Commission asks for quotas and tariffs to aid US steel industry
The domestic steel industry should be protected from imports by a combinaton of quotas and tariffs for five years, the International Trade Commission (ITC) ruled Wednesday.
President Reagan now has 60 days to decide whether to accept the politically charged recommendation. The President's top trade adviser, US Trade Representative William E. Brock, had no immediate comment on the ITC's decision.
The relief, approved by a 3-to-2 vote, carried the condition that the industry adopt a plan to make US-made steel more competitive in the world market. Last year the industry lost $3.2 billion, and so far this year foreign steelmakers have grabbed roughly one-quarter of the US market. Prior to 1982, steel imports were never as high as 20 percent of the market.
''The effects of this remedy on the American economy are simply too pervasive to permit the remedy to continue without meaningful efforts by the domestic steel industry to adjust to import competition,'' said ITC Commissioner David B. Rohr.
Among other things, the commissioners suggested that the industry plan should include cost-cutting measures and concessions on wages and compensation. Commissioner Susan Liebeler, who voted against import relief, said if aid were granted, steelworkers should take a 20 percent pay cut. Their wage-and-benefit package now averages about about $22.21 an hour. Other commissioners said her proposal did not represent a commission consensus.
Commissioner Rohr, who outlined the relief plan for the majority, said the industry should have 120 days from the time import restrictions are imposed to come up with a plan. If the industry plan does not ''reveal meaningful effects, '' the ITC could recommend that the President end import quotas, Rohr said.
The ITC's action presents the President with a dilemma. If he turns down the ITC's tariff and quota plan, it will anger many in the steel industry, which has major facilities in states with large numbers of electoral votes. Last year the industry employed 243,000 workers and paid out $7.4 billion in wages and salaries.
But limiting imports risks retaliation from trading partners and is expected to boost consumer prices in the US. Administration officials say $6 billion worth of US-made goods could be subject to retaliation.
The three ITC commissioners who opted for relief said they did not know precisely how much the tariff and quota package would cost the consumer. The ITC ''will provide information'' to the President on that subject, said Commissioner Alfred Eckes.
But after the commission's formal meeting, Mr. Eckes said, ''I would think there would probably be some increase in steel prices. In the short run, some consumers may feel they are disadvantaged'' by the ITC's decision.
The precise effect on consumer prices will depend, among other factors, on the portion of the tariffs that are passed on to consumers and on how much US steel producers raise prices as a result of import protection. Bethlehem Steel Corporation chairman Donald Trautlein has predicted that there would be an initial increase in steel prices of $50 a ton, or about 10 percent, if the industry got the relief it sought.
Despite the cost to consumers, Eckes favors the plan because it ''will enable the domestic steel industry to generate the much-needed cash flow to modernize existing steel production facilities and to become more competitive. The program also will help save jobs in this troubled basic industry.''
ITC chairwoman Paula Stern said she opposed quotas because imports ''are not the most criticial problem'' facing the industry.
Focusing on imports provides ''isolated scapegoats for a much broader problem ,'' she said
Bethlehem Steel and the United Steelworkers of America (USW), which brought the case to the ITC, asked the fact-finding agency to recommend that a quota limit steel imports to 15 percent of the US market for five years. Officials of Bethlehem Steel and the USW were not immediately available for comment on the ITC's decision.
The agency said that certain products for which aid was sought, including wire rod, pipes, and tubes, were not hurt by imports. For products determined to be injured by imports, including sheets, strips, and plates, quotas on imports were the most common form of relief the ITC suggested.
In a quota system imports are allocated a set share of apparent US consumption. The ITC recommended quotas ranging from 6 percent to 32 percent for different types of steel.
For wire products, the ITC recommended a tariff or a tax based on the value of the goods shipped. For semifinished steel, the ITC suggested a tariff quota. Under a tariff quota, a certain amount of imports enter the US at existing tariff levels. Goods in excess of that level face an additional tax.
Commissioner Eckes said, ''The import relief proposal to the President is not a recipe for permanent protectionism. Rather it is a temporary program of import relief, which is limited in duration, broad in scope, and compatible with the General Agreement on Tariffs and Trade.''