that we have now. So
we will be examining the proposal by Mr. Regula, but at this
juncture, at least the wire rod producers believe that section
201 as currently written, is sufficient.
Chairman Crane. How about the Visclosky bill?
Ms. Barshefsky. We have some significant concerns with
respect to the Visclosky bill. First, we have effective tools
to combat unfair trade practices. As Secretary Daley's and my
testimony indicate, we believe we are achieving important
results.
Second, our trade laws tend to be based on fair and
transparent processes. They are not designed to favor one set
of interests, producers or workers, at the expense of another
set of interests, producers, or workers. It is very important
that we not favor one constituency over another as we
administer our laws.
Third, we do have a concern that legislative quotas can
create severe distortions in the market. They can add to,
rather than resolve economic problems, potentially creating
shortages, potentially leading to excessive price hikes.
Fourth, the market is beginning, it is in its early stages,
admittedly, but beginning to look as though it may stabilize.
We don't want to disrupt that very important progress.
Last, action outside our trade laws exposes U.S. producers
and workers to retaliation. The United States is the single
largest exporting nation on Earth. We have much to lose if
foreign countries adopt protectionist practices against our
exports. We have much to lose if foreign countries implement
mirror legislation parallel to legislation we might propose. So
we believe we must proceed cautiously in this area.
We do believe we are making impressive progress on the
steel issue. We plan to work with you, with the industry, with
the steelworkers, as we have been doing very, very closely.
Certainly we will be examining whether other actions are
appropriate to take if this crisis does not soon abate. But we
must also be very careful to protect overall our export
interests, including in steel intensive sectors such as
machinery, heavy electrical equipment, automobiles, as well as
in our agricultural sector.
Chairman Crane. Thank you. One final question to both of
you. To what extent do our trading partners subsidize their
steel industries? How can we pursue an agreement to lower the
subsidies so as to better enable the U.S. steel industry to
compete?
Ms. Barshefsky. Well, of course for many years there has
been a negotiation on a multilateral steel agreement, which
would discipline steel subsidies, both as to carbon steel and
as to specialty steel. Those negotiations have been running for
many years, producing little result and problems identified
early on in the negotiation have seemed to prove intractable
over the years.
We still think an agreement that would sharply discipline
global subsidies would be important, but the United States will
not give up its rights under U.S. trade law in order to achieve
that goal.
I think that, overall, global subsidization of steel has
come down, particularly as countries realize money is not
infinite. It is a finite resource, and there are many pressures
on the public purse. But subsidization still does remain a
significant issue with respect to steel.
Mr. Daley. As I mentioned, Mr. Chairman, just one brief
note. We did find in the case that was filed against Brazil
subsidization, we take this issue very seriously. We are
monitoring for subsidies around the world, our commercial
service people and our import administration people are
monitoring to make sure that as the Ambassador stated,
subsidization, which was rather rampant a few years ago,
continues to come down. In the case of Brazil, we did find
subsidization.
Chairman Crane. Thank you.
Mr. Levin.
Mr. Levin. Thank you. Well, I think the record is something
like this, that in the last months, the administration did act.
I think it acted more aggressively than was true under previous
administrations or would have been true, and acted more
aggressively than it probably would have in the first years of
this administration.
But at the same time, there was a substantial lapse between
when the problem arose and when action became effective. It
wasn't that jobs were threatened, they were lost. Right? Ten
thousand? At least 10,000 people lost their jobs. Companies
were put under very severe pressure, and some into bankruptcy.
I think we have to ask ourselves about that response.
Europe did not face the same kinds of pressures, though it did
have some, being closer to Russia, for example. There was a
dramatic impact here from the Asian crisis in steel and
virtually none in Europe. I think we have to ask ourselves and
I think our constituents, and I mean yours and ours here, want
to know why.
Ambassador, when you say on the first page, ``therefore we
can and will lick this problem within this framework'' and
second, ``by sticking to the established rules, we can help
ensure that the Asian crisis does not lead to a cycle of
retaliation and protectionism. I just think we want to be sure
we are not frightened into inaction because some people call
action protectionism.
So I want to start, and we have talked about this before, a
discussion with you about the rules of competition here and our
reaction.
Under what we have done on the antidumping rules, and Amo
Houghton and I were proud to help lead the efforts to safeguard
them in the WTO, but look, they raise certain problems. Right?
We invoke them and countries can simply shift products. It took
a number of months. We did not seem to have an effective
trigger mechanism, effective monitoring system. So I think we
have to ask ourselves whether our framework is adequate,
whether the established rules respond.
So just if you would respond to that. In the last pages of
your testimony, there is an indication that you are willing to
look at some further legislation, some changes. You have
instituted a few of them yourself. I wanted to ask you, Mr.
Secretary, about my suggestion that we give you more resources.
But clearly there is something, there is a shortfall. There
is something missing. There is something wrong. We can't, as
problems shift from one product of steel to another or one
country that decides to fill the gap to another, simply take 8
to 10 to 12 months and lose another 10,000 jobs or begin to
lose another chunk of an important industry because other
countries are taking advantage of not free trade, but our open
market.
So if you would, just give us a preliminary response to
that.
Ms. Barshefsky. Let me say a few general things. First of
all, as a general matter, the fact that imports are increasing
does not necessarily mean they are unfairly traded. This
administration, and I believe the Subcommittee have always
understood----
Mr. Houghton [presiding]. Madam Ambassador, I think we are
all set now.
Ms. Barshefsky. So I don't know where your tape ended, but
first, the fact that imports increase is not necessarily an
indication of unfairness, particularly given the growth rate of
our economy relative to the growth rates of other world
economies, and particularly given the fact that 40 percent of
the world is in deep recession.
Second, once cases were filed, which presented an
indication that imports were unfairly traded, Secretary Daley
acted in extremely aggressive manner to ensure that the
investigations would be expedited, but also more importantly,
to ensure that his department could reach back and be able to
impose penalty duties on imports that had entered even as early
as 6 weeks after the case had been filed. This is almost
unprecedented, and went a long way I think toward the kinds of
downturn in import figures we see now.
Third, with the President's program, we have instituted a
much more comprehensive monitoring scheme, including the early
release of import data. I think we agree with you that our
monitoring before this crisis had perhaps not been as carefully
crafted as it should have been. The administration has taken
steps to rectify that so that we can identify much earlier on
problem areas, and attempt to deal with that on an expeditious
bilateral basis, that obviously if the trade is unfair, it will
be subject to treatment similar to the treatment to which the
current crop of countries is subject.
So we do think that we now have in place an effective means
of dealing with the problem. There is no question that the
surge itself is of unprecedented nature. There is absolutely no
question about that. But we believe we have attended to it in a
way that is effective and that at the same time, does not risk
a retaliatory spiral against our exports, including our exports
of steel intensive products.
Mr. Levin. Mr. Secretary.
Mr. Daley. I would just add a few comments to it,
Congressman. I do think, I believe as the Ambassador stated, we
have reacted very strongly and aggressively. I think we are
having an impact, and it is a balance between overreacting too
early and making sure that when you do act, you act in a
concerted action, and we have done that.
On your comments about additional resources, that is an
issue that I would like to pursue with you because we have seen
a substantially increasing caseload. We are trying to expedite
these cases. We have numerous investigations going on, probably
more today than we have ever had. It is putting quite a strain
on our resources, so we would like to follow up with you on
that issue.
Mr. Levin. Thank you. My time is up.
Mr. Houghton. OK. Well, I guess it is my turn next. Thanks,
Sandy. I just forgot to repay the compliment. Sandy is a great
advocate for fair trade, always has been, very articulate, and
an enormous influence here, certainly with me.
I would like to thank you very much for being here. You are
our friends at the administration. You always have been. You
are right to the point. You have been very, very, very helpful.
So I want to thank you for being here and sharing your wisdom
with us.
I have a couple of questions. The first is, that you really
sort of pick on the weak person. In other words, when you take
a look at the shipments, the metric tons out of Russia versus
Brazil and Korea and Japan, it is really not very much. I mean
that Russia has gone from 150 approximately to about 45,000
metric tons, January to January. Whereas Japan and Korea not
only are huge, but also they have gone up about 200,000 tons.
So you have sort of a neat program with Russia. It says
something to them. It says something to the others. You are
going to have a 6-month moratorium, you are going to have a
quota, you are going to set minimum prices for Russian steel,
like that.
Why didn't you do that with the others? Now I realize that
Russia is not part of the WTO, but it is a very specific tough
hard message out there for Russia, but they are so small
compared to the others. What about the big producers?
Mr. Daley. Two reasons, Mr. Chairman. One, the Russians had
asked for these discussions and they had asked for first of
all, the comprehensive discussions, quite frankly, quite a
while ago. Shortly after the cases were filed, they asked for
discussions, negotiations on the hot-rolled cases sometime in
late September. So they came forward. The other countries did
not.
We have gotten notice from Brazil within the last week that
they have an interest to discuss the case. We have not had any
discussions with them yet. But the Russians did come forward.
In spite of the fact that their volume may be much less
than the others, they were, in the opinion of industry and
workers, were very much driving the price down rather
substantially. It was the Russian steel that was playing a
rather large part, and is shown by the margin range, close to
200 percent on some of their steel coming in. So those were the
two reasons why we moved forward with both the suspension
agreement and a comprehensive deal with the Russians.
Mr. Houghton. Would you like to answer that or is that it?
Ms. Barshefsky. No. I think Secretary Daley has answered
the question.
Mr. Houghton. All right. Good.
You know, the second point is you talk about a trade war.
That is not good. Clearly we do not want to get into a match
where we are just biting at each other's heels, because as we
all know, that 95 percent of the world's customers are outside
of the United States, and we want to get at them. Of course
that is what you are trying to do with the fast track, the
multilateral----
Mr. Jefferson. Mr. Chairman.
Mr. Houghton. Yes.
Mr. Jefferson. Excuse me, please. Could you yield for just
a moment? Those children who are leaving here from my district,
they were here to see this hearing through. Apparently they are
having to leave. But I wanted to recognize their presence and
to say to them that we really are very pleased to have them
here. Many of them are now into the hall.
So I thank you for yielding for a moment. I hope some of
them heard what I had to say. I was going to recognize them
when it came my turn, but apparently they are having to leave.
So glad to have you here.
Mr. Houghton. Yes. Thank you.
[Applause.]
Mr. Jefferson. Thank you, Mr. Houghton.
Mr. Houghton. But you know, various suggestions have been
made that always just sort of fringe on retaliatory actions by
other countries. But really so what? Japan has not been
particularly sensitive to our needs, year after year after year
after year, the trade imbalance. Brazil, through Mercosur wants
to freeze us out anyway. Obviously we don't want to get into a
trade war, but is that a real danger with those two countries?
Ms. Barshefsky. First, let me say we have had a persistent
trade surplus with Brazil. I think the United States has to be
cautious in the way in which we respond to situations such as
this. We are able to be cautious in part because we have an
effective program to deal with the crisis.
But we need to be cautious for a couple of reasons. One is
that what we do is often a marker for what other countries
believe they can or should do. Every change we make to our
laws, we see now tends to be mirrored in foreign countries. We
see this, for example, with respect to the dumping law. But
foreign countries often don't have the due process protections
and other forms of procedural rights that we grant foreigners
here. That presents a significant problem for our exporters.
Second, as I said, 40 percent of the globe is in deep
recession. Six major economies have suffered negative growth
rates of 6 percent or more this past year. That means first of
all, the large economies like the United States, Europe, and
Japan, have to do what they can to help the economies in deep
recession recover. If they don't recover, obviously, that is
not only destabilizing for them, it also means they can't buy
what we sell.
But apart from that, the United States, as the strongest
economy in the world, does have something of a special
obligation to help out where we can. We have done that, but as
always, insist that any trade coming into this country be
fairly conducted. The actions we have taken on steel I think
underscore the point to our trading partners that we expect
trade to be fairly conducted or we will take significant
action.
That action, while some might call it protectionist, is
not. That is taking action under our legitimate international
rights, under our domestic laws, and we intend to adhere to
that kind of action quite firmly. But the bottom line is that
we do have to be cautious about the way in which we proceed. We
cannot dismiss out of hand the notion that other countries will
take retaliatory action or might impose mirror legislation. As
I said, we are the world's single largest exporter and we have
a broad range of interests, economic in particular, that we
need to protect.
Mr. Levin. Would the gentleman yield?
Mr. Houghton. Absolutely. Sure.
Mr. Levin. I think Mr. Coyne wants to ask a question. You
know, some of us have been on this Subcommittee for what, 13 or
14 years. The term ``trade war'' has often been used to justify
total inertness. I just hope that we will all be careful before
we invoke it.
If I might say so, in this case, for the steel companies
and steelworkers, there is a kind of an economic war that they
are victims of. No one is suggesting a trade war. I mean Europe
hasn't engendered a trade war by shutting out steel almost
completely. So for us to insist that we are going to act
against dumping, I mean everybody knew from the word go they
were dumping it here. We knew they were dumping because they
were in economic trouble. These weren't just imports that were
coming in here. I mean they were dumping. Now we will have an
earlier monitoring system.
Now I think we want to be careful, not cautious to the end
of just taking so long to act on an issue that's so clear in
terms of the impropriety of what they are doing. I mean we have
to show a sense of injustice here, and balance it with the
problems they have, but just not be taken for granted.
So I just wanted to say that, and the status quo, we have
to live within it, but we need to change it in terms of this
kind of a problem. So I hope while you are proud of what you
have done, to be much more active than I think you might have
been or your predecessors for sure, we have to honestly look at
the problem, how are we going to avoid just the replication of
this by shifting countries or shifting products or shifting
arenas all together from steel someplace else.
So I hope you look upon your aggressiveness, and you have
been aggressive, as something that sets a precedent and isn't
something that we need to be ashamed of. Because I think you
need to be proud that you invoke the law to move up, to move
ahead when there would be an impact of duties. The duties have
shown how right you were. Right? These are huge duties, aren't
they? These are huge. It shows how abusive this practice was.
Isn't that true, Mr. Secretary?
Mr. Daley. Absolutely, Congressman. There is no doubt when
you look at the margins, they are astronomical in the Russian
situation.
Let me just say we are very proud of the work we do in
import administration. We are extremely proud of enforcing our
laws. We make it very clear. I have been honored for 2 years
now to be secretary. I can't tell you how many counterparts I
have met from around the world, everyone of them in some way,
shape, or form complains about our, quite frankly, our dumping
laws. We are not at all anything but proud of them. We know
they are WTO-consistent. We think they serve a very legitimate
purpose. At the same time, we are also extremely proud of the
fact that we do have the most open market in the world, and the
fact is, our economy is doing better than anyone's. This is all
interrelated, but in no way, shape or form, Congressman, are we
anything but proud of the fact that we are enforcing the laws
that you pass. We do it with an aggressiveness that most of our
friends around the world think is a little over done, to be
frank with you.
Mr. Levin. Thank you.
Mr. Houghton. Mr. Coyne.
Mr. Coyne. Thank you, Mr. Chairman. I wonder if you could
let the Subcommittee know who some of the major buyers are of
this import surge that we have experienced?
Mr. Daley. To be very honest with you, Congressman, I do
not have the information. The industry probably would be in a
better position to tell you that, who is actually buying this.
We know the importers, but they aren't necessarily the final
users of this steel that comes in.
Mr. Coyne. Ambassador.
Ms. Barshefsky. I would give the same response. I do think
of course some industry members are in joint ventures and other
arrangements with off-shore producers. There may be some
imports into this country pursuant to those arrangements, but I
am not privy to them and I don't know what the volumes might
be.
Mr. Coyne. Well, do we have any indication that some of the
very companies that are complaining about these imports and
this dumped steel are indeed the purchasers of that steel?
Mr. Daley. We have heard that from different sources, but
we have no proof of that.
Mr. Coyne. You don't keep any statistics on that?
Mr. Daley. No.
Mr. Coyne. You have nowhere to recommend that we get that
information?
Mr. Daley. As I say, Congressman, it would probably be best
to ask the industry itself. We have records, and the Customs
Department has the records of the importers, but they generally
are not the end users of the steel. They are basically go-
betweens.
Mr. Coyne. Has the steel industry itself filed any 201
actions?
Ms. Barshefsky. The wire rod producers have filed. They
filed in December. The International Trade Commission, which
investigates section 201 cases, is now investigating that case.
Our understanding is that the carbon steel producers in general
have been looking at the question of a broad section 201 case,
but I don't know that they have reached any decision to file
one.
Mr. Coyne. Well in your judgment, do you think that the
steelworkers or the steel companies, and by extension, the
steelworkers, could be advantaged by more actions, 201 actions
by the steel companies?
Ms. Barshefsky. I would say that is really for the
companies and the union to decide. Obviously factoring into the
consideration whether to bring cases is their likelihood of
success, as well as the range of relief that might be
obtainable. That is typically a decision that a complaining
party and its lawyers make jointly. I assume that that kind of
an analysis is going on within the steel industry today.
Mr. Coyne. Thank you.
Chairman Crane [presiding]. Mr. Jefferson.
Mr. Jefferson. Thank you, Mr. Chairman. I believe that you
have been appropriately praised for the work you have done on
various antidumping provisions today to stem this problem. But
I have also heard in some of your testimony and in other
testimony before you came here that there are other factors
that played into this problem, that the antidumping laws aren't
designed to have any effect on.
The question is whether with respect to structural
overcapacity in the global steel industry, manufacturing
industry or whether with respect to perhaps anticompetitive
agreements, formal and informal, between steel producing
nations, are causing, contributing to this problem. If so, the
antidumping laws ought to affect those. Is there a need for
other regimes in this regard? If so, what should they be? If
you are looking at what Sandy said about looking down the road
to a comprehensive way to deal with, perhaps stopping, this
problem from occurring in the future.
Ms. Barshefsky. It is a little bit hard to get your hands
around legislating a solution, for example, to global
overcapacity, whether in steel or in any other product.
Certainly with respect to steel, there has been government-
directed lending. Korea is an example of this with respect to
Hanbo Steel, with respect to POSCO. This is a phenomenon that
is a phenomenon in general of government-directed lending to
noneconomic enterprises that IMF programs are designed to alter
because this is nonproductive use of scarce fiscal resources by
these countries.
Our push in Korea for the closing and privatization of
Hanbo, our push for the privatization of POSCO and commitments
by the Government of Korea not to direct lending to those
companies, is one part I think of a longer term solution. Korea
is not the only country. I use that though as an example.
With respect to anticompetitive practices, this is also of
some concern. There have long been allegations, as yet
unproven, of formal or informal arrangements between European
steel producers and their Japanese counterparts. It has long
been observed that the United States takes about 10 times more
steel from Japan than does Europe. People over the course of
many years have questioned why is that.
I think this is an issue that the European Commission has
from time to time looked at. I don't believe at this juncture
they have found evidence of that. But we have always had a high
degree of confidence in the European Community's competition
authorities, who for many, many years have been quite
aggressive on issues of this sort. Nonetheless, we have asked
Europe to continue to look into these allegations because
obviously, to the extent Europe takes more steel, the United
States will take less.
Mr. Jefferson. Thank you.
Chairman Crane. Mr. English.
Mr. English. Thank you, Mr. Chairman. I appreciate the
opportunity to participate in this inquiry. A couple of quick
questions. Thank you for your testimony today.
With regard to the suspension agreement with Russia, an
agreement that will suspend the investigation of the
unprecedented levels of dumped hot-rolled steel imports from
Russia into the United States. My understanding, and I think
this is everyone's understanding, is that the industry has been
very clear to the administration that it strenuously objects to
the suspension of these cases. Now, the Department of Commerce
released preliminary dumping margins on hot-rolled Russian
steel, ranging from 71 to 218 percent, and if finalized, these
margins would effectively end imports of dumped Russian hot-
rolled steel.
The suspension agreement is simply not as effective as U.S.
trade laws, and arguably the so-called comprehensive agreement
limiting Russian imports of other steel products can only be
effective if it is part of a global solution, which it is not.
Now, given that Federal law requires a 30-day period during
which the initial suspension agreement with Russia will be open
for public comment, and that the law also requires that
government take these comments into consideration before
finalizing the agreement, I am curious to know if the industry
and the workers continue to oppose this agreement, will the
administration take these objections into active consideration
and consider not entering into a suspension agreement with
Russia?
Mr. Daley. Congressman, we will take the comments of the
industry and the workers into consideration, as we have. We do
believe though, to be frank with you, that a 90 percent cut in
steel imports from Russia is a very positive step. Also giving
certainty into the future of exactly knowing what amount will
be coming to this country from Russia is a very positive step.
We have cut back the quotas, the amount of imports to 1996
levels, and at a price that we believe is a positive action,
with also a 6-month moratorium.
So we feel very good about this agreement. We think it
serves a strong purpose. That is, to stop this tremendous
surge. But we will take into consideration during this 30-day
period.
Mr. English. Mr. Secretary, on a different issue. I have
become more sensitive to the impact of currency devaluations on
commodity sectors as a result of our steel crisis. I am deeply
concerned about the fact that the dramatic devaluation of Asian
currencies, particularly the Korean won, has enabled exporters
of steel products from those countries in the Pacific rim to
reduce their prices to extremely low levels.
The Department of Commerce has not been able to adjust its
dumping calculations to take into account this devaluation. Let
me ask, how does your department intend to address this issue
in its final determination so as not to let Korean exporters in
the case of stainless steel, to dump their products in the U.S.
market with impunity.
Mr. Daley. If I could, Congressman, get back to you with
that answer, I would sure appreciate it.
Mr. English. Certainly. And then one last quick question
for Ambassador Barshefsky. I had understood your testimony a
few minutes ago to be an offer to expedite 201 cases. I am
curious if you would comment on why so far the administration
has been unwilling to initiate section 201 actions in the case
of steel. Would you care to comment on that? Is there a policy
reason why you have been reluctant to use this tool?
Ms. Barshefsky. Self-initiation of trade cases by this
administration or any administration is something that is very,
very rare indeed. We have indicated, and the President has
indicated that to the extent Japanese import levels do not
return soon to precrisis levels, the administration will self-
initiate trade action against Japan.
But generally speaking, this administration, with previous
administrations, favors the filing of trade cases by domestic
industries which feel adversely impacted by imports. That is to
say it is up to the industry to decide whether it is adversely
impacted, and to put together an action.
Our steel industry, of course, is very practiced at this,
has brought section 201 cases in the past, has been successful
in those cases in the past. The wire rod producers, as I have
said, have initiated their own case. Certainly our carbon steel
producers in general are well-positioned to do that.
The President has indicated that if cases are filed, he
will ask the International Trade Commission to expedite the
investigation. I would note simply that the International Trade
Commission is of course an independent regulatory body. Thus,
the President can make a request of them, but of course cannot
demand that they expedite. Nonetheless, he would urge them to
expedite any such investigation, were such a case to be filed.
Mr. English. Thank you for your testimony. I look forward
to your response, Mr. Secretary.
Chairman Crane. I want to express appreciation again to
both of you for being here today, and giving of your time, and
look forward to having constant ongoing communication with you.
Any time that it is not solicited, but you think it is
important, don't hesitate. You know where to get a hold of me.
Thank you both.
Ms. Barshefsky. Thank you so much.
Chairman Crane. And I would now like to invite our next
panel, Curtis Barnette, chairman and chief executive officer of
Bethlehem Steel, Robert W. Cardy, vice chairman, Specialty
Steel Industry of North America, George Becker, international
president, United Steelworkers of America, and Mark Glyptis,
president of Independent Steelworkers Union.
And gentlemen, after you all get seated, will you please
proceed in the order I called you? Mr. Barnette, Mr. Cardy, Mr.
Becker, and Mr. Glyptis, and try and confine your oral
presentation to as close to 5 minutes as possible. All written
material will be made a part of the permanent record.
Mr. Barnette, you are first.
STATEMENT OF CURTIS H. BARNETTE, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER, BETHLEHEM STEEL CORP.
Mr. Barnette. Mr. Chairman, thank you for the opportunity
to discuss with you today the crisis in our industry. I come
with the heaviest of hearts because truly this is a hearing
that should never have been necessary to hold, because the
American steel industry is an American success story.
During the eighties until the present time, we have reduced
our capacity by some 30 percent, some 50 million tons. Our work
force as a result of that, and as a result of modernization,
has been reduced by nearly 60 percent, 300,000 jobs. We have
spent approaching $60 billion, and we have doubled, and in many
cases, tripled our productivity. We are the low cost, the high
quality, the world class producer of steel in this marketplace.
Make no mistake of that. Yet today we face a crisis in our
industry. Why is that? What is it about our trade laws and the
administration of them that causes us to be before you today?
Our trade policy, and in many of my remarks, Mr. Chairman,
and Members of the Subcommittee, I can and must of course only
speak for myself and for Bethlehem Steel, but our trade policy
has been a very clear one. To have open markets, to have
market-based trade, to have that trade based on national and
international rules, and to cause those rules to be enforced
when trade is unfair and injurious. Something is not working.
For that reason, I would suggest, respectfully, in view of what
is happening in steel and because of this massive foreign trade
deficit that we have faced, that steel trade is at the
crossroads. I would respectfully suggest that our international
trade policy is at a crossroads. I would be pleased to comment
more on that, and observe with respect to that.
As an industry in this present situation, we have taken
three basic actions. First, legal actions, relying on our trade
laws, antidumping and countervailing duty laws. Second, we have
engaged with the very effective assistance of leading steel
companies and the United Steelworkers in an educational
campaign, Stand Up For Steel, Stand Up for America. It has been
enormously successful. It is an educational effort to talk
about this American success story and the injury we are facing
because of the unfair trade that is taking place.
Third, we are working effectively with our government,
State and local, and Federal, in order to bring about with
their assistance, changes in our laws where appropriate and the
effective and full enforcement of those laws where that is
appropriate. We have made strong recommendations to the
President and the administration, some 10 in number. They are
covered in my statement. We strongly urge the Congress to look
carefully at our trade laws and be sure, be sure that in no
respect are we more restrictive in this enormously complex era
that we are going through in trade, no more restrictive than
certainly our international trade obligations require us to be.
We have made some seven specific recommendations with respect
to legislative direction.
Finally, my concluding remark would be that we are at a
crossroads. If our laws are not effectively dealing with the
injurious trade, and if those laws are not amended to cause us
to have effective remedies at least such as the rest of the
world, then surely the need for different courses of action has
conclusively been established.
I appreciate very much the opportunity to appear before
you, Mr. Chairman, and Members of the Subcommittee. My
statement has been filed. I hope that can be made a part of the
record.
[The prepared statement follows:]
Statement of Curtis H. Barnette, Chairman and Chief Executive Officer,
Bethlehem Steel Corp.
This opportunity to appear before the Trade Subcommittee's
very timely hearing on the steel import crisis is very much
appreciated.
Last Fall, despite the immense pressures of completing the
legislative business for the year, Congress demonstrated its
concern and support for the American steel industry and its
workers and stressed the need for strong and effective
government action to help stop the surge of heavily dumped and
subsidized foreign steel imports. The enacted budget
reconciliation bill included a Congressional Resolution urging
the Administration to take the necessary and appropriate
actions to combat the unfairly traded imports flooding our
markets. Congress has sent a clear and important message that
the U.S. government should not allow dumped and subsidized
foreign steel to undermine our industry and American jobs.
This statement will consist of four parts: an update on the
steel import crisis, a summary of actions taken by the
industry, a reaction to the Administration's January 1999
Report to the Congress, and an outline of legislative
initiatives that need to be enacted. A separate statement for
the record, submitted by the American Iron and Steel Institute,
addresses the specific questions of what can be done to promote
increased foreign consumption of excess steel capacity.
Steel Import Crisis Update
The American steel industry has gone through a painful
restructuring since the 1980s--we have reduced inefficient
capacity by 30%, reduced jobs by 60%, made massive capital
investments of nearly 60 billion dollars, and more than doubled
our productivity. We emerged as the world class steel industry.
Our foreign competitors, however, did not make the painful
decisions made by the American industry. There continues to be
significant foreign overcapacity which has to land somewhere,
and it has landed in the United States--the world's most open
market. As we examine the data detailing the sharp increase in
steel imports and its effect on our industry, it is essential
to keep in mind the basic cause of the problem--uneconomic
decisions by foreign producers leading to excess worldwide
capacity that ultimately is unfairly traded in the United
States and thereby undermines the American industry and its
workers.
Record levels of unfairly traded imports in 1998 pose an
unprecedented threat to all that our world-class American steel
companies and employees have achieved in recent years. The
impact of the steel import crisis in the United States has
become even more severe in the first quarter of 1999.
Import volumes in 1998 reached unprecedented levels (see
Attachment 1). The United States imported a record 18 million
tons in the first half of 1998. Nevertheless, import levels in
the second half were even higher. During the third quarter, a
record 12.4 million tons of imports surged into the U.S.
market, an increase of 56 percent over the same period last
year. The July through November imports were the five highest
monthly totals for imports in U.S. history (see Attachment 2).
Although imports declined in December--reflecting the impact of
the hot rolled sheet antidumping petitions--imports of steel
mill products for 1998 set an all-time record for a single year
of 41,519,000 net tons--a 33 percent increase over 1997, which
itself was a record year.
There is only one accurate description for America--we have
become the World's Steel Dumping Ground. While average U.S.
import values have declined by almost $100 per ton in the past
year, total import volume has increased by over 70 percent (see
Attachment 3). On October 28, 1998, the Executive Director of
the steel importers association admitted to the Journal of
Commerce that ``there's no place left to put the steel.'' The
docks and warehouses are full. The inventories remain at record
levels. Yet, unprecedented levels of unfair and disruptive
steel imports continue to stream in from every corner of the
globe.
Comparing 1998 with 1997's record import levels, finished
steel imports are up 144 percent from key Asian producers (see
Attachment 4), and up 72 percent from Russia and two other
nations of the Commonwealth of Independent States (CIS), not
including cut-to-length plate, which is subject to a suspension
agreement (see Attachment 5). Other examples of 1998 import
surges include Australia (up 117 percent) and South Africa (up
106 percent).
More than half of the total import surge in 1998 has been
concentrated in hot-rolled carbon steel flat-rolled products
(see Attachment 6), which explains why this is the product area
covered by the initial trade cases filed earlier this year by
U.S. steel companies and the USWA. A closer look at the data
shows that flat-rolled imports have surged sharply since the
first quarter of 1998 (see Attachment 7), and significantly
higher import volumes and substantially lower average unit
values are especially pronounced for imports of hot-rolled
carbon steel flat products from Japan, Russia and Brazil (see
Attachments 8-10).
It is important to emphasize, however, that this import
surge is not limited to hot-rolled carbon products or to these
three countries alone. With U.S. imports from nearly 40
countries having exceeded their 1997 totals (see Attachment
11), steel import market share is rising in several key product
lines (see Attachment 12), and import surges, both by country
and by product, are occurring across-the-board.
In one dramatic example, U.S. imports of cut-to-length
carbon steel plate from South Korea have skyrocketed since June
(see Attachment 13), and more cut-to-length plate from Korea
entered the United States in a 4-month period, from August
through November 1998, than in the previous 7 years combined
(see Attachment 14). And these are not the only examples. More
plate in coil entered the U.S. from Japan in the last 3 months
than in the previous 10 years combined (Attachment 15), and
more cold rolled sheet entered the U.S. from Korea in the last
4 months than in the previous 5 years combined (Attachment 16).
This is a supply-driven crisis, in which an already
enormous world steel overcapacity problem has been made much
worse by major structural economic failures in Asia and the
CIS. Today, we have over 300 million tons, or roughly one-third
of total world steel capacity, desperate for new markets. This
current crisis is deeply troubling, causing serious injury to
American steel companies and employees, and it is unique in
three respects:
First, worldwide overcapacity and the failure of
foreign producers to execute the difficult restructuring
decisions made by the U.S. producers continues to undermine our
industry and workers. The problems caused by this overcapacity
have been exacerbated by the recent global macroeconomic
developments, from extreme currency shifts to severe economic
downturns abroad, which clearly are beyond the ability of U.S.
producers and workers to control.
Second, no one can recall a time when American
steel prices fell as far as fast in a period of still
relatively strong U.S. market demand. The stark truth is that
dumped and subsidized imports are deriving most of the benefits
of our own successful efforts to grow the demand for steel in
the United States and North America.
Third, and perhaps most troubling of all, the
serious import injury this time is threatening to destroy an
American success story of industrial revitalization, an
industry that is once again the world leader in labor
productivity and the application of state-of-the-art
steelmaking technology. This time, unlike in the early-mid
1980s, major structural economic failures abroad are
threatening the viability of a world-class, highly competitive
American steel industry--and with it, thousands of high skilled
U.S. jobs.
Recent press reports and public news releases detail the
effects of this accelerating national crisis. Unprecedented
levels of unfairly traded and disruptive steel imports have
caused a large and growing number of American steelworkers to
experience layoffs, short work weeks or reduced pay incentives.
And for American steel companies, these surging levels of
imports, at prices far below the cost of production, have
resulted in lower shipments, large production cuts, significant
declines in capacity utilization, lost orders, severe price
depression, and significant financial losses. Attachment 17 is
a listing of recent plant closings, layoffs and capacity
reductions as of February 10, 1999.
In addition, the adverse effects of this steel trade crisis
are now spreading with equal intensity to key suppliers and to
immediate downstream users, such as steel processors and
fabricators. Steel companies and employees are taking private
legal actions to address the crisis. However, public actions,
including prompt, enhanced enforcement of trade laws and other
effective actions by the Administration and the Congress, are
needed now just to keep this crisis from getting even worse.
Steel Industry Action Plan
In September, a three-part program was reviewed with the
Senate and House Steel Caucuses that required both public and
private sector responses.
