White House unveils steel import "action plan"

By Staff -- Purchasing, 9/7/2000

The White House has issued an action plan that spells out steps the government will take-including increased monitoring of steel imports from Japan and other nations-in an effort to head off future surges in supply that would throw the domestic integrated steel industry into another financial crisis. Interestingly, the action's plan dismisses the views of large steel-buying OEMs, who have been advocates of global sourcing.

The 240-page report, prepared by the Commerce Department, is the administration's latest in a series of efforts to respond to criticism from the steel industry that it was slow to respond to problems generated by the Asian financial crisis of 1997-1998. Steel companies and workers have complained that a flood of imported steel during that period pushed six U.S. steel companies into bankruptcy and resulted in thousands of layoffs. Analysts generally have agreed that other factors-including new more modern capacity from mini-mills-have played a role in the financial woes of the blast-furnace-based steelmakers.

Commerce Secretary Norman Y. Mineta contends the import crisis "showed the need for vigilance and stepped-up efforts to address the root causes of global instability in global steel markets.'' Mineta has pledged to follow the recommendations in the action plan: faster release of government statistics on steel imports; expedited anti-dumping investigations so decisions can be reached earlier; and an interagency rapid response team to provide relief to communities suffering from import surges. The administration also will work through the Paris-based Organization for Economic Cooperation and Development and negotiate individually with major foreign steel producers on ways to address overcapacity.

While the industry's ongoing recovery is reflected in increased production levels, imports for the first months of 2000 are on the rise, Mineta admits. "So, over the course of the next few months, the Clinton Administration will watch carefully the industry's capacity utilization levels, steel prices, employment levels and import penetration, and will take appropriate steps to address ongoing concerns," he says.

Big Steel endorses the plan

U.S. steel companies and the United Steelworkers union praised the report's findings but say it will be critical for the administration to follow through with its commitments.

Paul J. Wilhelm, president of U.S. Steel Group, a unit of USX Corp. in Pittsburgh, says the Commerce report "verifies the claims that the integrated steel mills have been making for years and that foreign competitors have been trying to deny for years about the ills of steel trade." He says the report "lays a foundation for action that must be taken for American steel companies to emerge from their financial crisis."

The Commerce report "proves that foreign steel producers refuse to play by the rules," says George Becker, president of the United Steelworkers. "The administration and Congress must now apply the facts laid out in this report to concrete programs that safeguard the jobs of American steelworkers."

Peter Kelly, chairman and CEO of LTV Corp., says that "our trade laws have come under increasing attack in recent years-from foreign competitors, the World Trade Organization and even Congress-so the Administration's report provides reasons why the U.S. needs stronger, not weaker, remedies for unfair imports, and why we must continue to resist efforts to undermine existing rules."

Japan is slammed, responds

The report singles out Japan, Russia, South Korea and Brazil as nations whose steel industries have unfair advantages in competing with American firms. The U.S. imposed punitive dumping duties on these and a number of other countries since 1998, when the U.S. market began getting flooded with low-cost steel imports following the Asian crisis that sharply cut demand in countries hit by fiscal and economic calamity. But the domestic steel industry has complained that it had taken the administration too long to provide relief in the form of higher tariffs on foreign products.

Foreign steel importers responded in a report contending that U.S. government actions to protect the domestic steel industry had cost American consumers more than $100 billion over the past three decades in higher prices for products manufactured with steel such as autos and appliances.

William Barringer, a Washington attorney for the Japanese Iron and Steel Exporters Association, says his group did not agree with many of the Commerce Department's conclusions, but does support the call for more consultations. Since business trade complaints can sour government-to-government relationships, "having consultations between countries before dumping or unfair trade cases are filed is a positive idea,'' Barringer says.

Hidenori Tazawa, executive vice president of NKK America and current chairman of the Japan Steel Information Center in New York, criticizes the White House study as failing to present a balanced analysis.

"The study was supposed to examine the global steel sector and how the problems created by overcapacity, subsidies and other market-distorting practices have affected international markets, but it appears to be mostly a look at only one side-foreign producers-in an obvious attempt to justify the protection and subsidies granted to the U.S. steel industry," Tazawa says. "The key threat to the U.S. integrated mills is competition from highly efficient mini-mills, which now account for nearly 50% of American steel output. Blaming imports and thereby encouraging resorts to more trade restrictions will not address these domestic cost and competition problems."

The Commerce report includes numerous allegations about the business practices of the Japanese steel industry and Japanese home market, which Tazawa says "lack any objective proof, misinterpret the facts, and are essentially groundless. In essence, the U.S. government seems to have accepted on faith the highly questionable claims of the U.S. steel industry about its offshore competitors."

The U.S. has been an important market for the offshore steel industry, which has for years been selling our established U.S. customers many high-quality products that the domestic mills cannot supply. "The study essentially ignores the existence of this substantial demand for specialized imports," Tazawa says, "and the fact that Japan and other countries contribute to the health of steel-consuming industries by meeting their steel supply needs."

Political overtones

In response to complaints from the labor union, the Clinton Administration already has outraged major U.S. trading partners and sparked a fight over U.S. steel policy at the Geneva-based World Trade Organization by supporting punitive tariffs on a wide range of steel imports. Over objections from the European Union, President Bill Clinton approved a $1 billion emergency loan program in 1999 to aid big-tonnage U.S. steel companies because of import competition.

And although Mineta denies it, political insiders see the new action plan as a way to shore up steel union support for Democratic presidential hopeful Al Gore. The steelworkers union endorsed Gore in 1999 but relations frayed with the 75,000-member labor organization after the vice president backed a U.S.-China trade agreement.