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Steel Tariffs Ended

December 4, 2003 at 12:00 AM EST
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JIM LEHRER: Further reaction now from Leo Gerard, president of the United Steelworkers of America, representing nearly 1 million working and retired members in the United States. He joins us from Pittsburgh. And Lewis Liebowitz is the chief counsel of the Consuming Industries Trade Action Coalition. The coalition represents business consumers of steel.

Mr. Gerard, you made a statement today, and you said today’s decision was a betrayal of American steelworkers. How is that, sir?

LEO GERARD: Look at, we’re very, very concerned it would appear that the president has capitulated to the European Economic Union and Japanese who are, in fact, responsible for a lot of the dumping and illegal trade that had gone on. The other problem is, in fact, that we have a trade surplus from the European community and the Japanese and we have a deficit with them. And lastly, but certainly not leastly in that regard they have a safeguard of their own on steel into Japan and into the European community.

So the restructuring of the steel industry is not over. There were, in fact, five bankruptcies since the tariff had been put in place. Restructuring is not an event; it’s a process. And we have 240,000 retirees who are counting on a successful steel industry and this will make that that much harder.

JIM LEHRER: Well, how would it affect them?

LEO GERARD: Well, we bargained substantial profit sharing that would go into a trust found to buy benefits for those retirees, almost a quarter of a million retirees who lost their benefits through 43 bankruptcies and 17 liquidations. Now with the tariff removed, it will add a lot of instability to the industry. It will add a much more complicated process of ongoing restructuring and consolidation. We still have something like 17 steel companies in bankruptcy trying to work their way out; five new ones that went in since the tariff come in and we have to return those companies to profitability so that profits can go into the trust fund to get some benefits for these folks. Some are 80, 90 years old; these are the folks that fought in the Second World War and Korea and Vietnam. These are the folks that built the steel that built the towers and built the bridges and made this a strong country.

And it’s not just about steel, Jim. It’s also about industrial manufacturing. We went step by step following the U.S. trade laws through 130 plus dumping cases that we won something on every one. We pushed for a 201 investigation because the dumping cases weren’t working. The ITC held, the International Trade Commission, held that investigation. They recommended unanimously for one of the few times in their history the president take a safeguard action.

So we followed the law and then the president put in a three-step program. Step one was a three-year declining tariff. Step two was trying to negotiate at the OACD a reduction in the global overcapacity and unfair subsidiaries, thirdly was to encourage the union and the industry to take part in a consolidation. We have held up our end of the bargain and now because of threats from Europe and Japan it appears the president has capitulated to them and it can make life much more difficult.

JIM LEHRER: Mr. Liebowitz for you and people you represent this is happy news though, correct?

LEWIS LIEBOWITZ: It’s a great day for steel consumers indeed. The steel consumers in the United States who represent about 12 million workers stood up and argued for their interest to be considered alongside of the steel industry. The president made a fair decision based on all the facts. The WTO decision was one of those facts, but chief among those facts in our view is the plight of steel consumers who had….

JIM LEHRER: Define steel consumers. Who are you talking about?

LEWIS LIEBOWITZ: These are companies, about 100,000 businesses in the United States who use steel in manufacturing. They employ about 12 million workers nationwide in every state.

JIM LEHRER: Now, how does this decision today affect them?

LEWIS LIEBOWITZ: Until this time, the steel consumers had to pay higher prices than their foreign competitors who make products out of steel: Auto parts, brake parts, appliances and electric motors and so forth, many thousands of products and they were rendered uncompetitive globally and a lot of business was flowing offshore to offshore companies that use steel in manufacturing. So steel users were a big loser from the tariff policy and it was time to get rid of them.

JIM LEHRER: Now this decision … hold on. We heard … let me make sure we hear his position and I’ll come back to you, I promise, Mr. Gerard. But this means, this decision today means that the people who use steel to make things are going to be able to buy steel at a cheaper price?

LEWIS LIEBOWITZ: They will be able to buy at globally competitive prices, which may be cheaper than they are today or may be more expensive but they are cheaper than they would otherwise be. In addition to that, though, many steel products aren’t available in the United States or aren’t available in sufficient quantity, and steel users who need those products will be able to get them on the global market where they’re available.

JIM LEHRER: Now, what do you think of the argument we just heard from Mr. Gerard and what he said was going to happen to his folks, particularly the retirees as a result of this?

LEWIS LIEBOWITZ: Many retirees have been disadvantaged by the plight of the steel industry and that’s not true just of the steel industry, by the way. Many industries have declining active workers and in a great number of retirees. The steel industry is one of those. Yes, but I think that most of those workers, their fate is no longer tied to the fate of individual steel companies. We need a steel industry. We will have one. The healthy companies will be able to pay their responsibilities for health care, for retired workers and active workers and for pensions, but it’s time to consider the rest of the economy too, and that’s why this is such a good day for consumers.