1. Trade Cases--On September 30, 1998, twelve domestic
producers and two unions filed trade cases against hot-rolled
carbon steel products from Russia, Japan and Brazil.
a) On November 13th, all six members of the International
Trade Commission voted affirmatively in the preliminary
determination on the question of injury.
b) On November 23rd, the Department of Commerce announced
an affirmative preliminary finding of ``critical
circumstances'' on the Japanese and Russian cases. The
Department's finding means that antidumping duties may attach
to entries of merchandise made up to 90 days prior to the
Department's preliminary determination of dumping. This finding
was based in part on the fact that imports from Russian and
Japan had increased by about 100 percent during the period
examined and, with respect to Russia, there is a history of
dumping findings on Russian hot rolled steel in third
countries. With respect to Japan, based on the size of the
alleged margins and other factors, the Department found that
importers of Japanese steel knew or should have known that the
imports were dumped and were likely to cause injury to the U.S.
industry.
c) On February 12, 1999 (25 days ahead of the statutorily-
mandated time schedule), the Commerce Department made
preliminary antidumping determinations against Japan and
Brazil. The Japanese margins ranged from 25 to 60 percent, and
the Brazilian margins ranged from 50 to 71 percent. The
Department also made preliminary countervailing duty findings
against Brazil ranging from 6 to 9 percent. These findings
confirm the extraordinary level of unfair trade that is causing
such serious injury to our industry, and we appreciate the
Department's expedited handling of these cases.
On February 22, 1999, the Department announced preliminary
margins for Russia, and at this same time announced that it had
reached a tentative suspension agreement with Russia on hot
rolled products. It also announced that it had reached a more
comprehensive steel export restraint agreement with Russia. The
petitioners in this case have repeatedly stated their strong
opposition to a negotiated settlement with Russia, and these
negotiations have been conducted over our well-recognized
objection. We are sympathetic to the importance of sustaining
Russia's fragile market economy, but the burden of doing so
must not fall disproportionately on one U.S. industry and its
workers.
Based on our understanding of the terms of the proposed hot
rolled product suspension agreement with Russia, we do not
believe that the agreement, if entered into, will meet the
statutory criteria of being in the public interest and
preventing the suppression and undercutting of prices for steel
produced in American plants by American workers, and we have
advised the Department and the Administration that we will
immediately take our case to the Federal courts, and we will
request the Congress to hold prompt hearings. Going beyond the
strict legal criteria, we believe such an agreement undermines
the Administration's stated commitment to strong and effective
enforcement of our unfair trade laws and deprives our industry
and our workers of the effective remedy to which we are
lawfully entitled.
Based on our understanding of the more comprehensive
agreement with Russia, we do not believe that the agreement
will achieve a reduction of imports of injurious and unfairly-
traded Russian steel, and would have the effect of undermining
other legal remedies.
d) On February 16, 1999, Bethlehem, four other domestic
petitioners, and the USWA filed new antidumping petitions
covering cut to length plate against the Czech Republic,
France, India, Indonesia, Italy, Japan, Macedonia and South
Korea. Countervailing duty petitions were also filed for six of
these countries. There are two very significant aspects of
these cases. First, the product involved is already the subject
of eleven existing antidumping orders and four suspension
agreements. It is a clear example of the phenomenon of
international trading companies finding new sources of unfairly
traded material to circumvent the effectiveness of our trade
remedies and of the breadth of the world overcapacity problem.
Second, the third largest American plate producer, Geneva
Steel, is not a petitioner in these cases because it has
already been forced into Chapter 11 Bankruptcy proceedings.
We and others are actively reviewing additional state and
federal legal actions, including additional antidumping and
countervailing duty cases and Section 201 ``escape clause''
petitions. Additional cases will be filed when appropriate.
2. Public Awareness Campaign--An informed public is
essential as we request our government to take immediate
actions to uphold our rights against these unfairly traded
steel imports, and we believe we have made important progress
in a joint industry-labor public awareness program. The USWA
and America's leading steel companies have established a
``Stand Up for Steel--Stand Up for America'' Campaign that
reaches out to America and is designed to involve all
interested parties. Numerous rallies and other public events,
have taken place with significant community participation.
Countless messages and letters have been sent to leading
newspapers and other media, and a vigorous print, radio and
television campaign to tell the public about the steel crisis
is being conducted. And we will continue these efforts--this
multi-steel company and USWA Campaign--as a means to educate
the public until the crisis is resolved and fair trade
restored.
3. Governmental--Throughout the Fall we had a number of
meetings with Cabinet level officers, including a meeting with
the President and Vice President. We have recommended actions
the Administration should take and they include:
1) Forceful and publicly known bilateral discussions with
all countries who are engaging in unfair trade to direct them
to stop.
2) Prompt and effective enforcement of trade cases brought
by the industry.
3) Willingness to self-initiate, or consider self-
initiating in consultation with the industry, as appropriate:
AD, CVD, 201 and other cases.
4) Willingness to deal with Russia by imposing a tariff on
Russian shipments, utilizing the 1990 USSR-US agreement on
Trade Relations and other Presidential authority.
5) Willingness to deal with the Japanese Cartel under 301,
by a WTO case or through the antitrust laws.
6) Utilize CVD regulations to provide strong CVD remedies.
7) Support for an effective steel import monitoring system.
8) Support for trade legislation that will strengthen our
trade laws in a manner consistent with the WTO.
9) Have the highest qualified public servants in position
or nominated to administer our trade laws.
10) Have forceful statements about the crisis in the
American steel industry made by the President, Cabinet Members
and others to the effect that rules will be enforced when trade
is unfair and injurious.
The Administration Steel Plan
On January 7th, the Administration released its
congressionally mandated report to the Congress on a
comprehensive plan for responding to the increase in steel
imports. The judgement from all quarters of industry and labor
is that the plan falls short of what is required, and that has
been forcefully communicated to the Administration. The plan is
primarily a recitation of actions previously taken by the
Administration. It contains four ``new'' items: a vague and
unenforceable demand for Japanese export restraints; a ``300
million dollar'' NOL carry back extension which was not
requested and is of no use to Bethlehem or any other company we
have talked to; accelerated release of steel import data which
is helpful but falls far short of ``real time'' data provided
by an import permit system; and trade adjustment assistance
enhancements that are bitterly opposed by the USWA.
Attachment 18 is a side-by-side analysis of the
Administration's report as measured against the industry's
requests enumerated in the previous section of this statement.
One of the most serious deficiencies, from the industry's
perspective, is the Administration's announced intention to
seek a suspension agreement with Russia in the pending hot
rolled sheet antidumping investigation. As noted above, we
believe that such an agreement would seriously undermine the
relief provided by law by permitting large quantities of
unfairly-traded steel to be imported into the United States. We
have advised the Administration that in the current
circumstances such an agreement is inappropriate and
unacceptable, and we will oppose it with every available
resource.
We continue to work with the Administration to encourage
more meaningful action, and we believe that the January 7
report should be viewed as a starting point rather than the
final response to the steel import crisis.
Trade Law Reform
In addition to what the Administration can and must do now
under existing law to address the steel trade crisis,
legislation is needed to cause our remedies against unfair
trade to be more effective in these new economic conditions and
to make sure those remedies continue to function effectively
into the future.
Bethlehem and the steel industry have long supported a
trade policy based upon open, fair, rule-based and market-based
trade, coupled with effective trade laws enforced as
appropriate to handle unfair trade. These trade laws need to be
firmly enforced to prevent unfairly traded imports from
injuring U.S. industries. The trade laws, however, also must be
improved and enhanced to the fullest extent possible consistent
with WTO.
It has been a full decade since the Congress last enacted
an omnibus trade law reform bill, that was not related to the
implementation of a trade agreement. In that decade, and
especially in this most recent crisis period, we have learned--
with deep regret, and having suffered material and serious
injury, that the existing laws do not provide the timely and
effective remedies intended by Congress and permitted by WTO
rules, and required to continue open and market-based trading.
The steel industry has supported international agreements
intended to open world trade. In particular, we supported the
WTO agreements, which established new international rules for
the trade remedies imposed from time to time by WTO Member
governments. But we did so based on an understanding that the
United States, with the world's largest open market, would have
and enforce the strongest possible remedies consistent with the
new rules. Congress intended that these laws provide remedies,
and all too often they simply have not, and do not work.
We intend to propose appropriate and necessary fair trade
law reforms in the 106th Congress. Our preliminary
recommendations include the following seven areas, and
additional technical amendments are needed in each one of these
areas.
1. Section 201: Section 201 should be amended to reflect
the standards in the WTO Safeguards Agreement, rather than the
more restrictive standards currently in our law. There is no
justification for the additional burden now imposed on U.S.
industries seeking safeguard relief. In addition, in any case
involving an ``upstream'' product that is both sold on the
merchant market and ``captively consumed'' by domestic
manufacturers who use it as feedstock, the statute should
direct the ITC to measure the domestic industry's market share
in a manner consistent with common commercial practices in the
industry concerned.
2. ITC injury analysis in AD/CVD cases: This is an area of
particular and unnecessary difficulty for industries seeking
relief against dumped and subsidized imports. Congress
intended, and WTO rules allow, that such imports face
offsetting duties whenever the domestic industry is injured to
any measurable degree by the imports. Where there is an unfair
trade practice, whether selling at less-than-fair-value or a
subsidized product, no amount of injury should be tolerated.
Any detectable injury should be remedied. That is the original
intent of the Congress--but it is not what happens today. An
industry should not have to suffer as much injury as we are
suffering now in order to get relief. Likewise, it should not
be necessary to wait until there is current injury in order to
find threat of injury. To list just three of the many needed
amendments, Congress should act this year to clarify that: (1)
there is no need to show actual losses or layoffs in order to
find present injury; (2) in cases where injury is developing
rapidly, the ITC must focus primarily on the most recent
information; and (3) any causal link between imports and injury
is sufficient for an affirmative determination--whether or not
there is evidence of one or more individual factors such as
underselling.
3. Antidumping calculations: Significant and unnecessary
loopholes in the current law allow foreign exporters to avoid
the law's full remedial effect by, for example, selling their
goods through related parties in the United States. Amendments
are needed to ensure that dumping margins are appropriately
adjusted to prevent such manipulations. Congress should
likewise amend the law to ensure that severe foreign currency
depreciations do not put antidumping relief out of reach. We
also believe that certain aspects of the current U.S.
methodology for non-market economies need to be tightened and
codified in the statute--especially as some of the larger non-
market economies move toward membership in the WTO.
4. Countervailing duty calculations: The Commerce
Department recently issued final countervailing duty
regulations, and in doing so codified a number of balanced
rules that can bolster the CVD remedy's effectiveness.
Nevertheless, the Department failed to promulgate one very
important rule that had been expressly sought by the Congress:
a rule that changes in the ownership of subsidized factories,
including privatizations, shall be treated as having no effect
on the countervailability of previously received subsidies.
This rule, along with a few other clarifications, should now be
added to the statute.
5. Section 301: The effectiveness of section 301 as a
market-opening tool has waned significantly, both because of
the WTO agreements and because of the proliferation of new and
harder-to-reach types of foreign trade barriers. Closed foreign
markets are an important part of the overall trade crisis in
the steel industry. We urge that Congress update section 301
with expanded authority for the President to address the new
generation of private and joint public/private restraints on
international trade. The USTR should have authority to act
directly against foreign firms that participate in, or are the
principal beneficiaries of, such restraints.
6. Import Monitoring: The current delays in providing steel
import information to the industry have been partially
addressed through the Administration's plan, but legislation is
necessary to implement a steel import licensing system that
will provide ``real time'' data. Congressman Regula and others
have introduced legislation (H.R. 412) to implement such a
system and we commend and support that effort.
7. WTO Dispute Settlement Review Commission: Unwarranted
fear of future litigation in Geneva is emerging as a major
problem in the administration of the U.S. trade laws. In large
part, what is needed is simply a more resolute approach by the
Federal agencies involved. However, Congress can help by
establishing a blue-ribbon commission, comprised of federal
judges, to review adverse WTO dispute settlement panel
decisions. This proposal has been previously introduced by
Senators Moynihan and Dole and publicly endorsed by the Clinton
Administration. We believe its enactment would help to prevent
U.S. officials from being intimidated, in carrying out the
dictates of U.S. law, by the prospect of WTO litigation. We
fully accept the new WTO rules and the jurisdiction of WTO
panels to enforce those rules, but where panels stray outside
those rules and invent new limitations on the use of U.S. trade
remedies, some procedure must be in place to facilitate an
appropriate Congressional response.
These seven fair trade law reforms are a starting point to
make more effective our existing trade law remedies. We will
have additional suggestions as we move forward.
In addition to H.R. 412, a number of other bills have
already been introduced in the 106th Congress to address the
steel crisis. They include H.R. 506, a bill to reduce import
volumes to pre-1997 levels (which now has 160 bipartisan
sponsors), H.R. 502, a bill to impose a 3-month ban on imports
from four countries, and H.R. 327, a bill to provide for the
assessment of additional retroactive antidumping duties. We
appreciate and thank the sponsors and co-sponsors of these
bills and others for their efforts to achieve a prompt,
meaningful and comprehensive response to the steel import
crisis.
The situation described in this statement places our
industry, and perhaps our nation, at a trade policy crossroads.
We believe that a comprehensive and effective response can be
based on WTO-consistent principles, but that course requires an
Administration willing to fully utilize the remedies available
to it under current law, and a Congress willing to make WTO-
consistent changes in our laws where they have been proven to
be deficient. If we fail to be able to respond effectively
within WTO rules, however, the need and requirement for an
effective solution will surely have been established and may
require a different course of action. The challenge is clear
and real. Prompt, comprehensive and effective action to address
the steel import crisis is absolutely essential if we are to
continue our present trade policy.
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Attachment 17
RECENT PLANT CLOSINGS, LAYOFFS AND CAPACITY REDUCTIONS
(as of February 22, 1999)
----------------------------------------------------------------------------------------------------------------
Date Company Product Affected Event
----------------------------------------------------------------------------------------------------------------
1998............................ California Steel All................. Petitioner California Steel
Industries. Industries has lost 15 to 20
percent of its sales volume so
far this year.\1\ Consequently,
it has had to reduce production
operations by an equivalent
percentage.\2\
1998............................ LTV................. All................. Petitioner LTV has curtailed
blast-furnace operations by 13
percent.\3\ That translates into
300,000 tons of lost production
in the fourth quarter of this
year.\4\
1998............................. Steel Dynamics...... All................. Petitioner Steel Dynamics started
up a second caster in June, but
is operating it at significantly
less than its capacity.\5\
Overall, Steel Dynamics is now
operating at 75 percent of
capacity even through it is one
of the most efficient mills in
the world.\6\
1998............................ Gulf States Steel... Hot Strip........... Petitioner Gulf States Steel has
shut down its hot-strip mill for
one week, and plans henceforth
to be operating the mill only
four days a week.\7\
9/10/98......................... Gulf States Steel... All................. Gulf States Steel announces that
it will lay off eight percent of
its work force, and eliminate
overtime for the remainder of
its employees.\8\
9/98............................. U.S. Steel.......... All................. Petitioner U.S. Steel has reduced
operations, and laid off 100
workers at its Mon Valley Works
near Pittsburgh in connection
with a 12 percent reduction in
output at that facility.\9\
Additional layoffs at that
facility are expected in the
``near future.'' \10\
9/22/98......................... U.S. Steel.......... All................. U.S. Steel President Paul Wilhelm
announces that the company has
decided to keep out of operation
indefinitely a blast furnace at
its Gary, Indiana works with a
capacity of 1 million tons.\11\
9/28/98......................... Geneva Steel Co..... All................. Petitioner Geneva Steel Co.
announces that it will cut
planned fourth quarter
production by nearly 20 percent
and lay off 350 workers.\12\
This follows Geneva's lay off of
270 workers earlier this
year.\13\ Its corporate credit
rating was downgraded because it
missed an interest payment.
9/7/98.......................... Nucor............... All................. Flat-Rolled Nucor announces that
it cut production at its
Hickman, Arkansas mill by more
than 40 percent (i.e., by more
than 800,000 tons) because of
market turmoil in the wake of
the flood of cheap imports.\14\
Since then, Nucor announced that
it was cutting back production
at all of its flat-rolled
facilities in the face of the
import onslaught.\15\ Nucor
announced that the effect of the
cuts was ``10-15% reduction in
sheet output, mostly HR coils.''
\16\
9/29/98......................... Acme Metals, Inc.... All................. Acme Metals, Inc. (``Acme''),
files for protection from
creditors under Chapter 11 of
the U.S. Bankruptcy Code. Acme
is a classic example of a U.S.
producer that invested heavily
in the expectation that strong
demand would enable it to
realize at least an adequate
return on their business. In
late 1996, it brought onstream a
$370 million new slab caster
designed to take advantage of
its high-quality blast furnace
operations, while linking it to
low-cost, mini-mill style
casting and rolling equipment.
Acme attributed its downfall
``in large part to heavy volumes
of cheap imports. . . .'' \17\
10/98........................... Steel Dynamics...... All................. While Steel Dynamics does not
plan to layoff workers, their
compensation will be cut by 20
percent.\18\
9-10/98......................... Gallatin Steel...... All................. Petitioner Gallatin Steel is one
of the industry's new mini-
mills. In September and October,
it reduced its production levels
to 50 percent of capacity.\19\
10/98........................... IPSCO Steel Inc..... Plate, Hot Rolled Petitioner IPSCO Steel Inc.,
Sheet. which only recently ramped up
production at its new mill in
Iowa (which makes both plate
products and hot-rolled sheet),
has scaled back operations from
seven to five days a week.\20\
10/98........................... Weirton............. All................. According to Weirton Steel
President Richard Riederer,
employees of Weirton Steel are
experiencing reductions in their
take home pay ranging from 20 to
50 percent.\21\
10/19/98........................ National Steel...... All................. Petitioner National Steel has
announced the idling of a blast
furnace producing 1.1 million
tons of iron at its Great Lakes
Division.\22\ As a result, the
steelmaking capacity at that
unit will be reduced by 25 to 30
percent.\23\
10/23/98........................ Weirton............. All................. Weirton announces that it is
laying off 300 workers--nearly
10 percent of its workforce--
``due primarily to a loss of
orders and the continued surge
of steel imports, primarily
those being illegally dumped
into the United States.'' \24\
10/28/98........................ Wheeling-Pittsburgh. .................... Company announces 18 voluntary
layoffs at its Martins Ferry
plant.
10/30/98........................ LTV................. .................... LTV announces a one-week
shutdown of the Direct Hot
Charge Complex at its Cleveland
plant. 320 workers will be laid
off or reassigned to lower
paying jobs during the shutdown,
scheduled to begin Oct. 31.\25\
11/04/98........................ U.S.Steel........... All................. U.S. Steel announces that it will
cut back operations at its
steelworks in Fairless Hills,
Pa. by about 70 percent. The
company will shut down
indefinitely its 80-inch
pickling line, cold reduction
sheet mill, sheet annealing line
and sheet temper mill. Several
hundred of the 850 workers at
the plant will be laid off.
President Paul Wilhelm remarks,
``The actions we're being forced
to take at the Fairless plant
are a direct result of the
record tonnages of illegally
dumped foreign steel reaching
this country.'' \26\
11/09/98........................ LTV................. Cold-rolled......... LTV announces that it will
permanently close cold-roll
finishing operations at the No 2
Finishing Department at its
Cleveland Works. Approximately
320 jobs are eliminated. The
company cites dumped imports as
one reason for the unit's
closure.\27\
11/19/98........................ Bethlehem........... Sheet............... Bethlehem Steel announces that
about 500 workers at its two
Washington County, Pa. plants
will be laid off for two weeks,
starting Nov. 23, due to
``record levels of imported
steel.'' The steelmaker also
announces a two-week shutdown at
its Massillon, Ohio plant.\28\
11/20/98........................ Bethlehem........... All................. Bethlehem Steel issues press
release detailing the impact of
dumped steel on the company's
operations. Announced production
cutbacks include a planned one-
week shut down of the Burns
Harbor, Ind. hot strip mill as
well as a mill in Steelton, Pa.
beginning Nov. 23, shift
cutbacks at Sparrows Point, and
the idling of plate facilities
in Coatsville, Pa. from Dec. 24
to Jan. 2.\29\ The Coatsville
shutdown requires that the
company lay off 1,000
workers.\30\
12/1/98......................... Laclede............. .................... Laclede Steel Co. files for
bankruptcy, attributing losses
primarily to a surge in
imports.\31\
12/3/98......................... Weirton............. All................. Weirton announces that it will
temporarily idle a blast furnace
starting Dec. 15, causing the
short-term layoff of about 415
workers.\32\
12/31/98........................ Geneva.............. .................... A Standard & Poor's report
speculates that Geneva will
likely file for bankruptcy.
While the company does not
confirm the report, a spokesman
states that it is in discussion
with creditors, after missing
January's interest payment on
its 9.5-percent senior
notes.\33\
1/7/99.......................... Bethlehem........... Stainless, cold- Bethlehem announces that, due to
rolled. ``unprecedented levels of
unfairly traded imports,'' it
will close two plants located in
Washington, Pa., and Massilon,
Ohio, and consequently eliminate
340 jobs at the Washington mill
and 200 in Massilon. The plants
contained stainless sheet and
strip operations, as well as
cold-rolled and finishing
facilities.\34\ On January 27,
after a final effort to locate
buyers for the Massilon mill,
the company declares that the
mill will be closed within a
week.\35\
1/14/99......................... Gulf States Steel... Flat-Rolled......... Moody's speculates that Gulf
States Steel, a small integrated
flat rolled mill in Alabama,
will file for bankruptcy ``in
the near future.'' \36\
2/1/99.......................... Geneva.............. All................. Geneva Steel of Vineyard, Utah
files for Chapter 11, citing ``a
dramatic surge in steel
imports'' as the cause of its
financial distress. The company,
which employs roughly 2,400
workers in Utah, is the third
U.S. steel manufacturer to
declare bankruptcy since
September 1998.
----------------------------------------------------------------------------------------------------------------
\1\ Tr. at 54 (Testimony of Jim DeClusin, Executive Vice President, CSI, Inc.).
\2\ Tr. at 54 (Testimony of Jim DeClusin, Executive Vice President, CSI, Inc.).
\3\ Tr. at 63 (Testimony of J. Vail).
\4\ Tr. at 63 (Testimony of J. Vail).
\5\ Tr. at 24 (Testimony of Keith Busse, President, Steel Dynamics, Inc.).
\6\ Tr. at 24 (Testimony of Keith Busse, President, Steel Dynamics, Inc.).
\7\ Tr. at 57 (Testimony of John Lefler, President and CEO, Gulf States Steel Co., Inc.).
\8\ Tr. at 57 (Testimony of John Lefler, President and CEO, Gulf States Steel Co., Inc.).
\9\ ``Layoffs at USX cited in talk of trade meeting,'' American Metal Market (Sept. 1, 1998); ``Imports keep
Gary Furnace idle,'' American Metal Market at 1, 12 (Sept. 23, 1998) (``Gary Furnace Idle'').
\10\ Tr. at 63-64 (Testimony of J. Vail).
\11\ See ``Gary Furnace Idle'' at 1.
\12\ ``Geneva joins list of production cuts citing import woes,'' American Metal Market at 1 (Sept. 29, 1998).
\13\ ``Geneva joins list of production cuts citing import woes,'' American Metal Market at 1 (Sept. 29, 1998).
\14\ ``Low prices force Nucor to cut production,'' Metal Bulletin at 33 (Sept. 7, 1998).
\15\ ``Nucor cuts sheet production by 15%,'' Metal Bulletin at 37 (Sept. 28, 1998).
\16\ ``Nucor cuts sheet production by 15%,'' Metal Bulletin at 37 (Sept. 28, 1998).
\17\ See ``Acme blames cheap imports for bankruptcy,'' Metal Bulletin at 15 (Oct. 1, 1998).
\18\ Tr. at 24 (Testimony of Keith Busse, President, Steel Dynamics, Inc.).
\19\ Tr. at 56 (Testimony of John Holditch, President, Gallatin Steel Co.).
\20\ ``American producers cut output as stocks mount and imports surge,'' Metal Bulletin at 19 (Oct. 8, 1998).
\21\ Tr. at 60 (Testimony of Richard Riederer, President, Weirton Steel Corp.).
\22\ ``National set to join ranks of cutbacks,'' American Metal Market at 1 (Oct. 19, 1998).
\23\ ``National set to join ranks of cutbacks,'' American Metal Market at 1 (Oct. 19, 1998).
\24\ Weirton Press Release, October 23, 1998.
\25\ ``Steel company will shut down part of Cleveland plant next week,'' AP State and Local Wire (Oct. 30,
1998).
\26\ ``U.S. Steel, citing imports, to idle most Fairless lines,'' AP State and Local Wire (Nov. 5, 1998).
\27\ ``LTV axes Cleveland unit; 320 jobs to go,'' American Metal Market at 1 (Nov. 11, 1998).
\28\ ``Imports bring 500 more steel layoffs,'' Pittsburgh Post-Gazette (Nov. 19, 1998).
\29\ ``In Response to Inquiries,'' Press Release, Bethlehem Steel Corporation (Nov. 20, 1998).
\30\ ``Bethlehem shaves output, idles staff,'' American Metal Market (Nov. 25, 1998).
\31\ ``Laclede Steel and Two Units in Chapter 11,'' The New York Times (Dec. 1, 1998).
\32\ ``Weirton to idle blast furnace,'' American Metal Market (Dec. 4, 1998).
\33\ ``Geneva comment called `speculation','' American Metal Market (Jan. 5, 1998).
\34\ ``Bethlehem closes two plants,'' American Metal Market (Jan. 7, 1999).
\35\ ``Bethlehem moves to shut Massilon,'' American Metal Market (Jan. 28, 1999)
\36\ ``Gulf States named as candidate for bankruptcy,'' Metal Bulletin at 18 (Jan. 14, 1999).
Attachment 18
Comparison of Administration Steel Plan and Industry Requests
------------------------------------------------------------------------
January 7, 1999
Industry Requests Administration Plan
------------------------------------------------------------------------
Bilateral Discussions: Forceful and Bilateral discussions with
publicly known bilateral discussion with some countries engaging in
all offending countries. unfair trade have occurred.
However, these discussions
have not resulted in clear
and enforceable commitments
to stop unfair trade.
Further, such bilateral
discussions have not
occurred with all countries
engaging in unfair trade.
The Administration states
that it has ``told the
Japanese government that we
expect Japan's exports to
return to appropriate pre-
crisis levels.'' This U.S.
government request has been
rejected by the Government
of Japan.
Prompt and effective enforcement of trade The Administration has
cases: (1) critical circumstances; (2) no expedited current cases. It
suspension agreement. also has made a critical
circumstances finding.
However, the Administration
suggests that it will seek
a suspension agreement in
the Russia case, which is
directly contrary to the
industry's stated position.
Willingness to self-initiate AD, CVD, 201, The Administration makes no
and other cases. specific commitments
regarding self-initiation
of cases, under the
antidumping, countervailing
duty, Section 201 or other
trade laws except with
respect to Japan, where the
Administration will
consider self-initiation if
Japan does not reduce
exports. To be successful
in current circumstances,
full Administration support
will be necessary along
with a commitment to
specific relief.
Willingness to deal with injurious Russian The Administration ignores
trade by imposing a tariff on Russian the industry requests to
shipments: (1) 1990-USSR-US Agreement on address the Russia steel
Trade Relations because of market crisis through existing
disruption--1990 Agreement; and (2) 19USC authority under the
2135--authority for President to impose a existing bilateral
duty of up to 40-45% of value. agreement and under Section
125(c). The Administration
indicates, however, that
despite industry
opposition, it may seek a
suspension agreement with
Russia in the pending hot-
rolled case.
Japan's Cartel: Willingness to deal with While the Administration
Japan's cartel activities. ``remains concerned about
allegations by U.S.
producers,'' it ignores
completely the industry's
requests to act against
Japan's cartel through Sec.
301, WTO or antitrust
laws.
CVD Regulations: Utilize CVD regulations The Administration issued
to provide strong CVD remedies. CVD regulations in November
consistent with the
Commerce Department draft
regulations which did not
add any further weakening
provisions.
Import Monitoring System: Establishment of The Administration proposes
an effective import monitoring system. to accelerate the issuance
of import data, however,
only when the
Administration deems that
there are extraordinary
circumstances. The
Administration does not
establish a system like
Canada's, nor does it state
that it will seek any
legislative changes
necessary to establish such
a system.
Trade Legislation: Support for trade The Administration ignores
legislation to strengthen trade laws. completely the industry's
request for support for
legislation to enhance the
trade laws and even fails
to state its support for
WTO-consistent 201.
Effective Enforcement of Trade Laws: Have The Administration does not
the highest qualified public servants in address this request.
position or nominated to administer our
trade laws.
Presidential Statements: Forceful There have been statements
statements from the President regarding of concern, but the plan
the steel crisis. does not recognize that the
crisis is caused by more
than a few major exporters.
Tax Policy: No request.................... The Administration proposes,
without having consulted
the industry, extending the
tax law net operating loss
carry back for steel from 2
to 5 years. This proposal
will not benefit any U.S.
steel company which is
currently being injured by
the unfairly traded
imports. Further, it
creates the false
impression that the
industry is being
subsidized by the
government.
Trade Adjustment Assistance Program: No The Administration plans to
request. appoint a White House
official to coordinate
adjustment assistance for
workers who lost their jobs
due to unfairly traded
imports. This proposal is
premised on the industry
losing jobs. The industry,
however, is proud of its
highly-skilled, capable
workers and adjustment
assistance is not an
appropriate response to the
import crisis.
World Economic Reform: Global economic The Administration is
reform, while critically important, is working toward restoring
not a steel-specific issue. global economic growth and
ensuring market-based
reform. The industry
supports such efforts,
however they do not address
the immediate steel import
crisis.
------------------------------------------------------------------------
Chairman Crane. Mr. Cardy.
STATEMENT OF ROBERT W. CARDY, VICE CHAIRMAN, SPECIALTY STEEL
INDUSTRY OF NORTH AMERICA; AND CHAIRMAN, PRESIDENT, AND CHIEF
EXECUTIVE OFFICER, CARPENTER TECHNOLOGY CORP., READING,
PENNSYLVANIA
Mr. Cardy. Good afternoon. My name is Bob Cardy. I am
chairman, president, and chief executive officer of Carpenter
Technology Corp., based in Reading, Pennsylvania since 1889.
I am appearing before you today in my capacity as the vice
chairman of the Specialty Steel Industry of North America.
SSINA is a Washington, DC-based trade association, representing
15 companies that employ over 25,000 workers. Specialty steels
are high-technology, high-value, stainless and other special
alloy products sold by the pound rather than by the ton. While
shipments of specialty steel account for only about 2 percent
of all steel produced in North America, annual revenues of
approximately $8 billion account for about 14 percent of the
total value of all steel shipped.
Our industry has long been recognized as extremely modern
and efficient, and second to none in the world. We have a
strong history of continuous investment in plant and equipment.
We are a world-competitive industry facing an import problem
based solely on unfair trade. We cannot afford to in essence
continue to subsidize our customers who are benefiting from
predatory import pricing, unless of course, the end objective
is the further decimation of the domestic steel industry.
Three years ago, SSINA did a study in which we examined the
anticipated growth in worldwide stainless capacity. We
projected that by mid1998, new capacity would come on stream
around the world at twice the size of the U.S. stainless
market. At the same time, we sought a multilateral specialty
steel agreement to reduce subsidies and encourage fair trading.
But our efforts were rebuffed by foreign interests. To no one's
surprise, with no MSSA in place, much of the new capacity that
came online was built with foreign government subsidies. Even
though market demand for stainless steel has been and remains
strong, we knew there was simply no way that world markets
could ever absorb the new capacity, and prices were going to be
depressed.
Then came the Asian crisis, and the issue of exporting
deflation to the United States. Prices today are off about 30
to 40 percent compared to just 3 years ago. Stainless steel
producers recently have filed 34 trade cases against 45
producers in 14 countries on four different product lines. We
are finally beginning to see some improvement in some of the
stainless prices as a result of those trade cases. However,
real relief under our trade laws can take from two to 3 years
from the time that exports rise to the filing of the cases, to
the determinations by the Commerce Department and the ITC, to
the issuance of the dumping orders, and finally, to the working
down of the inventories that have accumulated during this
process. The additional duties collected don't even come back
to the damaged companies.
Where do we go from here? The evidence is clear. Foreign
manufacturers are willing to do anything to sell at any price
to make a sale. Modern and efficient industries like ours must
aggressively attack these unfair trade practices in order to
preserve our markets. We are actively considering additional
cases.
The Commerce Department should recognize the devastating
effect of the Asian financial crisis on the U.S. marketplace.
In the past year, we have seen imports of certain stainless
steel products from Korea surge over 50 percent. At the same
time, the Korean won lost more than 60 percent of its value.
Yet the Commerce Department has refused to take this dramatic
currency devaluation into account when making its preliminary
dumping determinations. In fact, Korean stainless steel
producers have continued dumping their products into the United
States with impunity. Commerce should recognize the effect of
drastic exchange rate changes in administering the dumping
laws.
SSINA respectfully urges Congress to work with us and the
administration to develop a comprehensive policy to address
these issues. Pressure these foreign governments to discourage
obvious unfair trade practices, and support H.R. 412, the Trade
Fairness Act of 1999, which would improve the timeliness of
import information and make relief under section 201 more
readily available.
We also support legislation to pay the dumping duties over
to the injured U.S. industries. And finally, improve the trade
laws to provide more effective relief to the injured
industries. We must address the significant delay that occurs
between the time a sector of industry begins to experience the
impact of unfairly priced imports and the actual granting of
relief under the trade laws. It takes too long, too much damage
results.
We appreciate your help in assuring that competitive,
efficient industries such as ours are given the opportunity to
compete in a marketplace free of cutthroat practices which
violate both U.S. laws and the international rules of the World
Trade Organization.
Thank you, Mr. Chairman, for holding this timely meeting.
[The prepared statement follows:]
Statement of Robert W. Cardy, Vice Chairman, Specialty Steel Industry
of North America; and Chairman, President, and Chief Executive Officer,
Carpenter Technology Corp., Reading, Pennsylvania
Good afternoon. My name is Bob Cardy, Chairman, CEO and
President of Carpenter Technology Corporation. I am appearing
before you today in my capacity as the Vice Chairman of the
Specialty Steel Industry of North America.
SSINA is a Washington, D.C.-based trade association
representing 15 companies which employ over 25,000 workers.
Specialty steels are high technology, high-value stainless and
other special alloy products sold by the pound rather than the
ton. While shipments of specialty steel account for only about
2 percent of all steel produced in North America, annual
revenues of approximately $8 billion account for about 14
percent of the total value of all steel shipped.
