Auto/Autoparts Makers May Face Higher Steel Prices If Government Imposes Restrictions On Steel Imports

Autoparts Report, June 18, 2001

The Bush administration decided to initiate a sweeping trade case that would impose sharp restrictions on the amount of steel imported from abroad to protect the beleaguered American steel industry. The case will be brought before the U.S. International Trade Commission, the government agency that determines how much injury an industry has suffered as a result of import penetration.

The action would represent a major victory for U.S. steel manufacturers and their unions, which for years have sought protection against low-priced imports. The Clinton administration had rejected the industry's appeals, contending the measure they wanted to use, known in trade law as Section 201, was too blunt an instrument to employ and ran the risk of retaliation from other countries. However, Bush administration officials have been more receptive to the industry's appeals, contending that short-term protective barriers for the steel industry could be a way to win congressional backing for Bush's ambitious trade negotiating agenda.

Under Section 201, the commission would have to determine that U.S. industry was being seriously harmed by imported steel. The commission could propose remedies, but the administration would have the final say on what protection to implement. The range of sanctions against foreign steel could include stiff tariffs that would make imports prohibitively expensive for American automakers and other users of steel.

Such a remedy could be in effect only for a limited time, and during that period the U.S. industry would have to agree to restructure or take other actions to become more competitive. The U.S. industry has been pleading for the government to impose barriers to imports since 1988, when the Asian currency crisis resulted in a flood of cheap imported steel into this country. American steel companies found it difficult to compete at those prices, and at least 16 have filed for bankruptcy protection in recent years, blaming their woes on the low-priced competition.