Steeling for Hard Times

0 Comments | Insight on the News, Nov 9, 1998 | by Marc Selinger

The U.S. steel industry is seeking federal protection from surging imports selling below cost -- and jeopardizing thousands of American jobs.

The steelworkers' union and 12 steel companies, including giants such as Bethlehem Steel and U.S. Steel Group, are filing federal "antidumping" complaints against Brazil, Japan and Russia. The industry wants President Clinton to take "emergency measures," which could include import quotas.

Companies claim unfair imports cut profits by almost 60 percent in the first half of the year. Some are starting to lay off workers and predict the loss of 100,000 jobs if nothing is done. "It is an absolute crisis," says Paul Wilhelm, president of U.S. Steel Group.

U.S. executives claim that producers in Brazil, Japan and Russia are selling millions of tons of hot-rolled steel below cost in the United States because they can't sell it in their own countries, which are suffering from severe economic troubles. Hot-rolled steel has many uses, including construction and auto manufacturing.

Russia is the worst offender, selling steel in the United States for as little as one-third of its production cost. Overall, imports of hot-rolled steel from the three countries have soared 500 percent since 1995, U.S. companies claim, accounting for 28 percent of the U.S. market -- up from 10.9 percent last year and 4.3 percent in 1995.

The steel industry has started an advertising campaign to rally public support for its cause. "What we want is something to stop the hemorrhaging," says United Steelworkers of America President George Becker. In addition, the industry wants the Commerce Department, in concert with the U.S. International Trade Commission, to slap duties on imports to bring their prices up to more competitive levels. Investigative probes could take about a year, but industry lawyers believe the federal government can, if it wants, issue a tentative finding within two months.

The steel industry's complaint highlights disagreement about laws designed to protect U.S. companies from imports. "It's a real testament to the imbecility of U.S. trade policy that at a time of world economic crisis, we pick out three of the countries with the most severe economic problems and kick them in the shins with dumping cases," says Brink Lindsey, director of the Cato Institute's Center for Trade Policy Studies.

Clinton administration spokesman Jake Siewert says the problem underscores the need for Congress to pass the administration's funding request for the International Monetary Fund, or IMF, which bails out troubled economies. "That's the most immediate thing we can do," says Siewert. "A strong IMF is a stabilizing force unto itself."

Meanwhile, Greg Mastel, vice president of the Economic Strategy Institute, foresees other industries filing similar dumping complaints if steel succeeds. Steel is a bellwether for import-sensitive industries because it's heavily traded.

RELATED ARTICLE : Asian Woes Translate to American Lows

The U.S. trade deficit edged up slightly in July from the previous month as economic turmoil in Asia sent U.S. exports down to their lowest level in 17 months, the federal government recently reported.

The United States imported $13.9 billion more in goods and services in July than it exported to other countries, according to the Commerce Department. That's a 2 percent increase from the previous month and a 62 percent jump from a year ago. The overall U.S. trade deficit this year is running 46 percent ahead of last year's.

"That's a real strain on the U.S. economy," says Andrew Szamosszegi, senior research associate at the Economic Strategy Institute. "Unless things turn around, you're going to start seeing some layoffs." Farmers are particularly vulnerable because they are affected by low prices and bad weather as well as unfavorable trade trends. And trade figures haven't begun to reflect new troubles in Latin America.

The recent deficit figures underscore the need for Congress to approve $17.9 billion for the International Monetary Fund, or IMF, the international lender of last resort, says Jerry Jasinowski, president of the National Association of Manufacturers. Some lawmakers are resisting the full amount for the IMF, urging that the agency do its business more openly and promote free-market reforms in the countries it helps.

Although many experts are concerned about the July trade figures, they say the deficit was smaller than expected due to the General Motors strike, which reduced imports of auto pads, and low oil prices. Strong demand for imports also indicates the U.S. economy remains strong, notes Commerce Undersecretary Robert Shapiro. The trade deficit from May to July was below 1997 levels as a percentage of gross domestic product, adds Shapiro. And while exports to Pacific Rim nations have plunged 14.7 percent this year, they actually have risen to the rest of the world by 6 percent.