Our industry has long been recognized as extremely modern
and efficient and second to none in the world. We have a strong
history of continuous investment in plant and equipment.
We are a world-competitive industry facing an import
problem based solely on unfair trade. We cannot afford to, in
essence, continue to subsidize our customers who are
benefitting from predatory import pricing. Our basic
responsibility to our shareholders and employees requires that
we file dumping and countervailing duty suits to seek
restoration of fair pricing in the U.S. marketplace. We greatly
appreciate the opportunity to talk about our situation today.
Three years ago, SSINA did a study in which we examined
anticipated growth in worldwide stainless capacity. At that
time, we projected that by mid-1998, new capacity would come on
stream around the world at twice the size of the U.S. stainless
market. At the same time we sought a Multilateral Specialty
Steel Agreement (MSSA) to reduce subsidies and encourage fair
trading, but our efforts were rebuffed by foreign interests.
To no one's surprise, with no MSSA in place much of the new
capacity that came on line was built with foreign government
subsidies. Even though market demand for stainless steel has
been and remains strong, we knew that there was simply no way
that world markets could ever absorb the new capacity--and
prices were going to be depressed.
While we knew that global capacity was increasing
dramatically, we could not predict the second contributing
factor to the current crisis--disastrous economic developments
in Asia which began in mid-1997. You know the story: the
currencies of the Asian ``tigers'' were severely weakened,
their consumers panicked and refused to buy, and their steel
mills, desperate for hard currency, began the sale of the
decade--with no thought of profitability or even costs of
production.
As a result of excess capacity funded by government
subsidies and the unpredicted effect of the Asian crisis, the
price crunch was much more severe than we anticipated. Prices
today are off about 30 to 40 percent compared to just three
years ago.
To counter the surge of unfairly traded specialty steels
entering the country, we knew it would be necessary to begin
the long, arduous and expensive task of filing antidumping and
countervailing duty trade cases. Over the last 35 years, SSINA
has all too regularly found it necessary to challenge the
unfair international trading practices of our trading partners
around the world. In the past 18 months, stainless steel
producers have filed 34 trade cases against more than 45
producers in 14 countries on four different product lines. A
summary is attached to my statement. It has been a difficult
process. But, we are finally beginning to see some improvement
in some stainless prices as a result of our trade cases. Bear
in mind that it takes about a year and a half from the decision
to launch cases to final decisions by the Department of
Commerce and the ITC.
So where do we go from here? The evidence is clear--foreign
manufacturers are willing to do anything and sell at any price
to make a sale. Modern and efficient industries like ours must
aggressively attack these unfair trade practices in order to
preserve our markets. We will continue to closely monitor
imports. We will continue to actively pursue the trade cases
already filed to their successful conclusion. We will fight to
preserve existing cases as the ``sunset'' review process moves
through the Commerce Department and the International Trade
Commission. And, we are actively considering additional cases
on specialty steel products and producers.
The Administration is beginning to recognize the severity
of the steel import situation, as highlighted when the
Secretary of Commerce personally announced the antidumping
margins in the stainless steel wire rod cases last summer. The
message Secretary Daley delivered was directed squarely at
foreign producers of all products--dumping cannot be the answer
to the economic crisis in Asia or elsewhere. Our companies and
employees should not be the scapegoats for other nations'
economic mismanagement.
The Commerce Department should recognize the devastating
effect of the Asian financial crisis on the U.S. marketplace.
In the past year, we have seen imports of certain stainless
steel products from Korea surge over 50 percent. At the same
time, the Korean won lost more than 60 percent of its value.
Yet, for reasons that puzzle me, the Commerce Department has
refused to take this dramatic currency devaluation into account
when making its preliminary dumping determinations against
Korea. In fact, Korean stainless steel producers have continued
dumping their products into the U.S. market with impunity. Both
Secretary Daley and Undersecretary Aaron have stated numerous
times that they will enforce U.S. trade laws to the fullest
extent, yet if foreign exporters are allowed to take advantage
of a weak currency to dump product into the United States, they
will be beyond the reach of our dumping law--clearly not what
Congress intended. The Commerce Department should recognize the
effect of drastic exchange rate changes in administering the
dumping law.
We simply will not allow our efficient, technologically-
superior U.S. specialty steel industry and the valued jobs of
our dedicated workforce to be destroyed by illegal foreign
trade practices. I urge you to join us in protecting the
sanctity of our trade laws and to oppose at every opportunity
any attempt to weaken them.
SSINA joins with other steel trade associations in urging
the Congress to work with us and the Administration to develop
a comprehensive policy to address these issues. We urge that
the following steps be taken:
Administration pressure on foreign governments to
discourage unfair trade practices such as dumping and
subsidization;
Expeditious handling of trade cases on specialty
steel products;
Ways and Means Committee support for H.R. 412, the
``Trade Fairness Act of 1999,'' and legislation to pay the
dumping duties over to injured U.S. industries; and
Legislation to improve the trade laws to provide
more effective relief to injured industries.
We are working with our colleagues in the steel industry
and other industries to develop specific legislative proposals.
These will be provided to you shortly.
The specialty steel industry is on full alert in monitoring
specialty steel imports and reported foreign efforts to
circumvent U.S. trade laws. We appreciate your help in assuring
that competitive, efficient industries such as ours are given
the opportunity to compete in a marketplace free of cutthroat
practices which violate both U.S. laws and the international
rules of the WTO. Thank you, Mr. Chairman, for holding this
timely hearing.
ATTACHMENT
Stainless Steel Producers and Unions--Status of Unfair Trade Cases by
Major Product Line Filed in 1997 and 1998
------------------------------------------------------------------------
------------------------------------------------------------------------
Product........................... Stainless Steel Rod
Date Filed........................ July 30, 1997
Named Countries................... Italy, Germany, Japan, Korea, Spain,
Sweden, Taiwan
Status............................ The case concluded with the issuance
of final antidumping and
countervailing duty (CVD) orders by
the Commerce Department on 9/15/98.
The duties range up to 34%, with
penalties extending back to 3/5/98.
The International Trade Commission
(ITC) voted on final injury
determination on 9/1/98. Excluding
Germany, ITC concluded that imports
from six of the seven named
countries caused injury to
producers.
Next Step......................... On 10/15/98, appeals were filed with
Court of International Trade.
Successful appeals would result in
a significant increase in the
antidumping duties levied on
imports from Korea and the
assessment of antidumping duties on
imports from Germany. The industry
will vigorously pursue the appeals
process with the hope of a decision
by year-end 1999.
Product........................... Stainless Steel Round Wire
Date Filed........................ March 27, 1998
Named Countries................... Canada, India, Japan, Korea, Spain,
Taiwan
Status............................ On 6/4/98, ITC preliminarily
determined that imports from the
named countries are injuring the
domestic industry. In 11/13/98,
Commerce set preliminary
antidumping duties ranging up to
36% on imports from the subject
countries.
Case Concludes.................... The ITC and Commerce will conclude
their investigations and final
antidumping duty orders will be
announced in early April 1999.
Product........................... Stainless Steel Plate In Coils
Date Filed........................ March 31, 1998
Named Countries................... Belgium, Canada, Italy, South Korea,
South Africa, Taiwan
Status............................ On 5/15/98, the ITC voted
preliminarily that imports from the
named countries are injuring the
domestic industry. On 9/1/98,
Commerce issued preliminary CVD
determinations against Korea,
Italy, Belgium, and South Africa
ranging up to 15%. On 10/27/98,
Commerce announced preliminary
antidumping duties ranging up to
68% on imports from the six named
countries. Subsequently, on 12/3/
98, Commerce published a revised
preliminary determination on
imports from Taiwan and took the
extremely unusual step of finding
that Taiwanese producer Ta Chen
Stainless Pipe and its U.S.
subsidiary, Ta Chen International,
engaged in ``middleman dumping'' of
coiled stainless steel plate
produced by Yieh United Steel Corp.
Case Concludes.................... Commerce will issue final dumping
and CVD determinations on March 22,
1999; the ITC will issue its final
report by May 7, 1999.
Product........................... Stainless Steel Sheet and Strip in
Coils
Date Filed........................ June 10, 1998
Named Countries................... France, Germany, Italy, Japan,
Mexico, South Korea, Taiwan, United
Kingdom
Status............................ On 7/24/98, the ITC voted
preliminarily that imports from the
named countries are injuring the
domestic industry. On 10/30/98,
U.S. producers requested that
Commerce apply the ``critical
circumstances'' provision of U.S.
trade laws to combat recent import
surges. An affirmative finding
would impose antidumping duties
retroactively to 9/18/98. On 11/10/
98, Commerce announced preliminary
CVD rates ranging up to 29% against
France, Italy and South Korea. On
12/18/98, Commerce announced
preliminary antidumping duty
margins ranging up to 59%; and
decided favorably on ``critical
circumstances'' as to Germany,
Japan (Nippon Metals, Nippon Yakin,
and Nisshin only) and Korea (Taihan
Electric Wire Co. only). ``Critical
circumstances'' were not found for
Italy and Taiwan.
Case Concludes.................... Commerce will issue its final
dumping and CVD determinations on
May 20, 1999; the ITC will issue
its final report by July 5.
------------------------------------------------------------------------
Chairman Crane. Thank you.
Mr. Becker.
STATEMENT OF GEORGE BECKER, INTERNATIONAL PRESIDENT, UNITED
STEELWORKERS OF AMERICA
Mr. Becker. Thank you, Mr. Chairman. Without a clear
linkage to the global solution to the crisis of American steel,
the Steelworkers Union cannot support the recently concluded
agreements with Russia. The Steelworkers would be prepared to
support a suspension agreement and comprehensive steel
agreement, provided they were part of a global solution. In the
absence of such a linkage, there is no justification for
entering into a suspension agreement with Russia, particularly
in light of the Commerce Department's finding that Russia
engaged in an egregious level of dumping of hot-rolled steel.
The crisis facing the American steel industry cannot be dealt
with on a country-by-country or product-by-product basis.
It took over 15 months of suffering before the flow of one
steel product from three countries was restricted. It is also
far too easy for the dumped steel to be moved from one country
to another, and from one type of product to another. For
example, a year ago there was a suspension agreement with
Russia, the Ukraine, China, and South Africa to cut the link on
carbon steel plate. These countries virtually dropped out of
the market. Just last week, however, the Steelworkers and the
industry had to file trade cases against eight new countries
that have now moved into the market and dumped, and subsidized
steel plate.
There is also no protection against the foreign producers
such as those in South America from purchasing Russian
semifinished steel products and finishing them, and then
dumping the finished products into our market. These agreements
with Russia must either be linked to an administration-
initiated and supported 201 action on all steel products, which
would result in global, quantitative restraints, minimum
prices, and adequate enforcement mechanism and a moratorium on
further shipments until the inventory of dumped steel has been
cleared. Or two, become part of H.R. 506, this is the Visclosky
quota bill, and Senate bill 395, which is Senator Rockefeller's
bill, which would roll back all steel imports to the precrisis
levels.
The comprehensive steel agreement, while flawed as
described above, does have the virtue of clearly demonstrating
that the administration can if it wishes use its authority to
limit the flood of foreign steel into this country. We call on
the administration to demonstrate the same resolve, broaden
their focus, and address the problem in its entirety. We call
upon this Subcommittee to move the quota bill, H.R. 506.
Mr. Chairman, I would add though that the Steelworkers
Union and its members are losing confidence and trust in this
process. We played by the rules for 15 months while processing
the trade cases. We lost over 10,000 steelworkers. Three
companies have been bankrupt. Then finally winning the cases to
Japan, Brazil, and Russia, only to find that the government
tells Russia that they will not be held accountable for the
illegal dumped steel.
Today I find that the government is initiating the same
kind of action with Brazil on a suspension agreement. I would
question is Japan next. I think it is essential that we move to
solve this problem. These countries control that the rollback
in steel, the quantitative amounts of steel that showed up in
January, this is controlled just like it was controlled when
they dumped huge levels into the market, the huge surges. They
have rolled them back. They can ship it just as easily to
another country and they can increase it. They can ship product
lines. We need to solve this before we virtually lose the steel
industry that we know in America today.
Thank you very much.
[The prepared statement follows:]
Statement of George Becker, International President, United
Steelworkers of America
I. THE STEEL CRISIS
Mr. Chairman and distinguished members of the Ways and
Means Subcommittee on Trade, thank you for inviting me to
appear before you today to discuss what is truly a crisis in
the American steel industry and for steelworkers all across the
country.
Today, the jobs and future of steelworkers all across
America are being threatened by a flood of foreign steel, much
of which has been illegally dumped into our market. Already,
over 10,000 steelworkers' jobs in basic steel, iron ore mining,
and coke production have been lost. Thousands more have seen
their work hours and their paychecks cut as their employers
have adjusted to the grim reality of empty order books and lost
customers. The list of companies where steelworkers have lost
their jobs or had their work hours and paychecks cut grows
longer every day. Gulf States Steel in Gadsden, Alabama; Geneva
Works in Provo, Utah; Bethlehem Steel's Lukens Division plants
in Houston and Washington, Pennsylvania, and their Sparrow's
Point plant in Baltimore, Maryland; WCI, Inc., in Warren, Ohio;
USX's Fairless Works in Bucks County, Pennsylvania; North Star
Steel in Texas, and LTV's Cleveland Works in Ohio. The list
goes on and on. Several steel companies have already been
forced into bankruptcy as a result of the current crisis,
including Geneva, Laclede, and Acme.
Perhaps worst of all, the crisis we are in today was both
predictable and preventable. We are in a crisis today because
for over a year, our policymakers ignored our warnings as
foreign producers dumped millions of tons of steel into the
U.S. market.
When the Asian currencies collapsed in late 1997 and early
1998, we warned that if decisive action was not taken that
foreign-made steel would be dumped into the American market. We
warned that the International Monetary Fund's (IMF) insistence
upon export-based solutions to the economic problems facing
nations in Asia, eastern Europe, Latin America, and Russia
would be a prescription for disaster for our own manufacturing
industries. We warned that the longer action was delayed, the
more damage would be done, and the more difficult this problem
would be to solve. Our warnings fell on deaf ears.
Unfortunately, our predictions have now been realized.
1998 was a disastrous year for the steel industry and our
steelworkers. Last year, the U.S. imported a record 41 million
tons of steel. That's an increase of one-third over the volume
of imports the preceding year of 1997. From July through
November last year, each month's steel import figures were the
highest monthly totals in history. In fact, our total volume of
steel imports in 1998 was nearly half of the total volume of
shipments by the entire U.S. steel industry.
Almost a year ago, in March 1998, the U.S. steel industry
was operating at 93 percent of capacity. Today, in February
1999, the industry is operating at only 74 percent of capacity
despite a strong U.S. economy and a correspondingly strong
demand for steel. This decline in domestic capacity has
occurred simultaneously with the huge flood of steel imports,
which has arrived on American shores since the summer of 1997.
While the volume of imported steel has surged, average import
values fell by almost $100 per ton last year.
II. THE HUMAN IMPACT
Mr. Chairman, there is a human face behind all of these
cold statistics about import levels, unused capacity, and
import values.
Steelworkers work hard for a living. They work in some of
the hottest, noisiest, and most dangerous work places anywhere
and yet they take great pride in what they do. Many come from
families where their fathers, grandfathers, and even great
grandfathers worked in this industry. They are the people who
have helped to build America. They have made the steel that has
built our skyscrapers and our bridges and they are the same
people who have made the steel used to defend America
throughout its history. They are proud people. They have
repeatedly shown their willingness to compete in the world
market, but they cannot compete if the rules of international
trade are not fair or if our trade laws are being violated with
no sanctions.
Many of us have bitter and painful memories of the last
steel crisis in the late 1970s and early 1980s when over
350,000 steelworkers lost their jobs. Four hundred forty-seven
(447) steel making facilities were shut down. Twenty-five steel
producers went into bankruptcy.
While many found other jobs, many more never worked again.
The economic and social costs of that crisis were staggering.
Many steelworkers lost homes, automobiles, health insurance,
and maybe worst of all, lost hope. There were increased
incidents of substance abuse, mental health problems, marital
problems, and even suicides. Communities in large steel-
producing states, such as Pennsylvania, Ohio, and Indiana, saw
a large portion of their tax base disappear as steelworkers
went from being taxpayers to being recipients of unemployment
insurance, food stamps, and welfare payments from federal,
state, and local governments.
Just look at the steel industry in Pennsylvania in 1980 and
where it is today in 1999. In the Mon Valley near Pittsburgh in
1980, 6,500 steelworkers were employed at the USX Homestead
mill. Another 700 were employed at the Carrie Furnace. The
Duquesne Works employed about 2,200. National Tube had
approximately 5,000 steelworkers on the job. Today, in 1999,
all of those plants have closed and all of those jobs are gone.
The remaining steel mills in Pennsylvania and across the
country have significantly scaled back their work forces, in
many instances by more than half.
In the iron ore mining industry in northeastern Minnesota,
employment fell from 16,000 jobs in 1980 to 1,500 in 1982. In
fact, northeastern Minnesota saw its gross domestic product
plunge by 50 percent as 28,000 people left the region during
the 1980s. This same scenario was repeated in scores of other
steel communities in Pennsylvania, Ohio, New York, Indiana, and
Illinois.
We simply cannot go through this same experience again. If
we do not act decisively in the present crisis, there will be
no American steel industry in the 21st century.
When steelworkers lose their jobs, the consequences go far
beyond just the steel industry. Unemployed steelworkers cannot
afford to buy homes, cars, appliances, or much of anything
else. Businesses, which depend upon steelworkers bringing home
a paycheck find that their business is also hurt when
steelworkers lose their jobs. Likewise, state and local
governments that depend upon the income tax revenue from
steelworkers' earnings and sales tax revenues from their
purchases find that the revenues, which they need to finance
fire protection, law enforcement, education, highways, and more
for the benefit of the entire community, decline when
steelworkers lose their jobs.
When a steelworker permanently loses his or her job, that's
usually another name, or several family members' names, added
to the list of some 42 million Americans who have no health
insurance in the richest country in the world.
Two decades ago, the experts said that the American steel
industry had become bloated, inefficient, and noncompetitive
with foreign-made steel from countries like Japan, Korea, and
Germany. After cutting 350,000 jobs and after investing over
$50 billion in modern electric furnaces, continuous casters,
and other modern steel making technologies, the American steel
industry was reborn.
American steelworkers have become the most productive
steelworkers in the world. Since 1980, productivity has
increased by 169 percent, or 5.5 percent each year. In fact,
the productivity of steelworkers has increased far faster than
that of other workers in other industries. While the price of
an automobile has increased by 50 percent since 1980, the
consumer price index has increased by 97 percent since 1980,
and a ticket to a baseball game has increased by 200 percent, a
ton of American-made steel costs no more today than it did in
1980. By any measure, this has truly been one of the greatest
comeback stories of all time.
While some downstream users and consumers of steel products
may not share our alarm about the collapse of steel prices,
this cannot be a healthy economic development in the long run.
While a ton of American-made steel costs no more today than it
did 19 years ago, and in spite of the recent collapse in steel
prices, auto makers, appliance makers, and other downstream
users have not cut the prices of their products for consumers.
They are not passing on their cost savings to consumers.
The hard reality of economics is that many domestic steel
producers will not survive if they cannot earn a reasonable
profit. No business can operate indefinitely by losing money.
When those companies go out of business, the industry becomes
more concentrated and such concentrations inevitably lead to
higher prices in the long run. Such higher prices will not be
beneficial to consumers of steel products.
Make no mistake about it, the domestic steel industry is
not in a crisis today because it is unproductive, inefficient,
or overpriced. It is not in a crisis because it provides its
workers with decent pay and benefits. It is in a crisis because
of illegal dumping, ineffective trade laws, and because our
government has not embraced a policy of preserving this
nation's industrial manufacturing base.
III. THE ADMINISTRATION'S RESPONSE
On January 7, 1999, the Clinton Administration announced
what it called ``A Comprehensive Plan for Responding to the
Increase in Steel Imports.'' As I said in my January 8 letter
to the President, ``Unfortunately, this plan is neither
comprehensive nor terribly responsive.'' The four key points in
the Administration's plan were: 1.) a vague and unenforceable
demand for export restraints by Japan; 2.) the accelerated
release of import data; 3.) a new $300 million tax credit for
the steel industry; and 4.) trade adjustment assistance for
displaced steelworkers.
Let me be clear: threats against Japanese exports are
meaningless unless such threats are enforceable. While the
accelerated release of steel import data is helpful, unless
further steps are taken, this only ensures that we will be
getting bad news about steel dumping and import surges sooner
rather than later. Three hundred million dollars ($300 million)
of tax relief for the steel industry and more money for trade
adjustment assistance will do nothing to save the market for
American steel companies and save the jobs of steelworkers here
at home. In fact, in the absence of further effective measures,
these proposals represent a surrender of our markets, the
surrender of steelworkers' jobs, and a further step toward the
dismantling of our domestic industrial manufacturing base.
On a more positive note, the United Steelworkers of America
is pleased with the February 12, 1999 preliminary decision by
the Commerce Department in the anti-dumping and countervailing
duty investigations on hot-rolled steel from Japan and Brazil.
In the case of Japan, anti-dumping margins ranged from 25
percent to 67 percent. For Brazil, margins ranged from 50
percent to 71 percent. The International Trade Commission (ITC)
will make a determination on the issue of injury to the
industry. Clearly, these preliminary anti-dumping margins
confirm what the Steelworkers union and the industry have
alleged; illegally dumped steel is destroying our domestic
steel industry and taking the jobs of American steelworkers.
Steel and the steel industry are vital to protecting
America's national security interests. I would remind you that
it is American-made steel that is built into the aircraft
carriers and Navy ships built by steelworkers at Newport News
Shipbuilding Company in Newport News, Virginia. What would have
happened in 1941 if America had no steel industry and was
instead dependent upon Japan or Germany for its steel? Can we
afford to permit this industry to fail and to become reliant
upon foreign steel producers from Russia, China, Korea, and
elsewhere for such a vital product?
IV. THE CONGRESSIONAL RESPONSE
Several bills have been introduced in the 106th Congress to
address the plight of steelworkers and the steel industry.
These bills have attracted broad bipartisan support.
H.R. 327 by Representative Aderholt, provides for the
assessment of anti-dumping duties on entries of steel products
made prior to the effective date of any anti-dumping order
issued in the current investigation.
The Chairman of the House Steel Caucus, Representative
Regula, has introduced H.R. 412, the ``Trade Fairness Act of
1999.'' This bill would amend the injury test for a safeguard
action by eliminating the current requirement in the trade law
that imports be a ``substantial'' cause of injury to a U.S.
industry in order for the International Trade Commission (ITC)
to recommend relief to the President. Additionally, H.R. 412
would establish a steel import permit and monitoring program so
that the U.S. Government can obtain and analyze import data
more promptly. A similar bill, S. 261, by Senator Specter, has
been introduced in the Senate.
Representative Traficant has introduced H.R. 502, the
``Fair Steel Trade Act,'' to impose a three-month ban on
imports of steel and steel products from Japan, Russia, South
Korea, and Brazil.
All of these bills highlight the distress that the steel
industry faces and propose actions which would be helpful. One
bill in particular, however, deserves strong bipartisan
support.
H.R. 506, the ``Stop Illegal Steel Trade Act of 1999,'' by
Representatives Visclosky, Ney, Kucinich, and Quinn, would
require the President to take action, including the imposition
of temporary import quotas, tariff surcharges, or negotiated
voluntary export restraint agreements, or other measures, so
that the volume of steel products coming into the U.S. does not
exceed the average volume of monthly steel imports during the
36-months preceding July, 1997 when the current crisis began.
To date, over 164 House members have become cosponsors of
H.R. 506. Also, a similar measure, S. 395, has been introduced
in the Senate by Senators Rockefeller and Specter.
It is our view that H.R. 506 provides the most effective
opportunity for bringing a quick end to the current steel
crisis. We are hopeful that the threat of implementing this
legislation will help to curtail the continuing surge in
foreign steel imports into the U.S. Drastic circumstances call
for a drastic response. H.R. 506 will give the steel industry
and steelworkers time to get back on their feet and will give
our government time to negotiate a worldwide agreement on steel
imports into the U.S. The bill would expire three years after
enactment.
V. THE INADEQUACY OF THE WORLD TRADE ORGANIZATION (WTO)
Mr. Chairman, many critics, including those in the
Administration and here in Congress, have argued that some or
all of these proposed bills violate U.S. commitments to the
World Trade Organization (WTO) or other international trade
agreements. The Europeans have also filed an action before a
WTO tribunal seeking to bar the application of the 1916 Anti-
Dumping Act. If the Europeans' view of our anti-dumping law is
upheld, it will mean that when the U.S. entered into the WTO
global trade arrangement, we unwittingly wiped long-standing
legislation off our own statute books and willingly agreed to
wear handcuffs that prevent our addressing massive, industry-
threatening trade law violations. Certainly, this could not
have been Congress' intent in originally approving U.S.
participation in the WTO.
If, as we are constantly being told by our critics, our
commitment to the WTO prevents us from effectively addressing
the crisis caused by illegally-dumped foreign steel in the U.S.
market, then it is time for Congress and this Administration to
reconsider that commitment at the earliest possible
opportunity.
Ironically, while the Administration has insisted that they
cannot take more forceful action without running afoul of the
WTO, it is the Administration's own proposal for $300 million
in tax credits for the American steel industry that is now
being challenged by our trading partners as an illegal
government subsidy under the WTO. Apparently, it is the view of
some of our trading partners that there is literally nothing
that the President or Congress can do, or should do, to stop
this catastrophe for steelworkers and the steel industry. Such
a view is preposterous.
None of our trading partners would allow such a vital
industry in their own country to be destroyed in the name
adherence to the WTO or any other international trade
agreement. Indeed, our trading partners have erected many
barriers to the import of American-made products into their
markets in order to protect their own domestic industries.
December 8, 1999 will mark the fifth anniversary of the
Uruguay Round Agreements Act and U.S. participation in the
World Trade Organization. The Act mandates a review by the
Administration and Congress of the effects of the WTO on
domestic interests and the costs, as well as the benefits, to
the United States of its past participation. Most importantly,
Congress must consider the matter of this nation's continued
participation in the WTO. Should Congress conclude that
continued participation in the WTO is not in the national
interest, it can, under the law, require the withdrawal from
the WTO by enacting a joint resolution this year. What's more,
if Congress does not act, we must remain in the WTO until the
next opportunity for review and withdrawal, which does not
occur again until December 2004.
These issues of our sovereignty and the enforcement of our
laws to prevent or stop irreversible economic injury to vital
industries must be carefully examined if Congress is to make a
sound decision about our continued participation in the WTO.
VI. THE NAFTA DISASTER
Mr. Chairman, it would be bad enough if the only recent
crisis we faced was from foreign steel being illegally dumped
in our market. Other events, however, have magnified the impact
of the current crisis for steelworkers.
The implementation of the North American Free Trade
Agreement (NAFTA) has been an unmitigated disaster for
steelworkers and working people all across the United States as
well as workers in Canada and Mexico. By our government's own
admission, over 8,000 steelworkers have lost their jobs and
been certified as eligible for NAFTA trade adjustment
assistance. Nationwide, nearly half a million workers have lost
their jobs because of NAFTA.
NAFTA has transformed the U.S.' $1.7 billion trade surplus
with Mexico in 1993 into a nearly $15 billion trade deficit
last year in 1998. During the five years from 1993 to 1998,
other developed countries--such as those in the European
Union--have maintained their trade surpluses with Mexico, even
during the 1995 devaluation of the peso. Likewise, the U.S.
trade deficit with Canada for 1998 was over $18 billion.
The so-called ``free trade'' system that NAFTA established
across North America has given predatory corporations a license
to hunt for the cheapest labor and the lowest environmental and
safety standards on the continent. To make matters worse, the
twisted logic of NAFTA encourages even socially responsible
corporations to join this hunt in order to remain competitive.
No working person in Canada, Mexico, or the U.S., should be
forced to trade hard-earned economic security for the
``opportunity'' to work harder and longer for less. And no
community anywhere should have to accept lower health and
safety standards and environmental protection standards to keep
some of its citizens working. But it is precisely this kind of
blackmail which has ravaged workers in all three countries.
As a result of NAFTA, thousands of companies have moved
their U.S. operations to Mexico. They include many familiar and
prominent names: RCA television sets, Oshkosh overalls,
American Standard plumbing fixtures, TrueTemper hardware
products, Fruit of the Loom t-shirts and underwear, Farah
pants, Woolrich coats, Smith-Corona typewriters, Goodyear
tires, and the list goes on and on.
NAFTA has failed workers and not just here in the U.S. It
has also failed in Mexico where workers have seen their wages
drop by at least 27 percent since NAFTA was implemented. And
it's failed in Canada, which has lost more than 137,000 highly
paid industrial and manufacturing jobs.
VII. THE LOSS OF OUR MANUFACTURING INDUSTRIAL BASE
The current steel crisis, the inadequacy of the WTO, and
the negative effects of NAFTA are all symptoms of a profound
long-term problem facing America: the loss of our industrial
manufacturing base.
While most economic observers have noted the overall strong
performance of the U.S. economy, these observers often overlook
a very different story of what is happening in manufacturing.
According to the Bureau of Labor Statistics (BLS), from
December 1997 to December 1998, our nation lost 237,000
manufacturing jobs.
Why does this matter? Because many of these lost
manufacturing jobs are the kind of jobs that pay decent living
wages which can support a family and which allow families to
buy homes, cars, clothing, and the necessities of life. They
are also the kind of jobs that provide workers and their
families with health insurance and pensions so that workers
need not fear living out their older retirement years in
poverty. The loss of manufacturing jobs also guarantees that
the continuing and widening disparities in incomes between the
highest income earners in America and those at the lower end
will only continue to get wider in the future.
The Commerce Department recently announced that the trade
deficit for 1998 hit a record $168.6 billion, and may go even
higher this year. I was dismayed to read that Mr. Robert J.
Shapiro, the Undersecretary of Commerce for Economics and
Statistics stated, ``We believe the trade deficit represents
the strength of the U.S. economy compared to the weakness
abroad.'' I strongly disagree with Mr. Shapiro's assessment.
This $168 billion trade deficit represents lost industries and
lost jobs for America's workers. The Economic Policy Institute
has estimated that a $100 to $200 billion increase in the trade
deficit would mean the loss of 700,000 to 1.5 million jobs in
manufacturing and other industries producing tradable goods.
The issue before us is not whether there's going to be a
global economy. The global economy is a reality. The real issue
is what kind of global economy are we going to have?
Is it going to be a global economy that truly lifts the
wages and living standards of all workers, or is it going to be
a global economy that only works for the benefit of those with
great capital, wealth, and political power? Is it going to be a
global economy that accelerates the destruction of our
environment and natural resources for the benefit of a few, or
is it going to be a global economy that protects our natural
resources for everyone? These are fundamental questions which
we as a nation must address.
A recent Wall Street Journal/NBC News Poll indicated that
58 percent of the public thinks that foreign trade has been bad
for the U.S. economy because cheap imports have taken U.S.
jobs. The American public has spoken up repeatedly in favor of
fair trade. Yet our policymakers seem to have a tin ear when it
comes to this issue. If we don't move to stop violations of our
trade laws and if we don't ensure that trade agreements will be
mutually beneficial for all Americans, then there will continue
to be this deep antipathy about trade.
Mr. Chairman, steelworkers believe in America and the
American dream. Steelworkers have made the steel that has built
America and defended this nation throughout its history. We are
not asking our government for any special favor here. We are
asking the President and this Congress to stand up for us just
as we have stood up time and time again for our country. Please
do not wait too long to act or there will be no steelworkers
and no steel industry to stand up for.
Thank you.
Chairman Crane. Thank you, Mr. Becker.
Mr. Glyptis.
STATEMENT OF MARK GLYPTIS, PRESIDENT, INDEPENDENT STEELWORKERS
UNION, WEIRTON, WEST VIRGINIA
Mr. Glyptis. Thank you for the opportunity to appear here
today. As a brief introduction, I am president of the
Independent Steelworkers Union, which represents 4,000 members
at Weirton Steel Corp., in Weirton, West Virginia.
I would like to focus on the impact of the illegal steel
dumping of foreign steel on American steelworkers. Weirton
Steel has been an employee-owned company since 1984. We
currently have approximately 800 employees on layoff status.
That is nearly 25 percent of our work force. For many of those
800 employee-owners, time is running out. It is mind-boggling
to me how we can sit here today and talk about how things are
getting better. Things are not getting better. The potential
for additional layoffs exists. Weirton Steel just announced the
number 4 blast furnace, we have a two furnace operation. One of
our furnaces that has been idle since December will stay idle
for an additional 6 months. That is because we are losing our
orders to foreign countries.
The Clinton administration is more concerned about the
steelworkers in Russia, Japan, and Brazil, than they are about
American steelworkers. Our people are out of work at a time
when the demand for steel in America is at an all-time high.
There has never been, the demand for steel has never been
higher than it is today in this country. There are 10,000
American steelworkers out of work, as you have heard a number
of times here this afternoon. The potential exists if we do not
solve this problem, for an additional 100,000 steelworkers to
lose their jobs in this country. That is absolutely pathetic.
Our government has betrayed the American steelworkers. As
President Becker has indicated, there has been three steel
companies that have gone bankrupt already. There are a number
of other steel companies that we believe are near bankruptcy.
We need action and we need action quickly.
I know those numbers, those may just seem like numbers to
you, but let me put a face to those figures. There is Rob and
Tammy Elliot, a couple in their early thirties with two
children. Both Rob and Tammy work at Weirton Steel. They are
laid off from their jobs. Their State unemployment benefits and
health care benefits run out at the end of May. You have Kevin
Tassey, a laid off maintenance employee in the tin mill. His
unemployment benefits and health care benefits expire at the
end of April. That is about 3 weeks before his wife is
scheduled to deliver their second child. Then there's Andy
Kimerik, another laid-off employee-owner, who will be without
unemployment benefits and healthcare benefits by May 1. Andy
has a daughter with a brain tumor. His medical problems won't
end when his benefits expire. Those are just a few examples of
the many faces at Weirton Steel who need congressional help.
