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US-European rift over steel exports grows wider

The wedge of steel trade, now splintering relations between the United States and Europe, has been driven deeper by a pair of hammer blows.

Last weekend, major US steelmakers refused to accept a tentative settlement of steel problems negotiated by Secretary of Commerce Malcolm Baldrige and European Community officials.

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Then, on Tuesday, the Department of Commerce said in a preliminary ruling that six European nations have been selling steel at unfairly low prices in the US.

Add worldwide recession and the labor troubles of US companies, and an end to this trade spat seems as far away as ever.

''As far as I can see, it's chaos,'' says Harald Malmgren, a Washington trade consultant.

For US steelmakers, 1982 promises to be a bleak year. US Steel, the largest domestic producer, will reportedly lose close to $600 million on its metalmaking operations. Bethlehem Steel, No. 2, lost $113.8 million in the first two quarters. Over 110,000 steelworkers are out of a job. Mills have been producing at less than 60 percent of capacity.

Meanwhile, imports penetrated the US market at record levels last year, accounting for 19.1 percent of all steel sold in America, up from 16.3 percent in 1980.

US companies place much of the blame for their plight on what they say are unfair steel imports from European and other countries. In January, seven major domestic producers filed suit with the Commerce Department, charging steel companies in 11 nations with either receiving unfair government subsidies, or ''dumping'' their products -- selling them in the US below cost.

While these cases marched along the quasi-judicial process allowed under the General Agreement on Tariffs and Trade, government officials struggled to defuse the dispute with a negotiated settlement. After an off-and-on courtship of several months, Secretary Baldrige and EC Vice-presidents Etienne Davignon and Wilhelm Haferkamp reached a tentative accord Aug. 6.

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The agreement would limit European exports to the US of 11 steel products until the end of 1985. Overall, the pact would have cut Europe's share of the US steel market from the current 6.3 percent to 5.7 percent.

But for the agreement to take effect, US producers had to approve it. And as far as they were concerned, it didn't go far enough. European exports of pipe and tube for the oil industry weren't covered. Stringent limits were placed on unprofitable items, says one knowledgeable source, while more lucrative products had looser restrictions. So major US companies turned thumbs down on the deal.

''We believe the negotiated proposal is neither fair nor equitable,'' said David Roderick, chairman of US Steel.

Although the US government still has hopes, the prospect for a quick, negotiated end to the steel dispute appears unpromising. The Commerce Department's latest action is likely to loose a fresh round of recriminations between the US and the EC.

On Tuesday the Department of Commerce, in a preliminary decision, ruled that Belgium, West Germany, France, Italy, and Romania (not an EC member) were unfairly dumping steel in the US.

(In a companion decision, the Commerce Department ruled in June that many European countries were unfairly subsidizing their steel industries.)

The department found infractions ranging from the comparatively minor to the comparatively blatant: one Italian firm, Teksid, was accused of selling cold rolled sheet and strip in the US at 41 percent below the cost of production.

But Commerce officials cautioned that these preliminary findings were based on sketchy data. It feels that companies under investigation will supply better figures by Oct. 25, when a final ruling is due.

''Our final determination may change drastically from the preliminary,'' a department official said.

The findings were based on ''hypothetical conditions,'' grumbles Marcel Loeb, president of the American Institute for Imported Steel.

After a final determination of dumping, tariffs would be levied on the guilty products -- with tax revenue going to the US government. For now, importers must post a bond, equal to the margin of dumping, if they wish to sell any of these products in the US.

But for hard-pressed US firms, Commerce's latest action may not be enough.

US steel producers are ''far more desperate now than they were a few weeks ago,'' says Mr. Malmgren, the trade consultant.

Crucial steel-labor talks broke down July 30, with domestic companies unable to wring the $6 billion it sought in give-backs from the United Steelworkers union. Tax increases now being debated in Congress -- particularly a proposed cutback in so-called ''safe harbor'' leasing -- could hurt less-diversified producers.

Washington sources speculate that US companies may be planning further action , such as an antitrust suit, against European steelmakers.

And, for both US and European producers, the steel spat is complicated by competition from such modern, low-cost producers as South Korea.Structural change in the Western world's steel industry is inevitable.

"Five years from now, we wont't see the same face on the steel," industry said Secretary Bakldrige at a recent breakfast with reporters.

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