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Consumers Could Pay as Much as $4 Billion Annually

Washington, DC - The Consuming Industries Trade Action Coalition (CITAC) announced today initial findings from a study that reveals that the 8 to 40 percent tariffs on steel imports recommended by the International Trade Commission (ITC) in the Section 201 steel investigation could result in the loss of tens of thousands of jobs in the U.S.

The study, "Estimated Economic Effects of Proposed Relief Remedies for Steel," shows that the ITC remedy recommendations could lead to 74,500 jobs lost nationwide, including 30,600 in steel-consuming sectors. The study reveals that eight jobs would be lost for every one steel job maintained.

"This study proves again that tariffs on steel imports will hurt the American economy and American workers. Every state loses employment as a result of the ITC's recommended restrictions. Even states that may temporarily maintain some steelmaking jobs as a result of tariffs will, on balance, lose jobs. At a time like this, neither American families nor the economy can bear that burden," said CITAC Chairman Jon Jenson.

The study shows that while steelmaking jobs would be temporarily maintained through trade restrictions, far more jobs would be lost in other industrial sectors, even in the Rust Belt states such as Ohio, Pennsylvania and West Virginia.

The proposed remedies will lead to higher raw material costs for American companies, as well as greater competition from imports of steel-containing products - a devastating double hit on steel-consuming manufacturers in the U.S. Most industries that use steel cannot pass on the price increase to their customers. Many companies will either be forced to move operations overseas, where competitively priced steel is available, or will be driven into bankruptcy.

The study, conducted for CITAC by Trade Partnership Worldwide, LLC, quantifies the consequences of remedies recommended by the ITC for American steel-users and taxpayers, as well as the U.S. economy as a whole. The study looks at two scenarios: 1) imposition of a weighted average tariff of 9.2 percent on imports of the products found by the ITC to be injured (low tariff scenario); and 2) imposition of average tariffs of 20.7 percent on those imports (high tariff scenario). These analyses average recommended tariffs over all products covered in the current Section 201 steel investigation and do not include imports from Canada and Mexico. The full study will be published on December 19.

"There are 57 workers in steel-consuming companies for every one steelworker. For every single steelmaking job maintained, American consumers would have to pay up to $451,509 annually. This is in addition to the job losses and costs to the economy as a whole that go with tariff restraints. CITAC undertook this study to give the Bush Administration more evidence to consider as it reviews the ITC's recommendations. We hope they'll weigh the serious consequences that special protection for the steel industry will have on broad sectors of the economy against any potential benefit to the steel industry," Jenson stated.

The study predicts that the ITC's tariff remedies are unlikely to provide a significant benefit to struggling integrated steelmakers. According to Jenson, "The tariffs recommended by the ITC would impact volumes of domestic production without raising steel prices enough to bring steel producers back to profitability. Why pay an overwhelming price in lost jobs knowing you can't achieve your goal?"

The study also shows that higher prices and other inefficiencies created by the proposed remedies would cost consumers between $1.9 billion and $4 billion per year. The tariff remedies would also decrease U.S. national income by $500 million to $1.4 billion at a time when policymakers are looking for ways to boost, not slow, economic growth.

Robin Lanier of Consumers for World Trade stated, "Even before the release of the CITAC study, consumers were writing to the Bush Administration to voice opposition to new restrictions on steel imports. American families are really feeling the crunch of the recession this holiday season and they're justifiably asking what makes steel so special that it should cost the American economy so dearly."

The study found that the proposed remedies would slash imports from 18.5 to 35.9 percent and could raise the price of imported steel as much as 20 percent. Even those steel-consuming companies that do not rely on imports will face shortages of needed products at the same time they feel increased competition from foreign producers of steel-containing products that have access to competitively priced steel.

American steel-consuming industries include manufacturers of automobiles, housing and commercial buildings, electronic equipment, appliances, heavy machinery, tires, food processing equipment, oil and gas drilling equipment, and others who rely on imports as components and raw materials.

The CITAC study, authored by Dr. Joseph F. Francois and Laura Baughman, employed a state-of-the-art computable general equilibrium model to estimate the potential impacts of the proposed remedies on the U.S. economy generally, and the steel industry and steel-consuming industries specifically.

The ITC will submit its recommendations to President Bush December 19. The President can follow the ITC's lead or develop his own approach to remedy the alleged injury caused to domestic integrated steel producers.

Jon Jenson is optimistic. "The Administration can't revive the U.S. economy and preach free trade while also protecting integrated steel producers from their own competitive mistakes. We're confident President Bush will make a decision that's good for all Americans."

CITAC is a coalition of companies and organizations who are committed to promoting a trade arena where 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.

The Executive Summary of "Estimated Economic Effects of Proposed Relief Remedies for Steel" is attached. The full study will be published on December 19 and will be posted on the CITAC website at www.citac-trade.org.