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CONSUMING INDUSTRIES: BUSH ADMINISTRATION'S STEEL PLAN INITIATED WITHOUT REGARD FOR DOWNSTREAM USERS AND CONSUMERS

Washington, DC: Consuming Industries Trade Action Coalition (CITAC) Executive Director Janet Kopenhaver expressed her strong disappointment today at an announcement by President George W. Bush that he is initiating an investigation under Section 201 of the Trade Act of 1974 to determine if the U.S. domestic steel industry is being seriously harmed by steel imports. The President also announced two international initiatives that are designed to reduce foreign steelmaking capacity, but which will not by themselves encourage the U.S. industry, particularly integrated producers, to close the inefficient capacity in this country.

"A Section 201 investigation is a very serious step. If it results in restricting steel imports, it could severely impact U.S. consumers and steel consuming industries, but won't solve the U.S. industry's basic problems," stated Kopenhaver. "The Bush Administration's decision to initiate a Section 201 investigation appears to ignore the interests of a huge number of companies, workers and consumers who will face the consequences of import restraints."

Kopenhaver pointed to a recent CITAC study which showed that steel quotas - a likely result of the Section 201 investigation - could cost American consumers as much as $2.34 billion annually or up to $565,000 per steel job. In addition, roughly two to three times as many workers in steel-consuming industries would lose their jobs as would be protected in steel producing companies.

Kopenhaver said that major U.S. steel-using manufacturers will lose market share and jobs if they cannot obtain the products they need from competitive domestic and international suppliers. In exchange, "If import restrictions provide any real relief to the domestic steel industry and its workers - and that's highly questionable - it would be very limited in scope and have no lasting impact on their ability to compete globally, which they must do to survive," said Kopenhaver.

Kopenhaver added, "Policymakers need to take into consideration the potential negative impact of trade restraints on downstream users, other sectors of the economy and consumers when attempting to protect a narrow sector of the economy. Unfortunately, current U.S. trade law does not give consumers a voice. At the very least, consuming industries need to be full participants in trade remedy cases and in any consideration of new quotas or taxes, because it is American businesses and American jobs that are jeopardized by these measures," concluded Kopenhaver.

American steel-consuming industries include major producers of automobiles, housing and commercial buildings, electronic equipment, heavy machinery, tires, food processing equipment, oil and gas drilling equipment, and others who rely on imports as components and raw materials. CITAC members frequently describe situations where steel import restrictions (duties and quotas) cause damage to their businesses in terms of contracts and jobs lost or relocated offshore.

In addition, according to CITAC, any positive solution to the steel crisis should include steps to consolidate the domestic industry, making it more efficient and globally competitive, as some producers have already done. The President's "Multilateral Initiative on Steel" provides no detail on steps toward industry-based solutions.

The domestic steel industry itself imported approximately 10 million tons of semifinished steel in 2000. Even competitive U.S steel companies have declined to put their full support behind new restrictions on steel imports, noting they do not wish to subsidize inefficient competitors.

Kopenhaver concluded, "The United States has been a leader in building our global free trade system. Creating artificial barriers is not the long-term solution for the internal structural problems of the domestic steel industry. These barriers promise to create many new equally burdensome problems for American companies trying to compete globally."

CITAC is a coalition of companies and organizations committed to promoting a trade arena in which U.S. consuming industries and their workers have access to global markets for raw materials and other imports that enhance the international competitiveness of U.S. firms.