You have been provided with reports and statistics citing
the pros and cons of the illegal steel imports by other
witnesses. I am here to ask you, ask this Subcommittee, to look
around America and ask if we are ready to put our own
steelworkers out of work in order to protect and provide
steelworkers jobs around the world. Are you ready to give up
the American steel industry? I am here to ask you, no, I am
actually here to beg you on behalf of the men, women, and
children of the Ohio Valley, please find a way to save Weirton
Steel from being the latest casualty of the global economic
war.
If we go down, the Ohio Valley goes down. We become another
Homestead, Pennsylvania, or Youngstown, Ohio. We cannot let
that happen. Are we ready to give up on America? There are many
Ohio Valleys in this great country of ours. We are all looking
for help from our government. Our government seems more willing
to bail out, to come up with bail out schemes in failing
foreign economies that are designed to benefit Wall Street
instead of the Ohio Valleys throughout this Nation. The
American steel industry cannot be sacrificed or abandoned.
The Independent Steelworkers Union strongly supports quota
legislation. The Visclosky bill will ensure the volume of steel
imports does not exceed the average monthly volume of such
imports during the 36 months preceding July 1997. There are
parts of other bills along with this bill that I believe could
solve this issue. I think we could resolve this issue in a
timely fashion if we combine a number of the bills together.
There is the Regula bill, the Traficant bill, and other bills
that pieces of it make a great deal of sense.
The ISU will continue to oppose any suspension agreement.
It is contrary to applicable laws, and is inconsistent with the
administration's own critical circumstances findings back in
November. Further, it is contrary to a plan to respond to steel
imports, which the President submitted in Congress in July.
We also oppose a comprehensive steel agreement negotiated
with the Russians. I think George Becker covered that subject
very well. We also strongly oppose any suspension agreement
that does not involve a comprehensive global solution. Finally,
we will continue to work closely with the administration and
Congress to stop serious injury being caused to our industry
and to restore fair trade to steel.
I would like to thank you, Mr. Chairman, for giving me the
opportunity to appear today. I would like to invite you to come
down to Weirton and just see the devastation that we are facing
today. It is significant. If we do not solve this problem, that
valley is going to die. It is going to die. We didn't do
anything wrong. We are the most efficient steelworkers in the
world today, as Mr. Barnette testified. Sixty billion dollars
has been invested in the steel industry. Unions did the right
things and negotiated flexibly within the work force to become
the most efficient steelworkers in the world. Something is
wrong with our government when they would rather eliminate our
jobs, and we are the most efficient steelworkers in the world,
and give our jobs to Brazil, Russia, Japan, and in the case of
Russia, they are most inefficient steelworkers in the world.
The suspension agreement is an insult to the American
steelworker. We need to solve this problem. We are willing to
work with you. We want to help in solving this problem. We are
going to solve it.
I would like to just close and say we are proud Americans.
We still believe in the American way of life. Please help us
keep that American dream. Thank you.
[The prepared statement follows:]
STATEMENT OF MARK GLYPTIS, PRESIDENT, INDEPENDENT STEELWORKERS UNION,
WEIRTON, WEST VIRGINIA
GOOD AFTERNOON. I WOULD LIKE TO THANK YOU FOR THE
OPPORTUNITY TO BE HERE TODAY TO TALK ABOUT THE STEEL IMPORT
CRISIS AND THE EFFECT THE CRISIS IS HAVING ON THE WORKING MEN
AND WOMEN AT WEIRTON STEEL.
AS SOME OF YOU MAY KNOW, OUR EMPLOYEE-OWNED COMPANY IS
LOCATED JUST 30 MINUTES FROM DOWNTOWN PITTSBURGH IN WEIRTON,
WEST VIRGINIA.
IN 1984, THE WEIRTON STEEL CORPORATION WAS CREATED BY THE
SACRIFICES AND EXTREMELY HARD WORK OF THE PEOPLE OF THE OHIO
VALLEY IN GENERAL, AND THE EMPLOYEES OF WEIRTON STEEL IN
PARTICULAR.
THE SACRIFICES NECESSARY TO CREATE THE LARGEST EMPLOYEE
STOCK OWNERSHIP PLAN IN THE COUNTRY REQUIRED SUBSTANTIAL PAY
CUTS, WORK RULE CHANGES, AND A CAN DO ATTITUDE THAT CREATED THE
MOST EFFICIENT STEELWORKERS IN THE WORLD.
AS WE ENTERED THE 90'S, THE INDEPENDENT STEELWORKERS UNION
CONTINUED TO TAKE THE LEAD IN NEGOTIATING THE TOUGH LABOR
AGREEMENTS TO MAKE OUR WORKFORCE LEAN, BUT STILL HIGHLY
COMPETITIVE.
DURING THE PAST 15 YEARS, THE INDEPENDENT STEELWORKERS
UNION AND WEIRTON STEEL HAVE SEEN GOOD TIMES AND BAD TIMES. WE
HAVE PROSPERED AND SUFFERED, BUT WE SURVIVED.
HOWEVER STARTING IN 1998, ILLEGAL FOREIGN STEEL IMPORTS
FROM RUSSIA, JAPAN, AND BRAZIL HAVE FORCED WEIRTON STEEL AND
THE AMERICAN STEEL INDUSTRY IN A CRISIS THAT MAY LEAVE US
DESPERATE FOR JUST A CHANCE OF SURVIVAL.
THE ILLEGAL HOT ROLL IMPORTS HAVE LITERALLY FLOODED OUR
COUNTRY DRAWING DOWN PRICES AND HURTING OUR STEEL COMPANY'S
ORDER BOOK.
WE HAVE BEGGED THE CLINTON ADMINISTRATION TO STOP THE
ILLEGAL DUMPING, BUT THE ADMINISTRATION APPEARS MORE CONCERNED
ABOUT THE JOB PROSPECTS OF STEELWORKERS IN ASIA AND SOUTH
AMERICA.
THIS IS THE SAME PHILOSOPHY THAT LEAD TO THE NAFTA
AGREEMENT WHICH RESULTED IN NEARLY 400,000 JOBS GOING TO MEXICO
SINCE 1994. OUR OWN GOVERNMENT HAS ADMITTED NAFTA HAS COST US
4,000 AMERICAN STEELWORKER JOBS.
RECENTLY, THE COMMERCE DEPARTMENT ISSUED ITS FINDINGS
AGAINST JAPAN AND BRAZIL. BUT THE GOVERNMENT HAS DECIDED TO
WORK OUT A PRIVATE DEAL WITH RUSSIA AND NOT IMPOSE TARIFFS ON
ILLEGAL RUSSIAN STEEL IMPORTS. THE CLINTON ADMINISTRATION HAS
REFUSED TO TAKE EXECUTIVE ACTION TO STOP THE ILLEGAL IMPORTS.
THE SUSPENSION AGREEMENT ALLOWS THE RUSSIANS TO SELL THEIR
HOT-ROLL FOR $255 PER METRIC TON WHICH MEANS CONTINUED DUMPING
AND INEFFICIENT RUSSIAN PRODUCERS BEING ALLOWED TO UNDERCUT
EFFICIENT U.S. PRODUCERS WHOSE AVERAGE COST IN 1998 (AS
PUBLISHED BY THE ITC) WAS $345 PER METRIC TON.
WE ARE NOT BLIND TO THE SERIOUS ISSUES FACING RUSSIA.
HOWEVER, WE BELIEVE RUSSIA CAN SOLVE ITS OWN PROBLEMS WITH
ASSISTANCE FROM THE IMF AND OTHERS AS APPROPRIATE. WE DO NOT
BELIEVE SACRIFICING THE JOBS OF THE AMERICAN STEELWORKERS WILL
SOLVE THE RUSSIAN DILEMMA.
THE RUSSIAN DEAL SHOULD INCLUDE QUANTITATIVE RESTRICTIONS,
MINIMUM PRICES, AND ADEQUATE ENFORCEMENT MECHANISMS, AS WELL AS
A MORATORIUM ON FURTHER SHIPMENTS UNTIL THE INVENTORY OF DUMPED
STEEL HAS BEEN CLEARED.
INSTEAD OF DEFINITIVE ACTION, ADMINISTRATION OFFICIALS TELL
US WE NEED TO PUT A HUMAN FACE TO THE STEEL CRISIS.
AS PRESIDENT OF NEARLY 4,000 UNION MEMBERS, LET ME TAKE A
MOMENT TO PUT A FACE TO THE STEEL IMPORT CRISIS AND WEIRTON
STEEL.
WE HAVE TOM KAMAREC, A FIVE YEAR EMPLOYEE WHOSE DAUGHTER
RECENTLY HAD BRAIN SURGERY. TOM'S HEALTH CARE BENEFITS RUNS OUT
IN TWO MONTHS. UNFORTUNATELY HIS DAUGHTER'S MEDICAL PROBLEMS
WILL CONTINUE.
THERE'S KEVIN AND MARIA TASSEY. KEVIN WAS HIRED IN 1995.
JUST SIX MONTHS AGO, MARIA LEARNED SHE WAS EXPECTING THEIR
SECOND CHILD. THREE MONTHS AFTER RECEIVING THEIR NEWS, KEVIN
WAS LAID OFF FROM WEIRTON STEEL. HIS HEALTH CARE BENEFITS WILL
EXPIRE BEFORE THEIR BABY IS BORN.
ALAN BROWN IS A 13 YEAR EMPLOYEE. HE ORIGINALLY STARTED AT
WEIRTON STEEL IN 1978, WAS LAID OFF AND EVENTUALLY LOST ALL OF
HIS SENIORITY BEFORE BEING HIRED AT THE STEEL MILL AGAIN IN
1986.
ALAN WAS LAID OFF LAST DECEMBER, AND THE 47 YEAR OLD FATHER
OF THREE HAS A VERY UNCERTAIN FUTURE.
HIS OLDEST DAUGHTER WOULD LIKE TO GO TO COLLEGE IN THE NEXT
COUPLE OF YEARS, BUT ALAN ISN'T SURE THAT WILL NOW BE POSSIBLE.
ROB AND TAMMY ELLIOTT BOTH WORKED AT WEIRTON STEEL. ROB IS
A NINE YEAR EMPLOYEE IN THE BLAST FURNACE, WHILE TAMMY IS IN
THE CLERICAL DEPARTMENT WITH FIVE YEARS OF SERVICE.
THESE PARENTS OF TWO YOUNG CHILDREN ARE BOTH LAID OFF NOW,
AND ROB IS DESPERATELY LOOKING FOR A JOB SO HE CAN SUPPORT HIS
FAMILY.
THOSE ARE JUST A FEW OF THE NEARLY 800 FACES AT WEIRTON
STEEL WHO ARE CURRENTLY ON LAYOFF.
WE SAW MANY OF THOSE FACES IN WASHINGTON, D.C. LAST MONTH
WHEN WE RALLIED AT THE CAPITOL AND THE WHITE HOUSE IN ORDER TO
SAVE AMERICAN STEELWORKERS' JOBS.
LET ME TELL YOU SOMETHING ABOUT THE STEELWORKERS OF
WEIRTON, WEST VIRGINIA.
IN 1984, WE FOUGHT ATTEMPTS TO TURN WEIRTON STEEL INTO A
FINISHING MILL AND CREATED THE COUNTRY'S LARGEST ESOP.
IN 1984, WE HAD THE SUPPORT OF STATE AND FEDERAL OFFICIALS.
SENATOR ROCKEFELLER, IN HIS ROLE AS GOVERNOR OF WEST VIRGINIA,
PLAYED A KEY ROLE IN SUPPORTING THE ESOP AT WEIRTON STEEL AS
DID SENATOR ROBERT BYRD.
WE WERE SUCCESSFUL IN 1984 BECAUSE ALL OF US WANTED TO SAVE
AMERICAN JOBS.
NOW, IN 1999, WE ARE NOT ONLY FIGHTING TO SAVE WEIRTON
STEEL, WE ARE FIGHTING FOR THE SURVIVAL OF THE ENTIRE DOMESTIC
STEEL INDUSTRY.
WE ARE NOT GETTING THE HELP WE SHOULD FROM THE CLINTON
ADMINISTRATION. INSTEAD OF POSITIVE ACTION, WE ARE AT THE
RECEIVING END OF MEANINGLESS RHETORIC.
THE SAME MAN WHO CAMPAIGNED IN WEIRTON IN 1992 AND PROMISED
TO SUPPORT FAIR TRADE LAWS FOR THE STEEL INDUSTRY IS NOW
CAMPAIGNING FOR STEELWORKERS IN RUSSIA, JAPAN, AND BRAZIL.
THE CLINTON ADMINISTRATION AND TREASURY SECRETARY ROBERT
RUBIN ARE READY TO LET THE DOMESTIC STEEL INDUSTRY WITHER AWAY
AND DIE.
PRESIDENT CLINTON AND SECRETARY RUBIN ARE BETRAYING THE
AMERICAN STEEL INDUSTRY.
THEY KNOW THERE ARE MORE THAN 800 UNION STEELWORKERS AT
WEIRTON STEEL WHO ARE OUT OF WORK TODAY BECAUSE OF THE CLINTON
PHILOSOPHY OF GLOBAL ECONOMICS.
WE WILL CONTINUE TO ASK THE CLINTON ADMINISTRATION TO HELP
THE AMERICAN STEEL INDUSTRY. BUT WE ARE REALISTIC IN WEIRTON,
WEST VIRGINIA. WE KNOW THE PRESIDENT WHO WAS SO WORRIED ABOUT
HIS JOB HAS NO INTEREST IN OUR JOBS.
I CAN TELL YOU THE STEELWORKERS AT WEIRTON STEEL ARE MAD.
WE ARE MAD AT A GOVERNMENT WHICH APPEARS READY TO SACRIFICE
OUR STEEL INDUSTRY FOR THE GOOD OF RUSSIAN, JAPANESE, AND
BRAZILIAN STEELWORKERS.
WE ARE MAD AT OUR GOVERNMENT THAT HAS WRITTEN US OFF,
OFFERING A FEEL GOOD PROGRAM TO US AS WE LOSE OUR JOBS.
THE OHIO VALLEY IS CURRENTLY ON LIFE SUPPORT AND WE ARE
AFRAID THE CLINTON ADMINISTRATION IS READY TO PULL THE PLUG.
WE ARE MAD AT THE CLINTON PHILOSOPHY THAT IS READY TO
SACRIFICE THE AMERICAN STEEL INDUSTRY AND RELY ON FOREIGN
STEELMAKERS FOR OUR NEEDS IN THE FUTURE.
THIS COUNTRY WAS BUILT WITH AMERICAN STEEL.
THIS COUNTRY NEEDS AMERICAN STEEL.
THIS COUNTRY MUST MAINTAIN A STRONG STEEL INDUSTRY.
THE INDEPENDENT STEELWORKERS UNION SUPPORTS COMPREHENSIVE
LEGISLATION THAT WILL DEAL IMMEDIATELY AND DECISIVELY WITH THE
STEEL IMPORT CRISIS.
WE NEED A COMPREHENSIVE PROGRAM THAT WILL PROVIDE A LEVEL
PLAYING FIELD AND ALLOW US TO COMPETE.
THERE ARE SEVERAL PIECES OF LEGISLATION NOW BEFORE YOU AND
YOUR COLLEAGUES IN THE HOUSE OF REPRESENTATIVES. I URGE YOU TO
CONSIDER JOINING YOUR LANGUAGE INTO THE BEST BILL THAT WILL BE
GIVEN THE MOST SERIOUS CONSIDERATION IN THE CONGRESS. LET'S
AGREE ON A FAIR TRADE PROGRAM THAT CAN BE ACCEPTABLE TO THE
ADMINISTRATION BUT WORKABLE FOR THE STEEL INDUSTRY.
THE AMERICAN STEELWORKERS ARE THE MOST COMPETITIVE IN THE
WORLD. JUST ALLOW US TO HAVE THE CHANCE TO COMPETE.
WE ARE NOT ASKING FOR PROTECTIONIST LEGISLATION JUST THE
OPPORTUNITY TO COMPETE IN A FAIR MARKET. OUR FEDERAL GOVERNMENT
WOULD HAVE YOU BELIEVE THE AMERICAN ECONOMY IS AT AN ALL TIME
HIGH WITH JOBS AVAILABLE FOR ANYONE WHO WANTS ONE.
I CAN TELL YOU WE HAVE 800 STEELWORKERS AT WEIRTON STEEL
WHO WANT THEIR JOBS BACK.
IT'S TIME TO STOP WORRYING ABOUT THE STANDARD OF LIVING IN
THIRD WORLD COUNTRIES AND START WORRYING ABOUT MAINTAINING
DECENT JOBS FOR AMERICAN WORKING MEN AND WOMEN.
I AM HERE TO ASK THIS SUB-COMMITTEE TO LOOK AROUND AMERICA
AND ASK IF WE ARE READY TO PUT OUR OWN PEOPLE OUT OF WORK FOR
THE GOOD OF WORKERS IN ASIA AND SOUTH AMERICA.
ARE WE READY TO GIVE UP THE AMERICAN STEEL INDUSTRY?
ARE WE READY TO GIVE UP ON AMERICA?
I DON'T THINK SO AND I AM HERE TO ASK YOU TO JOIN ME AND
STAND UP FOR STEEL AND STAND UP FOR AMERICA.
I WOULD LIKE TO THANK YOU AGAIN FOR INVITING ME TO APPEAR
HERE TODAY AND I WOULD LIKE TO INVITE YOU TO COME TO WEIRTON,
WEST VIRGINIA AND MEET THE PEOPLE OF THE OHIO VALLEY WHO MAKE
STEEL.
WE ARE AMERICANS WHO STILL BELIEVE IN THE AMERICAN WAY OF
LIFE. PLEASE HELP US KEEP THAT DREAM ALIVE.
THANK YOU VERY MUCH.
Chairman Crane. Thank you. Were you here when Secretary
Daley was here, made his presentation?
Mr. Glyptis. Yes. I was.
Chairman Crane. Because he mentioned that imports from
Russia fell from over 600,000 metric tons in November of last
year to less than 11,000 tons in January of this year. So that
has got to be some consolation, moving in the right direction.
Mr. Barnette. It is no consolation. Forgive me for reacting
so promptly. I find it little or no consolation. In fact, one
of the most deeply distressing events in the administration
trade policy is to have this suspension agreement entered into
and a comprehensive agreement entered into with Russia over the
objection of the very petitioners who have won these cases, won
them by 71 to 218 percent margins. It is simply inexplicable
that this kind of agreement could be entered into.
We have the deepest of sympathy for Russia, Mr. Chairman,
but surely if we are going to help them, let's help them from
the Federal Treasury. Please do not sacrifice the steel
industry to help the cash flow of Russia. It has desperate
problems, and we want to help them. We should help them. We
will help them as an industry. But to say that this modest
decline in import levels should be a consolation is simply like
saying we took 100 percent of your property last year. Now we
are only going to take 25 percent of your property this year,
and expect that to be a remedy. This is simply illustrative of
the problem.
Chairman Crane. It doesn't sound like a modest decrease. He
points out that if you take Russia, Japan, and Brazil, the
three countries combined fell by 96 percent from the record
levels in November.
Mr. Barnette. That is because of the cases, Mr. Chairman.
They should have fallen. Look at the dumping margins. That is
what we want to be imposed. Let's impose the margins against
Brazil of 51 to 71 percent, against Russia from 71 to 218
percent, and against Japan from 25 to 68 percent. That is what
the trade laws were meant to do, to bring fair pricing into the
marketplace.
We would stand very much behind that kind of remedy. That
has been taken away from us in the case of Russia.
Mr. Becker. Mr. Chairman, if I could add something in this.
These countries watch each other during the same period of
time, from November, I think it was what you are quoting from
November to January, during that period of time, a lot of the
smaller countries that have smaller exporting steel countries
into the United States, we just sit and ran a total on five of
them. They increased by 129,000 tons during that same period of
time.
Now that may not sound like much up against the other, but
how long is it going to take for them to fill the gap? They all
have the capacity. South Korea has the capacity. India has the
capacity. Australia has the capacity. They will fill in, and
fill this as quickly as they can. There is nothing to stop
these countries that are under the trade cases from shifting to
other products, Brazil and Japan, they do this. They watch
this. This is the marketplace of the world. They are going to
take this market if we let them.
Mr. Glyptis. One other comment. The pricing on that
suspension agreement, $255 to $280 per metric ton. If you
translate that back to a short ton or a net ton, that pricing
is about $231, plus freight on board. That is a dumped price.
The suspension agreement with the Russians, at least from my
viewpoint, legalized illegal dumping. It is a dumped hot-rolled
price. Two hundred thirty one dollars is far, far below I
believe the cost of production.
Chairman Crane. Let me ask you all a question. In addition
to quotas on hot-rolled and cold-rolled steel, the
administration has also tentatively agreed to a quota on
Russian semifinished steel. At the same time, the Visclosky and
Traficant bills in the House would limit or ban imports of
semifinished steel. The U.S. domestic industry has long been
unable to meet more than a fraction of demand for steel slab.
In 1997, for example, the U.S. industry shipped 1.8 million
tons of semifinished steel, while imports equaled 5.4 million
tons.
Isn't the domestic integrated steel industry concerned
about the pending agreement and the proposed legislation that
potentially could limit your ability to obtain the inputs you
need to produce your finished product?
Mr. Barnette. We are, Mr. Chairman, but for a very
different reason. Semifinished imports increased in 1998 versus
1997 by only 400,000 tons, some 6 percent. Finished imports
increased in the marketplace by more than 40 percent. So it is
true from time to time that domestic producers do need
semifinished steel because they may have a repair in their
operations, they may have an equipment failure, they may have a
very strong market, they may need to have that opportunity. But
in the case of Russia, it is a comprehensive agreement, Mr.
Chairman. It covers all Russian products. It is taking away
from the American industry and the American workers the right
to have our laws enforced. that is what is so very, very
disturbing. That is, without regard to the need to help Russia,
we don't want to be identified with being misunderstanding of
that. We do want to help them. They need help. But surely the
flow of that help should not be at the cost and the expense of
a single private sector or industry.
Mr. Becker. Mr. Chairman, if I could. We have not advocated
ever to build a fence around America and to say that we didn't
want to share any of our marketplace. We are a trading Nation.
We have historically had imports since the mideighties, coming
into the United States at about the level of 18 to 20 percent.
We have advocated a quota bill that would be set at the
precrisis level. You listen to Ambassador Barshefsky. She said
this was a global problem. I agree with her. It is a global
problem. There is vast overcapacity out there. A lot of it was
built for the U.S. market to take our market. I think it
requires a global solution. That is what we are really saying.
You know this didn't just jump on us. Here we are sitting
here 15 months after the crisis arguing about this thing. The
Steelworkers Union started going before the administration
before cabinet-level positions advocating something to be done
at the beginning of 1998, and at every level they acknowledged
that a crisis was there. They acknowledged that something was
going on. They said they were sensitive to it. They said they
were studying it. We were kicked from one cabinet level
secretary to another one. We met with Treasury. We met with
Barshefsky. We met with Daley in Commerce. We met with all of
these people. They were very courteous, very kind. They
listened to us, but nothing was ever done. We had economic
models run before we went in on the first meeting that showed
we were going to lose 1.1 million jobs in the United States,
and that 70 percent of these were in manufacturing jobs. These
were our jobs. We knew this was going to happen because of the
policies that the IMF advocated with these countries in
curtailing their domestic spending and concentrate on exports.
We are the only market. So we knew it was coming here. There
was no surprise. At every level, we told them that if you don't
do something now, the next time we see you it is going to be
worse, and it was. In August, there was 4.4 million tons
shipped into the United States. You annualize that, that is
over 50 percent of our capacity, I mean our market in the
United States. They can run it up. They can run it down. Any
time they want it all, they can take it all.
So it is no surprise. We knew they were going to roll it
out. When we got close to the trade cases coming up for
settlement, we knew they were going to cut back. The people who
import steel and distribute it in the United States told them
to do that. They sent them letters to do that. We know that.
That is predictable. There is an old saying, that evil people
plot, good people plan. We know that there are people that are
planning or plotting how in the hell to get our market and get
back into it, and move it into different categories or
different countries.
We are pleading with you to save a very vital institution
in the United States. Why do you think that Congress is so
upset about this just as their constituencies back there. We
have got 191 signers, cosponsors right now on the Visclosky
bill. I mean they are outraged over this. Now after winning
this, what I don't understand after winning these three cases,
in essence, waiting and suffering and winning them, now the
government is cutting deals to give it back to them.
Chairman Crane. Mr. Levin.
Mr. Levin. Well, I think when you talk about timeliness and
you talk about comprehensiveness and the lack thereof, I think
you are so compelling. You all agree with each other, so I want
to ask a question that will be raised in the next panel. I
think I will ask you, Mr. Barnette, as the executive of a large
company, to respond, because it is really targeted at you.
In the next panel, Mr. Griswold is going to say this. He is
the associate director of CATO, trade policy studies. I am
going to quote, so I don't in any way want to misrepresent his
position. I think his position goes way beyond. It dismisses
timeliness issues, dismisses comprehensiveness issues, and
essentially challenges the basic assumption that you start with
and I start with, that we can't just let it all happen helter-
skelter. Here is how he puts it.
``Many other U.S. industries have been hit by the effects
of the Asian crisis. Exporters have seen sales slump while
import competing industries have faced stiffer competition at
home. There is no reason why the steel industry should receive
special treatment at the expense of its customers and American
consumers just because it is experiencing temporarily
unfavorable conditions.'' That is at the beginning of the
statement.
Toward the end of the statement, ``U.S. antidumping law has
become nothing more than a protectionist weapon for industries
feeling the heat of global price competition.''
Mr. Barnette.
Mr. Barnette. Yes. I would be pleased to respond to that. I
would say first that the steel industry is requesting no
special treatment. We want the laws upon which trade
liberalization has been based to be enforced. If they cannot be
enforced effectively, and if this serious injury continues to
decimate our industry, then we must as a country reexamine the
very rules-based nature on which our trading system is
operating.
Second, for that statement to be made, Mr. Levin, about the
operation of the laws which this Congress has enacted and which
is the very heart of trade liberalization, it ignores that
trade must be rules based. I would suggest that with the force
and vigor of your responsibility, that you question how one
could have the audacity to suggest that the proper
administration of antidumping and countervailing duty laws is
anything other than the very heart of trade liberalization
itself.
Mr. Levin. Thank you.
Mr. Cardy. Congressman, if I might, although I represent a
much smaller segment of the steel industry than my friend, Mr.
Barnette?
Mr. Levin. Yes, please.
Mr. Cardy. I find it a little bit ludicrous how we can
spend so much time talking about an issue that has been proven
through the agencies of government to be a violation of the
law. In the case that is being represented here with Russia,
the case was presented, the determination was found, and the
case was then thrown out. Here we stand now today saying that
we have a steel industry in the United States both, specialty
and carbon, that due to economic perturbations all over this
globe, is under attack and is bleeding badly. We have turned to
this government, not to do anything extraordinary really, just
to help us enforce the trade laws that you have already put in
place. We are using the laws that you folks have given us, and
we are using them very legally, to say help us keep this steel
industry from disappearing from this country. It has been
decimated, in all segments. And it will continue.
In addition to all of the other issues we must face, we now
have this Pacific rim economic issue that our government is
trying to address. In the way they are doing it, not monetarily
or through the IMF only, it is really coming back to haunt the
manufacturing sector of this country.
I would suggest to you, sir, that though the economics of
the United States appear to be just wonderful--low interest
rates, low inflation, full employment, everything is
wonderful--the manufacturing sector of this country is under
attack and it will not take very long for that to be reflected
in the overall economic vitality of this country. I think the
government is deceiving itself when it looks at the vitality of
the stock market and some of these segments of the economy and
does not look specifically at manufacturing and what is
happening there. It is under attack. Thank you.
Mr. Levin. Mr. Becker.
Mr. Becker. I couldn't agree more, that industrial workers
in America, industrial America is under attack. We lost 285,000
industrial jobs in America last year. But more specific to
steel, there are studies we know by groups that are
interlocked, multinationals and what have you, that believe
that we could just let the steel industry go. I believe this
would be tragic. I mean forget about the stock market. Forget
about the bond market and the high financiers. I think we need
to be concerned about workers and their families and
communities in America.
More specifically, though, to this Committee, I mean this
is the Ways and Means Committee, and I think it requires your
support if we are going to be able to get the Visclosky bill
passed. I am asking you of what we would suggest from the
Steelworkers Union, that we move this bill, that you get behind
this and champion this, make it your bill, get it out there,
and let's get the job done for once and for all.
Mr. Glyptis. Do you realize, just my testimony, that
100,000 steelworkers could lose their jobs if this crisis is
not solved. We are getting rid of the better jobs in America.
We are creating jobs that cannot support a single family. Of
all new jobs being created today, 74 percent cannot support a
single family. Can't pay the telephone bill or the heating
bill. Something is wrong with that. We need your support,
please.
Mr. Levin. Thank you.
Mr. Barnette. I would just, if I might simply state again,
Congressman Levin, that the central question is do we have a
rules-based trading system, and do we believe, as a matter of
trade policy, in a rules-based trading system?
Mr. Levin. Thank you very much.
Mr. Houghton [presiding]. Mr. English.
Mr. English. Thank you, Mr. Chairman. I will keep my
comments brief. What has struck me about this panel is you have
come forward not asking for anything extraordinary or unusual.
You are simply asking for an enforcement of existing trade
laws. Maybe I would expect a strengthening of them within the
context of the rules-based order. That is perhaps unusual,
given the way some editorial pages have mischaracterized your
situation. I think you come here today with a very positive
view of a basic industry that can be internationally
competitive, has striven to be internationally competitive, has
accepted a lot of sacrifices in its work force in order to
become much more capital intensive and become the most
productive in the world. My hat is off to all of you.
I guess my one question is starting with Mr. Barnette. We
have heard some rosy observations coming from the
administration here today. I realize that is probably the role
of the Secretary of Commerce and the U.S. Trade Representative.
I respect them very much. Has the abatement of steel imports
that they seem to be describing improved the financial
prospects of the industry in the near-term? Is this something
you can bounce back from very quickly? Or is a major part of
your industry actually very much at risk?
Mr. Barnette.
Mr. Barnette. The answer is the injury, the serious injury
is continuing, Congressman English. It continues in five or
more different dimensions. Shipments continue to be lost.
Production continues to be reduced. The pricing of the product
is reduced. Force levels are reduced, many on layoff. Indeed,
we have closed two facilities, in Massillon, Ohio, and in
Washington, Pennsylvania. All of that affects profitability and
liquidity.
So the injury continues. To the extent there is some modest
improvement, month to month, it is a little like being at the
bottom of a 100-foot swimming pool and you are on the bottom
right now, and you move up one foot and say things are
improving. You are not back to the top yet. That is the injury
that has been the cost to us. The price depression alone--and
that again is what is so disturbing about this Russian
agreement--it sets a price to bring Russian steel in here FOB
at a price that is about what it costs an efficient American
producer today to make the steel.
So the answer is the injury continues. That injury is
irreparable. It has happened, and it will be forever with us.
Mr. English. Mr. Becker.
Mr. Becker. Congressman, we did not come here asking that
the laws be enforced that we have on the books. I am here to
tell you that the laws are not working. It took 15 months to
process one issue, the hot-rolled steel, with three countries.
During this period of time, when we repeatedly asked the
administration to take some action while they were going
through these cases which they refused to do, we have lost over
10,000 steelworker jobs. We have lost three companies into
bankruptcy. We have got another half a dozen of them that are
on the verge. The laws are not working.
I am here to tell you that we are losing faith in this
process. We can't stand more trade cases to be filed and go
through this process while they switch from country to country
and product line to product line. We need some definitive
action. That is why we had the Visclosky bill out there. We
need this. You are signer to this. I know you understand what I
am talking about. We need to process this, but we need the Ways
and Means Committee to move this.
Mr. Cardy. If I could, Congressman English.
Mr. Houghton. I think we have got to move along here. Could
you make it fast?
Mr. Cardy. Fast. That is exactly what I want to talk about.
The fact of the matter is, the process isn't necessarily at
fault, but the pace of the process is ridiculous. While we are
bleeding, conversations are taking place. The speed needs to be
fixed. The process, the laws aren't bad. The process is OK if
it works fast. The issue of foreign currency devaluation has to
be considered in the decisionmaking process as well.
Mr. English. Well, and quickly said. Thank you.
Mr. Houghton. Thanks very much.
Mr. Coyne.
Mr. Coyne. Thank you, Mr. Chairman. I would like to follow
up with Mr. Becker relative to Ambassador Barshefsky's
statement earlier. I think you were here when she made the
statement that if 201 cases were filed, the administration
certainly would lend its support to that effort once they are
filed. It seems to me that what you are testifying to is that
over the past 15 months when those cases were filed, and when
you asked the administration for help, you didn't get it. Is
that accurate?
Mr. Becker. That's absolutely right. After the cases were
settled, they didn't like the answer. They come back and they
give relief in there. We won the cases. In other words, it was
upheld. Everybody admits that dumping took place. But the
findings they thought were too harsh, so they go in and cut
them. So why file a 201? Why go through this 15-month process
and all the expense involved when you don't know what the
administration is going to do with it anyway?
Mr. Coyne. Well, they seemed to take a new track today
saying they would be supportive. But the record is that they
weren't supportive. Is that accurate?
Mr. Becker. Well, I didn't--I am sorry. There is something
I missed then in what she said.
Mr. Coyne. Yes. Well, she indicated that, in the future,
the 201 cases were filed, they would be supportive by letter or
by intervening some way without violating any laws or
regulations. But I just want to make it clear that your history
is, in these cases, that when you asked them for help, you
didn't get it.
Mr. Becker. That is right.
Mr. Barnette. We have asked them, Congressman Coyne, as one
of the recommendations in my testimony, to self-initiate--to
consider self-initiation--by the administration. This is an
administration action. The ultimate remedy in 201 is decided
upon by the President of the United States.
It is not entirely accurate to say that we were successful
in the eighties in the 201 case. We brought the case and we
were successful at the International Trade Commission, but we
had a contrary remedy imposed by the then-administration. So it
is very much an administration-controlled remedy and we believe
they should be the moving party in this process.
