Imports steal US steel market

Congressman Peter Visclosky counts 30,000 steelworkers in his Gary, Indiana district. That's more than any other representative has.

Today, many of those workers fear for their jobs as a result of a surge of steel imports into the United States.

So it's no surprise that Mr. Visclosky is a lead cosponsor of a bill introduced in Congress last week that would roll back steel imports to their level prior to July 1997.

The bill, named with publicity in mind, is Stop Illegal Steel Trade Act. It has 127 cosponsors and a chance of passing the House. But it runs against world trade agreements.

The White House, Visclosky charges, has not acted on this issue.

Imports weren't a problem in 1906 when Judge Elbert Gary, chairman of United States Steel Corp., put a new plant on Lake Michigan's southern tip, mid some sand dunes, but with good transportation prospects. The new town was named Gary.

It was a time when US Steel had 65 percent of the nation's steelmaking capacity. The company is not nearly as dominant now.

For much of the past 30 or so years, and including today - imports have troubled the steel industry. US Steel shut down 10 factories in 1979, blaming imports. LTV, the nation's second largest steel firm then, filed for bankruptcy in 1986. By that date, steelworkers' ranks had thinned to 200,000 from 450,000 in 1979, partly because of greater efficiencies, partly due to imports.

Visclosky complains that another 10,000 steel jobs were lost last year as imports climbed 47 percent in the past 18 months.

"Every day, 24 more lose their jobs," he says. "That is absolutely intolerable."

The foreign share of the American steel market has grown from 25 to 34 percent. Much of that, Visclosky maintains, is due to illegally traded or "dumped" steel.

Today, the Commerce Department is scheduled to announce whether it agrees. In response to steel industry complaints, it will give a "preliminary determination" on whether and to what degree Japan, Russia, and Brazil have been dumping steel in the American market at prices lower than those in the home market. If so, it will spell out whether the steel importers have to pay a certain percentage - say 30 percent - penalty when a final determination is made some months hence that the domestic industry has been injured.

The libertarian Cato Institute's Aaron Lukas charges that Visclosky's bill will unnecessarily harm American businesses, workers, and consumers and thus is "profoundly unfair."

US steel-using industries, which use the cheaper imports, employ 40 times as many people as do US steel producers, he notes. And dollars spent on foreign steel return to buy American wheat, farm equipment, auto parts, and so on creating jobs.

But probably most economists believe there should be some rules to ensure fairness in the trade game. At the company level, foreign firms may strive to cover high fixed costs by exporting steel, even at a loss. At a national level, dumped steel in effect exports costly unemployment.

Economists Greg Mastel and Andrew Szamosszegi, in a new study for the Economic Strategy Institute in Washington, describe the world steel market as "perhaps the most distorted industrial market in the world." Many nations nurture their steel firms with subsidies and trade protection.

The US industry has spent $50 billion on modernization since 1980. It now is highly efficient with relatively low costs. That's changed from a decade or so ago when it was criticized for seeking "voluntary restraint agreements" limiting steel imports.

Further, the two economists oppose the Cato view that dumped and subsidized steel should be accepted as "gifts to consumers."

Their analysis finds that any transient gains from dumped steel are soon outweighed by domestic production losses, reduced investment in the industry, and cuts in high-paid jobs.

In other words, it pays to protect steel from unfair trade competition.

*David R. Francis is senior economics correspondent of the Monitor.