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I. INTRODUCTION

II. THERE ARE MULTIPLE LIKE "ARTICLES" IN THIS CASE

III. THE COMMISSION MUST CONSIDER WHETHER IMPORT RESTRICTIONS WOULD MATERIALLY ASSIST ANY DOMESTIC INDUSTRY IN RESTORING ITS COMPETITIVENESS
   A. Identifying the Problems with Specificity
   B. Downstream Industries Cannot Afford to Pay for "Free Riders"
   C. If Import Restrictions would Not Restore Competitiveness, Then Injury Was Not Caused by Increased Imports

IV. THE COMMISSION MUST CONSIDER EXEMPTING FROM ITS INJURY ANALYSIS PRODUCTS THAT ARE NOT AVAILABLE OR ARE IN SHORT SUPPLY IN THE UNITED STATES
   A. Product Exclusions
   B. Products that do not Compete with Domestic Articles Cannot Be a Cause of Injury.
   C. The Commission Should Recommend Procedures for After the Fact Product Exclusions

V. THE PROPER ROLE OF LACK OF INDUSTRY SUPPORT

VI. SERIOUS INJURY
   A. The Commission Must Consider Each Industry as a Whole
   B. Relief under Multiple Trade Statutes Should Be Discouraged

VII. CAUSATION
   A. Price Effects Do Not Establish Causation if Global Prices are Affected Equally by Trade
      1. Falling Prices in the United States Do Not Establish Causation
      2. The Commission Must Examine Global Price Levels

VIII. WTO DECISIONS CAN AND SHOULD BE CONSIDERED AND FOLLOWED BY THE COMMISSION, UNLESS CONTRARY TO U.S. LAW

IX. ISSUES BEYOND THE AUTHORITY OF THE COMMISSION IN THE INJURY DETERMINATION
   A. National Security
   B. Unfounded "Conspiracy" Theories

X. CONCLUSION

This brief is submitted on behalf of the Consuming Industries Trade Action Coalition ("CITAC"), an organization of American consuming industries. These businesses, over 100,000 of which use steel in the United States, are exposed to significant injury by application of import restrictions as a result of this investigation. The injury to steel-using industries could vitiate any benefit from import protection to steel producers in this market. Accordingly, we strongly urge the Commission to consider the effects of an injury finding on downstream industries in the injury phase of the investigation.

The welfare of consuming industries is at stake in this proceeding. Nationwide, the number of workers in steel-consuming industries outnumbers steel workers by a ratio of 57:1. Every State has more workers in downstream industries than steel production jobs. (Exhibit 1, attached hereto). A CITAC Foundation study earlier this year concluded that import restrictions on steel products would cost 9 jobs in downstream industries for every steel job saved, at an annual cost to the economy of over $565,000 per job.

During these hearings nearly 40 companies testified that their businesses depend on access to imported steel products (slabs, tire cord, flange forgings, seamless pipe and many other products). The dependence of American manufacturers on imports of steel and other products is well-known and clearly reflected in the record of this case.

In the injury phase of this case, as we show herein, the Commission must consider all relevant economic factors, whether listed in the statute or not, that bear on the condition of all the industries under consideration. Steel using manufacturers in the United States have offered considerable testimony on the specific products they require and the inability of U.S. producers to supply them all. In substance, the Commission must conclude that imports cannot injure domestic producers if they fill needs that U.S. producers cannot.

A fair resolution of this case cannot result from a single decision. The U.S. statute requires, in our view, that the Commission find multiple "industries" in this investigation.

The statute requires the Commission to determine whether an "article" (not a "product") is being imported in such increased quantities as to be a substantial cause of serious injury to the domestic industry producing an article like or directly competitive with the imported article. 19 U.S.C. § 2251(a). The ordinary meaning of "article" is helpful in discerning congressional intent. The Webster's New World Dictionary defines "article" as "a thing for sale." Webster's New World Dictionary, Second College Edition (1986) at 78. Accordingly, the ordinary meaning of "article" indicates that it should be defined precisely and individually.

