TOPICS > Economy

Saving Steel?

March 6, 2002 at 12:00 AM EDT

RAY SUAREZ: The National Steel Company of South Bend, Indiana, today announced it had filed for protection under federal bankruptcy laws, yet another example, say industry and labor leaders, of why protective tariffs on imported steel are necessary.

Thirty-one firms have gone bankrupt since 1997. The Steelworkers Union says more than 46,000 employees were idled. Prices for domestic steel are now at a 20-year low. At the White House yesterday, President Bush said those statistics justified the action.

PRESIDENT GEORGE W. BUSH: I decided that, that imports were severely affecting our industry, an important industry, in a, had a negative impact, and therefore, provide temporary relief so that the industry could restructure itself.

RAY SUAREZ: The president ordered tariffs of 8 percent to 30 percent on most imported steel for three years. The tariffs will be applied to imports from the European Union and countries like Russia, Ukraine, China, Japan, South Korea, and Brazil, which have all been accused of dumping cheap steel in the lucrative American market. Countries whose steel exports amount to less than 3 percent of American imports– like Argentina, Turkey and Thailand– would be exempt, along with NAFTA partners Mexico and Canada. The tariffs were not as big as the steel-makers and steelworkers wanted. They had pushed last week for 40 percent across-the-board hikes for four years at this rally near the White House, and they were exhorted in their lobbying efforts by AFL-CIO Chief John Sweeney.

JOHN SWEENEY, President, AFL-CIO: My brothers and sisters, we are not here to ask President Bush to amend any trade laws or to make any new trade laws. We are here today to ask him to enforce our trade laws.

RAY SUAREZ: But President Bush did not grant their other wish, that the federal government help struggling steel companies pay their pension and medical benefits obligations to retired steelworkers. At the Capitol yesterday, Republican and Democratic Senators from steel-producing states that are also major political battlegrounds were pleased. Pennsylvania Republican Rick Santorum:

SEN. RICK SANTORUM, (R) Pennsylvania: It is a shot in the arm that gives hope to people who, frankly, were feeling that the government was not paying attention; particularly the president, and presidents– Republicans and Democrats in the past– did not pay attention. This president has, and I think I, for one, am very, very grateful for what he’s done.

RAY SUAREZ: West Virginia Democrat Jay Rockefeller:

SEN. JAY ROCKEFELLER, (D) West Virginia: This may not sound credible coming from somebody in my profession. I don’t really give a darn about a political implications. I’m dealing and a doubt that Rick Santorum does either, Senator Specter or any of my colleagues, this is a question of in West Virginia 25,000 people who are working or who are retired who average about 48 to 50 years of age who have very little chance for any other kind of new life so to speak.

RAY SUAREZ: But Senator Dick Durbin, Democrat of Illinois, said the new tariff might not be high enough, or in place long enough.

SEN. RICHARD DURBIN, (D) Illinois: The American steel industry is drowning 40 feet offshore. The president has thrown them a 30-foot rope. Now, if this is the first move by the president, it’s a good one. If it’s the only move to deal with this problem, I’m afraid it’s not going to be adequate.

RAY SUAREZ: The European Union said it would take its case to the World Trade Organization, claiming the tariffs violate WTO rules and put European steel makers at a disadvantage even as they try to reduce their output.

PASCAL LAMY, EU Trade Commissioner (speaking through interpreter): We believe this is a political decision on the part of the Americans. There’s no legal basis for it. Indeed there’s no economic basis for it. From a legal point of view, this is a decision which flouts the WTO agreement.

RAY SUAREZ: The EU also said it would try to protect its own manufacturers from an influx of cheap steel they expect will be diverted from the U.S. Other nations suggested retaliation would be warranted against other American exports, such as agricultural products like these chicken parts sold in Russia. But President Bush said yesterday taking limited action to protect a critical domestic industry was playing by the rules.

