Canton Repository

April 9, 2003

Steel needs more help, industry tells Senate

By PAUL M. KRAWZAK
Copley Washington correspondent

WASHINGTON — Safeguard tariffs enacted to help the steel industry are not enough to insure its survival, industry representatives told senators Tuesday.

A highly valued U.S. dollar, the existing private health-care system and growing steel capacity around the globe threaten to plunge U.S. steelmakers back into crisis when the temporary tariffs end, they said.

In a hearing sponsored by the Senate Steel Caucus, top executives and a union chief said more government action is needed to help the industry.

Dan DiMicco, chief executive officer of Charlotte, N.C.-based Nucor Corp., complained about currency manipulation by foreign governments, which he said is a “subsidy” that hurts U.S. steelmakers.

When the dollar strengthens in comparison with foreign currencies, as is the case today, imports become progressively cheaper. At the same time, U.S. exports become more expensive for foreign consumers.

“Every sector of our economy, from agriculture to manufacturing to services, is hurt by currency manipulation by China and other governments,” he said. The United States should “send the message that we expect our trading partners in the Far East to stop the widespread and deliberate currency manipulations.”

The steel industry concerns on this score may place it at odds with Bush Administration policy, which, officially at least, is aimed at assuring a strong dollar.

Wilbur L. Ross Jr., chairman of Cleveland-based International Steel Group, said the United States needs to adopt a national health insurance system to be more competitive with foreign steelmakers.

“It’s the only long-term solution,” agreed Leo W. Gerard, president of the United Steelworkers.

Ross’ company reopened the former LTV Steel in Cleveland and is in the process of purchasing bankrupt Bethlehem Steel.

Ross said foreign competitors have a 10-percent cost advantage because they don’t have to set aside funds for employee health care. The governments in those countries pay for citizens’ health care.

John H. Walker, chief executive officer of Weirton Steel Corp. in West Virginia, said it was a mistake for the administration to exempt developing nations from the tariffs, which help domestic steelmakers by raising the price of imports.

The tariffs led to lower steel imports from nations that were covered by it, he said. Meanwhile, Turkey, India and Egypt, beneficiaries of the exemptions, increased their shipments to the United States.

For example, Turkey’s imports rose to 456,000 tons in 2002, a 39 percent increase over the previous year, he said.

“For this reason, I encourage you to urge the administration to reconsider its position on these particular countries and include them in the tariff program,” Walker said.

The United States also has to find a way to enforce its trade laws, which prohibit foreign manufacturers from selling steel at artificially low prices, according to the steel chiefs.

Several mentioned China as a threat. Already the world’s largest steel producer, China will expand its steel-making capacity by 50 million tons in the next five years, warned Thomas J. Usher, chairman and chief executive officer of U.S. Steel Corp.

A flood of steel imports from China would drive down prices in the United States, causing more steel company bankruptcies, the senators were told.

Most who testified at the hearing said the 1-year-old tariffs have substantially helped American steel makers by raising prices, checking the growth in imports and encouraging steel companies to restructure. The administration is reviewing those tariffs to see if they should be extended for their maximum three-year duration.

Sen. Jay Rockefeller, D-W.Va., who supported the tariffs, was sour nonetheless about their implementation.

“I don’t think either of the last two administrations gave one hoot about the steel industry,” he said, referring to President Clinton and now Bush.

The tariffs enacted by Bush were a “failure” because they fell short of his recommendation that they be hiked to 40 percent, he said. Instead, the Bush tariffs were a maximum of 30 percent last year, and fell to 24 percent this year. With a 24 percent tariff, a duty equaling 24 percent of the value of the import has to be paid. That makes the import more expensive.

Sen. Arlen Specter, R-Pa., who is chairman of the steel caucus, said for him the most important message from the hearing was the need to enforce trade laws.