It is not logical to determine that the vast array of steel products, some of which are not even recognized as "steel products" by industry organizations constitute a single "imported article" within the meaning of Section 201. While the Commission is constrained by the limits of its resources in categorizing products subject to investigation, the fact that the statute uses the term "article" in the singular, rather than in the plural, and that the broader term "product" (used in the antidumping and countervailing duty statutes) was not employed strongly indicates that a precise analysis is required.

We note that the United Steelworkers assert that this case should be considered to involve a single "industry." We fundamentally disagree with this characterization because it ignores reality and the statutory language. To take three examples, no rational definition of "article" can encompass articles as diverse as carbon steel slab, stainless steel woven cloth and a fabricated structural shape

Once the Commission determines there is more than one "like" or "directly competitive" article, there seems to be no defensible rationale for finding only four like or directly competitive "articles." For example, slabs and galvannealed sheet cannot be considered a single imported "article" under any rational definition (see above).

CITAC understands the desire of those favoring relief to avoid the "fracturing" of the industry. However, the statute is not susceptible of revision simply because of a desire for "comprehensive" relief.

In our like product discussion above, we conclude that the only rational analysis in this investigation is one that considers products individually. This is necessary because the Commission must examine, in its injury analysis, whether increasing imports of an "article" constitute a "substantial cause" of serious injury or threat. This can only be done if the imports being considered are related to articles produced in the United States. Producers faced with economic problems must identify those problems with specificity so that the Commission may examine them with specificity. Those favoring relief clearly bear the burden of coming forward with evidence of increasing imports, serious injury and requisite causation.

Another reason for caution in identifying issues with specificity is the effect on downstream users and consumers of the products under investigation. Consideration of a single like product, or only a few broadly defined products, could have considerable distortive consequences for the U.S. economy. Industries that are not injured may be included with broad aggregations and thereby receive the windfall of an injury determination. This will force customers to pay for undeserved relief. Alternately, industries that are truly injured may be concealed within broader industries that are not injured. Only specific analysis can avoid these potential distortions.

Downstream industries in the United States should not be asked to pay for import relief that will raise prices, restrict choices and reduce the competitiveness of U.S. manufacturers employing millions of workers in the U.S. when a substantial part of that relief may go to companies that do not need it. As a threshold matter, the Commission should, to the maximum extent feasible, eliminate free riders at the injury stage and limit the remedy stage to the consideration of those industries that are truly "seriously injured." If a broader approach is taken, the Commission will surely face the prospect of re-examining injury in the remedy phase of the investigation.

At the injury phase of this case, the Commission should make a very strong presumption against a finding of injury unless import relief would restore the competitive position and profitability of the relevant domestic industry. The statute requires that import relief "address the serious injury" and be "most effective" in making a "positive adjustment to import competition." 19 U.S.C. § 2252(e)(1). /

The structure of the statute indicates that, in order to qualify for import relief, it must be shown that the relevant domestic industry must be able to compete with imports after the relief terminates. This strongly suggests that any injury that cannot be eliminated by import restrictions must not have been substantially caused by increasing imports. In other words, if the Commission finds that import restrictions would not leave the industry able to compete successfully with imports, then it should make a negative injury determination on grounds of lack of causation.

Such an evaluation is particularly important for consuming industries, because such industries will bear the burden of any import relief recommended and imposed. At the end of the relief process, domestic consuming industries are entitled to know that our sacrifice will have tangible positive results for us.

A clear imperative in Section 201 investigations is the balancing of all economic interests in the United States. This is not an issue that can be entirely deferred to the remedy phase of an investigation. It affects substantially the injury determination. As noted above, imports cannot injure domestic producers if they do not compete with domestic production.

The Commission has the authority to exclude products from this investigation at the injury stage of the investigation. The statute provides that the Commission analyze each imported "article" to determine whether increasing imports have caused or threaten serious injury.

In the first instance, products that do not compete with U.S.-produced articles cannot cause or threaten injury. In many instances, there is no dispute that imported products do not compete with U.S. articles. In these instances, a finding of no injury is mandated.