PRESIDENT GEORGE W. BUSH: That’s exactly what the World Trade Organization allows for. The International Trade Commission made this recommendation. As you know, I honored our NAFTA agreements by exempting Canada and Mexico. I also, we will honor our agreements with developing nations. Now this is, this is a remedy allowed under the WTO. It also is a part of our law, and I intend to enforce our laws. The Bush Administration had repeated top-level meetings on the tariff pitting pro and anti tariff cabinet secretaries against each other. It’s estimated 12 million Americans work in industries that consume steel, while 160,000 now work day to day in the steel industry.

RAY SUAREZ: For more on the president’s decision on steel, we’re joined by Gerard Depayre, the deputy ambassador for the European Union in Washington; Lewis Liebowitz, counsel for the Consuming Industries Trade Action Coalition, which represents American companies that use and purchase steel in the United States and abroad; Representative Bob Ney of Ohio, a member of the Congressional Steel Caucus; and Leo Gerard, international President of the United Steelworkers of America, the largest union for the industry, representing 700,000 members in Canada and the United States. Leo Gerard let’s start with you. The tariff is of shorter duration and smaller than you had sought but how does what the president announced, how would it help your members?

LEO GERARD, United Steelworkers of America: Well, I think it’s going to give us a opportunity to work with the industry in a restructuring and consolidation program. Obviously, we would have liked it to have been 40 percent for four years. We believe that would have given us both the length of time that we need and the economic ability to bring it about.

One of the things that is very disturbing is that we have 600,000 retirees and their dependents whose health care and pensions are still at risk. Today’s announcement by National Steel demonstrates that this crisis far from over. We think that this now gives us, as I’ve said to a number of people, a flashlight of hope at the end a very long and dark tunnel. We need to keep in mind that our steel industry in America can produce steel amongst the lowest man hours per ton in the world, the lowest emissions per ton in the world, and the lowest energy consumption per ton in the world. This is an efficient, moderate industry.

One of the problems is that there 300 million excess tons of capacity, none of which reside in Canada or the United States. That is the second piece of problem that we hope the Bush Administration will take up – is reducing that global over capacity, but we also hope and will participate with Senator Rockefeller in the Steel Caucus and Senator Ney in the Congressional Steel Caucus in bringing about legislation that will protect the pension and health care benefits of our members. They are the victims of this unfair trade and the more than 132 actions that we filed and succeeded in under our U.S. trade laws.

RAY SUAREZ: Even if the industry consolidates, if we end up at the end of this process with fewer companies making an amount of steel that matches the demand in the United States, won’t that hangover of medical costs, pension still be around the necks of American industry?

LEO GERARD: Well, I think it’s important that we recognize that this is the only steel industry in the world that has that burden. The Europeans are consolidating and have been. In Europe that issue of pension cost, health care cost, environmental clean up cost has been absorbed by the various governments and yet they have given their industry coal subsidies, iron ore subsidies, and a number of other subsidies. One of our concerns is that we’ve asked for a level playing field. We’re very productive. We’re very efficient. On a level playing field, we can win. But there is this 300 million tons of global excess capacity.

And I find it very ironic that those regions of the world now that we have taken some action to give ourselves a safeguard, those regions of the world are now saying we’re worried that the steel that used to be dumped in America is now going to be dumped in our country. And they are preparing to do the same thing. We need to reduce the global over capacity; we need to give the American industry a chance to put itself back in a strong capital footing

RAY SUAREZ: Well, Lewis Liebowitz you just heard the litany of problems that Mr. Gerard says his industry faces. The tariffs are temporary they phase out in three years. Are they an answer that he needs, a little breather, some time?

