Free-trader Bush is pressed to protect steel

The ailing industry builds its case for limiting imports - and soon.

Ever since Franklin Roosevelt, most US presidents have been free-traders - more interested in helping consumers than protecting industry from foreign competition.

But, every now and then, an industry makes a case for relief, and a president makes an exception. Ronald Reagan throttled back motorcycle imports, giving Harley Davidson the chance to survive. Bill Clinton took pity on US lamb ranchers by holding back imports from New Zealand and Australia.

Now, in what could be his first major trade move, President Bush may start the process with a much larger industry: steel. It's a $50 billion business that supplies a product used in everything from autos to paper clips.

The beleaguered industry, helped by friends in Congress, is pressuring the White House to give it three to five years of protection from steel imports.

Sixteen US steel producers are in bankruptcy, and the industry says more may follow if the president doesn't act.

But steel consumers warn that import restrictions may lead to higher prices - and higher prices may drive more steel-using companies to move their factories out of the country.

So far, the administration has indicated it's looking seriously at protecting the industry. Under international trade law, a country can protect an industry that has been damaged by a surge of imports - even if that surge was not based on illegal pricing. Steel imports began surging in 1997.

"There is a clear recognition about the problems that the industry faces and how it's never fully recovered from the 1997-1998 period," said Robert Zoellick, the United States trade representative at a hearing before the House Ways and Means Committee on March 7. But Mr. Zoellick added that the industry and labor unions must provide for their longer-term future by agreeing to some form of restructuring.

On the campaign trail, Mr. Bush told voters he was a free-trader who hoped to open up foreign markets to US goods. But trade analysts predict he will act more like Mr. Reagan, whose trade policy was pragmatic.

"We're likely to see Bush be pragmatic as well," says Ron Sorini, a former deputy US trade representative, now a trade adviser in Chicago at the law firm Sandler, Travis & Rosenberg. "I don't think he'll be anxious, but if there is a strong compelling economic case, it's a responsible thing to do."

Politics may also play a role. An old friend of Bush, Gov. Robert Taft of Ohio, has written the president twice and spoken to him personally about the steel situation, which has left 10,000 Ohioans working for steel companies in bankruptcy. "Governor Taft actually delivered [votes] for Bush," reminds Taft spokeswoman Mary Anne Sharkey.

Last week, the industry and labor made their case before the House Steel Caucus, composed of about 140 members of Congress. Their message: Much of the industry is on its knees. Consider:

* Stock prices for the major integrated producers are down by 80 percent over the past year. "No one in their right mind would invest in these companies," says George Becker, former president of the United Steelworkers of America, the main steel union.

* Since 1998, 15,000 steelworkers have lost their jobs. Mr. Becker estimates companies in bankruptcy now employ 40,000 steelworkers. The safety of future health and pension benefits is a major concern. Healthcare costs alone totaled nearly $875 million for the industry in 1999. Such costs expenses also add to the cost of mergers, which the administration wants to encourage as a step toward greater competitiveness globally.

* Steel companies had heavy losses last year, and the red ink is continuing. In the past three months, three major steelmakers in Ohio have gone bankrupt. Even the most efficient producers, the mini-mills, which use scrap metal to make new steel, are complaining, since their profits are down.

According to the industry, the main reason for the red ink and layoffs is imported steel. The American Iron and Steel Institute says imports made up about 17.3 percent of the US market last year. This is up from 16.5 percent in 1999, but down from 21.7 percent in 1998.

"The North American market, the world's most open and attractive steel market, is flooded with predatory steel imports, with no end in sight," says Charles Sanida, president of IPSCO Steel in Lisle, Ill.

But steel users, including many small and medium-size companies, have grown more competitive thanks to the imports, says Jon Jenson of the Consuming Industries Trade Action Committee in Washington.

He estimates steel represents 40 to 70 percent of costs for metal-forming companies. "We want a voice, so people are aware of the consequences of trade restraint," Mr. Jenson says.

He points to a recent example: Last February, Clinton limited imports of wire rod. This action - known as a Section 201 - appears not have made anyone happy, says Lewis Leibowitz, a trade lawyer at Hogan & Hartson in Washington.

"Midway through the relief period, the petitioners [the wire rod industry] are complaining that imports are too high and prices too low," says Mr. Leibowitz, who also represents Mr. Jenson's group. He says customers are also unhappy, because of the bureaucratic rules. "It illustrates the difficulty of these kinds of restraints and that nobody knows for sure what good it does."

If Bush does pursue the case, it will be referred to the International Trade Commission, which may take up to eight months to determine if an import surge has occurred and harmed the US industry. If the ITC rules against the imports, it will then recommend a course of action, which Bush may or may not enact. His ruling would come just about the same time he will be arguing that the rest of the world should begin a new round of trade talks, aimed at opening up markets.

(c) Copyright 2001. The Christian Science Monitor

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