Even if the Commission determines (incorrectly, in our view) that there are broad categories of "like products," there is no statutory prohibition on product exclusions at this stage of the proceeding. We encourage the Commission to take the opportunity to remove from this case all imported articles that are manifestly not in competition with U.S. articles.

The Commission must apply a standard of causation in this case more strict than would apply in an antidumping or countervailing duty investigation. Increasing imports must be the most important single cause of serious injury. Imports that do not compete with domestic production, as a matter of law, cannot cause injury to such domestic production. Even within "like product" categories the Commission may find, this truth must be considered.

Specialty products needed by U.S. industry but not available from domestic producers, for example, cannot possible injure any domestic producer. It would contravene the statute and the WTO Safeguards Agreement to consider such imports as a cause of injury.

Similarly, products that are imported because of short supply conditions in the United States cannot cause injury to domestic production. These products complement domestic production and do not compete with it.

Numerous parties have appeared during this investigation to make these points. During the public hearings, at least 38 U.S. downstream users of articles under investigation appeared to testify. All of these and others (e.g., U.S. importers) pointed out short supply or domestic availability issues to the Commission. This evidence, which was almost always uncontradicted, clearly establishes a general issue of product availability in this investigation. /

Evidence of product shortages or unavailability is directly relevant to the consideration of whether there is serious injury or threat thereof caused by increasing imports. Non-competing imports in all sectors should be excluded from consideration in determining whether imports are increasing, or whether increasing imports are a substantial cause of serious injury.

The hearings have pointed out the dependency of a broad range of U.S. companies on imports of particular articles that they need to make their products. As noted above, at least 38 companies appearing before the Commission (and numerous others that have filed briefs or other submissions) testified to their requirements for imported products covered by this investigation.

While 38 companies may seem a large number, there are more than 100,000 businesses in the United States that use steel. It is certain that many more companies will suffer injury from import relief on steel products than have appeared before the Commission thus far. Accordingly, CITAC strongly urges the Commission to recommend a "short supply" procedure in any remedy recommendation it may develop. Without such procedures, the ultimate relief would surely do more harm than good by undermining the competitiveness of U.S. downstream industries.

This case intends a comprehensive examination of the condition of producers in the United States of a vast range of steel products. In instances where producers are not in favor of relief, CITAC believes that the Commission should make a negative injury finding.

There are practical reasons for the Commission to eliminate from consideration the products where there is no or minimal support for relief. The reason is obvious: the Commission has a considerable job in examining contested issues and should not divert its attention to uncontested issues.

Legally, the Commission must make an injury or threat of injury determination based on "all economic factors" it considers relevant. The statute plainly does not limit consideration to the enumerated factors. 19 U.S.C. § 2252(c)(1). Lack of industry support for relief is an economic factor the Commission must consider. Under the circumstances of this investigation, lack of domestic industry support, reflected in specific declarations of lack of support for relief or in failure to participate in the case, may well be considered controlling.

Antidumping jurisprudence under pre-Uruguay Round statutes provides clear guidance for the Commission. In Suramerica de Aleaciones Laminadas, C.A., v. United States, 44 F.3d 978 (Fed. Cir. 1994), the Court of Appeals for the Federal Circuit held that "economic factors" included the degree of industry support for a petition. "The industry best knows its own economic interests and, therefore, its views can be considered an economic factor." Id. at 984. Importantly for CITAC, the court also held that the views of downstream consumers of the article under investigation also constitutes an "economic factor" that the Commission must consider. Id. /

The absence of industry support, whether overt or reflected in lack of cooperation with the investigation, should clearly be relevant to the Commission. Indeed, it may be controlling in cases where lack of industry support for relief is clear and overwhelming. In such cases, the Commission should terminate the investigation immediately.

Having concluded that there are multiple "like" or "directly competitive" articles, and a corresponding number of "industries" in the United States, it is necessary for the Commission to consider the question of "serious injury." The statute again provides the proper guidance, because it defines the "industry" as the producers of the article "as a whole".