LEWIS LIEBOWITZ, Consuming Industries Trade Action Coalition: I certainly don’t think they are an answer and they are a terrible decision for American steel-using manufacturers. The consequences for them will be much worse than any benefits for the steelworkers. And that’s our concern. Your report mentioned there are 12 million plus workers in steel consuming industries, over 100,000 companies manufacture with steel. And by our estimation, eight jobs will be lost in those industries and elsewhere in the economy for every job that might be saved to the steel industry. It’s the adverse consequences of trade protection that concern steel using manufacturers. They can’t stand to have prices in this market that are higher than their competitors’ overseas pay for steel. And that’s exactly what will happen with these tariffs, so steel using manufacturing jobs will migrate to where the steel is at global prices.

RAY SUAREZ: Well, let’s talk a little bit about examples. I mean, how much of the cost of a finished product is steel when you have got to pay for labor and inputs and energy and all the other things you have to pay for?

LEWIS LIEBOWITZ: We have heard a lot of cars for example and appliances going up a few dollars. What we’re concerned about are intermediate manufacturers, people who make auto parts, brake parts, steel drums, electric motors. Their steel costs can be 50 to 70 percent of their cost of goods sold. These are real companies that face these real problems. They can’t pass those price increases along to the customers who are largely large companies who have a great deal of buying power. They’ll go off-shore to get those parts.

RAY SUAREZ: Let me go to Representative Ney at this point, because I’m wondering if a lot of these industries that Lewis Liebowitz is talking about aren’t also in the states that are represented in your steel caucus.

REP. BOB NEY, (R) Ohio: First of all, I want to thank President Bush for doing the right thing. He did something that was balanced and he is talking about fair trade. And as far as Mr. Liebowitz’s statements about products, I challenge any American that’s listening to this broadcast to look back in the last two years when cheap dumped steel – and longer — has been thrown all over our market. Tell me when the price of a car last went down due to the cheap dumped steel. Tell me when the price of an appliance last went down. This is absolutely a lame argument. It’s used by people who want to look only at the profit margin for a few at the top. I’m all for our free enterprise situation, but these were countries that were producing steel at a certain price and they were dumping it on to our market.

These are illegally dumped products. It fits within the WTO. Leo Gerard is completely correct in his statements. As far as we’re concerned in Congress this was a balance. And I think that’s why you’re not really seeing a lot of people yelling from this side that are traditional free traders because they know you have to have at least a level playing field. So I don’t buy those arguments. And that’s why I think you’ve seen this to be well received here in the U.S. Congress by both sides of the aisle.

RAY SUAREZ: But when you talk about dumping Lewis Liebowitz is talking about manufacturers who are look around the world to find the cheapest price for the steel that goes into the products they make.

REP. BOB NEY: But what they’re talking — they have been using arguments and they tried to you know obviously to stop this decision — they have been using the argument that if in fact there are tariffs, the prices are going to go up on products. Again, I simply don’t buy that argument on it because there’s been enough data shown on that. It’s just an argument that is out there to justify having unfair trading situation for us and, again, these are illegally dumped products. And this fits within the WTO’s guidelines. The president did the right thing. He didn’t make a political decision; he did the decision that was correct for working people in this country and correct, by the way, for our security. I just got back from Afghanistan a couple days ago. Let me tell you something: This is also for our strength militarily and for our future down the road.

RAY SUAREZ: Mr. Ambassador, just a few moments ago you heard the president say that under the procedures of the WTO this is provided for, that countries can make moves like this one in order to protect national industries. Is he right?

GERARD DEPAYRE, Deputy Ambassador to the U.S., European Union: Absolutely, that the safeguard clause is an instrument of trade policy that is provided for in the international rules. There is such a thing as a safeguard code. But the question is — another one is the way in which the safeguard code is used. We believe that these measures are not legally nor economically justified — not legally because we believe that the International Trade Commission in its finding of injury which it has to make under a safeguard investigation, has on a number of points its findings have been inconsistent or are inconsistent with international moves on safeguards. For instance, there is a requirement that imports increase to be the cause of injury. And the imports, U.S. imports have decreased in recent period. Economically, we don’t think it is justified, the grave difficulty which we recognize of the U.S. Steel industry are due to the lack of the restructuring and consequent loss of competitiveness of some parts of this industry.

