U.S. Panel Supports Tariffs on Steel
With the White House struggling to assist the beleaguered U.S. steel industry, the International Trade Commission recommended Friday that President Bush impose punitive tariffs as high as 40% on steel imports for up to four years.
Bush, who has 60 days to act on the recommendations, is expected to support punitive measures because he initiated the ITC investigation. The White House is under fierce pressure from the politically powerful steel industry, which has suffered 25 bankruptcies since 1997 because of a global oversupply and a collapse in prices.
Domestic steelmakers applauded the ITC decision, though they expressed concern that the six-member U.S. commission didn’t unanimously support the toughest penalties. The tariff recommendations ranged from 8% to 40% on different types of steel products.
“We need to have a significant remedy here if we have any remedy at all,” said Dan DiMicco, president and chief executive of Charlotte, N.C.-based Nucor Corp., the country’s most profitable steelmaker.
But critics say import restrictions protect inefficient producers and would hurt a weakened U.S. economy by raising the price of everything from automobiles to microwave ovens. If the U.S. imposed a flat 20% tariff on steel imports, it would cost consumers an additional $2.4 billion and save just 7,500 positions in the steel industry, according to the Institute for International Economics, a Washington think tank.
“In a huge economy like the U.S., $2.4 billion is not a big number, but it’s pretty costly when you relate it to the number of jobs you would keep,” said Gary Hufbauer, a trade expert at the institute. “At a cost of more than $300,000 per job, it sounds pretty horrific.”
The ITC action prompted harsh criticism from allies. European Union Trade Commissioner Pascal Lamy accused the U.S. of hiding its steelmakers behind a wall of protectionism that would “virtually close the U.S. market to the rest of the world.”
He said his government would file a challenge with the World Trade Organization if the punitive measures are imposed. “The U.S. industry needs to put its own house in order,” Lamy said. “This should not be done at the expense of others who have already done so.”
Bill Sopko, president of Cleveland-based Stamco Industries, a brake component maker that imports high-strength, low-alloy steel, fears his U.S. customers will turn to foreign suppliers with access to cheaper steel.
“If they do put a 40% tariff on [steel imports], the prices will go way up and my customers will probably source their parts somewhere else in the world,” he said.
Sopko said the only domestic supplier of the type of steel he uses is Cleveland-based LTV Corp., which has filed for bankruptcy and may go out of business, leaving him dependent on imports. On Friday, LTV, which has 7,500 employees, won a bankruptcy judge’s permission to idle its mills at least until Feb. 28 while it awaits approval of an emergency federal loan guarantee or finds a buyer.
Even within the U.S. steel industry, there are divisions between those that rely on imported steel to produce finished products and those that are competing directly with the foreign goods.
“We can’t have a level playing field if companies such as California Steel have restricted access to raw materials and the mini-mills that buy scrap and pig iron are completely free to do whatever they want to reduce their costs,” said Lourenco Goncalves, president and chief executive of Fontana-based California Steel Industries Inc., which imports and processes semi-finished steel slabs.
Steel has proved to be a major challenge for the pro-trade Bush administration, which needed the support of Republicans in the Congressional Steel Caucus to gain Thursday’s passage by one vote of a House bill giving the president trade promotion authority.
Domestic steelmakers and the United Steelworkers of America, which has lost 300,000 jobs in the last two decades, contend that they are battling for survival against a surge of cheap imports from countries such as Russia, South Korea, Japan and Brazil. Though they have invested heavily in modernization in recent years, the large, heavily unionized U.S. producers are carrying billions of dollars in so-called legacy costs for retiree pensions and health care. U.S. producers also complain that their foreign competitors benefit from large government subsidies.
This week USX-U.S. Steel Group and several other leading firms announced they were considering a merger, but only if the U.S. government provided import relief and picked up some of their multibillion-dollar tab for health-care and retiree benefits.
Keith Busse, president and chief executive of Fort Wayne, Ind.-based Steel Dynamics Inc., said tough import restrictions would increase pressure on foreign governments to join in the Bush administration’s efforts to reduce excess steel capacity worldwide. U.S. officials are slated to meet next week in Paris with representatives of major steel-producing countries.
“Everybody recognizes we have tremendous global overcapacity, and these [punitive tariffs] will force others to deal with that problem,” Busse said.
