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Hon. Robert B. Zoellick
United States Trade Representative
600 17th Street, N.W.

Hon. Donald L. Evans
Secretary of Commerce
14th Street and Constitution Avenue, N.W.
Washington, D.C. 20230

Re: CITAC Steel Task Force Opposition to Requests for Further Expansion of Steel Tariffs and Other Import Restrictions

Dear Ambassador Zoellick and Secretary Evans:

This letter is presented on behalf of the Consuming Industries Trade Action Coalition Steel Task Force ("CITAC STF"), a group of United States manufacturers in industries that use steel. As we have made clear, the President's decision to restrict imports of steel has resulted in severe hardship and job losses in steel consuming industries. While there have been benefits for steel producers, we believe the net effect on the U.S. economy has been decidedly harmful.

The President's program on steel has several aspects that could benefit steel consuming industries, including exemptions for certain imports (e.g., NAFTA imports, imports from developing countries) and the product exclusion process. Steel producers, however, eager to force prices up and availability down, have requested that even these meager concessions to the needs of steel consumers be withdrawn. By letters of July 30, 2002, January 10, 2003 and January 16, 2003, steel producers representing producers of stainless steel bars and angles, certain flat rolled finished steel products and certain steel bars have asked for imports of these products from developing countries to be subject to tariffs.

An action to terminate this exemption would likely add substantially to the hardship for steel consuming industries in the United States. We urge that the Administration refrain from this action, which is wholly unjustified.

Under the President's Proclamation of March 5, 2002, imports of subject merchandise from developing countries and NAFTA countries are not subject to the remedies provided by the Proclamation. This action is solidly grounded in international agreements to which the United States is a party. More importantly for steel-consuming industries in the United States, however, these exemptions provided much-needed moderation in the artificial scarcity of steel products. Price increases on flat-rolled steel, for example, were of historic proportions and have severely damaged the ability of U.S. manufacturers to remain competitive in world markets.

The competitive impact on steel consuming industries is clear and simple: while steel imports are restricted, imports of steel-containing manufactured goods are not. Many U.S. manufacturers have lost considerable business to foreign competitors who have access to lower-priced steel that is available in international markets, but now denied to U.S. manufacturers.

The Administration should not further restrict imports without full consideration of the effects of such restrictions on U.S. manufacturers, including steel consuming industries. Such an analysis is not only essential for downstream U.S. manufacturers; it is also essential to safeguard the customer base for U.S. steel producers. Apparently oblivious to the effects of their efforts on their own customers, U.S. steel producers are rapidly undermining their own future by urging ever-higher prices.

Steel price increases in the United States are not matched around the world. The plain fact is that, in nearly all world markets, basic steel products are cheaper than they are in the United States. We believe this reality is far more important to steel producers and steel consumers than whether steel prices are higher or lower than they were five, ten or twenty years ago.

In addition, the Administration should recognize that the evidence is far from clear that there has been a "surge" of imports from developing countries. Under the North American Free Trade Agreement Implementation Act, which has a "surge" mechanism, a "surge" is defined as "a significant increase in imports over the trend for a recent representative base period." ¹ Applying this definition, it is clear that "petitioners" have not identified a recent and objectively valid base period against which to measure these imports.

It is important to recall that the Proclamation did not mandate imposition of tariffs based on a rise in developing country imports above nine percent of total imports for all developing countries or three percent for a single developing country. The Proclamation requires a much more rigorous examination. First, there must be a "surge" of imports from a developing country WTO member of a product described in the Proclamation. ² Second, such a "surge of a developing country WTO member" must be found by the President to "undermine the effectiveness of the pertinent safeguard measure." ³

The language of the Proclamation does not permit the kind of cumulation of imports attempted in the three letters seeking expansion of the section 201 tariffs. Rather, the plain meaning of Paragraph 12 of the Proclamation is that each WTO member developing country must be examined separately. ⁴

As noted above, adherence to the requirements of the Proclamation and to the relevant provisions of NAFTA and the WTO Agreement on Safeguards is not only prudent as a matter of U.S. international obligations; it is also essential to prevent further harm to U.S. steel consuming industries.

For the reasons stated herein, the CITAC STF urges the Administration to refrain from expansion of the section 201 remedies to developing countries, because the petitioners have not alleged sufficient facts to justify such a drastic remedy. Moreover, the adverse consequences of an expansion of steel tariffs to steel-consuming industries and the entire U.S. economy make such expansion inadvisable and wholly unwarranted.

Respectfully submitted, Lewis E. Leibowitz Lynn G. Kamarck Counsel to CITAC STF

1. 19 U.S.C. § 3372(c)(3).
   
   
2. For example, the letter of January 10 from a coalition of flat-rolled steel product producers seeks to gerrymander the analysis by excluding steel slabs. Because developing countries are not important sources of slabs, the percentage of imports from developing countries would increase sharply if slabs are excluded from the calculation.
   
   
3. Proclamation 7529 (March 5, 2002) at 12.
   
   
4. The language in the first sentence of 12 relates to the method for determining if developing country imports would be subject to the safeguard measures at the outset. The Annex to the Proclamation makes these determinations announcing which developing countries are included in the remedy. See Annex to Proclamation 7529, note 11(d). The second sentence of 12 sets forth the process for expanding the measures to other developing countries. That sentence does not permit collective expansion; new restrictions would be possible only after a country-by-country analysis.