Bush Orders Steel Inquiry

Reaching further than his predecessor to help a troubled domestic industry, President Bush on Tuesday called for an investigation into whether U.S. steelmakers are being unfairly undercut by cheap foreign imports.

The move could lead within months to the use of trade sanctions against countries that allow subsidized steel to be dumped in the U.S. market.

And in the complicated world of trade politics, the decision also helps build goodwill for Bush as he seeks to push an ambitious trade agenda through Congress. But it could trigger a backlash abroad that might jeopardize foreign support for the president’s market-opening efforts. It would also drive up steel prices, critics warned.

Bush, announcing his initiative at the White House, said he is “deeply concerned” about domestic steel producers and about “unfair trade practices that may be affecting the economics of the industry.” At least 18 steel manufacturers have filed for bankruptcy protection in recent years, including LTV Corp., the nation’s third-largest steel producer.

The president plans to ask the U.S. International Trade Commission, an independent agency, to investigate allegations of steel dumping and propose remedies to help the industry that could include protective tariffs or quotas. Bush would have the final word on what sanctions, if any, are imposed.

Depending on the scope of the government response, a long list of countries that sell steel in the United States could be affected, including the 15-member European Union, Japan, Brazil, South Korea, Mexico, China, Indonesia, Ukraine, India, South Africa and Australia.

Lawmakers from steel-producing states, some of whom would be key swing votes on legislation Bush wants to expand his trade negotiating power, hailed Tuesday’s action as a bold step to help the shrinking industry.

“Today’s announcement is an important breakthrough for the U.S. steel industry that clearly signals the Bush administration’s willingness to go to bat for the domestic steel producers and workers,” said Rep. Phil English (R-Pa.), chairman of a steel caucus in the House.

Said Rep. Sander M. Levin (D-Mich.), a top Democrat on trade issues: “This is a good step. I’m glad it was taken.” Levin urged the administration to make the probe as broad as possible to cover a wide range of products, from hot- and cold-rolled steel to plates, pipes and bars.

Some lawmakers had urged President Clinton to do the same thing--especially after steel imports surged starting in 1998. But Clinton resisted until almost the end of his term.

The day before he left office, Clinton wrote the chairman of the trade commission acknowledging that the steel industry faces “a new crisis.” The Jan. 19 letter to Chairman Stephen Kaplan recommended the very step that Bush announced Tuesday--”to provide effective relief for the U.S. steel industry,” Clinton wrote.

Steel was a potent political issue in some parts of the country during last year’s presidential campaign. Many people in West Virginia, for example, remembered that, in 1992, Clinton and running mate Al Gore had campaigned in the state on a promise of protecting the domestic industry. Gore, blamed by many voters for inaction when he ran for president himself last year, lost West Virginia to Bush.

The issue continues to resonate in Congress. Thirty busloads of steelworkers are expected to rally today at the Capitol for relief from what they claim is an international market run amok that has robbed the domestic industry of thousands of jobs.

The Bush initiative, said Leo Gerard, president of the United Steelworkers of America, “is the result of unprecedented activism by steelworkers throughout this country who have written more than half a million letters to Washington urging action to cope with the steel crisis.”

Steelmakers also have been lobbying for action. Thomas J. Usher, chairman of Pittsburgh-based USX and acting president of U.S. Steel, praised the administration for a “bold and responsive” move. Usher said 18 domestic steelmakers have filed for bankruptcy since 1998 because of unfairly traded foreign steel, causing the loss of 20,000 jobs and putting 36,000 more at risk.

U.S. steelmakers were seriously hurt in the aftermath of the 1997 Asian financial crisis, and they are now feeling the pain of a slowing U.S. economy and global overcapacity that have pushed prices to a 20-year low.

But the U.S. steel picture is not all bleak. Critics of the Bush administration’s decision argue that it is the large, heavily unionized steel mills that have been hit the hardest in recent years, whereas more efficient mini-mills and such producers as Charlotte, N.C.-based Nucor Corp. and Butler, Ind.-based Steel Dynamics Inc. reported record profits in 2000. They also note that imports have dropped in recent months and the U.S. steel industry is itself a major user of foreign product, importing 10 million tons of semi-finished steel last year.

The Consuming Industries Trade Action Coalition, a group of steel-importing industries, said import protections would prevent the steel industry from taking necessary further cost-cutting measures and could drive steel prices higher. They said the losers would be consumers, who would pay higher prices for cars and other products that use steel.

A coalition study claims steel quotas would cost American consumers as much as $2.34 billion annually, or as much as $565,000 per steel job in additional costs.

“We’re not convinced that [imports] alone is the only problem causing the steel crisis in America,” said Bill Sopko, president of Cleveland-based Stamco Industries Inc., which makes brake components.

Wall Street reacted positively Tuesday in the wake of Bush’s move. Steel stocks soared, with the Standard & Poor’s steel share index surging 6.6%.

Daniel Griswold, associate director of the Cato Institute’s Center for Trade Policy, called the Bush administration’s move an “awful decision” that “sends a chilling message that even though we’re demanding that other countries open their markets we’re going to close ours in a significant way.”

Griswold predicted the Bush administration’s move would trigger a backlash among U.S. trading partners, jeopardizing efforts to expand the North American Free Trade Agreement through the Western Hemisphere and launch a new round of trade talks through the World Trade Organization.

“This is just another example of the United States saying, ‘Do what we say, but not what we do,’ ” he said.

European Union spokesman Willy Helin agreed that the investigation “comes at a very awkward moment” given the new administration’s efforts to patch up relations with its Atlantic trading partners. He said EU Trade Commissioner Pascal Lamy will be in Washington on Thursday to warn members of Congress that imposing new import restraints on steel is “not the appropriate way” to resolve the global steel crisis and could endanger other trade efforts.

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Anderson reported from Washington and Iritani from L.A.

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Stealing the Steel Market

As U.S. demand for steel has risen, non-NAFTA countries have claimed a larger market share.

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Market share of finished steel coming into the U.S. from non-NAFTA countries

2000 (preliminary): 17.4%

Source: American Iron and Steel Institute

Steel’s Long Slide

Steel stocks have plummeted since the mid-1990s amid rising imports and falling prices for raw steel. But the stocks have resurged this year and shot up Tuesday after President Bush ordered a probe into whether current import levels are further harming the industry.

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Standard & Poor’s index of four major steel stocks (Allegheny Technologies, Nucor, USX-U.S. Steel and Worthington Industries), quarterly closes and latest

Tuesday: 49.09

Source: Bloomberg News