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Higher Prices and Supply Shortages Already Reported

Washington, DC - Consumers and downstream users of steel, lumber and other imported products struggling as a result of trade restrictions imposed by the Bush Administration took their stories to Washington trade professionals, the diplomatic corps and Washington media outlets this week.

Jon Jenson, Chairman of the Consuming Industries Trade Action Coalition (CITAC), spoke yesterday to a group assembled to discuss the impact of President Bush's section 201 steel decision. Jenson stated that the 30% tariffs recently imposed are "costing the economy significantly," and "jeopardizing international trading relationships."

Providing examples of damage to the domestic economy, Jenson said steel users are being told that certain types of steel are not available until mid-July or August and that producers are rationing their output, putting customers on allocation. At least one producer has stopped taking orders entirely. The resulting shortage is creating a "dramatic increase in price." In the last four months, hot rolled sheet, widely used by downstream users, has gone from $210/ton to $320/ton today, according to American Metal Markets. The next increase is expected in July, and if predictions of $350/ton from noted steel market analyst Charles Bradford are correct, the price would reflect a 70% increase over the last six months.

"For companies that can only afford a 10% increase in input costs before they lose profitability, a 70% increase is devastating," stated Jenson. "Steel makes up 40-70% of the cost of the products I'm talking about. The steel price impact is enormous."

Jenson went on to describe two specific companies already hit hard. A steel-using company in Grand Rapids, Michigan recently lost $6.5 million in business and will be forced to cut jobs. Its long-time customer, located just down the street, is moving production abroad to take advantage of world-competitive steel prices.

Another company, also in Michigan, is laying off 200 workers because one of its main inputs - stainless steel bar - is 40% cheaper in France. Productivity at the French facility is lower, but the steel price differential overrides the productivity factor.

Laura Baughman, co-author of the CITAC study "Economic Effects of ITC Relief Recommendations," described the higher prices and supply shortages in the steel market at a Washington International Trade Association (WITA) meeting on April 16. Many have been put on allocation by their suppliers, have seen prices rise 10 to 20% and have lost millions of dollars in contracts to competitors oversees who have access to world-priced steel.

In response to a question about steel users passing on price cuts when steel was at a twenty-year low (1998-2000), Baughman referred to the Consumer Price Index, noting that the prices of both cars and appliances declined over the period. "We're talking about the small businesses making the automotive parts. They have to sign contracts with customers promising 5% price decreases each year. If there is any savings, it is passed on to the consumer. Steel-using industries also were a powerful job engine, bringing on 848,000 new employees between 1997 and 2000."

Susan Petniunas of American Consumers for Affordable Housing (ACAH) also participated in the WITA panel and urged participants to express their concerns to the Administration about impending 29% tariffs on Canadian softwood lumber. Petniunas said the new taxes will add nearly $1,500 to the price of a new home, pricing close to 450,000 families out of the housing market because they cannot qualify for mortgages.

Consumers for World Trade (CWT) representative Robin Lanier chaired the session, noting that individual American consumers ultimately pay the bill for trade restrictions. For example, the annual cost to an American family of textile and apparel restrictions reaches $700. As a result, associations like CWT and ACAH have thrown their weight behind a bill to improve the standing of downstream users, and therefore consumers, in trade cases.

CITAC is leading the effort for passage of The Transparency and Fairness Trade Act (HR 2770), which would create opportunities for downstream industries to participate in, and receive more balanced outcomes from, the U.S. trade policymaking process. The bill has two essential components: 1) bringing downstream industries into the trade debate by making purchasers full parties to trade cases; and 2) exempting imports temporarily from trade remedy actions if they are not made in the United States or are in short supply.

In addition to promoting HR 2770, Jenson said CITAC will continue to educate American manufacturers, support exclusion requests and opportunities, and continue to voice the concerns of downstream users caught in the fruitless cycle of protectionism.

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