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Senator Max S. Baucus

Dear Senator Baucus:

I am writing in response to your recent remarks concerning the need for America's steel users and producers to work together to address the problems of the steel industry (Finance Committee hearing on the nomination of Robert Zoellick as U.S. Trade Representative, January 30, 2001). The Consuming Industries Trade Action Coalition ("CITAC") is a growing coalition of companies that rely on imports to maintain their competitiveness in global markets. CITAC's goal is to bring the concerns of America's consuming industries to the attention of trade policy leaders, such as yourself.

Some steel producers clearly are in a crisis. Companies that consume steel, many of whom are CITAC members, are concerned about the state of our suppliers, domestic and foreign. We are also very much opposed to policy solutions, such as import quotas or other import restrictions, that will cost steel users dearly, but will NOT address the real problems of steel producers in the United States. It is time we realized that, after 30 years of scapegoating imports, important parts of the U.S. industry are no closer to competitiveness than they ever were.

We want to take up your offer to work with steel producers, importers and policy-makers to make sense of the steel industry's problems and address them effectively. The first step is to recognize that some of America's steel producers are not world-competitive, despite their protestations to the contrary. Government subsidies and protection will only mask their problems; eventually they must face reality and consolidate or close their inefficient operations.

The second step is to recognize the factors that make these companies poor investments, especially "legacy" costs. If these companies are to pay pensioners many times as numerous as active workers, they must have help from the general public, not just their customers.

Steel consumers should not and cannot bear the burden of these costs indefinitely. If steel prices increase in comparison to world prices, downstream customers will become vulnerable to imports of steel-containing products. They will have to downsize (further reducing steel producers' customer base) or move out of the country to maintain access to raw materials at competitive prices. Neither outcome is good for steel producers or good for the country.

We welcome your suggestion that producers and customers get together to discuss these issues. In concert with policy-makers in the Executive and Legislative Branches of government, we can find the best solutions that will preserve some 170,000 steel jobs and 8.5 million jobs in steel-consuming industries.

We look forward to working with you to make progress happen.

Sincerely,

Jon E. Jenson