Mr. Glyptis. Sir, what is the appropriate 201 action by the
government, by the President? If he is willing to write a
letter, OK, then why wouldn't he put his name on a 201 action?
Because you don't know what he is--if he could write a letter,
what you need is his name in support of that action. That is
where the power is really at, in my view.
Mr. Coyne. OK. Earlier in a question that I asked Secretary
Daley about U.S. steel companies purchasing some of this dumped
steel that comes into the country, he said he had heard about
it; that was his response to that question. Is Bethlehem Steel
or your company, Mr. Cardy, are you purchasing any dumped steel
in the country?
Mr. Cardy. No. It is not an issue with my company. There
are companies in the steel industry that have supply
arrangements between them with steel being around to
accommodate capacity shortfalls or whatever the issue might be.
I can't believe that the companies that are in front of you
today talking about this issue are also the culprits in
creating the dumping situation.
Mr. Coyne. So that is not the case in either of your
corporations.
Mr. Cardy. Not the case in our company. It is not, Mr.
Coyne. We may, from time to time, purchase, as many other
companies purchase, foreign, particularly some Finnish steel,
at a fairly traded basis. And to the extent that there have
been Finnish steel purchases, those too were at a fairly traded
basis.
Mr. Barnette. Congressman.
Mr. Coyne. Oh, go ahead.
Mr. Becker. I wanted to--I think it has finally sunk into
me the gist of what you were talking about with Ambassador
Barshefsky. I was relating this to our request for some kind of
quantitative restraint that we were asking for while these
trade cases were being filed so that we wouldn't go through
this hemorrhaging while we were in the decisionmaking process.
And that is what we were refused. We were told repeatedly that
they felt this was problematic with the WTO; that we used to
maybe be able to do something like that, but we can't do it
anymore under the GATT and the WTO.
But, in truth, on the 201 aspect of it, they have always
said that they would expedite cases on the 201. The problem is,
though, is what they would do with it once you went through the
process.
Mr. Coyne. Thank you.
Mr. Houghton. Thanks very much, gentlemen, for being here.
Again, you know, we are all in this together. We want to be of
help and somehow we have got to pull this idea together to make
some sense. I think the speed is something which I have always
worried about. And you talked about this, Mr. Cardy. I guess
everyone has mentioned this. You know, is there a will or is
there a structure, but, really, is there a way of getting at
this thing?
Mr. Becker. Mr. Chairman.
Mr. Houghton. Senator Specter. Can I just finish?
Mr. Becker. If I could.
Mr. Houghton. Can I just finish in just a second?
Mr. Becker. All right.
Mr. Houghton. Senator Specter suggested taking this out of
the governmental process and putting it into the private right
of action so that it would go through the court system rather
than going through the laborious process of either 301 or 201
or the ITC and the President and things like that. I want to
know what you think about that. But go right ahead, please.
Mr. Becker. OK. There's one thing that--what we were
talking about with Weirton, about jobs and the human faces the
President talks about putting on trade, which I agree with very
much. When we talk about other countries taking our jobs, I
like to remind everybody that we literally, truly, don't have
enough jobs in the steel industry that we can give away to keep
the steel industries going in Russia and Japan and Brazil and
South Korea and India. We don't have that many jobs.
We have lost over 350,000 jobs in the eighties that we
never got back. We have 150,000 in the United States and
100,000 of them we believe are at risk now. We just don't have
enough jobs to keep those countries going.
Mr. Houghton. Yes. The question is what do we do about this
whole thing. We understand the condition and you describe it
very well. But what specifically do we do? And I would like to
ask again--were you here when Senator Specter talked? It was
just an interesting idea. It has to go through Congress in
order to be adopted.
Mr. Becker. About being able to file----
Mr. Houghton. Yes, right. About doing injunctives correctly
and an injunction that----
Mr. Becker. It sounds very good to me because the way he
was putting it is that the steelworkers themselves or their
representatives would be able to file for injunctive relief. It
is very attractive to me. I think we could have moved along a
lot quicker than it took to move these strike cases, these ones
against Brazil and Japan and Russia.
Mr. Houghton. Right. Yes, go ahead, please.
Mr. Cardy. I think I would just add that the specialty
steel industry would support that approach. Personally, I find
it unfortunate that we are spending an immense amount of money
on the fees necessary to pursue all of these cases, that we
can't turn to the government of the same country we all live in
to get proper recourse to these issues and we have to resort to
going to the courts. I mean, if that is the way it has to be
done because of the inactivity and the ineffectiveness of the
government, then so be it. But it is unfortunate from my point
of view that we have to resort to that. But we will if we have
to.
Mr. Houghton. Well, in theory it is. But, in practice, we
want to get something done.
Mr. Glyptis. Perhaps the answer lies with ingredients from
a number of bills: Senator Specter, Visclosky, Regula. Maybe
there are bits of pieces of other bills that can all
incorporated into a solution, an immediate solution, a very
quick solution. And maybe that is where the answer lies. But,
once again, we are going to need your support to get there.
Mr. Barnette. One of the very troubling things,
Congressman, is, for example, in a critical circumstances
finding by the Department of Commerce, they found there is a
reasonable basis to believe or suspect that the importers,
these are from Russia and Japan, knew or should have known
material injury from the dumped merchandise was likely. That is
the very stuff of which U.S. district judges make findings and
order injunctive relief. So I believe that, as he often does,
that Senator Specter has an idea that is well worth the full
consideration by the Congress.
Mr. Houghton. OK. Well, thank you very much. We certainly
appreciate it and we will follow up here.
The next panel is George Mischenko, vice president and
general manager for Co-Steel Raritan of New Jersey; Mr. Woltz,
who is president and chief executive officer for Insteel
Industries; Jon Jenson, president of Precision Metalforming
Association; Dan Griswold--I hope all you gentlemen are here--
is associate director of the Center for Trade Policy Studies at
the CATO Institute; and Greg Mastel, who is vice president and
director of studies, Economic Strategy Institute.
So the panel that is leaving, thank you very much. The new
panel, would you please take your seats. Well, gentlemen, thank
you very much.
Mr. Mischenko, would you like to go ahead?
STATEMENT OF GEORGE MISCHENKO, VICE PRESIDENT AND GENERAL
MANAGER, CO-STEEL RARITAN STEEL CO., PERTH AMBOY, NEW JERSEY
Mr. Mischenko. Good afternoon, Mr. Chairman. My name is
George Mischenko. I am vice president and general manager of
Co-Steel Raritan in Perth Amboy, New Jersey. We are the largest
single-site producer of steel wire rod in the country. I began
at Raritan in the maintenance department during the plant's
construction 20 years ago and today serve as general manager
for the entire operation. Previously, I worked for U.S. Steel
for 10 years. We make rod by recycling scrap steel. This wire
rod is fabricated into many kinds of wire and wire products
such as fasteners and automotive parts.
Let me get right to the point, Mr. Chairman. We agree with
Chairman Crane's conclusion in his statement announcing this
hearing, ``There is no question that the U.S. steel industry is
facing competition from foreign producers that has intensified
since the onset of the global financial crisis. I believe that
the United States should strongly enforce its existing trade
laws, which are designed to deal with such competition.''
I am here today on behalf of U.S. wire rod producers to
make the same point. We also believe that the existing trade
laws should be enforced to enable American business to cope
with the dramatic increase in imports brought on by the global
financial crisis. Consequently, on December 30, 1998, we filed
a section 201 petition with the ITC alleging that wire rod
imports are a substantial cause of serious injury and
requesting relief under the safeguard law.
We believe section 201 is the appropriate remedy for our
situation for four reasons. First, we believe we meet the law's
threshold of serious injury. Over the last 5 years, and
especially during the last 18 months, an onslaught of wire rod
imports has devastated our industry. Imports have increased
more than 60 percent since 1993, capturing over one-third of
U.S. consumption and causing a collapse of prices. The industry
as a whole has not made a profit for three consecutive years
now. Despite modern facilities and excellent productivity, the
wire rod industry's financial results have fallen significantly
below that of the overall steel industry. At my company, we had
to reduce shifts and permanently eliminate 15 percent of our
management and hourly work force. We also canceled plans for a
25-percent increase in our mill's capacity that would have
enabled us to serve our customers better.
Second, the 201 approach is a flexible one. The President,
after receiving the ITC recommendations, can fashion a remedy
to meet specific needs while taking into account the impact on
customers and the U.S. economy.
Third, section 201 is appropriate because, as our lawyers
emphasized, it is fully consistent with the international
obligations of the United States.
Fourth, and finally, section 201 is especially appropriate
when inflationary pressures are in check. Fed Chairman Alan
Greenspan recognized just this week that our economy has become
less inflation-prone than in the past.
Later you will hear from our customers in the wire products
industry. They plan to oppose our petition. We had many candid
discussions with them and made clear our intentions to work
with them to achieve a remedy that considers their interests,
for example: Excluding certain products from our petition;
leaving Canadian and Mexican imports out of any remedy;
agreeing to fashion the remedy to avoid increases in downstream
product imports; and, finally, working with the wire producers
as we develop the specific remedy plan. We are sorry they have
elected to oppose our petition. Fortunately, we understand
their door is still open. A rod industry that defers
investment, shutters capacity, and is financially weakened is
not in the long-term interest of the U.S. wire producers or the
U.S. economy.
In conclusion, Mr. Chairman, we believe the existing trade
laws are designed to address the flood of imports that the
steel industry is facing. We have set out to put those
safeguards to the test for wire rod to determine if they will
live up to Congress's design. If section 201 remedies are
denied, then I may be back before this Subcommittee very
quickly asking for changes in the law because if the U.S.
International Trade Commission thinks we are not seriously
injured, then I don't know who is. Thank you.
[The prepared statement follows:]
Statement of George Mischenko, Vice President and General Manager, Co-
Steel Raritan Steel Co., Perth Amboy, New Jersey
Good afternoon, Mr. Chairman, my name is George Mischenko,
Vice President and General Manager of Co-Steel Raritan in Perth
Amboy, New Jersey. Co-Steel Raritan is the largest single-site
producer of steel wire rod in the country. Steel wire rod is a
hot-rolled, coiled steel product produced from scrap steel, and
is fabricated into a wide array of wire and wire products such
as fasteners, fencing, coat hangers, and automotive parts. I
have worked at Raritan since it was built nearly twenty years
ago, and was there when the President of the United States
donned a hard hat and helped us melt one of our first heats of
steel. I began in the maintenance department during
construction, and am now General Manager for the entire
operation. Previously I worked for U.S. Steel for ten years.
Let me get right to the point, Mr. Chairman. We agree with
the conclusion you made in your statement several days ago
announcing this hearing, and I quote:
``There is no question that the U.S. steel industry is facing
competition from foreign producers that has intensified since
the onset of the global financial crisis. I believe that the
United States should strongly enforce its existing trade laws,
which are designed to deal with such competition. . .''
(emphasis added)
I am here today on behalf of Co-Steel Raritan and other
U.S. wire rod producers,\1\ to make the same point. We also
believe that the existing trade laws should be enforced to
enable American business to cope with the dramatic increase in
imports brought on by the global financial crisis, such as we
in the wire rod industry have experienced. Consequently, on
December 30th we filed a Section 201 petition with the U.S.
International Trade Commission (``ITC''), alleging that
increased quantities of wire rod imports are a substantial
cause of serious injury, and requesting relief under the
safeguard law. We urge you and your colleagues to support our
case.
---------------------------------------------------------------------------
\1\ Companies filing the petition are: Birmingham Steel Corp.,
Birmingham, Alabama (headquarters), Cleveland, Ohio, Memphis,
Tennessee; Connecticut Steel Corporation, Wallingford, Connecticut; Co-
Steel Raritan, Perth Amboy, New Jersey; GS Industries, Inc., Charlotte,
North Carolina (headquarters), Georgetown, South Carolina, Kansas City,
Missouri; Keystone Steel & Wire Co., Dallas, Texas (headquarters),
Peoria, Illinois; North Star Steel Company, Minneapolis, Minnesota
(headquarters), Beaumont, Texas, Kingman, Arizona; Northwestern Steel &
Wire Co., Sterling, Illinois; Atlantic Steel Industries, Inc., Atlanta,
Georgia. The United Steelworkers of America AFL-CIO (representing
workers at GS Industries, North Star Steel Texas, Northwestern Steel &
Wire, and several other domestic producers) is a petitioner. Also, the
Independent Steel Workers Alliance representing the workers at Keystone
Steel & Wire's Peoria, Illinois plant is a petitioner.
---------------------------------------------------------------------------
We believe Section 201 is the appropriate remedy for our
situation for four reasons:
First, we believe that we meet the law?s threshold of
``serious injury.'' Over the last five years and especially in
the last 18 months, imports of steel wire rod have devastated
our industry. Imports have increased more than 60 percent since
1993, capturing a growing percentage of the market and causing
a collapse of prices. The onslaught of low-priced imports--now
accounting for over one-third of U.S. consumption--has
seriously harmed the U.S. industry. The industry as a whole has
not made a profit for three consecutive years now. Despite
modern facilities and excellent productivity (worker hours per
ton are among the lowest in the industry worldwide), the wire
rod industry's financial results have fallen significantly
below the average performance of the U.S. steel industry.
At my own company, the import pressure has forced us to
reduce shifts in our melt shop and rolling mill, and on
December 1st of last year we permanently eliminated 75 jobs--or
15% of our management and hourly workforce--the first layoffs
in our history. In 1998, import pressures also led us to cancel
plans to raise our mill's capacity to 1.1 million tons--a 25
percent increase that would have enabled us to serve our
customers better.
Let there be no mistake about the level of serious injury
the wire rod producers are now suffering. The sea of red ink
has led to production shutdowns, delayed or abandoned
investment, and laid-off or unemployed workers throughout the
industry.
We recognize that the Administration has reached an
agreement with Russia to limit steel exports to the United
States, including wire rod. However, the agreement does not
appreciably affect our situation. The decrease in Russian steel
imports is more than offset by increases from non-traditional
suppliers like India, Indonesia, South Africa and Moldova.
Indonesian imports alone went from zero in 1997 to a level
nearly five times that of Russia in 1998.
Second, the Section 201 approach is a flexible approach to
a serious problem that can be remedied while taking into
account the impact on customers and the U.S. economy. The
President, after receiving the recommendations of the ITC, can
fashion a remedy to meet specific needs. The 201 remedy is
particularly suitable in this case where more than 20 countries
export wire rod to the United States. Wire rod mills are found
all over the world, and there are additional foreign suppliers
who are undoubtedly targeting this market as I speak. Adverse
conditions abroad and measures taken in a number of countries
to protect their home markets make the United States the export
destination of choice. Moreover, the Section 201 remedy may be
molded in appropriate circumstances to accommodate the supply
and product needs of wire rod customers. For example, it can
reflect the existence of a more integrated North American
market so that imports from Canada and Mexico, as NAFTA
countries, can continue flowing as normal into the U.S. market.
On the other hand, non-traditional suppliers who have flooded
the market with low-priced imports can be dealt with
decisively.
Third, the Section 201 approach is appropriate because, as
our lawyers emphasize, it is fully consistent with the
international obligations of the United States. Those
obligations require that safeguard actions conform to GATT
1994, in particular Article XIX, and the World Trade
Organization agreement implementing that Article. So what we
are seeking is a remedy that is consistent with our
international trade rules, and one that must gradually phase
down during the adjustment period.
Finally, use of Section 201 is appropriate at this time in
our nation's economic history when inflationary pressures are
in check. As Federal Reserve Chairman Alan Greenspan said just
this week, ``. . . recent experience does seem to suggest that
the economy has become less inflation prone than in the past,
so that the chances of an inflationary breakout arguably are,
at least for now, less than they would have been under similar
conditions in earlier cycles. . .'' Other economic observers
note that our economy is flexible and resilient, currently
reaping the benefits of productivity increases from years of
technological investments, of decades of deregulation, of
advances in telecommunications and distribution, and cheap
energy costs. This makes it a particularly opportune time for
the ITC to recommend, and for the President to impose,
safeguard remedies without risking any significant inflationary
impact on the overall U.S. economy.
Mr. Chairman, so far I have only referred to existing law
and I know you're interested in our views on the bills pending
before this Committee. We decided months ago to file our
Section 201 petition under current law because we believe that
the dismal conditions in our industry fit the injury criteria
of the law. If you insist on my providing specific
recommendations on the proposed legislation, then I would ask
for your indulgence--let me tell you what I think after July
12th when the ITC must make a final decision on our petition.
If Section 201 remedies are not recommended in our situation,
then I may be back before this Committee very quickly asking
for changes in law because if we're not ``seriously injured,''
I don't know who is.
Later this morning, you will hear from our customers in the
wire products industry, who plan to oppose our Section 201
petition before the ITC. We had hoped that our customers would
understand our predicament. We had many candid discussions with
the American Wire Producers Association (``AWPA'') leadership
about our plans to file a petition. We made clear our intention
to work with them to achieve a remedy that would alleviate the
wretched financial condition of the rod producers, yet take
into account the interests of the rod consumer. We made a
number of adjustments to accommodate the wire industry:
We acknowledged customer needs and excluded
certain products from our petition such as wire rod for tire
cord, valve spring wire, and pipe wrap;
We will not request that imports from Canada and
Mexico be covered by any remedy;
We have agreed to work with the wire producers to
find appropriate ways to avert any possible downstreaming if
relief is granted on wire rod; and
We proposed to work with the wire producers as we
develop the specific remedy plan.
Having taken these steps, and made these commitments, we
are sorry that the AWPA has elected to oppose the petition. At
the same time, we understand that the AWPA door ``is still
open'' to us. For our part, we are prepared to continue the
dialogue and will follow through with our commitment to work
with the AWPA throughout the process.
The wire rod industry needs a remedy that will enable it to
climb out of a sea of red ink and to resume making the kind of
investments that will maintain state-of-the-art facilities. A
rod industry that defers investments, shutters capacity, and is
financially weakened is not in the long-term interest of the
U.S. wire producers and the U.S. economy as a whole. The
flexibility of Section 201 will permit the President to fashion
a remedy that accommodates the interests of both producer and
consumer. As the President's Steel Plan notes, Section 201 is a
legitimate and essential tool for addressing the type of world
conditions we now face.
In conclusion, Mr. Chairman, we believe the existing trade
laws are designed to address the flood of imports that the
steel industry is facing. In the case of the wire rod sector,
we have set out to put those safeguards to the test to
determine if they will live up to Congress' design. We hope
that you and the Members of this Committee will support us in
this effort. Thank you.
Mr. Houghton. Thank you. Thank you very much.
Mr. Woltz.
STATEMENT OF H.O. WOLTZ III, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, INSTEEL INDUSTRIES, INC., MOUNT AIRY, NORTH CAROLINA;
AND VICE PRESIDENT, AND CHAIRMAN, GOVERNMENT RELATIONS ADVISORY
COMMITTEE, AMERICAN WIRE PRODUCERS ASSOCIATION, ALEXANDRIA,
VIRGINIA
Mr. Woltz. My name is H.O. Woltz III. I am president and
chief executive officer of Insteel Industries, which is
headquartered in Mount Airy, North Carolina. I am also the vice
president of the American Wire Producers Association and
chairman of the association's government relations advisory
committee.
As the only purchaser of hot-rolled steel speaking today,
you will find my testimony in sharp contrast to much of what
you have heard today. The 102 members of the AWPA employ 42,000
workers in 38 states and 138 congressional districts. Our
members make wire and wire products such as nails, garment
hangers, springs, wire fencing, and steel reinforcing products.
As independent wire producers, the AWPA active members
depend on U.S. steel producers to provide sufficient quantities
and qualities of wire rod. However, because domestic wire rod
capacity is substantially lower than domestic demand, imports
are critical to our survival. This economic reality was
recently recognized by the U.S. International Trade Commission
when it concluded that the domestic industry could supply only
about 80 percent of the domestic demand for wire rod.
As a significant consumer of steel wire rod, I am alarmed
at the news from Washington with regard to steel trade issues.
Underlying the many recent proposals to restrict trade is the
notion that imported steel is ruining the domestic industry. I
would like to provide another perspective on this issue.
Our raw material, hot-rolled steel wire rod, accounts for
more than half the total cost of our products. Through 1997,
and until early 1998, supplies of wire rod were being allocated
to consumers by domestic mills because of limited domestic
supply. Transaction prices rose more than 10 percent in the
year 1997, reflecting strong demand. Without the availability
of foreign steel during this period, Insteel would have been
unable to meet its commitments and would have idled its plants.
In 1998, demand climbed as the Asian financial crisis
impacted world markets. Wire rod supply problems disappeared
and prices fell due to heightened import competition.
Significantly, prices for many of my companies' products
declined by double-digit percentages as new import competition
in our markets had an adverse effect on selling prices.
Contrary to the mantra of big steel and big labor, steel
producers are not the only companies to experience heightened
levels of competition due to the Asian crisis. It will take
time for our markets to adjust to the events of 1998, but they
will recover. Until they do, restricting the availability of
raw materials to companies like Insteel will result in reduced
competitiveness of our products and job losses in our industry.
While about 170,000 people are employed in the domestic
steel production, literally millions of workers owe their
livelihoods to the availability of competitively priced steel
that allows their employers to compete in the global economy.
History shows that restrictions on imported wire rod inevitably
result in increased imports of downstream wire and wire
products. Consider the thousands of jobs in steel-consuming
industries that may be put at risk by arbitrary restrictions on
imports of hot-rolled steel.
With this background in mind, the AWPA and its members
oppose legislation that would adversely affect our ability to
obtain wire rod in the quantities we need in order to meet our
customers' requirements. H.R. 327, 412, 502, and 506 threaten
the viability of a large segment of American industry. These
proposals are either contrary to our national trade laws,
violate our obligations under the WTO, or require the creation
of even more bureaucracy for purposes of administration and
oversight. Significantly, one or more of these resolutions may
have the impact of reducing the availability of imported wire
rod, despite recent ITC rulings that these imports do not
injure the domestic industry.
There are, however, legislative changes that the AWPA
believes would improve the administration of our trade laws and
the fairness of their application. Most importantly, the
current law discriminates against U.S. purchasers by denying
them the same access to information as other parties in trade
cases. In injury investigations before the ITC, consumers of
the imported product are not interested parties and their
counsel are excluded from reviewing proprietary information in
accordance with an administrative protective order. It should
be an overriding goal of the trade laws to provide due process
to purchasers and to encourage the involvement of U.S. industry
that purchases and uses the product under investigation. More
informed findings and more equitable remedies will result.
In conclusion, it would be a tragic mistake for the United
States to adopt protectionist measures to address short-term
market dislocations created by the Asian financial crisis. The
current proposals to limit steel trade will inevitably lead to
shortages, skyrocketing prices, and an erosion of
competitiveness of vital steel-consuming industries. Thank you
for this opportunity to share my opinions.
[The prepared statement follows:]
Statement of H.O. Woltz III, President and Chief Executive Officer,
Insteel Industries, Inc., Mount Airy, North Carolina; and Vice
President, and Chairman, Government Relations Advisory Committee,
American Wire Producers Association, Alexandria, Virginia
My name is H. O. Woltz III, and I am President and CEO of
Insteel Industries, Inc., with its headquarters in Mt. Airy,
North Carolina. I am also Vice President of the American Wire
Producers Association and Chairman of the Association's
Government Relations Advisory Committee.
The American Wire Producers Association (AWPA) is a
national trade association which represents the vast majority
of independent manufacturers of carbon, alloy and stainless
steel wire and wire products. The 102 members of the AWPA
operate more than 210 plants that provide good paying jobs to
over 42,000 American workers. Those plants are located in over
38 states and 138 congressional districts.
AWPA members produce a vast array of steel wire and wire
products which are used in the automotive, agricultural and
construction industries as well as directly by consumers. AWPA
member companies purchase hot rolled carbon steel wire rod from
domestic and foreign sources. We process this wire rod into
wire and fabricate a wide variety of end products and
semifinished products from this wire. Examples of wire and wire
products produced by our members include nails, wire strand,
chain link fence, springs, garment hangers, agricultural
fencing, and steel reinforcing products for concrete
structures. AWPA members supply between 85 and 90 percent of
the total domestic demand for these products with an annual
value in excess of $19 billion.
Given the almost infinite variety of wire and wire
products, the common denominator for the manufacturers in this
sector of the steel industry is their raw material--hot rolled
carbon steel wire rod. In fact, the stated goal of the AWPA is
``to undertake programs and activities that assure wire
producers free and fair access to an adequate supply of wire
rod. This includes the encouragement of an increase in North
American capacity for the manufacture of wire rod.'' To this
end, the AWPA's active members, who constitute the largest
group of consumers of domestic wire rod in the United States,
have supported the domestic rod industry's initiatives to
develop and expand the availability of American-made wire rod.
As independent wire producers, the AWPA's active members have
no affiliations with their rod sources. Hence, we depend on our
main suppliers--the US rod manufacturers--to provide sufficient
quantities and qualities of rod for our wire-drawing
operations. Despite this strong and mutually beneficial
commercial relationship with the domestic rod industry,
independent wire producers still must purchase imported rod to
meet their requirements. The domestic rod industry is not
capable of satisfying all of the domestic demand, either in
terms of over all quantities or the variety of grades of wire
rod used by AWPA members. This economic reality was recognized
recently by the US International Trade Commission(ITC) in its
antidumping and countervailing investigations of Certain Alloy
and Carbon Steel Wire Rod from Canada, Germany, Trinidad &
Tobago and Venezuela. In those investigations, the ITC found
that the domestic rod industry was able to supply approximately
80 percent of the domestic demand for rod. The remaining 20
percent must be obtained from other sources.
It is also significant that most domestic producers of hot
rolled wire rod own, or are affiliated with, downstream wire
producers. These integrated producers, therefore, compete in
the marketplace with AWPA's independent wire producers for
sales of wire and wire products. The AWPA believes that this
encourages the domestic hot rolled wire rod producers to
restrict supply of wire rod in order to improve the
profitability of the steel mills and to improve the
competitiveness of their downstream operations vis-a-vis
independent producers of wire products. Potentially damaging
cost-price squeezes for independent wire producers can result
under these circumstances, thus sapping the vitality of an
important and efficient industry. Adequate competition for hot
rolled wire rod is, therefore, essential to the viability of
independent producers of wire and wire products.
In order to protect its members' access to an adequate
supply of wire rod, the AWPA has opposed measures to limit,
artificially, the availability of wire rod. Such artificial
restrictions lead to shortages, allocations and inflated
pricing. Furthermore, restrictions on the importation of hot
rolled wire rod inevitably result in increased imports of
downstream wire and wire products. As foreign producers are
foreclosed from the US rod market, they shift their exports
downstream into wire and wire products. In other words,
restrictions on the importation of hot rolled wire rod leads to
increased imports of wire and wire products such as nails,
strand and springs. This downstreaming not only affects the
employment levels and vitality of the wire industry, but also
that of the hot rolled wire rod producers as demand for
domestically produced wire rod is reduced by downstreaming.
As a significant consumer of hot rolled steel wire rod, I
personally am alarmed at the news from Washington with regard
to steel trade issues. I read of proposed legislation calling
for a moratorium on steel imports, proposals for drastic
decreases in the importation of steel from Japan, Korea and
Brazil, agreement on quotas for steel imports from Russia, and
a host of other protectionist proposals. Underlying these
proposals is the notion that imported steel is ruining the
domestic industry and that dumping and other unfair trade
practices are rampant. I would like to provide you with another
perspective on this issue.
My company, Insteel Industries Inc., is a leading producer
of steel wire and wire products. Our company operates eight
manufacturing facilities in Delaware, North Carolina, South
Carolina, Tennessee, Texas and Virginia. Insteel employs
approximately 1,100 people. Insteel is a state of the art
manufacturing company serving the appliance, construction, and
home furnishing industries with products such as nails, wire
for springs, reinforcing wire for tires, and concrete
reinforcing products.
Our raw material, hot rolled carbon steel wire rod,
accounts for more than half the total cost of our products. We
source our raw material domestically and internationally. In an
ideal world, all of our raw material would come from steel
producers located in the United States. The world is not ideal,
however, and therefore we must rely on imported steel for a
portion of our requirements.
Speaking from Insteel's experience, through 1997 and until
early 1998 supplies of hot rolled steel wire rod were being
allocated to consumers by domestic mills because of limited
domestic supply. Transaction prices rose more than 10 percent
during 1997, reflecting strong demand. The availability of
foreign steel was critical to our ability to meet our
commitments to our customers during this period of time.
Without it, our plants would have been idle, our employees
would have been on short weeks, and our customers would have
suffered delays and disruptions of supply.
It is a fact that imports of steel products rose
substantially in 1998. However, if you go beyond the self-
serving arguments of the steel companies and their labor
unions, you will see that the facts are much different than
they would have you believe. Literally millions of tons of
steel products have been imported by the domestic steel
producers themselves. During 1997, and 1998 steel companies
imported semi-finished steel products and hot rolled steel
because their business was strong and they were unable to fully
satisfy demand from their own capacity. Without these imports
there would have certainly been a steel shortage, accompanied
by rapidly increasing prices.
Market conditions for much of the world steel industry
changed in 1998. The Asian financial crisis took its toll on
demand world wide, and prices declined. It is interesting to
note, however, that the cost of inputs to make steel also
declined significantly. Steel scrap and pig iron both plummeted
in price during 1998. After a period of adjustment during which
the new, lower prices worked their way through the inventory
pipeline, many steel makers found that they still had adequate
margins to operate profitably, despite the heightened
international competition brought on by the financial collapse
in Asia. This is quite a tribute to the vitality of the
domestic steel industry--a vitality to which they apparently do
not want to admit.
The lead times for importing steel are long. Sometimes we
are required to make commitments as far as nine months ahead in
order to have steel produced and delivered to us from overseas
sources. With the strong demand that the steel industry
experienced in 1997, the pipeline was full when the Asian
crisis began to affect demand. Logically, the pipeline took
time to adjust in 1998 following the robust conditions of 1997.
As orders and commitments worked their way through the pipeline
during 1998, imports began to decline at the end of the year.
The steel companies, however, are using the increased import
figures of 1998 to bolster their arguments for more protection
from competition. Steel is a cyclical business, and the
disequilibrium of supply and demand that was witnessed during
1998 will likely correct itself in 1999. By mischaracterizing
the events of 1998, ``Big Steel'' hopes during 1999 to alter
significantly the trade playing field to their advantage,
assuring tight supplies and high prices--and reduced
competitiveness of steel consumers--for years to come.
The world steel markets, and indeed many world markets,
have been destabilized by the Asian crisis. Insteel and the
other members of the AWPA are facing heightened competition
from imported wire products as a result of market disruptions
worldwide. Prices for our finished products, such as nails,
tire reinforcing wire, and prestressed concrete strand, have
fallen significantly in the past twelve months because of
heightened import competition. It will take time for our
markets to adjust to these new realities, but they will
recover. In the meantime, restricting the availability of raw
materials to companies like Insteel through protectionist
legislation will result in reduced competitiveness of our
products and job losses in our industry. Those jobs will be
lost to producers of wire products in foreign countries that
have access to world market steel.
The AWPA and its members are concerned about proposed
legislation which would adversely affect our ability to obtain
wire rod in the quantities and qualities that we need in order
to meet our customers' demanding requirements. As I have
already noted, the domestic rod producers are the principal
source of our raw material. However, the domestic producers
themselves have acknowledged that they cannot meet all of our
needs--either in total volume or in certain important grades
and types. We must rely on foreign mills for these
requirements. Legislative proposals to impose rigid quotas
would severely disrupt our operations and undermine our ability
to compete in the domestic and international marketplace. Rigid
quotas can not possibly keep pace with the dynamic changes that
occur in our market places. Accordingly, the AWPA opposes the
recent trade bills which have been introduced in this Congress.
(1) House Resolution 327 would enable the Secretary of
Commerce to impose antidumping duties retroactively for a
period of up to one year prior to the filing of the original
antidumping petition. The AWPA believes that this proposal is
not only contrary to our national trade laws but that it also
violates our obligations under the World Trade Organization.
The existing system of the retroactive assessment of dumping
duties already creates uncertainty and often results in
unfairness for American importers and customers. The proposal
to extend that uncertainty and unfairness for an additional
period of more than a year is abusive, as well as unnecessary.
(2) House Resolution 412 would, among other things, establish
a permit and monitoring system for steel imports. The AWPA
believes that the proposed system would be cumbersome, cause
delays in the entry of legitimate merchandise, and impose
significant administrative burdens and costs on the Department
of Commerce (Commerce) and the US Customs Service. The permit
system appears to be a thinly disguised trade barrier for the
benefit of one group of domestic companies.
(3) House Resolution 502 would prohibit the importation of
steel products from four countries: Brazil, Japan, Korea and
Russia. Not only is this proposal contrary to our international
trade obligations, but it affects imports of steel wire rod
which the US Government has previously found not to be a cause
of injury to the domestic rod producers. How can the United
States ban the entry of products which its agencies have
determined are not causing economic harm?
(4) House Resolution 506 would establish quotas on imports of
wire rods and other steel products at levels which are
equivalent to or lower than those during 1995 through 1997.
This rigid formulation does not take into account the dynamic
nature of our industry and the growth in the demand for wire
rod. Equally as important, this formulation does not consider
the negative effect on imports of the antidumping and
countervailing investigations which were pending during part of
this period. As the members of this Subcommittee know, the mere
filing of a trade case disrupts and often depresses imports
during the course of the investigation. Even in the cases
involving wire rod--where the US International Trade Commission
found no injury--rod imports from the subject countries were
adversely affected during the course of those investigations.
There are, however, two legislative changes which the AWPA
believes would improve the administration of our trade laws and
the fairness of their application.
First, the current trade laws discriminate against US
companies which purchase imported raw materials, by denying
them the same access to information as other parties in an
investigation before the ITC. In injury investigations by the
ITC, the antidumping and countervailing duty laws limit the
disclosure of business proprietary information to counsel for
``interested parties,'' in accordance with an administrative
protective order. The term ``interested parties'' includes
domestic and foreign manufacturers, US importers, labor unions,
and foreign governments.
However, industrial consumers in the United States--such as
the members of the AWPA--do not meet this definition of
``interested parties.'' As a result, counsel for AWPA are not
permitted to review the same proprietary information that is
available to counsel for the domestic industry or the
importers. This places the AWPA and other consumers at a
serious--and completely unfair--disadvantage. Other parties'
counsels have access to the information submitted by AWPA
members, but AWPA's counsel cannot examine the entire record.