RAY SUAREZ: So what does the European Union have in mind? Have you come up with a response yet to the president’s initiative?

GERARD DEPAYRE: Well, let me say perhaps that what was needed were measures facilitating and encourage restructuring. Not import restriction which will delay, not encourage or speed up restructuring. It’s easy to understand. Prices will go up, market opportunities will increase as results of these measures and companies who were losing money, will — market opportunity will be able to survive and thus to maintain inefficient and excessive capacity. Experience has shown time and time again that this is the case.

Now, what — you should ask me what we, are we going to react, Mr. Lamy indicated that this morning we have filed a complaint with the WTO regarding the finding of injury, and in this respect I will remind you that the United States does not have a good record. There have been three safeguard cases that have been contested in the WTO, for these three safeguard cases, the United States lost. Secondly we are going to take safeguard measure at the request of the industry because we’re concerned about diversion of trade that will result from the closure of the U.S. market. It has to be clear that the average tariff – tariff between the countries — is about 3 percent. Therefore, certainly will have a draconian effect.

RAY SUAREZ: Let’s take on your point that three years just isn’t going to be enough time to do the transitional work necessary.

LEO GERARD: I want to deal with three points.

RAY SUAREZ: Quickly.

LEO GERARD: Quickly I’ll deal with them. First of all, Mr. Liebowitz’s point. Steel prices have fallen $150 during the last three years, $150 a ton. We didn’t see any corresponding decrease in price. The companies he represents were all making lots of money before, they’re making lots of money now; they’re going to make lots of money after.

With regards to Mr. Depayre’s comments about imports have actually decreased, imports surged to 40 percent of the U.S. market and then when they fell back to 36 percent from 33 percent, they said imports are falling. The traditional share of the U.S. market that imports had prior to this rash of illegal dumping and illegal trade and import surges was about 20 percent. Now, if the Administration and the Steel Caucus in both the House and Senate lead the charge to help us get pensions and retiree health care taken care of like they are in every other major industrialized world, we’ll be able to restructure the industry during that three year period.

RAY SUAREZ: Let me get a quick response from Mr. Liebowitz.

LEWIS LIEBOWITZ: Just a couple of quick points. First of all, in the 201 case we’re not talking about dumping. Dumping was not an issue in that case. It’s fairly traded steel. There are separate laws that deal with dumping and subsidization that have often been used by the steel industry. And the Americans steel using manufacturers can’t afford to pay prices that are higher than their competitors pay now. It maters much less whether or not prices are higher or lower than they were three or four or five years ago. What matters is what the competitive situation is now. And that’s why this will have more adverse consequences than positive consequences for the United States economy.

RAY SUAREZ: Representative Ney, you have heard about the adverse consequences being suggested, a possible trade war with our allies, possible increases in the cost of manufactured goods. Your response?

REP. BOB NEY: Well, I don’t believe that is going to happen. Look, Europe obviously tried to come in before this decision and offer some type of price decrease, I guess you’d call it, or some type of tariff situation, which we didn’t accept, and rightfully so. I don’t see where it’s going to be a trade war because there’s a lot of unfair situations that have occurred. And you know we are people here who care about the quality of life. When I hear about competition, it really irks me because other people are making 15-20 cents an hour and are worked in sweatshops. And we haven’t complained about having to compete against that and we want the life to be better around the rest of world, so we’ve had unfair competition, but when to came to illegally dumped product that is really I think throwing salt into the wound.

I don’t see where there’s going to be a trade war; we can get back into that too, you know that goes both ways across the ocean. But I think people have to come to their senses on this. It’s an illegally dumped product. It has not been fair. It’s an unlevel playing field. And, again, President Bush made the right decision and in fact President Bush did more to stabilize this Congress for us to look at future trade agreements frankly that are going to be good for Europe and the rest of world.

RAY SUAREZ: Representative Ney, gentlemen, thank you all.