Minimill producers of flat-rolled steel products such as hot-rolled and cold-rolled sheet, corrosion resistant sheet and plate are generally healthy and competitive (for example, in 2000 Nucor's profits and sales were at record levels). Some integrated producers, by contrast, have performed very poorly. However, the poor performance of the integrated producers, without more, is insufficient to find "serious injury" for the above-listed industries.

A large number of articles included within the scope of this case are subject to antidumping or countervailing duty investigations or orders. / The Commission must determine whether the application of these other statutes is relevant to the determination of injury under Section 201.

We believe it clearly is relevant to the injury analysis. Indeed, the intent of Congress favors the resolution of unfair trade cases under the antidumping and countervailing duty laws. If domestic producers believe that remedies under these laws is suitable, then it is clearly preferable for downstream industries that relief be applied selectively under those statutes rather than broadly, and only to remedy "unfair" trade rather than to restrict fair trade.

Section 201 indicates that Congress intended such a result. Section 202(c)(5) requires the Commission to examine any reason why imports are increasing. If it finds evidence of unfair trade activities (dumping or subsidies), it is to notify the Department of Commerce immediately. In the legislative history, the Senate Finance Committee noted that this provision is intended to implement the preference for handling antidumping or subsidy practices under the AD/CVD laws rather than Safeguards. Senate Report No. 93-1298 (Nov. 26, 1974) reprinted in U.S. Code Cong. & Admin. News, 93d Cong. 2nd Sess. 7186, 7266.

The Commission should discharge its responsibilities under this provision by examining whether antidumping practices, having been remedied (either provisionally or finally) can possibly leave room for a remedy under Section 201. While theoretically possible under the statute, such "layering" of relief is difficult to justify and would be extremely burdensome to downstream industries. Accordingly, CITAC urges the Commission to avoid double application of relief under AD/CVD laws and Safeguards.

The statute provides that a decline in demand caused by a recession or economic downturn in the United States cannot be aggregated into a single cause that is more important than imports. However, the statute does not preclude the Commission from determining that an economic downturn caused by declines in global demand are a more important cause of injury. Indeed, the global decline in steel demand is a key component of the decline in the economic position of steel producers in the United States. The Commission should take account of global economic conditions in this case.

Declining prices in the United States do not constitute a "substantial cause" of serious injury. First, declining prices are not necessarily injurious (for example, if they reflect declining raw material costs). As has been pointed out in the hearings, Section 201 is a volume statute, not a price statute. It requires that increasing imports of an article must be a substantial cause of serious injury or threat. 19 U.S.C. § 2251. It does not permit an injury finding based solely on declining prices. There must be a clear causal nexus between increasing imports and declining prices.

CITAC's testimony (see statement of John C. Kennedy, Transcript (September 17 at pp. 230-232) included a clear explanation of the effect of steel prices on U.S. steel consuming industries. U.S. steel users cannot afford to pay higher prices than their competitors abroad pay for competing steel products. The international competitiveness of U.S. industry will rapidly erode, reducing U.S. demand for steel products and undermining any chance of successful relief for steel producers.

Accordingly, price declines in the United States do not necessarily signify injury to domestic steel producers. Rather, the Commission must consider whether steel prices in the United States are lower than they are elsewhere. If so, it could be argued that imports are causing injury in the United States. However, the fact is that prices in the U.S. are generally higher than they are abroad. There is no substantial evidence on the record that steel prices in the United States are lower than in other markets. Price levels higher than those in foreign markets mean that imports are not the most important cause of injury, because global conditions, not U.S. imports, are the most important cause of declining prices.

In addition, imports of steel products themselves do not constitute the entire effect on domestic price levels. Imports of steel-containing products are also a significant cause of price changes in the U.S. market for steel products. If a price-based analysis is made at all, it must look at all causes of U.S. price declines, which includes price levels of raw materials as well as downstream products that are imported.

