March 15, 2000 at the ESI-CELI Congressional Forum
Speech: "Lessons of America's Steel Crisis: Past and Present"
By: Lewis E. Leibowitz (Partner, Hogan & Hartson LLP & Counsel, CITAC)


I would like to thank CELI and ESI for putting together this important conference. The description of the issue ignored the interests of steel users and purchasers. This is not unusual, but it's a lack of attention we mean to change.

I want to focus on the interests of consuming industries in the U.S., companies that manufacture, process or distribute goods made from steel. These include industries such as automotive, energy production and distribution, wire producers, metal fabricators, wire drawers, heavy equipment manufacturers, construction and many others.

I am pleased to be here today on behalf of the Consumer Industry Trade Action coalition ("CITAC"), a group of companies and associations dedicated to keeping channels of trade open in our own national economic interest. US trade laws do not strike the right balance between the interests of petitioning companies and their customers. CITAC wants to improve these laws that do too little to protect the rights of consuming industries.

The Wall Street Journal (March 8, 2000) recently carried a story that sends an important message. The National Association of Purchasing Management reported that the cost of manufacturing inputs has increased substantially since last year. Steel prices have shown seven consecutive monthly increases. However, the manufacturing sector is not able to pass on cost increases to its customers. The only way to survive cost increases is to increase efficiency or squeeze profits. Companies for whom raw materials costs like steel are 50-70 percent of their costs can't wring out that much efficiency. Many of them will have trouble surviving if they cannot get steel products at world competitive prices. Ask yourselves: Where will the business go?

Domestic steel producers can only make about 75 percent of the steel that the American economy needs. We will need imported steel for as far in the future as the eye can see. Our consuming industries need access to steel and other products to maintain their ability to produce in the United States on a competitive basis.

We know that barriers to trade are money-losers. Consuming industries pay the bills for import barriers, in the form of duties, quota "rents" and higher domestic prices (even for domestically produced goods). They know that if their access to raw materials is limited, their competitors will have a cost advantage and increase their business at our expense.

Some have called this thinking "shortsighted." I don't agree. Shortsighted would be an industry that thinks it can wall off the United States from global competition. If steel producers think that is possible, they are not living in the real world. Their health depends on their customers' health. Steel users' health depends on access to world-competitive steel. The best way to save jobs is to compete, not complain.

Another fact that must be faced: steel users are individually and collectively bigger than steel producers. There are more than 40 workers in steel consuming industries in this country for every steel worker. The US steel industry's total employment of about 172,000 is barely one-fourth of General Motors' employment. The market capitalization of all the steel companies in the United States is substantially less than that of Amazon.com, even after yesterday's bloodbath in the stock market. All the steel stock in the US would buy less than 5 percent of Microsoft.

Against this background, it seems clear that the US trade laws pay insufficient attention to the consequences of relief to consuming industries. Trade remedy laws benefit a few industries, not US manufacturing as a whole. Take away producers of steel mill products (172,000 workers), semiconductors (111,000 workers) and bearings (30,000 production workers)(not large segments of American manufacturing (12.5 million workers)), and most of the rest of US manufacturing does not gain from antidumping and countervailing duty laws or Safeguard legislation. That does not mean that other industries do not use the laws-but they are not used so frequently. While the trade remedy laws are important to the industries that use them, please, consuming industries ask: do not make these laws worse than they already are.

For this reason, CITAC opposes legislation that would change the causation standard in 201 cases; that would require consideration of merchant markets rather than total production in making injury determinations; that would presume injury from increasing imports and declining prices; and that would presume reimbursement of antidumping duties from related exporters. CITAC also opposes other pending legislation on private rights of action for dumping, changing or even abolishing the International Trade Commission.

Trade cases lead to high tariffs, quotas and therefore loss of business. Consuming industries want to assure that restrictions on trade are no worse than they must be to relieve the injury caused by trade; that the duties last no longer than necessary; and that they only apply when it will do substantial good for the petitioning industry without doing enormous harm to the economy as a whole. But, in the current system, consuming industries have no voice.

Therefore, CITAC has prepared legislation to make reasonable and targeted reforms to the trade laws: antidumping, countervailing duties and Safeguards. The legislation covers four points.

Consuming industries (purchasers of products) should have full party status in trade remedy cases. That means that consumers should be able to participate fully, have access to the record and have the right to appeal decisions that harm them and with which they disagree.

The laws currently impose duties without even considering whether the duties are in the interest of the United States. The public interest should be considered before imposing prohibitive tariffs on imports that American industry needs.

Duties should be assessed only to the extent needed to remove the injury to domestic petitioners. The "lesser duty rule" in the WTO Antidumping and Subsidies Agreements should be implemented by the US

Duties should not apply to products that are not available from domestic sources or which are in "short supply." It makes no sense for consumers to pay high duties when they have no domestic alternatives.

CITAC thinks these issues have a legitimate role in the trade law debate. If the real parties in interest are not represented in trade cases, no amount of reform will make them "fair." None of the changes we seek threatens the viability of the "unfair trade laws" or damages the suppliers of America's consuming industries. We seek to make these laws fair to everyone. We hope that our legislation will be considered this year.

For further information, please contact me at or our Chairman, Jon Jenson, at .

*At the end of 1994, steel industry production workers: 184,000
*In February 2000, 172,000. Decline of 12,000 in 5 years +. About 2000 jobs per year.
*At end of 1979, 430,000. In 20 years, reduction of 258,000 workers, an average of 12,900 per year. Not too bad recently.
*Construction: 4,989,000 workers (Feb. 2000)
*Heavy Machinery: 1,350,000
*Metal Fabricating: 1,123,000
*Transportation Equipment: 1,228,000 Total for four industries: 8,690,000
*Ratio: 50 to 1. It's gone up since last year.





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