U.S. Targets Brazil, Japan in Steel-Dumping Ruling

Signaling that the domestic steel industry deserves some breathing space from an unprecedented flood of imports, the U.S. Commerce Department on Friday issued a preliminary ruling that Brazil and Japan have dumped hot-rolled steel here and unfairly subsidized prices by up to 70%.

The findings could lead to anti-dumping tariffs and penalties as early as mid-June if the Commerce ruling is finalized in late April, as expected, and if the U.S. International Trade Commission subsequently determines that the dumping resulted in financial injury to U.S. steelmakers.

The Commerce Department acted in response to a complaint filed last year by the U.S. steel industry and labor against Japan, Brazil and Russia. A finding on Russia has been delayed, pending the outcome of talks the government said could lead to a negotiated settlement.

“The findings made today will provide much-needed relief to the U.S. steel industry and workers who have faced dramatic surges in unfairly traded imports [of steel] over the past year,” Secretary of Commerce Bill Daley said at a news briefing. “We have seen plant shutdowns, companies declare bankruptcy and, most of all, people lose their jobs and their ability to support their families.”

In making the ruling, the Clinton administration is treading a delicate line between upholding its image as an exponent of global free trade and ensuring fair trade practices involving a strategic and highly political industry. Big Steel has gone to great lengths to modernize in the last two decades but at the cost of hundreds of thousands of jobs.

Nonetheless, the industry has been hammered for a year by a surge in steel imports, as a global slowdown in Asia and Eastern Europe made the United States the most attractive market. Japanese steel imports rose 163% last year, and Russian shipments were up 60%. Brazil’s shipments of hot-rolled steel--a basic form in which it is sold before being remanufactured--were up 10%, although overall shipments declined.

The American Iron and Steel Institute, a Washington-based trade group, says the import flood has cost the industry 10,000 jobs--total industry payroll stands at about 150,000--and three steel companies have gone bankrupt.

Several steel companies reported darkening profit pictures last year. Steel companies’ sales and earnings have been hard hit, rattling investors. The Standard & Poor’s steel stock index slid 15.1% in 1998, versus a 26.7% price rise for the S&P; 500 blue-chip stock index. The U.S. industry blames the flood of imports, which after averaging 23.1 million net tons a year from 1990 to 1997 jumped to 41 million net tons last year. Total domestic shipments have averaged about 100 million net tons in recent years, the American Iron and Steel Institute said.

Mindful of rising American political tensions over Japan’s laggard economy and rising trade surplus, Kaoru Yosano, Japan’s minister of trade and industry, told reporters in Tokyo that his government would react “calmly” to the dumping penalties if they were imposed in a lawful manner. Japan is the world’s third-largest steel producer.

Complicating the issue is that Japanese steel exports to the United States have fallen in the last two months, and the Japanese expect them to fall again this month. Japan says the drop is because of reduced U.S. demand, but American industry sources argue that it’s a reaction to U.S. threats of making dumping penalties retroactive.

Aluisio Lima-Campos, economic advisor to Brazil’s ambassador in Washington, denied the dumping finding, saying Brazilian steel prices have remained stable for the last five years and that exports to the U.S. have actually declined. Brazil is the 10th-largest steel producer and largest in Latin America.

“What’s bad about this is that it is giving credence to the belief that what the United States is trying to do is force Brazil into some sort of restrictive agreement. The message being sent to Brazilian industry is: ‘Come to an agreement with us, or you won’t export one more kilo of steel,’ ” Lima-Campos said.

The ruling came as no surprise to economists who say U.S. dumping rules are heavily weighted in favor of domestic industry.

“It’s pretty hard not to find dumping the way the law is constructed,” said Jeff Schott, senior fellow at the Institute for International Economics in Washington.

Dumping penalties are allowed by the World Trade Organization, which governs international trade, and have become the U.S. government’s preferred tool in protecting industry. The United States has used anti-dumping penalties against such diverse products as tomatoes, orange juice, brooms and shoes.

But increased use of them has raised protests from foreign governments that see the U.S. as talking free trade in one breath, then acting to shield its companies from competition in the next.

Kazuo Kodama, chief spokesman for the Japanese Embassy in Washington, said his government is far more concerned about the American government’s plans to reinstate the controversial Super 301 trade law that expired in 1997.

That law requires the U.S. trade representative’s office to draw up a list of countries guilty of serious trade violations and impose penalties on those that fail to adequately address U.S. concerns.

Japan and other countries have threatened to challenge the Super 301 law before the WTO, arguing that unilateral trade penalties violate the global trade agreement.

“We are concerned that any unilateral measures taken by the U.S. government will not be constructive to strengthening the global trading system,” Kodama said.

Greg Mastel, a vice president at the Washington-based Economic Strategy Institute, said the Commerce Department ruling sends a strong message to other countries and the domestic steel industry that American trade laws still have teeth.

Mastel disagrees that this action will trigger a new round of protectionism.

“U.S. trade laws were created as a safety valve for times when the trading system is under stress,” he said. “If the trade laws can demonstrate themselves to be useful, I think it will further the cause of free trade.”

He predicted that the ruling will have an immediate positive effect on the U.S. trade deficit because other low-cost steel producers fearful of similar penalties will cut back their sales to the United States.