In fact, in the recent antidumping and countervailing duty
investigations of steel wire rod, counsel for the domestic rod
industry responded in a confidential submission to many of the
points raised by the AWPA. Counsel for the AWPA were not
allowed to see that response, effectively denying the AWPA due
process and the right to answer the arguments of its opponents.
Not only is this result unfair, it also discourages
customers from participating in these and other trade
proceedings. The same rule applies in Section 201
investigations. The AWPA knows from its experience that the
active participation of industrial consumers enhances the
amount and the quality of information available to the
decision-makers at the ITC. It should be an overriding goal of
the trade laws to encourage the involvement of the US industry
that purchases and uses the product under investigation. This
goal would be advanced by recognizing the interests of
customers to the same extent as the law now recognizes the
interests of domestic and foreign producers and their agents.
Second, the AWPA also supports legislation to suspend, on a
temporary basis, the assessment of antidumping and
countervailing duties on products which are in short supply or
otherwise unavailable from domestic suppliers. Such legislation
would address the unintended effect of the antidumping and
countervailing duty laws to prevent the importation of products
which are not available domestically. Under the present law,
there is no procedure which permits the temporary suspension of
antidumping or countervailing duties for products which the
domestic industry cannot supply.
The AWPA is not attempting to weaken the antidumping and
countervailing duty laws. On the contrary, the AWPA has long
supported the rigorous enforcement of US trade laws, and its
members have used these laws in order to respond to unfairly
traded or subsidized imports which have caused serious economic
harm to the steel wire and wire products industry. Moreover,
AWPA members rely primarily on US manufacturers of steel wire
rod for their raw material. The AWPA members have worked
closely with the domestic rod industry--now composed entirely
of world-class and efficient mini-mills--to develop and expand
the availability of American-made wire rod. The temporary
suspension of duties would be invoked only if the specific
product were not available from US producers. There can be no
injury to these domestic producers if they cannot supply the
needed product to their customers in the US market.
Independent wire producers of the AWPA have had
considerable experience with the unintended effect of
antidumping and countervailing duty proceedings on the
availability of certain types of wire rod. During the
investigations of carbon steel wire rod in 1993-94, and again
in 1997-98, the imposition of preliminary dumping and
countervailing duties prevented US manufacturers of steel wire
and wire products from obtaining certain types of wire rod
which were unavailable from domestic producers. In addition,
there were severe shortages of even basic types of wire rod,
leading to significant price increases, allocations, canceled
orders and delayed deliveries. The unavailability of wire rod
threatened severe economic harm to a vigorous and profitable US
industry, and it encouraged foreign competitors to target the
US market for steel wire and wire products. Although the ITC
eventually made findings of no injury and these investigations
were terminated, this experience demonstrates the necessity for
a mechanism to provide relief in cases when domestic industries
cannot obtain essential raw materials from sources in the
United States.
The members of the AWPA have also had experience with the
administration of a program which successfully dealt with the
non-availability of certain types of steel products from
domestic producers. During the Steel Voluntary Restraint
Agreements Program (VRAs), steel wire drawers were able to
obtain a positive short supply determination for rod products
which were unavailable from domestic mills. For six consecutive
calendar quarters, AWPA members that produce stainless steel
wire, requested and obtained permission to import specific
grades of stainless steel wire rod, which were not available
from domestic producers. In fact, domestic producers of
stainless steel wire rod confirmed to the US Department of
Commerce that such rod was not available in the US market in
sufficient quantities to meet domestic demand. Commerce was
able to make these determinations in a prompt and fair manner
without placing an undue burden on its resources.
In conclusion, let me say it would be a tragic mistake for
the United States to adopt ill-advised protectionist measures
to address the short term market dislocations created by the
Asian crisis. The market is recovering even as we meet here
today. We are already seeing domestic announcements of price
increases for hot rolled steel products, indicating that demand
is firming and import competition is moderating. We are also
seeing significantly reduced levels of imported steel in the
domestic market, particularly from Japan. The current proposals
to limit steel trade will inevitably lead to shortages and
skyrocketing prices in the near term because the markets are
now recovering on their own. We should allow this recovery to
continue and the market to adjust to recent events, as it has
in the past.
The steel companies claim that 10,000 steelworkers have
lost their jobs due to increased steel imports. This is, at
best, misleading, and certainly only part of the story. Most
reliable sources estimate the total employment within the steel
producing industry in the United States at about 170,000
people. In contrast, there are literally millions of workers
whose livelihoods depend on access to high quality,
competitively priced hot rolled steel. Automakers, parts
suppliers, construction workers, appliance manufacturers, and
general industrial employees all depend on adequate supplies of
competitively priced steel. These jobs will be at risk if
Congress enacts legislation that arbitrarily restricts the
importation of foreign steel in order to provide protection to
the weakest of the domestic steel producers.
Thank you for considering these facts as you deliberate on
these issues concerning steel trade. If I can provide any
further information to you, please call on me.
Mr. English [presiding]. Thank you, Mr. Woltz. Mr. Jenson,
good to see you again. We would welcome your testimony.
STATEMENT OF JON E. JENSON, PRESIDENT, PRECISION METALFORMING
ASSOCIATION, INDEPENDENCE, OHIO
Mr. Jenson. Thank you and good evening. Thank you for the
opportunity to appear before you today on behalf of Precision
Metalforming Association and the $36 billion metalforming
industry it represents. Most of PMA's nearly 16,000 member
companies are dispersed throughout 38 states and 248
congressional districts.
As you know, the metalforming industry employs more than
380,000 American workers and uses about a quarter of the steel
produced in North America, mainly flat-rolled products. Our
industry is just one of the many steel-using industries in this
country, the so-called downstream manufacturers. Together these
downstream manufacturers employ more than 40 American workers
for every worker in the steel industry.
A strong and competitive steel industry is important to the
United States. We depend on it. Most of our member companies
use mostly domestic steel, and steel is our essential raw
material. It represents from 40 to 70 percent of the cost of
manufacturing our products. So steel prices are critical. They
are all the more critical because our members compete globally
with businesses abroad. If our members have to pay more for
steel than our foreign competition, our members will lose
orders and be forced to cut back or cease production.
Why are we concerned about trade measures that would
threaten the availability of steel? Because history tells us
what happens when the steel market tightens. Three things
happen: Prices go up, delivery lead times lengthen, and quality
deteriorates, every time. We know that restraints on steel
imports during the eighties and early nineties hurt the
American economy. The ITC found that quotas increased imports
of steel-containing products, costing U.S. companies billions
of dollars in sales. The ITC also found that quotas reduced
American exports by as much as $5.6 billion in 1989, nearly 2
percent of exports. Quotas today would do the same. Why roll
back history and our economy to relive a failed trade remedy?
At current levels of demand, U.S. steel producers cannot
supply more than about 75 percent of our needs, leaving a
shortfall of about 30 million tons. Imports are absolutely
necessary for the survival of American manufacturers, and this
is the key reason why we urge a balanced view of the trade
situation. Existing U.S. trade law provides remedies for
dumping or subsidization of steel or import surges of steel.
While not perfect, these remedies are, for the most part,
consistent with international trading rules. They should be
allowed to work and there are early indications, as we heard
earlier this afternoon, that they are indeed working.
Regarding the four pieces of legislation introduced in the
House, we oppose them for various reasons. H.R. 327 provides
for the retroactive assessment of antidumping duties that
changes the rules after the game is over. Regarding H.R. 412,
we oppose the proposed changes in the injury test because it
would make trade restrictions easier than at present and is
probably inconsistent with WTO requirements. While we favor a
more timely release of import statistics, we do not favor
charging a fee for import licenses or the extraction of
confidential business information, which would stifle imports.
H.R. 502 would impose a 3-month ban on steel imports from
several nations. It indiscriminately shuts off imports of
various steels without regard for the consequences, exactly the
type of trade restraint that harms downstream manufacturers.
And some feel it is a blatant violation of our WTO obligations.
H.R. 506 would impose quotas. We oppose the bill because
quotas do not work. It will harm consumers and steel-consuming
industries to a much greater extent than it would ever help
steel producers or steelworkers. Import quotas of less than 2.4
million tons per month are simply inadequate for 1999's steel
demand. If quotas were administered on a country-specific
basis, as is the apparent intent, the quotas will be even lower
and do even more harm to the U.S. economy.
In summary, we recommend that the U.S. Government take no
extraordinary action that may endanger the availability of
steel, harm downstream manufacturers and consumers, and
threaten our international trade relationships. We urge that
the trade cases and other actions already underway be allowed
to work, as there is evidence that the import surge is easing.
A good way to increase American exports of steel is in the form
of manufactured steel-containing products. And this can happen
only if American manufacturers can obtain the right steel when
it is needed at world competitive prices.
[The prepared statement follows:]
Statement of Jon E. Jenson, President, Precision Metalforming
Association, Independence, Ohio
Good afternoon. My name is Jon E. Jenson, President of
Precision Metalforming Association (PMA), headquartered in
Independence, Ohio. I am appearing before you today on behalf
of PMA and the $36 billion metalforming industry that it
represents. Most of PMA's nearly 1,600 member companies are
dispersed throughout 38 states and 248 congressional districts.
As you know, the metalforming industry transforms sheet
metal into intermediate and final products--precision parts,
components and assemblies--using stamping, fabricating and
other value-added processes. The industry employs more than
380,000 American workers, and uses about a quarter of the steel
produced in North America--mainly flat-rolled products.
The industry serves virtually all segments of the North
American economy, and sales abroad are increasing. Our largest
market is automotive, but our products are found in wide range
of industrial and consumer products--from dozens of components
in computers, telephones, TVs and other communications devices,
to kitchen and laundry appliances, to food and beverage
containers, to hundreds of components in cars, trucks, aircraft
and other conveyances, to residential, commercial and
industrial structures and their heating, air conditioning,
electrical and people-moving systems. The products of our
industry are part of everyone's life, every day.
Our industry is just one of many steel-using industries in
this country--the so-called ``downstream'' manufacturers.
Together, these downstream manufacturers employ more than 40
American workers for every worker in the steel industry. These
jobs are important to the welfare of our country. We can't
protect them if our government makes these producers non-
competitive by hiking prices for our inputs, while our
competitors enjoy low prices.
A strong and competitive steel industry is important to the
United States, to our industrial economy and to our industry.
We depend on it. Most of our member companies use mostly
domestic steel, and we clearly recognize the need for a viable
steel industry in this country.
Steel is the essential raw material in our products. It
represents from 40 to 70 percent of the cost of manufacturing
our products. So steel prices are critical. They are all the
more critical because our members compete globally with
businesses abroad. If our members have to pay more for steel
than our foreign competition, our members will lose orders and
be forced to cut back or cease production.
Being relatively small companies, most of our members buy
steel through service centers, rather than mill direct. They
have little leverage with the mills. We know that small steel
purchasers, like our members, will feel the brunt of quota-
induced price increases.
But steel availability is not just about price. It is
important to remember that steel is not a monolithic commodity.
It is a series of many specific products, each with particular
mechanical and physical properties, dimensional tolerances,
processing characteristics, surface qualities, and so forth.
This variety is essential because our production processes
are becoming more sophisticated, more demanding, more precise
and more specialized. One type or size of steel does not fit
all.
So ``availability'' is first of all about having the right
steel. And it should be pointed out that some steels are not
always available domestically. When manufacturers have to seek
foreign steel to meet specific product requirements, the
purchase decision may have little or nothing to do with price.
Second, availability is about having the right steel on the
plant floor ready for processing when it is needed. Not on a
rolling schedule a week away, or on a truck somewhere. ``Just
in Time'' manufacturing is making this more important--as are
trends toward small production quantities, shorter product life
cycles and smaller inventories.
And the third element of availability is, of course, price.
Having the right steel, available at the right time, at a
world-competitive price is the practical real-world definition
of availability. If all three elements are not in place, steel
is simply not ``available''--although some would have you
believe otherwise.
Why are we concerned about trade measures that would
threaten the availability of steel? Because we've been there,
done that. History tells us what happens when the steel market
tightens. Three things happen. Prices go up, delivery lead
times lengthen and quality deteriorates. Every time.
We know that restraints on steel imports during the 1980s
and early 1990s hurt the American economy. The U.S.
International Trade Commission found that quotas increase
imports of steel-containing products, costing U.S. companies
billions of dollars in sales. The ITC also found that quotas
reduced American exports by as much as $5.6 billion in 1989,
nearly two percent of exports. Quotas today would do the same.
Why roll back history--and our economy--to relive a failed
trade remedy?
For several reasons, the U.S. is a net steel-importing
nation. Despite significant investment in new state-of-the-art
steelmaking and rolling facilities, the US steel industry has
been unable to keep pace with the growing needs of American
downstream manufacturers. At current levels of demand in this
country, U.S. steel producers cannot supply more than about 75
percent of our needs, leaving a shortfall of about 30 million
tons. Imports are absolutely necessary for the survival of
American manufacturers. They play a vital role in keeping
America as a whole a strong international competitor--and they
help to sustain our economic growth. This is a key reason why
we urge a balanced view of the trade situation.
In the past several months we have heard much about the
condition of the U.S. steel industry--particularly the effects
of imported steel. It is essential that the U.S. government's
review of proposals for trade action be informed by a balanced
and dispassionate understanding of the forces affecting the
marketplace.
The consensus outlook for the U.S. steel industry is for
long-term growth. Production by domestic steel mills is at
near-record levels, and domestic demand for steel is breaking
records. In 1998, U.S. steel mills shipped an estimated 105.5
million tons--a level reached only once before in the history
of the industry.
The consensus forecast is for a very slight decline in U.S.
production in 1999 (less than one percent), and for four-
percent growth in 2000--to a new record level. Continued steady
growth with continued low inflation is predicted for the U.S.
economy as a whole. Not surprisingly, many investment advisors
are recommending steel stocks to their clients.
Steel producers do face a short-term problem--in the second
half of 1998 there has been significant pressure on steel
prices in the U.S. market, especially in commodity grade
steels. November 1998 prices of commodity grade hot-rolled
steel were about 12.5 percent lower than year-earlier prices,
and prices of other flat-rolled products also have declined
significantly. At the same time, U.S. hot-rolled prices are not
low by world market standards. In fact, despite the decline,
current U.S. hot-rolled prices are significantly higher than
spot prices in most foreign markets.
Price pressure is focused most directly on spot sales of
commodity products; there is considerably less pressure on
higher value-added steel products sold under contract. Major
buyers of high-grade steels buy under multiple-year contracts
that assure both buyer and seller of future volumes, and have
the effect of smoothing out market price fluctuations.
Four principal factors help explain current steel market
conditions: a rapid expansion of U.S. production capacity; the
effect of the GM work stoppage; an increase in imports; and the
decline of demand in Asia.
1. Heavy investment by U.S. steel mills has greatly
increased production capacity in the United States and has
reduced production costs. This puts strong competitive pressure
on mills that have not upgraded their facilities.
For example, the U.S. market for hot-rolled steel is
slightly less than 22 million tons. In 1997 and 1998 U.S. mills
added 4.9 million new tons of capacity, and another 4.1 million
is scheduled to come on stream in 1999. This 9 million tons of
efficient new capacity -40 percent of the merchant market--is a
huge increment. It puts pressure on prices and older mills that
have not kept pace. Cold-rolled and galvanized sheet capacity
has also been increased.
2. A temporary excess of flat-rolled steel supply in mid-
1998--caused largely by the GM strike--is being rapidly worked
off.
The work stoppages at GM caused a loss of 548,000 vehicles
scheduled for production, and reduced U.S. demand for steel by
about 685,000 tons. With GM now operating at full capacity
demand is back at high levels.
3. Import levels in 1998 have been unusually high.
At the beginning of 1998 there were steel shortages in the
U.S. market, with smaller customers being most affected. Unable
to satisfy their requirements from U.S. mills, many of these
small customers welcomed steel from foreign mills. U.S. steel
mills also increased their foreign purchases for use as
feedstock, accounting for as much as 25 percent of imports.
Imports were particularly price competitive in light of the
currency devaluations in several major steel-producing
countries. Imports of finished steel in 1998 reached very high
levels -28.8 million tons through October.
However, the situation appears to be correcting itself.
Preliminary import numbers for December show a decline of more
than 30 percent from November levels. There are also
indications that ship loadings of steel products bound for the
U.S. have fallen significantly. Loadings in Japan fell 22
percent in October.
4. Worldwide demand for steel is down, making pricing more
competitive.
The sharp contraction of large parts of Asia, Russia and
countries in Latin America has led to a decline in steel
demand, and has put pressure on steel prices globally. While
U.S. mills have not been impacted directly by declining
overseas demand because they are not significant exporters,
they are facing increasing competition in the U.S. from foreign
mills seeking sales in the strong U.S. market. The impact of
this increased competition is most evident in the spot market
where prices have declined sharply. It is important to note
that much of the steel sold in the U.S. is covered under long-
term contracts where prices reflect long-term supply and demand
conditions, and are not as significantly impacted by short-term
disruptions in the market.
The current situation does not justify ``extraordinary''
U.S. government action. Existing U.S. trade law provides
remedies for the dumping or subsidization of steel, or import
surges of steel. While not perfect, these remedies are, for the
most part, consistent with international trading rules. They
should be allowed to work--and there are early indications that
they are working. No extraordinary intervention in the market
seems justified.
The effects of the GM strike are being worked off, and
there are early indications that foreign exports to the United
States are declining. And, while the construction of new
production capacity in the United States has placed competitive
pressure on older mills that have not made capital
improvements, that investment, on balance, is a positive
development--it is making the U.S. steel industry, as a whole,
more competitive.
In making steel trade policy decisions the government is
wise in considering the implications for the overall economy.
If steel prices in the U.S. move further out of line with those
in the world market, then American-made products that use
steel--autos, heavy equipment, and a host of other products--
become less competitive. Jobs are lost. Production moves
offshore. And much of the steel would still be imported, but in
the form of vehicles and equipment that capture market share
from American manufacturers. The U.S. cannot afford to become
an island of high steel prices.
In the 106th Congress, four pieces of legislation have been
introduced in the House of Representatives in response to the
increase in U.S. steel imports. Apart from the possibility that
actions already taken and those in prospect may already have
adequately addressed the import situation, our general concern
with these new legislative proposals is twofold.
First, we are concerned with any proposal that would
threaten the availability of steel--risking disruption of the
import lifeline that many American manufacturers and consumers
depend on.
Second, we are concerned that some of the provisions may
not be consistent with international trade rules. We think it's
important to abide by our international obligations, not just
because it is right, not just because to do otherwise may
invite trade retaliation, but also because it is in our own
national interest. Users and consumers of products benefit from
being able to choose quality products at low prices. Why
penalize the American public with self-inflicted trade
dislocations?
Our more specific comments on the four legislative
proposals:
H.R. 327 provides for the assessment of antidumping duties
on entries of steel products made prior to the effective date
of any antidumping order issued in the current investigation.
We oppose the bill because:
It is anti-consumer.
It is inconsistent with our international trade
obligations.
It changes the rules after the game is over
H.R. 412 would change the causation standard for Section
201 cases by eliminating the requirement that imports be a
``substantial'' cause of injury to U.S. industry in order for
the ITC to recommend industry relief to the President. (The
word ``substantial'' is defined as an ``important'' cause, no
less important than any other single cause.) The bill would
also require importers to purchase import licenses and allow
for disclosure of import information on a weekly basis.
We oppose the proposed changes in the injury test because:
It would be anti-consumer, making trade
restrictions easier than at present. At the same time it may
not be of much benefit to the steel industry because the
current low prices are due chiefly to increased imports.
Therefore, ``substantial cause'' is not the problem. The
problem is serious injury.
The proposed change is probably inconsistent with
WTO requirements. WTO rules say the imports must be increasing
under such circumstances as ``to cause'' serious injury or to
threaten it. But the proposed change would fall below this
standard: ``a cause'' is not the same as ``to cause.''
A change that goes too far, as this one seems to,
will hurt U.S. consumers and U.S. exporters.
We oppose the imposition of import licenses because:
While we favor a more timely release of
information on imports, we do not favor charging a fee for
import licenses. Such a scheme is anti-consumer and
unnecessary.
The Department of Commerce already has instituted
an effective system of reporting imports.
If more rapid dissemination of information is
needed, sampling can be done and released.
The bill calls for release of business
confidential information, which will stifle imports that
American industry needs.
Any change to Section 201 should safeguard U.S. consumers
by: (1) assuring that import-dependent manufacturers in the
U.S. have access to imported material that is not available
domestically when needed and in the specifications needed; and
(2) assuring that import relief under Section 201 does not
increase effective U.S. prices above world-competitive price
levels.
H.R. 502 would impose a three-month ban on steel imports
from Japan, Russia, South Korea and Brazil.
We oppose the bill because:
It is anti-consumer.
It indiscriminately shuts off imports of various
steels without regard for the consequences--exactly the type of
trade restraint that harms downstream manufacturers.
It is a blatant violation of our WTO
responsibilities.
H.R. 506 would impose quotas on steel imports equal to the
monthly average of imports for the three years ending with June
1997.
We oppose the bill because:
Quotas do not work. They will harm consumers and
steel-consuming industries to a much greater extent than they
could ever help steel producers or steelworkers.
Import quotas of less than 2.4 million tons per
month are inadequate for 1999's steel demand.
If quotas are administered on a country-specific
basis, as is the apparent intent, the quotas will be even lower
and do even more harm to the U.S. economy.
In summary, we recommend that the U.S. government take no
extraordinary action that may endanger the availability of
steel, harm downstream manufacturers and consumers, and
threaten our international trade relationships. We urge that
the trade cases and other actions already underway be allowed
to work, as there is evidence that the import surge is easing.
A good way to increase American exports of steel is in the form
of manufactured steel-containing products. And this can happen
only if American manufacturers can obtain the right steel, when
it is needed, at world-competitive prices.
Mr. English. Thank you, Mr. Jenson.
The Chair recognizes Mr. Dan Griswold, the associate
director of the Center for Trade Policy Studies at the CATO
Institute. Welcome.
STATEMENT OF DANIEL T. GRISWOLD, ASSOCIATE DIRECTOR, CENTER FOR
TRADE POLICY STUDIES, CATO INSTITUTE
Mr. Griswold. Thank you, Mr. Chairman, and Members of the
Subcommittee for allowing the CATO Institute to testify here
this afternoon.
The difficulties facing the steel industry today are not
unique. Increased competition and lower prices are the bane of
every industry's bottom line. Many other U.S. industries have
been hit by the effects of the Asian crisis. Exporters have
seen sales slump while importing competing industries have
faced stiffer competition at home. There is no reason why the
steel industry should receive special treatment at the expense
of its customers and American consumers.
The viability of the U.S. domestic steel industry is not
threatened by recent increases in imports. Domestic steel
producers continue to supply more than two-thirds of the steel
consumed in the United States. Domestic steel shipments reached
102 million tons last year, down slightly from 1997, but still
the second highest level of production in the last two decades.
U.S. domestic producers actually increased their share of world
steel output last year from 12.3 percent to 12.6 percent.
The big steel companies and their unions point to the
10,000 jobs lost in the last year. That number needs to be put
in perspective. In that same period, the U.S. economy as a
whole created 2.5 million jobs. Representative Visclosky
pointed out that one steelworker is losing their job per hour.
The U.S. economy is creating 250 new jobs in that same hour,
the same time span.
Since 1980, the domestic steel industry has cut two-thirds
of its production workers. Most of those layoffs were not
caused by imports but by rising productivity within the
industry. With productivity outpacing domestic demand, the
industry has required fewer workers. The resulting decline in
employment has been relentless with the number of employed
steelworkers falling in 15 of the last 18 years. Employment has
moved steadily downward whether imports have been rising or
falling as a share of new domestic supplies.
Raising barriers against steel imports will impose a real
cost on the American economy. Millions of American workers and
tens of millions of American consumers will be made worse off
so that the domestic steel industry can enjoy temporary
benefits. Consumers will pay more than they would otherwise for
products made from steel, such as household appliances, cars
and trucks. If protectionist measures succeed in raising the
average price of steel, new products by $50 a ton, Americans
will pay the equivalent of a $6 billion tax on the more than
120 million tons of steel they consume a year.
Steel protection will impose a heavy cost on the huge
segment of American industry that consumes steel as a major
import to its production process. The major steel-using
manufacturing sectors--transportation equipment, fabricated
metal products, and industrial machinery and equipment--employ
a total of 3.5 million production workers. Workers in those
industries outnumber steelworkers 20 to 1.
Despite complaints from the big steel mills that Congress
and the administration are not doing enough, the system is
already stacked in favor of domestic producers. U.S.
antidumping laws are already punishing foreign producers for
engaging in practices that are perfectly legal and common in
the domestic American market. U.S. firms, including steel
makers, routinely sell the same product at different prices in
different markets or temporarily sell at a loss in order to
liquidate inventories and recover fixed costs.
It has become obvious in recent days that the aim of the
steel industry's antidumping provisions has not been to restore
some mythical ideal of fair trade, but to lock out--and that
was a phrase used last week by a steel company executive--to
lock out steel imports altogether. On top of protection already
in place, an array of proposals in Congress threatens American
access to imported steel and you've heard much about those
today. None of the offered legislation would increase general
economic welfare in the United States and much of it would be
in violation of U.S. international commitments.
Quotas are one of the most damaging forms of trade
restrictions. They redistribute wealth from consumers to
domestic producers and to those foreign producers lucky enough
to get quota rights. Recent worldwide economic developments
have produced conditions that at present are unfavorable for
American steel producers and favorable for domestic steel
users. In such a circumstance, it is not the business of the
U.S. Government to intervene in the marketplace and favor one
U.S. industry at the expense of other U.S. industries.
And you have just heard from representatives from two of
those industries whose industries, in particular, it makes no
sense to penalize the industries that, in terms of employment
and value-added, are of much greater significance to the
overall national economy. The Federal Government should not use
its power to confer special benefits on a small but vocal
segment of producers at the expense of the Nation's general
welfare. Thank you.
[The prepared statement follows:]
Statement of Daniel T. Griswold, Associate Director, Center for Trade
Policy Studies, Cato Institute
First, let me thank Chairman Crane for the leadership he
has shown on trade issues, and let me also thank the other
members of the committee for allowing the Cato Institute to
testify at this afternoon's hearing.
The difficulties facing the steel industry today are not
unique. Increased competition and lower prices are the bane of
every industry's bottom line. Layoffs, falling profits, and
industry restructuring can be seen today in the oil industry,
where import prices have fallen 40 percent in the last year.
Yet just about everyone understands that lower oil prices are
good for our economy and that duties on imported oil would drag
down living standards and damage our national interest. The
same is true for steel protection.
The primary cause of rising steel imports and falling
prices during 1998 was the Asian economic crisis, which
resulted in (1) a collapse in demand for steel in that region
and (2) a realignment of currency values that makes foreign
steel much more price-competitive in the United States. In
light of those circumstances, it is only natural that that
prices fell and that the still vibrant U.S. market pulled in
extra imports.
Many other U.S. industries have been hit by the effects of
the Asian crisis: Exporters have seen sales slump while import-
competing industries have faced stiffer competition at home.
There is no reason why the steel industry should receive
special treatment at the expense of its customers and American
consumers, just because it is experiencing temporarily
unfavorable conditions.
The viability of the U.S. domestic steel industry is not
threatened by the recent increase in imports. According to
Commerce Department figures, imports of steel mill products
peaked in the fall of 1998 and have been declining since then.
Normal marketplace reactions, compounded by the threat of
retroactive antidumping duties, caused December steel imports
to fall by one-third compared to November, including a 47
percent plunge in imports from Japan and a 79 percent fall in
imports from Russia.
For all of 1998, imports of steel mill products were up 33
percent from 1997, but most of the net increase in imports went
to meet strong domestic demand. In terms of tons of steel
shipped, the U.S. domestic steel industry had one of its best
years ever in 1998. Domestic steel shipments reached 102
million tons last year, down 3 percent from 1997, but still the
second highest level of production in the last two decades.
Domestic steel production in 1998 was still 20 percent above
production in 1989, at the peak of the last expansion. With
world steel production falling, U.S. domestic producers
actually increased their share of world steel output last year,
from 12.3 percent in 1997 to 12.6 percent.
Prospects for the U.S. steel industry remain positive
despite current problems. Domestic demand is expected to remain
strong, especially in the automotive sector, and exports could
pick up in 1999 as demand in East Asia begins to recover. After
bottoming out in the fourth quarter of 1998, steel prices are
expected to rise in 1999; indeed numerous U.S. mills have
announced price hikes in the past few weeks. Despite the recent
increase in imports, domestic steel producers continue to
supply more than two-thirds of the steel consumed in the United
States.
The Futility of Protection
The big steel companies and their unions point to the
10,000 jobs that have been lost in the industry in the last
year, but that number needs to be put in perspective. First,
total job losses in the steel industry are relatively small
when compared to the 2.5 million net new jobs created in the
whole U.S. economy in 1998. U.S. economic policy should not be
driven by an industry whose job losses in the last year are
being overwhelmed by an expanding economy that, during the same
period, created nearly that many net new jobs on an average
business day.
Second, falling employment in the steel industry is nothing
new. Since 1980, the domestic steel industry has shed two-
thirds of its production workers. Most of the layoffs in the
steel industry have not been caused by imports, but by rising
productivity within the industry. In 1980, a ton of
domestically produced steel required 10.1 man-hours to produce;
today the industry average is 3.9 man-hours. With productivity
rising faster than domestic demand, the industry has required
fewer workers. The resulting decline in employment has been
relentless, with the number of employed steelworkers falling in
15 of the last 18 years. Employment has moved steadily downward
whether imports have been rising or falling as a share of
domestic supply. For example, imports as a percent of new
supply (shipments plus imports) fell from a peak of 26.2
percent in 1984 to a low of 16.7 percent in 1991. Yet during
that same period, employment in the steel industry fell by more
than 70,000. (See the attached graph.)
Foreign competition has helped to spur this progress in
productivity, but the most ferocious competition has come from
within our borders, from so-called mini-mills. The more
efficient of these smaller mills can produce a ton of steel in
under two man hours, and are relentlessly expanding the scope
of products they can make. In 1981, mini-mills accounted for 15
percent of U.S. steel production; today they account for nearly
half of the steel-making capacity in the United States. With or
without protection, the industry will continue to consolidate
and shed workers, with production shifting from the larger
integrated mills to the smaller, more flexible and efficient
mini-mills.
Steadily declining employment has come despite three
decades of government import protection. Beginning with import
quotas in 1969, protection has been the rule rather than the
exception for the steel industry. Quotas were followed in the
late 1970s by the Carter administration's ``trigger price''
mechanism and then in the 1980s by the Reagan administration's
``voluntary'' import quotas. U.S. ``fair trade'' laws seem to
have been written primarily for the steel industry. About a
third of the antidumping orders in the last two decades have
been directed at imported steel. The latest round of
protection--with preliminary antidumping rates ranging from 25
to 71 percent, and a suspension agreement with Russia--
threatens a severe disruption in U.S. industry access to needed
steel supplies.
The Steel Manufacturers Association, the trade group
representing the mini-mill sector, recognizes the futility of
protection. According to an official statement, its members
``note the deterioration of artificially protected industries
and markets. They have seen artificially nurtured industries
sink into excessive complacency and stagnation. They believe
that competition has fostered a revolution in the U.S. steel
industry.'' These words are as true today as ever.
Costs to U.S. Economy
Raising barriers against steel imports will impose a real
cost on the American economy. Millions of American workers and
tens of millions of American consumers will be made worse off
so that the domestic steel industry can enjoy temporary
benefits. Consumers will pay more than they would otherwise for
products made from steel, such as household appliances, trucks,
and cars. (The average five-passenger sedan contains $700 worth
of steel.) Artificially propping up the domestic cost of steel
will only raise the cost of final products to U.S. consumers.
If protectionist measures succeed in raising the average price
of steel mill products by $50 a ton, Americans will pay the
equivalent of a $6 billion tax on the more than 120 million
tons of steel they consume each year.
Steel protection will impose a heavy cost on the huge
segment of American industry that consumes steel as a major
input to its production process. The major steel-using
manufacturing sectors--transportation equipment, fabricated
metal products, and industrial machinery and equipment--employ
a total of 3.5 million production workers. Production workers
in manufacturing industries that use steel as a major input
outnumber steelworkers by 20 to 1.
A prime example is General Motors Corp., which buys 4.7
million tons of steel directly each year and another 2.5
million tons indirectly through independent suppliers. GM buys
most of its steel through long-term contracts, and is thus
insulated from short-term price fluctuations, but any price
increase caused by protection will eventually filter through
when contracts are renegotiated. In a brief filed with the
International Trade Commission in October 1998, GM warned that
antidumping duties against steel imports could negatively
affect its ability to compete in global markets. GM's domestic
operations ``become less competitive in the international
marketplace to the extent those operations are subjected to
costs not incurred by offshore competition, and to the extent
that U.S. import barriers impede access to new products and
materials being developed offshore, or remove the competitive
incentives to develop new products in the United States.''
Another company hurt by steel protection is Caterpillar of
Peoria, Ill., which buys 600,000 tons of steel annually to make
earth-moving equipment. While three-quarters of Caterpillar's
production facilities are located within the United States, one
half of its sales are abroad. Higher steel prices in the
domestic market will eventually cause its products to become
less price competitive compared to products made in other
countries. Sales, profits, and employment will suffer.
One of the largest direct consumers of steel is the
construction industry, which accounts for about 35 percent of
domestic steel consumption. Duties and tariffs against imported
steel will filter through to higher prices for homes and
commercial office space. The jobs of thousands of construction
workers could be put in jeopardy. When construction and other
non-manufacturing industries are included, the total number of
employees in steel-using industries dwarfs the number of
steelworkers by 40 to 1.
Especially vulnerable to rising import prices are workers
in smaller companies that manufacture metal products. These
firms typically buy on the spot market rather than on long-term
contracts, and are the first to feel the pinch of higher steel
prices. Many of them also act as suppliers to larger
corporations, and are thus less able to pass along a hike in
steel costs in the form of higher prices for their final
products. The result of higher domestic steel prices to these
companies will be lower sales, declining profits, and fewer
jobs created.
