*EPF511 12/07/2001
Trade Panel Recommends Tariffs, Quotas to Help Steel Industry
(Commissioners support global over-capacity talks) (870)

By Andrzej Zwaniecki
Washington File Staff Writer

Washington -- The U.S. International Trade Commission (USITC) has recommended to President Bush an array of trade remedies to provide import relief for the U.S. steel industry.

In October USITC ruled that a surge of imports in 12 steel products had hurt the U.S. industry.

Based on this determination, the commissioners proposed December 7 additional ad valorem duties ranging from 8 to 40 percent, quotas, and tariff-based quotas up to 20 percent. All of the recommended remedies are structured to become more liberal over time through tariff reductions and quota increases.

The tariffs and quotas would be in place for up to four years to give U.S. steel producers time to restructure and adjust to import competition.

The imported products covered by the commission's recommendations accounted in 2000 for 27 million tons of steel valued at $10,700 million.

The commissioners initiated the case under Section 201 of U.S. trade law, under which domestic industries injured or threatened by a surge of imports may seek import relief. Section 201 concerns fairly traded goods, not dumping or other behavior covered by unfair-trade laws.

The U.S. steel industry has indicated to USITC that it would be unable to adjust to import competition, independently of import remedies, unless impediments to restructuring, such as labor agreements and pension, health care, and environmental clean-up costs, were removed.

However, Commissioner Deanna Okun said that law does not authorize any action addressing these problems. She said she recommended that the president "evaluate carefully" solutions to these problems proposed by various parties.

The large integrated steel producers have also suggested that the revenues collected through any import relief measures implemented by the president should be used to assist the industry in its efforts to restructure.

Noticing that "it is not clear that this recommendation falls within the purview" of Section 201, Commissioner Dennis Devaney said that "the president clearly has the power to consider innovative approaches to remedy."

The commissioners will formally report their recommendations to President Bush by December 19.

The president will have then 60 days to decide whether to provide relief to the U.S. steel industry, and if so, what kind of relief. But Bush is not bound by USITC recommendations; under the statute he can accept them, modify them or do nothing at all.

A senior Commerce Department official signaled earlier that the Bush administration would not rush to make a decision.

And U.S Trade Representative Robert Zoellick indicated that relief measures were conditional on industry's willingness to restructure.

Earlier this week, USX-U.S. Steel Corp., the largest U.S. steel-maker, and Bethlehem Steel Corp., the third largest, proposed a merger and invited several of their domestic competitors to join in to create a single, powerful steel company, according to press reports. They have asked a steel union to renegotiate a labor contract and the federal government to come up with $13,000 million to pay for pension and health-care benefits for retirees.

More than 20 U.S. steel-makers have filed for bankruptcy since 1999 when a surge of steel imports at historically low prices flooded the U.S. market.

Meanwhile, the United States has mounted a diplomatic campaign that aims at reducing the global excess of steel production and capacity. Officials from the Commerce Department, the Office of the U.S. Trade Representative and the Treasury Department have been traveling to countries with the biggest steel producing industries, including Japan, China, Mexico, Brazil and Russia, to persuade them to support significant cuts in output.

Commissioner Lynn Bragg, announcing her decision, said that proposed relief "will complement the president's efforts to address concerns regarding global over-capacity and production."

And Devaney said he believes that "it is extremely important to send the strongest recommendations to the president so that he will have maximum leverage during these global negotiations."

"This will also insure that our trading partners appreciate the critical circumstances facing the U.S. steel industry," he said.

Worldwide steel capacity is estimated at more than 1,000 million tons annually. Production is expected to exceed 800 million tons this year while expected consumption amounts to around 700 million tons. Steel prices hover at the lowest levels in 20 years.

At a September Organization for Economic Cooperation and Development (OECD) meeting on steel in Paris major steel-producing countries agreed to take action to reduce production of or close inefficient steel mills after consultations with domestic steel manufacturers.

These countries are meeting again in Paris this month to report on the state of their industries and any planned actions.

At that meeting the United States is expecting clear indications that participating countries can reach quickly an agreement on voluntary reductions in their steel capacity, a senior U.S. trade official said in October.

"There is no point on the part of the administration to extend these talks much beyond December," he said.

News release on the commission's recommendations is available on the USTR Web site:
http://www.usitc.gov/er/nl2001/ER1207Y1.HTM

(The Washington File is a product of the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

(The Washington File is a product of the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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