October 26, 2000
The Consuming Industries Trade Action Coalition (CITAC) would like to comment on a recent letter written to you by a group of steel companies and the United Steelworkers Union, dated October 16, 2000 (the "Big Steel Letter"). In CITAC's view, the Big Steel Letter mischaracterizes the current state of U.S. steel markets and unjustifiably demands extraordinary restrictions on steel imports. Because the relief Big Steel demands is unwarranted and would cause far more harm than good to the United States economy, such a demand is contrary to the national interest. We urge you to reject this and other calls for extraordinary trade restrictions.
CITAC is a group of companies and associations representing America's consuming industries-those companies and workers that rely on open markets for their raw materials and components. Our members include major producers and distributors of automobiles, housing and commercial buildings, wire and wire products, electronic equipment, heavy machinery, tires, food processing equipment, clothing and textile products, oil and gas drilling equipment and services, and many other products.
Many of our members rely on steel products. However, U.S. producers do not make enough steel or the right kinds of steel to satisfy U.S. demand-that is why we have substantial steel imports. Major steel-consuming industries (heavy equipment, industrial machinery, construction and transportation equipment) employ more than eight million workers (over 40 times the number of steel workers in the U.S.) who would suffer if access to steel imports were restricted. Only adequate supplies of imports ensures that downstream industries have sufficient supply.
The Big Steel Letter misstates the facts about today's steel market and the "crisis" of 1998. While imports rose sharply in 1998, so did U.S. steel demand. That rise in demand continues. The imbalance was caused in part by a major strike at General Motors as well as the Asian financial crisis and a strong US steel market. Clearly, there was market disruption. Just as clearly, the U.S. steel producers were able to file antidumping cases that resulted in hot-rolled steel imports being reduced nearly 100% from countries named in those cases.
Through the 1990s, steel demand in this country increased by nearly 50 percent. During that time, U.S. producers shipped near-record levels of steel. In fact, steel shipments in 2000 are well ahead of last year's levels. Steel demand growth has been met by large increases in capacity by the minimill sector and by imports by integrated mills themselves. But it is still not enough and steel imports are still needed by steel users in the U.S.
The Big Steel Letter perpetuates long-standing myths, as if repetition will make them true. Steel job reductions in 1998 were no greater than about 7000-actually somewhat less than the 20-year average of annual job losses for the industry. In fact, job attrition in the steel industry is due more to productivity gains than to increases in imports.
We are sympathetic to the travails of steelworkers. Many workers in consuming industries belong to unions and are concerned about their futures. Steel industry financial performance is dependent on world markets, just like the health of consuming industries. Many industries face pressure for change in the face of global competition. In this, steelworkers are like those in other industries. They have not made the case that the steel industry is unique. The question is what we, as a nation, should do.
The Big Steel Letter demands three actions by the Administration:
Each of these is inappropriate and ill-advised. Most important from CITAC's perspective, these extraordinary steps, if taken, would damage the American economy. As the industries that pay the bill for protectionism, CITAC members should have a say in whether import restrictions are taken. Currently, we don't, under established trade laws.
It would be extremely damaging to the process of orderly consideration of trade remedies for the Administration to pressure the ITC, an independent agency, into making a decision to maintain antidumping and countervailing duty orders on steel, if they do not meet the legal test for continuation. Yet the Big Steel Letter implicitly asks the Administration to put just such pressure on the ITC in that decision-making process.
Trade restraints on non-WTO member countries would be no more helpful to the American economy than restrictions on WTO member countries. The only difference is that we might not be violating our trade agreements; then again, we might be, by diverting trade to other WTO countries. All this, however, is beside the real point: trade restrictions hurt many more Americans than they help.
A "comprehensive" self-initiated 201 investigation would make an already bad situation worse. We believe that, if the steel producers have a good case under Section 201, they should bring it by petition-and let consuming industries and foreign suppliers to our market make their arguments to the ITC and the President.
We regret the Big Steel Letter because it perpetuates the mistakes that Big Steel has made for many years. Reliance on import restrictions is not a long-term solution for the problems of U.S. steel producers. As consumers, we have come to expect the best steel available in the shortest time and at world-competitive prices. We also know that the best suppliers are committed in the long term to their customers. Unfortunately, U.S. steel producers are currently not among the world's best in terms of quality or efficiency. Perhaps this is because they concentrate more on complaining than competing.
Import restrictions not only hurt our industries in the U.S.-they subsidize our competitors. As downstream markets are distorted, U.S. customers will move out of the country, where they can get the raw materials they need.
There is no easy answer to the pressure of import competition, which most of our industries face. The only right answer is to compete-vigorously, fully, with an eye on the customer and on the future.
We urge you to reject the demands of the Big Steel Letter and other arguments for imposing damaging import restraints in steel and other products our economy needs to be competitive. Open markets are best for all Americans.
Jon E. Jenson, CAE
cc: Honorable J. Dennis Hastert, Speaker of the House
Honorable Trent Lott, Senate Majority Leader
Honorable Richard Armey, House Majority Leader
Honorable Richard Gephardt, House Minority Leader
Senator Thomas Daschle, Minority Leader
Honorable Bill Archer, Chairman, House Ways and Means Committee
Senator Don Nickles, Senate Majority Whip
Honorable Charles Rangel, Ranking Member, House Ways and Means Committee
Senator William Roth, Chairman, Senate Finance Committee
bcc: Grant Aldonas, Senate Finance Committee
Angela Ellard, House Ways and Means Committee
G. William Hoagland, Senate Budget Committee
Norman Y. Mineta, U.S. Department of Commerce
Ambassador Charlene Barshefsky, Office of the U.S. Trade Representative