If the steel industry succeeds is gaining protection from
imported steel, an even larger gap will open between domestic
and international prices for steel mill products. This will
give an advantage to foreign firms competing against American
steel-using industries. Faced with artificially high steel
prices at home, Americans will simply buy their steel
indirectly by importing more finished products made abroad from
steel available at cheaper global prices. If the federal
government blocks the import of steel mill products through the
front door, steel will come in the back door in the form of
automobiles, industrial equipment, machine tools, and other
steel-based products.
Besides being economically self-defeating, steel protection
would be at odds with America's foreign policy interests. The
best thing America can do to encourage growth and stability in
the world economy is to keep our markets open. It makes no
sense to hector Japan to stimulate its domestic economy or to
underwrite IMF loans to Brazil and Russia while denying
producers there the opportunity to earn valuable foreign
exchange by selling steel to willing American buyers.
One recent study suggested that restrictions on steel
imports will enhance overall U.S. economic welfare.
Specifically, the Economic Strategy Institute published a study
earlier this month which purports to show that steel dumping,
however that term might be defined, reduces U.S. economic well-
being, and that antidumping duties are needed to prevent this
harm. ESI's findings rest ultimately on the fact that wages in
the steel industry are higher than average and that displaced
steel workers frequently are forced to accept lower paying
jobs. Thus, according to the ESI study, net U.S. welfare is
reduced by dumping that causes job losses in the steel sector;
antidumping is good for us because it prevents those job
losses.
First, this argument gets causation backwards: it assumes
that high-paying jobs are the cause of economic welfare, rather
than the consequence of it. If applied across the board, the
ESI analysis would mean that public policy generally should
protect our high standard of living by discouraging or even
outlawing layoffs from high-paying jobs. This is basically the
European approach, and its effects are all too visible in low
growth and chronic double-digit unemployment.
Second, and more narrowly, the ESI analysis assumes that
job losses in the steel sector wouldn't occur in the absence of
low-priced import competition--an assumption refuted by the
industry's steadily declining employment over the past 20
years.
Third, the study fails to adequately account for the
offsetting production and employment gains that the lower
prices would stimulate in the far larger steel-using sectors.
Even if one accepts the study's methodology, the hypothetical
gains from imposing antidumping duties against foreign steel
are tiny--less than .005 percent of annual GDP--and not worth
the far more real danger that the law will be used for
protection.
America's Unfair ``Unfair Trade'' Laws
Despite complaints from the big steel mills that Congress
and the administration are not doing enough, the system is
already stacked in favor of domestic steel producers. U.S.
antidumping law has become nothing more than a protectionist
weapon for industries feeling the heat of global price
competition.
These laws punish foreign producers for engaging in
practices that are perfectly legal, and common, in the domestic
American market. U.S. firms, including steel makers, routinely
sell the same product at different prices in different markets
depending on local conditions, or temporarily sell at a loss in
order to liquidate inventories and cover fixed costs. Any steel
company that lost money in the third or fourth quarters last
year was selling its goods at below total average cost and was
consequently ``dumping'' its products on the domestic market
according to the definition contained in U.S. law. If every
domestic sale was required to be at a ``fair'' price according
to the antidumping law's definition, most American companies
would be vulnerable to government sanction, and U.S. consumers
would find far fewer bargains.
It is a misnomer to say that steel is being ``dumped'' on
the U.S. market. Virtually every ton of steel that enters the
United States has been ordered by a willing American buyer,
often months in advance of its actual delivery. Antidumping
duties not only stop foreign producers from selling in the U.S.
market; they stop American citizens from buying the type and
amount of steel they need at prices that benefit them most as
shareholders, workers and consumers.
Proposed Legislation Would Compound the Damage
On top of antidumping protection already in place, an array
of new protectionist proposals in Congress threatens U.S.
producers' access to imported steel. None of the offered
legislation would increase general economic welfare and much of
it would be in violation of U.S. international commitments.
1) H.R. 506/S. 395, Stop Illegal Steel Trade Act, sponsored
by Rep. Visclosky and Sen. Rockefeller. This bill would limit
steel imports from all nations to 1997 levels on a monthly
basis for a period of three years. Although SISTA says that the
import limits could be accomplished by ``quotas, tariff
surcharges, or negotiated enforceable voluntary export
restraint agreements, or otherwise,'' it is in essence a quota
bill that would set strict limits on the volume of foreign
steel U.S. companies would be allowed to purchase. SISTA is a
clear violation of our institutional obligations under the
GATT.
Quotas are one of the most damaging forms of trade
restrictions. They redistribute wealth from consumers to
domestic producers and to those foreign producers lucky enough
to get quota rights, while the U.S. government does not receive
tariff revenues. In other words, SISTA would tax U.S. steel
users to benefit major steel companies, both here and abroad.
Moreover, SISTA would endanger the ability of U.S. steel-using
industries to obtain the materials they need. According to
calculations by the Precision Metalforming Association, for
example, SISTA quota levels would leave U.S. manufacturers
nearly 4 million tons short based on 1998 levels of demand.
2) H.R. 502, Fair Steel Trade Act (FASTA), sponsored by
Rep. Traficant. FASTA would impose a 3-month ban on imports of
steel and steel products from Japan, Russia, South Korea, and
Brazil, in disregard for the needs of American consumers and
steel-using industries. A trade ban--even a limited one--would
seriously damage private business relationships and undermine
the global competitiveness of dynamic U.S. companies. This bill
would deprive the U.S. economy of all the gains from steel
trade and offer only temporary benefits to domestic steel
companies. It would, in short, be a disaster.
3) H.R. 412/S. 261, Trade Fairness Act of 1999, sponsored
by Rep. Regula and Sen. Specter. This legislation would create
a permit and monitoring program that would require all steel
importers to register with the Commerce Department and report
information on the cost, quantity, source, and ultimate
destination of all steel shipments. The bill authorizes
Commerce to collect ``reasonable fees and charges'' to defray
the costs of issuing permits.
More significantly, the bill would amend the Trade Act of
1974 to make an injury finding easier under Section 201. First,
it would drop the requirement that imports be a ``substantial
cause'' of serious injury (i.e., ``not less than any other
cause'') and instead require that imports be only a cause of
injury, however insignificant. Second, the bill would detail
the factors to be considered by the ITC to determine whether
U.S. industry has suffered serious injury.
The Trade Fairness Act is the most subtle of all the
current proposals, and thus the most dangerous. Its import-
reporting regime, in addition to being an unfair burden that
falls only on steel importers, has the potential to choke off
beneficial steel trade through paperwork. The Section 201
amendments, however, are its most ominous provision. By making
201 cases much easier for petitioners to win, this bill
threatens to open the floodgates of protectionism in the
future. It is clearly a step in the wrong direction.
4) Voluntary Export Restraints. The administration is
attempting to jawbone foreign governments--especially Japan--
into reducing steel exports ``voluntarily.'' Of course, a VER
is in reality an informal quota that is hardly voluntary. Like
all quotas, VERs distort the economy and reduce national
welfare. The Institute for International Economics has
estimated that steel quotas in the 1980s imposed a net loss on
the U.S. economy of $6.8 billion a year.
Conclusion
Unfortunately, changes in steel prices are invisible to
ordinary Americans. Those changes show up, eventually, in the
price of an automobile, or a plane ticket, or rental space in
an office building--but the causal connections are complex and
subtle. The effect of a tax on foreign steel just doesn't show
up in the average family's budget in any direct or immediate
way. As a result, steel producers are free to equate their
interest with the national interest without generating much in
the way of grass-roots opposition.
The campaign for steel protectionism thus highlights a
classic problem of political economy known as concentrated
benefits and dispersed costs. The benefits of restrictions on
foreign steel are concentrated in the relatively small steel-
producing sector, while the costs are dispersed throughout the
entire economy. Steel producers therefore have a very clear and
powerful incentive to lobby for protectionism, while most of
the rest of us who stand to lose don't have a big enough or
clear enough stake to oppose them with any vigor.
Worldwide economic developments have combined to produce
conditions that at present are unfavorable for U.S. steel
producers and favorable for American steel users. In such a
circumstance, it is not the business of the U.S. government to
intervene in the marketplace and favor one U.S. industry at the
expense of other U.S. industries. In particular, it makes no
sense to penalize the industries that in terms of employment
and value-added are of much greater significance to the overall
national economy. So if you think an import tax to help out the
oil companies sounds like a bad idea, you ought to come to the
same conclusion about steel protectionism. Just because the
costs are better hidden doesn't mean they're not there.
The federal government should not use its power to favor
one industry over another, or to confer special benefits on a
small but vocal segment of producers at the expense of the
nation's general welfare. Congress should reject calls for
steel protection and reform the antidumping law to prevent
future abuse.
[GRAPHIC] [TIFF OMITTED] T7306.017
Mr. Houghton [presiding]. Thanks. Mr. Mastel.
STATEMENT OF GREG MASTEL, VICE PRESIDENT AND DIRECTOR OF
STUDIES, ECONOMIC STRATEGY INSTITUTE
Mr. Mastel. Good afternoon, Mr. Chairman. When the steel
industry's problems with dumped imports became apparent some
months ago, the Economic Strategy Institute undertook a
rigorous analysis of the global steel industry, dumping as a
commercial tactic in the steel industry, and the application of
U.S. antidumping laws as a remedy. That study, which is
entitled ``Leveling the Playing Field and Anti-Dumping and the
U.S. Steel Industry'' was supported by a grant from the Kearny
Foundation, a nonprofit foundation whose purpose is to assess
problems and opportunities of trade and business with Asia.
In the limited time I have, I would like to briefly
summarize two important conclusions from the study. First, the
world steel market is deeply distorted by various subsidies,
trade barriers, cartels, and numerous government-industrial
policies. The global steel market is the most distorted
industrial market in the world economy.
Many countries, notably Japan and Korea, have built
domestic steel industries with industrial policies that rely
heavily upon closed home markets, which ensure high domestic
prices. Over the years, former government trade barriers that
were once the backbone of this strategy have been replaced by
the operation of cartels. This is especially true in Japan.
Companies from Brazil to Sweden have followed with their own
versions of Japan strategy over the years and domestic steel
industries have proliferated.
Recently, the global steel market has been further
complicated by the emergence of two partly reformed nonmarket
economies, Russia and China, as, respectively, the world's
largest exporter and the world's largest manufacturer of steel.
In most of the world's steel market, the key decisions are made
by the government, not by the market. As the OECD has
documented, the cumulative result is the world has a great
excess production capacity in steel.
For the United States, the world's only truly open major
market for steel, dumping is the common result. Backed by
subsidies or profits from closed home markets, steel companies
from many countries dump steel on the world market to dispose
of overproduction. Through dumping, these companies export
steel and their home governments keep their steelworkers
employed and, effectively, export unemployment to open-market
countries. As the world's major open-market country, the United
States absorbs much of both.
Certainly, the Asian and Russian economic crises pushed
these dumped steel exports to higher levels in 1998 than had
been previously experienced. Still, were it not for many years
of systematic market distortion, there would be far less excess
production capacity in the world and efficient steel
industries, like that of the United States, would suffer far
less from dumped imports.
Second, dumping is damaging for the U.S. economy.
Some observers have naively argued that dumping should be
viewed as a gift to consumers and happily accepted. This view
simply ignores the competitive realities in world industrial
markets and cannot withstand a rigorous analysis. As documented
in my recent study of dumping in the steel industry, dumping is
a periodic phenomenon that greatly impacts the U.S. industry,
on average, only once every several years. Consumers only
benefit in the year the dumping is actually taking. Steel
manufacturers, however, feel the negative impact over a period
of many years. Investment and production decisions continue to
be affected by the threat of dumping even after dumping has
ceased.
Without vigorous use of antidumping laws, the result would
be a U.S. steel industry which, despite being otherwise
competitive, would shrink dramatically in response to dumping.
The cost to the U.S. economy in lost wages, production, and
investment rapidly outweighs the transient consumer benefits
from dumping. Over the course of a 10-year simulation of the
steel market, uncountered dumping resulted in a $30 billion
decrease in U.S. steel shipments.
Further, the potential costs to steel consumers of
countering dumping are small. Even if dumped imports were
entirely eliminated, the U.S. steel market would still be quite
competitive and open, with more than a dozen U.S. companies
competing vigorously among themselves and with fairly traded
imports. Under these conditions, countering dumping is highly
unlikely to produce prices above normal market prices.
In conclusion, let me turn to one last point I want to
emphasize for you, including observations. Countering dumping
also has the secondary benefit of bolstering public support for
free and open trade. Simply put, free trade will not long be
politically viable without fair trade. The founders of the
world trading system, now known as the WTO, were well aware of
this political reality and that is why the WTO fully endorses
the operation of U.S. antidumping laws.
Those who want to ensure an open U.S. market and pursue
further trade negotiations would be well advised to ensure that
U.S. laws, like antidumping laws, are rigorously enforced. For
without the operation of those trade laws, trade problems like
those now being experienced by the steel industry, would likely
shatter public support for free trade. I think the wide support
for some of the legislation that has been talked about today is
the clear evidence that that is exactly what is happening.
antidumping laws are a very important political safety valve
and the steel industry's recent experience demonstrates they
are still needed very much. Thank you, Mr. Chairman.
[The prepared statement and attachment follow:]
Statement of Greg Mastel, Vice President and Director of Studies,
Economic Strategy Institute
My name is Greg Mastel and I am currently vice president
and director of studies at the Economic Strategy Institute
(ESI).
For a number of years, I have been interested in the
operation of U.S. trade laws and the international economic
problems that make them necessary. I authored a book a year ago
on the operation of U.S. antidumping laws, which impose duties
on imported products sold at less than their cost of production
or less than their price in the home market. When the steel
industry's problems with dumped imports became apparent some
months ago, ESI undertook a rigorous analysis of the global
steel industry, dumping as a commercial tactic in the steel
industry, and the application of U.S. antidumping laws as a
remedy. This study was supported by a grant from the Kearny
Foundation, a non-profit foundation whose purpose is to assess
problems and opportunities of trade and business with Asia.
With your permission, Mr. Chairman, I would like to include
the executive summary of this study, titled Leveling the
Playing Field: Antidumping and the U.S. Steel Industry, with my
testimony in the hearing record.
In the limited time I have, I would like to briefly
summarize two important conclusions from the study.
First, the world steel market is deeply distorted by
various subsidies, trade barriers, cartels, and numerous
government industrial policies. The global steel market is the
most distorted industrial market in the world economy. Many
countries, notably Japan and Korea, have built domestic steel
industries with industrial policies that rely heavily upon
closed home markets, which ensure high domestic prices. Over
the years, the formal government trade barriers that were once
the backbone of this strategy have been replaced by the
operation of cartels. Countries from Brazil to Sweden have
followed their own versions of the ``Japan strategy'' over the
years and domestic steel industries have proliferated.
Recently, the steel industry has been further complicated
by the emergence of two partly reformed non-market economies,
Russia and China, as respectively, the world's largest exporter
and the world's largest manufacturer of steel.
In most of the world's steel market, the key decisions are
made by the government, not by the market. As the OECD has
documented, the cumulative result is the world has a great
excess production capacity in steel.
For the United States, the world's only truly open major
market for steel, dumping is the common result. Backed by
subsidies or profits from closed home markets, steel companies
from many countries dump steel on the world market to dispose
of overproduction. Through dumping, these companies export
steel and their home governments keep their steel workers
employed and, effectively, export unemployment to open market
countries. As the world's major open market, the United States
absorbs much of both.
Certainly, the Asian and Russian economic crises pushed
these dumped steel exports to higher levels in 1998 than
previously had been the case. Still, were it not for many years
of systematic market distortion there would be far less excess
production capacity in the world and efficient steel
industries, like that of the United States, would suffer far
less from dumped imports.
Second, dumping is damaging to the U.S. economy. Some
observers naively argue that dumping should be viewed as a gift
to consumers and happily accepted. If other countries are
willing to subsidize and dump steel, we should benefit from
their mistake and enjoy the lower prices.
This view simply ignores the competitive realities in world
industrial markets and cannot withstand rigorous analysis. As
documented in my recent study of dumping in the steel industry,
dumping is a periodic phenomenon that greatly impacts the U.S.
industry on average only once every several years. Consumers
only benefit in the year the dumping is actually taking place.
Steel manufacturers, however, feel an ongoing negative impact.
Investment and production decisions continue to be affected by
the threat of dumping even after dumping has ceased. Without
vigorous use of antidumping laws, the result would be a U.S.
steel industry, which despite being otherwise competitive,
would shrink dramatically in response to dumping. The cost to
the U.S. economy in lost wages, production, and investment
rapidly outweighs the transient consumer benefits from dumping.
Over the course of a ten-year simulation of the steel market,
uncountered dumping resulted in a $30 billion decrease in U.S.
steel shipments.
Further, the potential costs to steel consumers of
countering dumping are small. Even if dumped imports were
entirely eliminated, the U.S. steel market would still be quite
competitive and open, with more than a dozen U.S. companies
competing vigorously among themselves and with fairly traded
imports. Under these condition, countering dumping is highly
unlikely to result in prices above normal market prices.
CONCLUSION
Mr. Chairman, no one would dispute that other factors, such
as increased productivity, and demand disruptions, have had an
impact on the steel industry. That said, however, the U.S.
steel industry has made enormous competitive strides in recent
years and, if dumping is countered, stands well positioned to
generate high-paying jobs and contribute many billions of
dollars to the U.S. economy in coming years.
By countering dumping, the U.S. government attempts to re-
establish the level playing field that has been distorted by
subsidies, cartels, and government industrial policies. On a
level playing field, investment and production decisions will
be made on a rational basis, which will greatly benefit the
U.S. economy in the long term.
Countering dumping also has the significant secondary
benefit of bolstering public support for free and open trade.
Simply put, free trade will not long be politically viable
without fair trade. The founders of the world trading system
were well aware of this political reality and that is why the
WTO fully endorses the operation of U.S. antidumping laws.
Those who want to ensure an open U.S. market and pursue
further trade negotiations would be well advised to be certain
that U.S. trade laws, like antidumping laws, are vigorously
enforced. For without the operation of those trade laws, trade
problems, like those now being experienced by the U.S. steel
industry, would likely shatter public support for free trade.
Thank you, Mr. Chairman.
Leveling the Playing Field: Antidumping and the U.S. Steel Industry by
Greg Mastel and Andrew Szamosszegi
Executive Summary
Driven by mercantilist trade distortions that underlie the
global economic crisis, foreign exports of steel to the United
States have hit record levels in 1998 and are continuing at
high levels in 1999. This sudden flood of steel into the United
States has forced U.S. steel mills to close or slow production
and put thousands of steel workers out of work. These problems
have, in turn, sparked a debate over what response, if any, the
U.S. government should pursue. This paper analyzes the causes
and impact of the surge in steel imports and analyzes the
appeal of various policy responses, including U.S. trade laws
aimed at countering unfair trade practices, such as
subsidization and dumping.
The world steel market is perhaps the most distorted
industrial market in the world. To achieve economic and
political objectives, many countries have pursued industrial
policies aimed at nurturing a steel industry with trade
protection and subsidies.
In contrast, the United States steel industry has generally
not been the recipient of such special treatment. The U.S.
economy is open and subsidies have been very limited,
especially when compared to those of other major industrial
countries. In the 1970s and 1980s, the U.S. steel industry had
serious competitive problems, but $50 billion in new investment
has built an industry with some of the highest productivity
levels and lowest costs in the world.
Success in today's highly distorted world steel market,
however, often has less to do with investment, adoption of new
technology and increased labor productivity than with the
industrial and trade policies of foreign governments. The
combined result of the numerous steel industrial policies is
that the world has tremendous excess production capacity in
steel. In such a situation, the high-fixed cost structure of
the steel industry encourages fierce price competition during
downturns. The involvement of governments, which press for
keeping production lines open and workers employed, greatly
accentuates this tendency. Dumping--sales in export markets
below cost or sales below the price in the home market--is the
frequent result.
The United States has frequently used antidumping laws,
which counter dumping with offsetting duties, and
countervailing duty laws, which counter unfair subsidies, to
level the international playing field in steel. Since 1980,
there have been 46 successful antidumping (AD) cases involving
steel and 27 countervailing duty (CVD) cases. In response to
the recent surge of steel imports, the U.S. steel industry has
filed a number of new AD/CVD cases. These complaints allege,
with considerable factual support, that companies from a number
of countries, including Russia, Japan, South Korea, and Brazil
are again receiving subsidies or are engaged in injurious
dumping in the U.S. market, which are illegal under both U.S.
and international law. If these allegations are upheld by U.S.
authorities, offsetting duties will be imposed to counter the
injurious impact of these practices on U.S. steel manufacturers
and workers.
However, the economic desirability of imposing AD/CVD
duties has been questioned. Some argue that the United States
would be better off simply accepting dumped and subsidized
products as ``gifts to consumers.'' While this line of analysis
is superficially attractive, it cannot withstand rigorous
analysis.
The long term costs to producers and workers of failing to
counter the dumped and subsidized steel in the U.S. market
substantially outweigh the transient consumer benefits arising
from short term price cuts. Without an assurance that action
can and will be taken against trade distorting and illegal
commercial practices, investment in and production of steel and
many other manufactured products in the United States will
become an unattractive proposition. Over time, the losses to
the U.S. economy in terms of lost production, investment, and
high-wage jobs, mount to painful levels.
This paper will demonstrate this point by using a dynamic
partial equilibrium economic model to simulate the economic
impacts of unrestrained steel dumping on the U.S. economy.
Based upon historical experience, injurious dumping is modeled
as an intermittent or periodic practice that is employed by
foreign companies in only some years. Also based upon
historical experience, scenarios for 5 percent to 15 percent
price cuts due to dumping were considered. The results suggest
that if the United States had not imposed antidumping duties in
the 1990s, the economic costs of dumping would have outweighed
the benefits of low prices to consumers within several years.
In 1997, the total net costs of failing to counter dumping--
lost economic activity, lower wages, etc.--would have totaled
between $71 and $338 million, depending upon the level of
dumping.
Based upon this simulation and related analysis, the paper
concludes that the United States has a strong interest in
countering dumped and subsidized steel imports. The alternative
of simply accepting these market distortions would harm the
U.S. industrial base, erode high-wage employment, and impose
considerable net costs on the U.S. economy. Additionally,
political support for free trade in the United States would
likely erode in response to an obviously unlevel playing field.
Without question, the global steel market is entering a
period that will require substantial adjustment. There is
simply too much production capacity in the world and some of it
must close. By employing AD/CVD duties, the U.S. government can
ensure that efficient, competitive U.S. capacity will not be
driven out of business by unfair foreign trade and industrial
policies. By imposing duties on the imports that are most
heavily subsidized or dumped, AD/CVD laws also encourage the
closure of the least competitive steel mills around the world--
a desirable and efficient market outcome.
An alternative approach that is often suggested, limiting
imports through a Voluntary Restraint Agreement (VRA) may also
preserve the U.S. industry. This approach is far less
attractive, however, because governments, not markets,
determine VRA market shares, and because quota rents would go
to foreign governments or companies.
Chairman Crane [presiding]. Thank you. Hold on just a
second. Thank you and I apologize, gentlemen, for being absent
during your presentations but I had to go make a trade talk to
the Latin American Foundation and their plight is of concern to
us too, beyond just Brazil's export of steel.
At any rate, let me ask one question of those of you--and
Mr. Woltz and Mr. Jenson, I understand that you folks are steel
users. And, as representatives of steel users, can you tell me
the extent to which the administration consulted with your
companies during the negotiations with the Russians to ensure
that you would not be adversely affected by any agreement
limiting Russian steel shipments to the United States?
Mr. Jenson. Well, to my knowledge, we were not consulted at
all. And one of our concerns with the supplemental agreement,
the comprehensive steel agreement, is that consumers and users
are not mentioned as parties, affected parties.
Chairman Crane. Well, that was one of the concerns I had
too on hearing some of the arguments that were presented and
some of the charges.
But, Mr. Woltz, do you have any comment?
Mr. Woltz. Insteel Industries was not consulted either.
Chairman Crane. All right. Mr. Levin.
Mr. Levin. I have got to thank you. Your testimony is
interesting. I don't think we will ever get, for example, Mr.
Griswold and Mr. Mastel to agree. But it is good to hear such
divergent views.
I take it, Mr. Griswold, you would--just so I am clear--you
would abolish all of our antidumping laws now?
Mr. Griswold. I think the antidumping laws, certainly as
they are currently written, serve no national interest. They
certainly serve the interests of selected industries. The steel
industry has filed, as I understand, about one-third of the
antidumping cases in recent years and makes heavy use of it.
They do protect selected industries at the overall expense of
the U.S. economy. There is no economic justification for them
and they are primarily a political tool as they are written
today.
Mr. Levin. So I think that you would repeal them?
Mr. Griswold. I would. I think if we are going to have
antidumping laws, they should be based, as they originally were
when they were written in 1916, which was to counter predatory
pricing. Today's law has nothing to do with predatory pricing.
That is not a threat in steel. No particular country or steel
company overseas is going to corner the U.S. market. It is too
diversified an industry.
If it was based strictly on protecting consumers from
predatory pricing, I could support that in theory.
Mr. Levin. When you say predatory, you are saying
consumers. So that if an industry is injured seriously, that
isn't enough.
Mr. Griswold. No. The original intent of----
Mr. Levin. I mean for your--forgetting the original intent,
but if there is selling here below cost of production there,
you would simply let it be.
Mr. Griswold. I would, as I----
Mr. Levin. OK, sir. That is a good answer. I mean, you
don't really need to--I mean, I will say this about CATO, it is
consistent.
Mr. Griswold. I will take that as a compliment.
Mr. Levin. No, and I mean that somewhat charitably. I mean,
you are predictable and consistent. I don't know that it is
fair to label it, as you do, nothing more than a protectionist
weapon for industries feeling the heat of global price
competition. You don't really care what the basis of that
competition is. If it is subsidized overseas, if it is
controlled by the country, it really doesn't matter.
Mr. Griswold. Well, of course, with subsidized, we have the
whole CVE.
Mr. Levin. Well, but you would, I take it, abolish that
too.
Mr. Griswold. It is a whole different question. But
antidumping laws as currently written serve no national
interest.
Mr. Levin. All right. I think my time is going to evaporate
quickly. I think I wanted to just say a word--look, it is clear
you have different interests. Those of you who produce products
have a different interest than those who produce the raw
material. That is somewhat built in.
Mr. Woltz, you don't say you support--I think you said in
your testimony you support our antidumping laws, basically.
Mr. Woltz. Yes. Our association is made up of members who
have made active use of the dumping laws and they all feel that
it is appropriate to do so.
Mr. Levin. Right. So, and I think you said it, Mr. Jenson,
you said that you wouldn't object to more effective monitoring?
Mr. Jenson. Right, as long as it didn't involve fees and
the extraction of information.
Mr. Levin. Right. And how about accelerating the process by
which determinations are made? Would you object to that?
Mr. Woltz. From Insteel's point of view and from the point
of view of the AWPA, much of the time that is expended in these
processes is time that is devoted to gathering the facts
surrounding importation of various products. And, to the extent
that the process can be collapsed and more time effective but
still have a high degree of integrity, I am sure that
expediting the process is a good move. But, to the extent that
we sacrifice quality of the facts and the underlying
investigation is compromised, I don't think it serves the
interests of producers or consumers to expedite the process
just for that purpose.
Mr. Levin. OK. But as long as the quality of the product
isn't impinged on seriously or significantly, you don't object
to an acceleration of the determination process?
Mr. Woltz. No.
Mr. Levin. And how about the question of the
comprehensiveness of those determinations, so that a
determination isn't undermined by having a country simply shift
from one product to another?
Mr. Woltz. Well, as a member of a downstream industry, we
see all of these actions as potentially exposing downstream
industries to additional competition. We saw it in the VRA
program. We have seen it with every round of dumping and
countervailing cases that have been initiated by our supplier
base; that restrictions on the importations of wire rod lead,
every time, to additional imports of downstream products that
affect our markets. And that is of great concern to us.
Our markets are not large markets like wire rod, which is,
in the United States, merely a 7-million-ton market. Insteel's
markets are made up of 200,000- and 300,000-ton-per-year
consuming businesses and, generally, it is very difficult to
make effective use of the dumping laws in markets of that size.
So the downstreaming issue is of great concern and it will
remain so through the processes that are underway now with the
201 that has been filed.
Mr. Levin. My time is up. Thank you.
Chairman Crane. Mr. Houghton.
Mr. Houghton. Thank you, Mr. Chairman. A big problem. Very
difficult to put your arms around this.
If you assume--you may not--but if you assume what Mr.
Barnette, who is chairman of Bethlehem, says, that the U.S.
steel industry is the lowest cost, highest quality, best
service steel industry in the world, something isn't right.
Here you have our imports going up year by year by year. The
only reduction really is, in terms of over the last years,
Brazil and Russia, more than made up for by increases in other
countries, particularly Japan and Korea. You take a look at our
exports. Our exports--and I have got the numbers here for hot-
rolled carbon steel--they are going down year by year by year.
So imports are going up, our exports are going down, and we
have got the greatest industry in the world. What is happening?
What do we do about it?
Mr. Griswold. If I could try to respond to that, Mr.
Congressman.
Mr. Houghton. Go ahead.
Mr. Griswold. One, exports have been going up and down.
They peaked in 1984 and then came down to a trough in 1991 and
then it has kind of been up and down. So it hasn't been a
steady rise up.
The second thing is, you can't----
Mr. Houghton. Exports have been in steady descent.
Mr. Griswold. Exports----
Mr. Houghton. Exports from the United States.
Mr. Griswold. They have taken a hit in the last year, as
exports have----
Mr. Houghton. They had in 1996, 1997, and 1998.
Mr. Griswold. But I think it is a mistake to look at the
steel industry as monolithic. You have the integrated----
Mr. Houghton. I am not. I am just looking at it as--there
is no monolithic when I take a look at hot-rolled carbon steel
and that is just a product classification.
Mr. Griswold. Well, I think some mills will have difficulty
in the current environment. Other mills will do just fine. The
productivity figures vary widely. Industry average of four man
hours per ton, but some of the minimills can produce steel in
one to two man hours per ton. So the whole industry is not
going to close up under certain conditions, but there will be
some segments of the industry that will not survive the current
conditions.
Mr. Houghton. Does anybody else have any comments?
Mr. Mastel. If I could add to that. I think the point here
that I made in my testimony is that the global steel industry
is so heavily subsidized, cartelized, and otherwise steeped in
government intervention, that the decisions are made by
governments, not by the marketplace.
Mr. Houghton. All right.
Mr. Mastel. I mean, the fact that we import in one
direction, even though the economic realities would tend to
push the other way, it only proves that, in fact, it is not the
market, it is the various government decisions that are
influencing movement in the steel market.
Mr. Houghton. Right. But now let me just interrupt here.
And I appreciate your other comments, as long as the green
light is on. What do we do? I mean, you know, this is not just
steel. We had a session in here on the oil industry,
semiconductors, television, lot film, all sorts of things. So
you not only have the predatory pricing, either concocted by a
company, an industry, or a government, but also you have
exclusion from the foreign markets, which then make it
impossible for us to retaliate. What do we do? Do we let it go?
Mr. Mastel. I think it is too expensive to let it go. I
mean, what we have seen in the steel industry, as you say, is
an experience that can be repeated in any other sector. In
fact, any sector that a foreign government takes an interest in
right now, there is a risk of dumping in that sector which
would then drive the U.S. industry ratcheted down over time. So
I think we can't afford either economically or politically to
ignore dumping and subsidies as a problem.
Unfortunately, our laws, antidumping laws, really treat the
symptoms. Now they treat a symptom when it is already underway.
They don't get to the core of the problem, which tends to be a
closed-door market, a government-industrial policy, or a
subsidy, or cartel. Those are harder to get at and we rely, so
far, on the WTO as our primary mechanism to sort of break down
those barriers. But it seems to me if we are trying to solve
the ultimate problem, you have to accelerate that approach. But
it is difficult one.
Mr. Woltz. Sir.
Mr. Houghton. Right. Right. Well, maybe we could have one
more comment on this thing, because my time has run out. It has
been a long hearing. Would you like to----
Mr. Woltz. If I may, speaking for the wire rod business and
the wire business, I think, as you reflect on the cause of an
imbalance of imports and exports and what first appear to be
adverse trends in exports, consider the wire rod market.
Roughly 7 million tons of consumption in the United States,
domestic capacity to produce closer to 5 million tons. Under
any circumstance, wire rod consumers must import wire rod to
have sufficient supplies. I would suggest that the incentive
for the wire rod producers to export is low when the deficit of
domestic capacity exists as it does.
Mr. Houghton. Yes, but it is sort of a self-fulfilling
prophecy. The economics aren't right because of foreign
competition, people go out of business, and, therefore, there
is an undercapacity for the need when the next upswing comes.
So, you know, it is a very difficult situation. Look, we could
philosophize on this forever. I appreciate it very much.
Chairman Crane. Well, we appreciate your participation and
your patience. This has gone longer than we had anticipated
and, again, I apologize to you for missing your presentations,
but I have got the written comments. And I thank you and, with
that, the Committee stands adjourned.
[Whereupon, at 5:37 p.m., the hearing was adjourned.]
[Submissions for the record follow:]
Statement of American Iron and Steel Institute
The following statement is submitted by the American Iron
and Steel Institute (AISI) on behalf of its U.S. member
companies, who together account for approximately two-thirds of
the raw steel produced in the United States. Because other
witnesses and submissions are providing the House Ways and
Means Trade Subcommittee with a general overview of the U.S.
steel trade crisis, AISI would like to offer this statement to
address only a single aspect of the present crisis--namely, the
Subcommittee's interest in addressing ``ways to seek greater
foreign consumption of excess steel.''
