Position Papers

Trade Restraints Hurt US Manufacturers

American steel consumers must compete globally, and therefore must have access to steel that is internationally competitive in quality and price. Restraints on steel imports deal these steel-using manufacturers a serious blow through:

1. increased raw material costs (prices have risen between 40-75% over the last three months);
2. delays (some steel users say deliveries are on-time only 50%, delays can force costly shutdown of operations and create uncertainty for small business owners);
3. shortages created by domestic steel mills putting users on allocation;
4. inability to pass price increases on to customers (steel users can't change their contracts with customers even if the steel mills have broken contracts with them to raise prices); and
5. greater competition from abroad for the steel-containing products they make. Steel-using competitors abroad have access to world-priced steel, allowing them to export a less expensive end product to the US. And,
6. lack of choice in the market. Steel users choose their inputs based on processing characteristics, availability, price and other variables. With restrictions, they have no choice but to buy whatever they can get at whatever price it is offered.

Trade Restraints Will Lead to Layoffs, Bankruptcies Downstream

There are 59 American workers in steel-consuming industries for every one steelworker. In fact, a CITAC study found that at least 8 jobs would be lost in steel-consuming industries for every one job saved in steel production as a result of the 201 tariffs. This is a conservative estimate.

Some steel users are now selling their products at a loss. They have been unable to pass on price increases, but must buy steel to stay in business. There is only so long that can continue before these small businesses go out of business.

Layering of Restrictions Stops Imports, Disables Steel-Using Companies

In addition to the Section 201 tariffs (up to 30%), the domestic industry continues to move forward with an antidumping case on cold-rolled steel (asking for up to 153% extra duties) and another case on wire rod. However, neither case warrants imposition of new additional duties.

About 28% of all steel products consumed in the US in 2001 was cold-rolled steel. Approximately two million short tons of imported cold-rolled steel would be affected by both the Section 201 and antidumping duties. This represents 72% of all cold-rolled imports.

The antidumping law requires that the International Trade Commission (ITC) base its final injury determination on the current state of the industry, not on past conditions. Today, import volumes have dropped significantly, US steelmakers share of consumption is 94.4% and prices have skyrocketed by over $100 per ton.

In the wire rod case, there are several types of wire rod that are either not available from US producers or are in short supply - domestic producers do not make enough to meet domestic demand. However, the domestic industry has so far refused to exclude the products that are unavailable or in limited supply.

The US steel industry doesn't need more import restrictions, can't justify the tariffs on the law or the facts and will further injure its customers if the duties are imposed. US integrated steel producers already have massive trade protection that is hurting US industries and threatening the US economy.

Trade Restrictions Don't Address the Problem

We need a strong and vigorously competitive domestic steel industry, but restraints on steel imports will not make U.S. producers stronger or more competitive. Thirty years of protectionism have amply demonstrated this. Steel imports are not the cause of certain integrated mills' inability to compete internationally. (The mini-mills are quite profitable and account for about half of all U.S. steel production.)

The root cause of the integrated producers' woes are high energy and raw material costs, poor productivity relative to international competitors, poor management decisions, outdated work rules and technology, and other factors. For example, "legacy costs" for retiree health benefits add nearly $30 per ton to integrated producers' costs.

Steel Imports Are Essential

Since domestic steelmakers can supply only about 75-80 percent of the nation's demand for steel - imports are not optional. They are a necessity for the well being of our industrial economy. Quality and availability, as well as price, are reasons why steel is imported. In fact, U.S. steelmakers themselves import foreign steel, and account for about 30 percent of all steel imports.

Adequate Protection Already Exists

Steel is one of America's most protected industries. Antidumping and countervailing duty laws are already in place. In fact, more than 50 percent of steel imports are currently covered by antidumping actions, and nearly every major steel producer in the world has been sued under these laws. Dumped and otherwise unfairly traded steel is not the issue. We support the enforcement of existing trade laws on unfairly traded steel. Unfortunately, the 201 tariff affects fairly traded as well as unfairly traded steel.

Trade Restraints Threaten America's Leadership on Trade

Our trading partners have already threatened to impose damaging retaliation in response to the 30% tariffs. At the beginning of August, the US lost another case before the World Trade Organization as a result of our restrictions on steel. A number of our trading partners have already asked the WTO to review the 30% safeguard tariffs. The ability of the US to lead in increasing and expanding international trade is necessary for the future prosperity of the country and of American consumers.

THE CITAC STEEL TASK FORCE URGES TRADE POLICYMAKERS TO:

• Pressure the Bush Administration to conduct an early review of the 201 tariffs and repeal them on or before the September 2003 scheduled review.

• Refuse to impose more quotas or tariffs (on cold-rolled or wire rod) on top of the existing "umbrella" of import restrictions already in place on major steel products.

• Ensure unrestricted availability of imports of any steel products that are not available from U.S. suppliers or are in short supply in the United States.

• Give consumers a voice in the steel policy formulation by including consumers in hearings and meetings directed at steel policy making.