June 27, 2000
Good morning, and thanks for the introduction. As you know, I am Jim Antunes, from A.J. Antunes & Co., in Carol Stream, Illinois. I am speaking both for myself and for NAFEM, the North American Association of food equipment manufacturers, of which our company is a member and I am a past board member.
NAFEM represents 650 firms that manufacture commercial foodservice equipment, such as stoves, broilers, toasters, refrigerators, dishwashers, beverage dispensers, food carts and many other lines of food preparation and serving equipment. In total, our members use about 550,000 tons of stainless steel a year. Our members employ about 60,000 men and women in the United States. Industry sales are about $6.5 billion at the manufacturers level.
The rest of the world perceives American manufactured foodservice equipment as being superior to our foreign competition. While our equipment commands a premium price in the marketplace, we still need to be price competitive. When we are forced to pay an artificially high price for a commodity like stainless steel, our foreign competitors are able to capture customers and we lose market share. Ladies and gentlemen, when our members lose a customer, it is very difficult to recapture that lost business. Our industry needs to pay a price equal to our foreign competitors for all of our components, including stainless steel, so we can remain world leaders in our industry. Because of our leadership position, about 20 percent of all food equipment manufactured in the United States is exported. That is a lot of exported or re-exported stainless steel - that is, stainless steel exported in a high value-added, job-intensive manufactured product. With 20 percent of our industry's products exported, that means that 20 percent of the jobs in our industry - about 12,000 jobs - are directly tied to exports.
Because of our success, we have an increased need for stainless steel and an increased need for workers. We have a technological edge and will continue to compete effectively around the world unless artificial trade barriers raise our costs and put us at a world market disadvantage.
My own company is typical. Our products include pizza ovens, commercial toasters, hot dog grills and steamers. We have been in business for 45 years, employ 225 people, and have been growing steadily. We opened a new plant last year, increasing our manufacturing capacity by 200%.
A significant percentage of our customers are in the fast food industry and we have been able to follow these customers overseas. We have distribution in 104 foreign countries and over 30 percent of our product is exported.
However, we do have a problem, a big problem. And that is the cost of stainless steel, especially when prices here are higher than those our competitors pay overseas.
If you have ever looked behind the order counter at a McDonalds or a Burger King, or into the kitchen at any restaurant or cafeteria, large or small, what you see is an expanse of clean, shining metal. The great majority of the products of our industry are made from stainless steel. Hygiene requires a non-rusting, hygienic surface that is easily cleaned. Economy and efficiency demand durability. Stainless steel represents about 30 percent of all costs of production.
Let me give you two examples of how protectionism in the steel industry hurts not only our industry but also our nation's economy.
First, under the voluntary restraint agreements of the late 1980s, stainless steel prices rose 75 percent in one eighteen month period. This was well above world prices. Our ability to compete overseas was crippled. Growth came to a staggering halt. It was several years after the VRAs were removed before our industry was able to regain our momentum.
Then, last year, the domestic stainless steel industry cam before the ITC claiming unfair competition and asking for punitive tariffs. There was clear evidence at that time that the domestic stainless steel industry was profitable and that domestic production and sales were greater in 1999 than in 1988. Information from standard overseas pricing data, publicly available, showed that U.S. prices for stainless steel were at that time ten percent higher than Germany and ten percent higher than the average Asian prices. Therefore, our members were already paying a premium for our stainless steel. I ask you, where was the unfair competition? Where was the injury?
But, as you know, the current law under which the ITC must make its decision completely disregards the impact of its decision on U.S. industries that use a material like steel, and in fact disregards the impact of its decision on the U.S. economy as a whole. The ITC decision was based on only one thing; without imports, the U.S. stainless steel industry would have been even more profitable. That is all that mattered.
And how did the Department of Commerce determine the size of punitive duties, given evidence that U.S. prices were already higher than overseas prices? I have no explanation for that at all. All I know is that the duties totally shut down shipments of stainless steel from many of the overseas manufacturers.
What is the consequence? In the ten months since the ITC and Commerce decisions, the U.S. prices of stainless steel has risen thirty percent. Some of this is due to increases in the cost of nickel, but that explains only part of it. The rest is pure protectionism.
We cannot continue to grow, and we cannot even maintain our overseas markets if we pay more for a raw material than our overseas competitors. In fact, our export sales are slowing. Up until now, many of our members have been protected by long-term contracts, both for steel purchases and for our export sales. The impact starting right about now will be severe.
Some of those 12,000 jobs in our industry directly tied to export sales are at risk. If steel prices go up any further, we will be at risk of losing these export markets for good. It is very hard to regain a customer once he is lost, particularly an international customer.
The only solution is reform of U.S. trade laws to require the ITC to consider the impact of its decisions on using industries and the national economy, and even if ITC does find unfair trade, to require Commerce to assess duties no higher than required to create an even playing field.