It is correct that depressed steel demand and major
structural economic failures abroad--in the Commonwealth of
Independent States (CIS), in Asia, in Brazil and elsewhere--
have contributed in important ways to the crisis in world steel
markets today. The collapse of domestic steel demand in Russia
and in parts of Asia has significantly exacerbated world steel
overcapacity conditions and led in turn to unprecedented levels
of steel dumping in the U.S. market. It is also the case that
AISI, through its market development programs, has had success
in promoting the use of steel--at least here, in the U.S. and
NAFTA region. The question is: are there lessons to be learned
from this AISI experience when it comes to promoting steel
demand in the CIS and other world markets? AISI's statement is
divided into two parts--(1) our market development views and
experience and (2) our observations on lessons to be learned.
AISI's Market Development Views and Experience
With respect to the worsening global steel oversupply
problem caused by the world financial crisis and the collapse
of domestic steel demand in the CIS and Asia, AISI views the
situation in two ways: first and foremost, as an immediate,
unprecedented steel trade crisis, which must be addressed
through a combination of private and public actions; and
second, as a long term problem, where renewed efforts to
promote domestic steel demand in other regions must--along with
restructuring and modernization--be a part of any long term
solution.
AISI also views the issues of trade and market development
as closely linked. The current U.S. steel trade crisis is being
driven by an excess of supply over demand caused by record
levels of unfairly traded imports. One of the most frustrating
aspects of this crisis is that it is occurring against the
backdrop of continued strong U.S. steel demand. Indeed, there
has been a remarkable rise in U.S. steel consumption in the
1990s, due to U.S. steel producers' significant investment,
working closely with customers, to establish world class
practices and product applications. The problem is, record
levels of unfairly traded imports have taken an increasing
share of this growing market (see attached chart). Accordingly,
it remains a top market development goal for AISI and its
members to increase the North American share of the steel
market and to ensure that the benefits of AISI's successful
efforts to grow the markets for steel in North America do not
go to dumped and subsidized imports.
AISI has repeatedly made the point to foreign steel
producers and governments that, while there may always be trade
disputes, if steel's customers ever stop thinking of steel as
their material of choice, the steel industry world-wide loses.
Put another way, AISI and its member companies believe strongly
that, to be successful in promoting the use of steel, both the
steel industry and steel the material must be innovative,
competitive, high tech and environmentally responsible.
AISI and its member companies also know that it is
necessary not only to think defensively, but to think about
growth. Steel today is a high quality, low cost engineering
material--one that offers strength and safety, while being
recyclable, affordable, durable and versatile. As such, steel
is and should be poised not only to defend and strengthen its
role in current or traditional markets but to grow new steel
market applications and to pursue aggressively new
opportunities in such growth markets of the future as (1)
residential construction, (2) commercial and industrial
construction, (3) infrastructure and (4) transportation.
AISI believes that, whether it is the CIS or elsewhere, it
is important that offshore steel producers look at their own
situations and consider carefully whether AISI's basic approach
to market development makes sense for them. To summarize,
AISI's efforts aim to strengthen and expand current steel
markets, identify new steel markets and create innovative
approaches to increasing steel demand. We try to anticipate the
future needs of the market, solve critical issues and partner
with engineers, designers, architects, builders and other
companies, especially key customers and suppliers.
What AISI has learned is that it takes a good business
plan, research and effective ways to ``benchmark'' or measure
progress to drive the investment of key consuming markets
toward steel. Simply put, it takes a lot of time, hard work and
money to grow steel markets. Just in 1998: (1) AISI budgeted
$16 million on specific market development activities; (2) $10
million more went to related programs that we co-fund and
support--programs such as the International Iron and Steel
Institute's (IISI's) ``ULSAB'' project, the Auto-Steel
Partnership, the Steel Recycling Institute, the North American
Steel Framing Alliance and the Metal Roofing Alliance; and (3)
on top of this, U.S. and Canadian producers spent another $20
million on a TV ad campaign about ``the new steel''--this as
part of a five-year $100 million investment to get the consumer
to think more favorably about steel than about competing
materials.
AISI and its members know, too, that it is always important
to keep in mind the critical role of steel's customers. Thanks
not just to the efforts of U.S. and North American steel
producers but even more to the efforts of North America's world
class steel-consuming industries, steel intensity has increased
in the United States and throughout the NAFTA region in recent
years. As a result, the IISI has announced that its ``estimate
for annual consumption in the year 2005 in the NAFTA (region)
has been reassessed upwards by 20 million tons.''
Lessons to Be Learned from AISI's Experience
The IISI's recent announcement shows that it is possible to
grow steel markets in the NAFTA region. But the question
remains: are there lessons here that can translate into other
markets? On that subject, we would like to conclude with five
observations:
First, it is important to recognize that Asia and the CIS
are two very different situations. While Asia until 1997 had
the world's largest and fastest growing steel consumption,
efforts to rebuild domestic steel demand from the ground up in
the CIS will require special measures.
Second, until there is political and economic stability in
the CIS, nothing will work.
Third, AISI believes that, with a return to stability, much
is possible, and steel could indeed play a significant role in
meeting the pressing current--and future--needs of the CIS with
respect to housing, industry, infrastructure and
transportation.
Fourth, as AISI also knows, it will take a long term
commitment to grow steel markets, and there is a real question
about how much steel producers themselves can do. After all, it
is steel's customers who will need to invest again in the CIS,
and it is they who will probably need to become the leading
force behind any successful efforts to grow steel markets in
the CIS.
Fifth, AISI believes that there are some lessons to be
learned from our market development activities and that one of
them, clearly, is the need for ``partnering.'' CIS steel
producers especially will need not only to modernize but to
downsize substantially. This will be painful, and the U.S. and
other OECD governments might need to assist them in this
process. The OECD Steel Committee recently recognized this when
it urged its members to consider a cooperative program aimed at
facilitating multilateral solutions to specific aspects of this
crisis, including the CIS steel demand problem. In this regard,
AISI believes that, while, there should be national and
multilateral efforts to help the Russian economy and its steel
industry (e.g., by providing market development assistance),
the U.S. government should not be helping Russia by depriving
U.S. petitioners of the remedies due them under U.S. trade
laws, i.e., by providing a guaranteed U.S. market share to
dumped steel from Russia.
Conclusions--With a Focus on the CIS
The CIS should begin by recognizing that, as a major world
steel exporter, it has a responsibility to avoid dumping
practices that export serious injury and unemployment to other
markets. Steel producers elsewhere can help only in small but
important ways by, for example, providing technical and
marketing assistance. The steel framed house demonstration
project that AISI participated in last year in Moscow was a
start.
But there should be no illusions by anyone: first recovery,
and then growth in the CIS, will take many years and a
sustained, concerted effort by many players.
In the meantime, there can be no substitute for the full,
strict enforcement of U.S. trade laws. This remains the most
effective way to restore market forces, promote the necessary
adjustment and rebuild domestic steel demand in the CIS and
elsewhere.
AISI appreciates this opportunity to comment to the Trade
Subcommittee on ways to seek greater foreign consumption of
excess steel.
[GRAPHIC] [TIFF OMITTED] T7306.018
Statement of Hon. Jerry F. Costello, a Representative in Congress from
the State of Illinois
I appreciate the opportunity to present testimony before
this panel today.
The United States has built a steel industry that has one
of the highest productivity levels and lowest costs in the
world. Unfortunately, our commitment to new technology and
increased labor productivity is of little worth in a global
marketplace that favors illegal trade and commercial practices.
Our domestic markets are being flooded with cheap imports from
Asia, Russia and Brazil who continue to defy international
trade policies in order to prop up their own markets. We can
ill afford to be the world's dumping ground for unfairly-traded
steel. While I am concerned by the financial disasters in Asia,
Russia and elsewhere, these countries should not be allowed to
export their problems here. We must find other means to help
our trading partners deal with their economic challenges;
allowing unfairly-traded steel to flood our markets creates an
imbalance that helps no one.
As a member of the Congressional Steel Caucus, I have
worked diligently with my colleagues to urge the Administration
to take a strong stand against illegally-dumped steel. The
proposed agreement with Russia to reduce Russian imports of
steel products by almost 70 percent is a good first step.
However, it must be followed by continued pressure on other
nations to reduce their dumping of illegally-subsidized steel.
I am pleased the Administration has responded to those of us in
Congress who continue to make steel a high-profile issue. The
U.S. must continue to be vigilant in providing relief to our
steel industry and its workers, after they have suffered from
an unfair flood of foreign imports. However, let me be clear
about this: the Administration's efforts to date are not
enough. We must do more and we must do more immediately.
In my own district in Southwestern Illinois, steelworkers
and their families and communities have stood up strongly for
steel. Workers at Laclede Steel in Alton and National Steel in
Granite City have faced difficult times since the surge in
steel imports flooded our markets. Laclede is facing bankruptcy
and efforts are underway just to keep the plant open. Orders
have been down and prices have fallen at both plants.
Unfortunately, these steel companies like others across the
nation, have been unable to avoid layoffs. Mr. Chairman, I
represent approximately 4,000 USWA union members in my
district. I cannot in good conscience report to them that we
have done enough here.
I strongly support legislative remedies--specifically
measures introduced by my colleagues Rep. Visclosky and Rep.
Regula--to end the flood of illegal foreign steel imports. I
hope the Leadership of this House will expedite consideration
of legislative remedies to put an end to the steel crisis. The
U.S. steel industry, steel workers and their families, and
American consumers of steel products and its derivatives
deserve a fair market for U.S. steel. Foreign dumped steel not
only has immediate negative consequences on the steel industry,
over time the impact on the U.S. economy in terms of lost
production, high-wage jobs, and investment is irretrievable.
I hope this Congress and the Administration will take
immediate action to end illegal foreign imports of steel.
Statement of Hon. John P. Murtha, a Representative in Congress from the
State of Pennsylvania
FIRST I WANT TO ACKNOWLEDGE THE EFFORTS OF STEEL LABOR AND
INDUSTRY IN WORKING TOGETHER ON THE ISSUE OF THE STEEL IMPORT
SURGE. THE STEEL CAUCUS HAS ALWAYS PRIDED ITSELF ON ITS
BIPARTISAN APPROACH TO SAVING THE STEEL INDUSTRY, EVER SINCE
RALPH REGULA AND I HELPED TO FOUND THE STEEL CAUCUS IN 1983 TO
SAVE OUR U.S. STEEL INDUSTRY FROM FOREIGN SUBSIDIZED STEEL
IMPORTS. BY CONVINCING THEN PRESIDENT REAGAN TO SUPPORT
VOLUNTARY RESTRAINT AGREEMENTS, THE ONLY PROTECTIONIST MEASURE
HE EVER SUPPORTED, WE WERE ABLE TO GIVE OUR STEEL INDUSTRY THE
CHANCE TO MODERNIZE AND BECOME COMPETITIVE. MORE RECENTLY, AT
THE START OF THE CURRENT CRISIS, THE UNION AND THE INDUSTRY
CAME TOGETHER TO FORM A COALITION AND SPEAK AS ONE VOICE ON THE
ISSUE. THEIR UNIFIED MESSAGE WAS STRONG AND CLEAR. I WOULD LIKE
TO ACKNOWLEDGE THAT BECAUSE I THINK IT'S IMPORTANT IN NOTING
HOW MUCH MORE WE CAN ACCOMPLISH WHEN WE WORK TOGETHER.
RONALD REAGAN WAS THE MOST FREE-TRADE ORIENTED PRESIDENT
WE'VE SEEN IN MODERN TIMES. HE WAS ABSOLUTELY DEAD SET AGAINST
PROTECTING INEFFICIENT U.S. INDUSTRIES, AND COMMITTED TO
BREAKING DOWN TRADE BARRIERS AROUND THE WORLD. YET EVEN
PRESIDENT REAGAN RECOGNIZED THAT THE STEEL INDUSTRY OF THE
UNITED STATES IS UNIQUE. IT'S UNIQUE BECAUSE WITHOUT IT, OUT
NATION WILL NOT BE ABLE TO MOBILIZE FOR MAJOR MILITARY
CONFLICT. OUR NATIONAL SECURITY IS JEOPARDIZED IF WE ALLOW OUR
STEEL INDUSTRY TO BE CRIPPLED OR PERHAPS EVEN DIE BECAUSE OF
FOREIGN SUBSIDIES. SO THE PLAN THAT PRESIDENT REAGAN INSISTED
ON WAS ONE THAT REQUIRED OUR STEEL INDUSTRY TO MODERNIZE AND TO
BECOME THE MOST COMPETITIVE IN THE WORLD.
WE HAVE DONE THAT. WE DEVELOPED THE MOST MODERN,
COMPETITIVE STEEL INDUSTRY IN THE WORLD, AND TODAY WE STILL
HAVE THE MOST MODERN AND COMPETITIVE STEEL INDUSTRY IN THE
WORLD. THE ISSUE TODAY CLEARLY IS NOT ABOUT COMPETITIVENESS--
THE ISSUE IS ABOUT UNFAIR SUBSIDIES THAT VIOLATE ALL THE FAIR
TRADE POLICY DEVELOPED AND ACCEPTED IN INTERNATIONAL ACCORDS.
THE BOTTOM LINE IS THAT NO ONE CAN CLAIM THEY'RE AGAINST
WHAT WE PROPOSE BECAUSE THEY ARE ``FREE TRADERS.'' NOTHING WE
PROPOSE HERE IS COUNTER TO THE FREE TRADE MENTALITY. EVERYTHING
WE PROPOSE IS COMPLETELY CONSISTENT WITH THE COURSE ESTABLISHED
BY FORMER PRESIDENT REAGAN.
TO UNDERSTAND THE CURRENT CRISIS, WE NEED TO UNDERSTAND THE
CRISIS OF THE 1980'S. THAT CRISIS PRODUCED A LOT OF CASUALTIES.
WE HAD DOZENS OF PLANTS CLOSE AND LOST THOUSANDS AND THOUSANDS
OF JOBS. THE COMPANIES THAT SURVIVED WENT THROUGH RADICAL
RESTRUCTURING. IN THE DISTRICT I REPRESENT THE ECONOMY HAS
NEVER FULLY RECOVERED. IN THE JOHNSTOWN, PENNSYLVANIA MARKET
ALONE, WE WENT FROM OVER 12,000 STEEL JOBS IN 1983 TO ABOUT
2,000 TODAY. THE UNEMPLOYMENT RATE HAS REMAINED AT NEARLY TWICE
THE NATIONAL AVERAGE. WE DON'T NEED ANY MORE LAYOFFS IN THE
OPERATIONS WE HAVE LEFT.
THE CURRENT CRISIS BEGAN OVER A YEAR AGO WHEN WE STARTED TO
SEE THAT THE EXTREME DISTRESS OF THE ASIAN ECONOMY WAS SPURRING
ASIAN COUNTRIES TO TRY TO USE THEIR SUBSIDIZED STEEL PRODUCTION
TO EXPORT THEIR WAY OUT OF ECONOMIC DISTRESS. THEY, AS WELL AS
OTHER COUNTRIES LIKE BRAZIL, FOUND DEMAND FOR STEEL IN ASIA
EVAPORATING, SO THEY SENT IT HERE AT PRICES AS LOW AS TWO
THIRDS OF THE MARKET PRICE. THE LATEST FIGURES SHOW THAT IN
1998 WE IMPORTED MORE STEEL INTO THIS COUNTRY THAN IN ANY OTHER
YEAR IN HISTORY. IT REPRESENTED A 33% INCREASE OVER 1997, WHICH
ALSO HAD BEEN A RECORD-BREAKING YEAR. ALMOST A THIRD OF ALL THE
STEEL CONSUMED IN THE UNITED STATES LAST YEAR WAS IMPORTED
STEEL. IN THE LAST QUARTER OF 1998, JAPAN AND RUSSIA EXPORTED
TO THE U.S. TWO AND A HALF TIMES THE AMOUNT OF STEEL THEY SENT
HERE DURING THE SAME PERIOD IN 1997.
NOW, LET ME ALSO SAY I THINK THE RECENT ADMINISTRATION
EFFORTS HAVE BEEN HELPFUL AND HAVE HOPEFULLY AT LAST BEGUN TO
STEM THIS TREMENDOUS FLOOD OF IMPORTS, WHICH HAVE TO-DATE
CAUSED AT LEAST TEN THOUSAND LAYOFFS DOMESTICALLY. THESE
LAYOFFS HAVE CERTAINLY BEEN FELT IN MY AREA OF SOUTHWESTERN
PENNSYLVANIA, WHERE THE EFFECT OF THE IMPORT SURGE HAS TRICKLED
ALL THE WAY DOWN FROM THE BIGGER PLANTS TO THE MELTING
FACILITIES, TO THE SMALLEST MACHINE SHOPS.
HOWEVER, MY CONCERN, AS RALPH REGULA AND I RECENTLY
EXPRESSED IN A LETTER TO U.S. AMBASSADOR TO JAPAN TOM FOLEY, IS
THAT THIS DROP IN IMPORT VOLUME WILL ONLY BE TEMPORARY UNLESS
WE KEEP UP THE PRESSURE ON THESE ASIAN COUNTRIES TO REFORM
THEIR MARKETS. WE NEED TO SEE MORE THAN ONE OR TWO MONTHS OF
RELIEF. THE NUMBERS HAVE TO STAY DOWN. WE NEED TO SEE PEOPLE
WHO HAVE BEEN LAID OFF OVER THE PAST YEAR RETURNING TO WORK.
SO, WHILE I AM ENCOURAGED BY THE ADMINISTRATION'S EXPEDITED
FINDINGS IN THE CASES AGAINST JAPAN AND BRAZIL, ITS STRONG
MESSAGE TO JAPAN, AND THE AGREEMENT IT HAS REACHED WITH RUSSIA,
I FEEL WE NEED A MORE COMPREHENSIVE AND LONGER-TERM SOLUTION
THAT WILL ENSURE THE IMPORT NUMBERS DON'T JUMP RIGHT BACK UP,
EITHER IN THE HOT-ROLLED CATEGORY OR IN ANY OF THE OTHER STEEL
PRODUCT CATEGORIES. I AM ALSO CONCERNED THAT THERE MAY YET BE
MORE LAYOFFS UNDER THIS SCENARIO, ESPECIALLY GIVEN THE GLUT OF
STEEL THAT IS ALREADY ON THE MARKET AND THE UNCERTAINTY THE
INDUSTRY STILL FACES.
ONE OF THE MEASURES I'VE COSPONSORED IS THE BILL
CONGRESSMAN VISCLOSKY HAS AUTHORED TO RETURN ALL STEEL IMPORTS
TO 1997 LEVELS. THIS IS A COMPREHENSIVE, IMMEDIATE, EMERGENCY
STEP THAT CONGRESS COULD TAKE AND NEEDS TO TAKE TO MAKE SURE
THAT WE DON'T LOSE MORE JOBS AND MORE PLANTS IN THE STEEL
INDUSTRY IN THE NEAR TERM.
ALLOWING THIS CRISIS TO CONTINUE ANY LONGER CAUSES A NUMBER
OF PROBLEMS. IT PLAYS HAVOC WITH THE LIVES OF STEELWORKERS AND
THEIR FAMILIES, WHO'VE BEEN THROUGH SO MUCH TURMOIL ALREADY. IT
SENDS ANOTHER ROUND OF SHOCK WAVES THROUGH LOCAL ECONOMIES IN
AREAS THAT NEVER FULLY RECOVERED FROM THE LOSS OF STEEL JOBS IN
THE '80S--ECONOMIES THAT ARE STILL STRUGGLING DESPITE THE
STRONG NATIONAL ECONOMY. WE CANNOT LET ENTIRE PLANTS SHUT DOWN
WITH THE EXPECTATION THAT THEY CAN START RIGHT BACK UP AGAIN
WHEN THE CRISIS IS OVER. THE STEEL INDUSTRY DOES NOT HAVE THAT
KIND OF FLEXIBILITY. THE COSTS INVOLVED IN SHUTTING DOWN
OPERATIONS AND STARTING THEM BACK UP MAKE THE STEEL INDUSTRY
DIFFERENT THAN MOST OTHER INDUSTRIES. IF WE LET THIS GO ON
LONGER, WE'LL NEVER GET THESE PEOPLE BACK TO WORK BECAUSE THE
PLANTS JUST WON'T BE THERE ANYMORE. THE U.S. STEEL INDUSTRY
WILL SUFFER MORE PERMANENT DAMAGE AND THAT IS UNFAIR. IT'S
UNFAIR BECAUSE OUR STEEL INDUSTRY IS THE MOST EFFICIENT IN THE
WORLD AND THESE COUNTRIES WITH INEFFICIENT MARKETS AND
SUBSIDIZED INDUSTRIES NEED TO MAKE A SERIOUS COMMITMENT TO
REFORM. OUR STEEL INDUSTRY HAD TO DO THIS IN THE 1980'S. THESE
COUNTRIES NEED TO DO IT NOW. OUR STEEL INDUSTRY AND THE
STEELWORKERS HAVE ALREADY GIVEN UP OUR POUND OF FLESH TO THE
WORLD MARKET. AFTER WHAT WE WENT THROUGH IN THE 1980'S TO
MODERNIZE, WE SHOULD NOT BE ALLOWING COUNTRIES WITH
INEFFICIENT, SUBSIDIZED ECONOMIES TO PUT OUR STEEL INDUSTRY
UNDER. WE DIDN'T GO THROUGH ALL THAT IN THE 1980'S AND COME
THIS FAR ONLY TO SEE OUR STEEL INDUSTRY WITHER AND DIE IN THE
MIDST OF A BOOMING U.S. ECONOMY.
CONGRESS CAN AND SHOULD ALSO TAKE STEPS NOW TO ENSURE FOR
THE LONGER TERM THAT OUR TRADE LAWS WILL ENABLE US TO ACT MORE
SWIFTLY TO PREVENT THIS KIND OF CRISIS FROM HAVING SUCH A
SEVERE IMPACT ON OUR DOMESTIC INDUSTRY AND OUR STEELWORKERS
AGAIN IN THE FUTURE.
I THEREFORE ALSO URGE THE COMMITTEE TO SUPPORT ``THE TRADE
FAIRNESS ACT,'' CONGRESSMAN RALPH REGULA'S BIPARTISAN BILL, OF
WHICH I AM A COSPONSOR, THAT WOULD AMEND THE 1974 TRADE ACT TO
LOWER THE INJURY STANDARD FOR A SECTION 201 CASE TO A LEVEL
CONSISTENT WITH THE WORLD TRADE ORGANIZATION RULES. THIS WOULD
ENABLE THE U.S. TO INITIATE A CASE UNDER SECTION 201 SOONER AND
STOP THE IMPORT FLOOD SOONER. THE BILL WOULD ALSO ESTABLISH AN
IMPORT MONITORING SYSTEM SIMILAR TO THAT OF CANADA AND MEXICO
TO GIVE OUR INDUSTRY MORE IMMEDIATE ACCESS TO IMPORT DATA,
WHICH WILL ALSO HELP TO ENABLE THE U.S. INDUSTRY TO REACT MORE
QUICKLY TO IMPORT SURGES.
SO, IN CLOSING, WHILE WE STILL NEED TO KEEP UP THE PRESSURE
ON THE ADMINISTRATION TO PRESS THESE COUNTRIES TO REFORM, AS
WELL AS TO BRING ALL OF OUR TRADE LAWS TO BEAR ON THIS CRISIS,
THERE ARE ALSO STEPS AS I'VE MENTIONED THAT CONGRESS CAN----AND
SHOULD-----TAKE IMMEDIATELY THAT WILL SAVE OUR STEEL INDUSTRY
IN THE SHORT TERM AND STRENGTHEN OUR TRADE LAWS IN THE LONGER
TERM AS WELL AS SEND A MESSAGE TO FOREIGN COUNTRIES THAT THEY
MUST MAKE GOOD ON THEIR PROMISES TO REFORM THEIR MARKETS.
I APPRECIATE THE COMMITTEE'S ATTENTION TO THIS ISSUE AND AM
READY TO WORK WITH THE MEMBERS IN ANY WAY I CAN TO ACCOMPLISH
THE GOAL OF ENDING THIS CRISIS IN A LASTING WAY AND PUTTING OUR
STEEL INDUSTRY BACK ON FIRM FOOTING.
Statement of Hon. Robert W. Ney, a Representative in Congress from the
State of Ohio
Let me first say, this issue today on steel must be framed
correctly. It is not about free trade versus fair trade versus
protectionism, it is about illegal dumping. As you know, steel
producers in Japan, Russia, Brazil and others are facing
drastically reduced demand both in their home markets and their
traditional export markets. Their solution has been to unleash
an unprecedented barrage of exports on the U.S. market.
Unfortunately, these practices have placed America's domestic
steel producers in peril. As a result, several U.S. steel
industries have filed antidumping cases against Russia, Japan
and Brazil. The cases have been filed because dumped and
subsidized imports have surged in the last year, driving down
prices and profits while stealing sales from U.S. producers.
With many economies around the world in disarray, many
steel producing countries are trying to export their way out of
their economic problems by illegally dumping steel onto the
market. Unfortunately, these practices have placed America's
domestic steel producers in peril. Now is the time to put the
interests of American working families ahead of foreign
governments.
Within the last few months, thousands of steelworkers have
lost their jobs, small businesses are shutting down and local
communities are being brutalized because our government refuses
to put the interest of working people ahead of foreign
governments. Every other country has taken measures to protect
their steel market from these predatory and illegal dumping
practices. It is long past time for our government to do the
same.
With each passing day, more steelworkers lose their jobs,
more local governments face declining tax bases, and more
families face financial hardships. This needs to stop now. Our
families deserve better from their government than being told
to wait for further rulings in accordance with World Trade
Organization laws. Let me be clear, the President could have
stopped this months ago, and should do so now.
After several letters, meetings, and phone calls with the
Administration, some action has been taken. Never the less, the
response should have been taken in October of 1998. The United
States Department of Commerce ruled on critical circumstances
that Japan and Russia have been illegally dumping imported
steel into our market. This ruling is not the official ruling
of the original cases filed from the steel industries, however,
it is a significant separate ruling that should now deter Japan
and Russia from continuing their illegal dumping. This is only
one little piece of the puzzle.
Second, the Commerce Department announced a tentative
agreement with Russia on reducing their imports of Russian
steel. Although, again this is another piece of the puzzle,
this does not drastically help our steelworkers and steel
industry. In all actuality, this agreement does not do much at
all. The Russian Suspension deal limits the amount of steel it
can ship here, however, the agreement enables Russia to
continue to sell the steel below their costs and U.S. industry
prices. In addition, the U.S. is suspending the trade case
filed against them by the industries in exchange for the
following:
Stop hot rolled shipments to the US for six months
Reduce hot rolled shipments to 825,000 tons per
year for the next five years
Sell hot rolled at prices ranging from $231 to
$254 per ton
While reducing imports sounds good, it really is not.
Before the agreements, Russia was selling hot rolled around
$210 per ton. Before the crisis, U.S. producers were selling
hot rolled for $315 to $325 per ton. Russia will still continue
to dump steel. The agreement also limits the amount of imports
on 16 other Russian steel products. The amounts are based on
1997 levels which was a huge year for Russian exports. In 1997,
Russia sent 3.3 million tons of steel to the U.S., double of
what they shipped in 1995 and 1996, normal trading years.
Virtually every steel company and union in the country is
opposed to this agreement with Russia.
On February 2, 1999, I joined Congressman Peter Visclosky,
Jack Quinn, and Dennis Kucinich in introducing legislation to
freeze steel imports at pre-July 1997 levels. This legislation
will do what President Clinton has not done, and that is stand
up for our steelworkers and put America's interests first for a
change. For too long, President Clinton has refused to take
action as our steelworkers, our communities and our families
have been brutalized by a flood of illegal steel imports. By
freezing our level of steel imports at pre-1997 levels, we will
tell the world that the United States refuses to be their
dumping ground.
The Stop Illegal Trade Act (SISTA) has the support of
nearly 200 Members of Congress including Democrats,
Republicans, and Independents. If this bill is passed, the U.S.
Customs Service will be required to stop the flow of steel into
the U.S. market once the pre-1997 level of steel imports has
been reached. The SISTA bill would go into effect immediately.
It would limit steel imports from all nations on a monthly
basis. These quotas will be phased out within three years. In
addition to the SISTA bill, I have also co-sponsored other
pieces of legislation to address the flood of illegal steel
imports. This is a bipartisan effort within the House and the
Senate.
In closing, I would like to say our trade policy should be
based on putting America's interest first. For months and
months, our steelworkers, their families and their communities
have been paying the price for irrational trade policies that
put foreign governments and international financial interests
ahead of America's working families. We have begun to make
progress, but much more needs to be done. Under current law,
President Clinton has the power to stop the flow of illegal
imports and should act immediately. By placing tariffs or
imposing a moratorium on illegally dumped foreign steel, our
workers will be our top priority and have a level playing field
against these unfair trade practices. I understand the
President has concerns about the united States' perception
around the world, but that should take a back seat to our
responsibility to the working families of this country. Waiting
for an international trade organization to rule on what we all
know are blatantly illegal trade policies will destroy the
lives of too many families for too long. If the President will
not take action, then Congress must step forward. I urge the
Committee to please consider and pass the Visclosky-Quinn-Ney-
Kucinich resolution.
Statement of Hon. Jack Quinn, a Representative in Congress from the
State of New York
Mr. Chairman and distinguished members of the Subcommittee
I thank you for the opportunity to speak to you about the
situation in which the Nation's Steel Industry now finds
itself, due to the illegal dumping of foreign steel into the
United States. The American Steel Industry is under attack.
Illegal imports are flooding into our country at record
breaking levels. No industry can compete against the flood of
steel that has been dumped in our markets in the past year.
I represent the 30th District of New York (Buffalo and
Western New York). My district still relies on the steel
industry as a source of employment for thousands of hard
working men and women. Over the past 20 years, Western New York
has lost tens of thousands of jobs due to the closing of steel
related industries. Before being elected to Congress, I served
as the Supervisor of the Town of Hamburg. We lived through the
closing of Bethlehem Steel, one of Western New York's number
one employers. The closing of Bethlehem Steel and similar
facilities in the Buffalo are had a very detrimental impact on
our economy. People in Western New York are still feeling the
affects of those shutdowns.
Buffalo is not alone. Similar communities throughout this
great country of ours have experienced the same economic
difficulties. We need to learn from our mistakes and stop this
steel crisis before it has a more severe affect upon our
industries, communities, and working families. Let what we
learned yesterday in Buffalo and Western New York be lessons
for us all today. We must end the unfair and illegal dumping of
foreign steel into the United States before the damage becomes
to great to repair.
This year alone, steel imports from Japan rose by 113%,
from Korea by 90%, and from Russia by 45%. These are alarming
numbers. Some foreign corporations in these countries are
selling steel at $100 per ton less than it cost them to make
it.
The crisis has resulted in a 30% surge in steel imports and
the loss of at least 10,000 jobs between the months of January
and October. This number represents roughly 12% of all union
steel workers, but does not reflect the many non-union or
salaried workers who have also lost their jobs. Twenty-four
workers lose their jobs everyday.
The steel industry lost 350,00 thousand jobs during the
last steel crisis when it took 10 man hours to make one ton of
steel. The industry modernized its plants and equipment and
downsized. Now it takes 2 man hours for America's 170,000
steelworkers to make one ton of steel. The steel industry has
greatly improved it's productivity. Since 1980 the steel
industry's productivity has risen 240%. The industry and its
workers have made strides to be the best steel producers in the
world. We must not allow foreign countries to ruin the steel
industry and cause the loss of thousands of jobs due mainly to
the illegal dumping of steel into the United States.
The steel crisis re-emerged in July of 1997. In 1998, 18
million tons of steel was imported into the United States. As a
matter of fact, 56% more steel was poured into the United
States in the third quarter of 1998 than during that same time
in 1997. In comparison, the U.S. exported only 5.5 million tons
of domestic steel. These numbers pail in comparison to each
other.
The Administration may tell you that steel imports have
gone decreased. They have fallen only slightly, yet still
remain above pre-crisis levels. Hot rolled steel imports have
increased 500% since 1995. Hot rolled steel imports from
Russia, Japan, and Brazil captured over 25% of the domestic
market in 1998. That is up almost 15% from 1997. The problem is
not getting better it seems to be getting worse.
The U.S. Steel Industry adds $70 billion to the Gross
Domestic Product (GDP). If the steel industry continues on the
course it is presently there will be no doubt the GDP be
affected. The negative consequences of this massive surge in
dumped imports is evident in the market. Spot prices for hot
rolled steel fell nearly 16%. Average prices from Russia,
Japan, and Brazil were 10% to 27% below average prices of
domestic producers, in the first half of 1998. For these
reasons the United States Steel Industry net income declined
nearly 60%.
What has been done to stop these imports from being dumped
into the United States. The answer is not much. Section 201 of
the Trade Act of 1974 gives the administration the ability to
set quotas for each exporting nations guilty of violations such
as the unfair dumping of steel. The Commerce Department has
recently reached an agreement with Russia, that would reduce
Russian steel imports by almost 70%. The suspension on Russian
hot rolled steel is a step in the right direction and I applaud
the administration for taking such strides.
However, further action must be taken. H.R. 506, the Stop
Illegal Steel Trade Act (SISTA) would accomplish the goal of
stopping illegal steel imports from entering the United States.
I have become the lead Republican on this quota bill to help
resolve the crisis. This bipartisan bill would stop the flood
of illegally dumped foreign steel by freezing monthly steel
imports at July 1997 levels. By rolling back the amount of
still imported to pre-crisis levels, U.S. Steel companies can
compete fairly in the domestic market and thousands of jobs
would be saved.
Congressman Regula has also introduced legislation, the
Trade Fairness Act of 1999(which I have co-sponsored), which
will provide safeguards in current trade laws, specifically
section 201. This bill will allow the president to impose
duties and quotas, when an industry is injured by a surge of
imports. The Trade Fairness Act will also establish a Steel
Monitoring Program. The Steel Monitoring Program would more
closely monitor the amount of foreign steel coming into the
U.S. on a more timely basis and determine if the marketplace is
being disrupted by unfair imports.
H.R. 506 is an immediate and short-term solution to the
steel crisis. It has received bipartisan support in the House.
Congressman Regula's bill also provides relief from the crisis.
The Trade Fairness Act of 1999 is a long-term solution to the
problem. It provides many safeguards against this happening in
the future. The future is now and we must act immediately.
Once again, Mr. Chairman I thank you for allowing me the
time to speak on such an important matter. I look forward to
working with you on this issue.
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