JIM LEHRER: Do you agree with Mr. Gerard that whatever your position may be on today’s decision it will result in fewer U.S. steel companies and fewer steelworkers and fewer and less money in this pot he’s talking about for retired steelworkers? Is that just inevitable?

LEWIS LIEBOWITZ: It is inevitable there will be a struggle in that regard. I think if you look at the facts you’ll see that the benefit of continuing the tariffs from this point onward would be very marginal in comparison to the harm they would do to the rest of the economy.

JIM LEHRER: Harm in what way?

LEWIS LIEBOWITZ: Again higher prices, more jobs going offshore as the price squeeze for companies — most of whom are small businesses in the United States — losing business offshore to competitors and their pensions and their health care going offshore with them.

JIM LEHRER: Mr. Gerard, what about that? Your picture is one. The bigger picture according to Mr. Liebowitz, is better, it’s more upbeat as a result of what happened today.

LEO GERARD: Let me — I was anxious to get in because Lewis is misconstruing and absolutely sending on some misinformation; first and foremost Lewis’ group represents the importers not necessarily the consumers. Secondly, that steel….

JIM LEHRER: Before you go on — people who buy steel some of it is from overseas, some from domestic makers?

LEO GERARD: Yes.

LEWIS LIEBOWITZ: The bulk of our group is American steel-using manufacturers not the importers although there are importers in our group.

JIM LEHRER: All right. Go ahead.

LEO GERARD: And the price of steel has fallen continuously since the imposition of the tariff. The reason steel prices peeked around the tariff time is there was 25 million tons of steel production shut down in bankruptcy. LTV was one. We brought that back with ISG. We saved that then…

JIM LEHRER: ISG, what’s ISG?

LEO GERARD: International Steel Group. We saved a number of these companies and when that production came back, and supply came back on and prices dropped. The other thing Lewis didn’t talk about is only 7 percent of the steel consumed in the United States was covered by the tariff. It was a three-year declining tariff we’re in the last 16 months roughly. And in the last 12 months, you could buy steel in America made in America cheaper than you could buy steel in Europe made in Europe.

And the reason that that came about is through the tariff we’re able to participate in a meaningful restructuring of the steel industry to return it to profitability so we could have reinvestment in the industry and between International Steel Group, U.S. Steel and a couple of others, almost $4 billion was reinvested. We were able to take some of those profits and allocate them to a trust fund and that’s just not going to happen now. We’re still selling steel in the United States cheaper than Lewis and his importers can bring it into the United States.

LEWIS LIEBOWITZ: There he goes with the importers again. Prices went up for the last nine months of last year. They peaked at the end of last year and they are now headed up again. There is a shortage….

JIM LEHRER: Wait a minute. You guys … excuse me. You all know the lingo and know the world here. So when you say prices going up, going up where for whom?

LEWIS LIEBOWITZ: Price increases have been announced effective Jan. 1 by all of the major steel producers in the United States for shipments as of Jan. 1. They are sticking. In other words, the price increases are being accepted in the market. There is a looming shortage, mostly because of increase demand abroad, especially in China, so that the combination of that tightness in the market and continued tariffs would be devastating for American steel users.

JIM LEHRER: Is it your position, Mr. Gerard, to put it simply, that these tariffs should have remained on forever or that you wanted them to play out to 2005, as originally planned?

LEO GERARD: We wanted them to play out to 2005 and the reason is that we worked with all of these steel companies to help create new business models, new business plans. And then we renegotiated collective agreements based on those business models and business plans. Now that that’s pulled out from under us, the business plans and models we put in place to help the members and retirees are gone.

When Lewis talks about rising prices, we need to say relative to whom? And the rising prices are rising everywhere, but you can still buy steel in the United States cheaper than you can in Europe, cheaper than in Japan and cheaper than you can in a lot of South American countries, and we have taken the productivity down that we can produce steel almost every major U.S. mill around one, to one and a half man-hours per ton, which is among the best in the world.

JIM LEHRER: Finally Mr. Liebowitz, before we go, this goes into effect midnight tonight.

LEWIS LIEBOWITZ: That’s correct.

JIM LEHRER: What will be the immediate effect, if any?

LEWIS LIEBOWITZ: I think the immediate effect will be largely psychological. We don’t expect a huge influx of steel imports immediately. It takes several months for imports to be delivered once they’re ordered. So the United States needs imports, 25 to 30 million tons a year, because we don’t make enough steel in the country to satisfy the demand. Imports have been too low. They will go up some but it will take a while. The immediate effect is psychological.

JIM LEHRER: Gentlemen, thank you both very much.