During the hearings in this investigation, several parties have criticized the WTO decisions on Safeguards actions in the United States and elsewhere. These criticisms miss the mark. The Safeguards Agreement has been interpreted by the WTO in accordance with well-accepted methods, such as the Vienna Convention. The decisions are, in substance, a statement of the agreements the United States and other have made in the Uruguay Round and other negotiating rounds. There is no logic in saying that these decisions were at variance with what the U.S. agreed to.

The "Charming Betsy" doctrine (Alexander Murray v. Schooner Charming Betsy, 6 U.S. (2 Cranch) 64, 118, 2 L. Ed. 208 (1804)), is fully applicable to Section 201 actions. "Charming Betsy" holds that a U.S. statute must not be interpreted in a manner that is inconsistent with international obligations of the United States unless no other interpretation of the relevant statute is possible. In Section 201, WTO decisions are, in virtually every respect, consistent with the U.S. statute.

For example, the Commission should consider whether the imports were caused by "unforeseen circumstances". If it finds that no unforeseen circumstances were the cause of increasing imports, then the Commission should make a negative determination.

The issue of national security is clearly not an "economic factor" that the Commission must consider in its analysis of whether U.S. steel producers are seriously injured by reason of increasing imports, or threatened with such injury. CITAC believes that this issue should not cloud the record of this case. CITAC strongly urges the Commission to reject efforts of U.S. producers and their supporters to inject unwarranted fear and uncertainty into the Commission's deliberations on injury.

Steel is used in thousands of products. Some of them (e.g., ships, tanks, and munitions) obviously have a use in military applications. However, there is no evidence on the record of which we are aware that indicates the volume of military needs or whether, in the absence of import relief under Section 201, the ability of the steel industry to meet those needs would be in question.

There is no need to worry. The decline (or even the demise) of certain producers of steel products would not seriously affect the national security of the United States. Military use of steel for munitions amounts to less than 0.1 percent of U.S. steel shipments. Other uses, such as shipbuilding, tanks, etc. are very small and could easily be met within the market.

It is our good fortune that we will not have to fight World War II, a war of production, again. The targets of this Section 201 action are our allies, not our foes. However, even if we did have to fight another World War, the amount of steel products shipped by domestic producers in 2000 is more than 150 percent of the steel shipped in 1944, the peak year of World War II demand.

In addition, of course, the nature of war and the materials needed to fight it have changed considerably in the last 57 years. War is much less steel intensive than it was. Even the GI's helmet, which was made of steel in the 1940s, is now made of Kevlar®. This material has considerable advantages over steel: for example, it will stop a bullet, which steel helmets did not, and it is considerably lighter than steel.

The changing nature of defense needs is reflected in the list of the top 100 defense contractors in Fiscal Year 2000 (Exhibit 2, attached hereto). It should be noted that there is not a single steel producing company on the list, but there are several steel users.

There is no doubt that our military preparedness requires a wide variety of materials, including steel and other metals. However, any such consideration is well beyond the purview of Section 201. Furthermore, the increased burden for national defense should not be borne solely by U.S. consumers of steel.

There have also been unsupported accusations that international steel producers are engaged in some sort of a "concerted assault" on the U.S. industry. A finding of injury has to be based on hard facts, not unsupported, unfounded accusations of conspiracy.

The accusation is a variant of the "predatory pricing" theory of competition law and policy. There is simply no evidence of such a concerted effort, which would require clandestine cooperation among dozens of companies around the world. All the evidence of worldwide conditions of competition refutes the existence of such a conspiracy.

The Commission should reject the notion that there is any danger under the circumstances of this record of a "predatory pricing" conspiracy.

For the reasons stated above, CITAC urges the Commission to consider carefully the full range of articles covered by this investigation, a statutory responsibility not diminished in any way by the USTR letter or the Senate Finance Committee resolution of July 26. The future survival of the 12 million workers in steel consuming industries depends on a careful and thorough analysis.

Respectfully submitted,
Lewis E. Leibowitz
Lynn G. Kamarck
Counsel for CITAC