World trade beginning to tilt
Fragile global economy is creating new problems for US tradepolicy - and for steelworkers across America.
When the local steel plant cut back on Tommy Higgins's hours, he did everything he could to make ends meet. He carpooled to work to save money on gas. He painted houses on days off.
But it wasn't enough: He eventually had to put a "for sale" sign in front of his Arkansas home. "You do what you have to do when times get bad," he yells over the thunder of a furnace during one of his days at work.
It's a situation that Mike Reichert of Tennessee knows well. So does Steve Boren of nearby Blytheville, Ark. These steelworkers, like thousands of others across the United States, have had their lives turned inside out by the collapse of the American steel market.
Cheap imports from Asia, Brazil, and Eastern Europe are pouring in as foreign companies seek ways to boost struggling economies. Their plight typifies how a fragile world economy is producing widening imbalances in global trade - an issue that will be front and center in Washington this week as US officials try to fend off protectionist sentiments (related story, page 5).
The result, for American steelworkers at least, has been disastrous as companies either cut back or fold, unable to compete with imports. From the banks of the Mississippi here in northeast Arkansas to plants amid the corn fields of Indiana, it's one way that world economic malaise is touching American lives.
"We have been hit significantly," says David Chase, general manager of Nucor Steel. "It started in July and it hasn't let up much. Production from last year was off 20 percent.... Paychecks are being reduced by 30 to 40 percent, sometimes more. Financial conditions are dictating spending changes in the local economy. It's bad."
The American Institute for International Steel in Washington announced last week that the US imported 4.03 million tons of steel products in November, up 72.3 percent from a year ago. And on Friday, US Steel, the largest domestic steel producer, reported a 50 percent drop in 1998 fourth-quarter profits.
View from the Mississippi
For areas like northeast Arkansas - the third-largest steel producing region in the country - such numbers are a cause for great concern. In Blytheville, a town of 22,000, new subdivisions resemble ghost towns as contractors have left houses unfinished as the demand has vanished.
The city has certainly taken its knocks. Located in Mississippi County - one of Arkansas' poorest - Blytheville once flourished with cotton crops. That revenue disappeared with the onset of agricultural mechanization, though, and the region didn't rebound until the 1960s, when Eaker Air Force Base opened.
Then in 1988, Nucor Yamato decided to locate one of its plants in Armorel, seven miles away from Blytheville. Four years later, when the military closed Eaker, a second Nucor plant in Hickman eased the strain on the economy. Indeed, the average steelworker at Nucor made about $60,000 a year, in contrast to the average per capita income in Mississippi County, which was $14,784 as recently as 1995.
"We had just rebounded when the base closed," explains Steve Boren, a Blytheville native and seven-year Nucor employee. "Up until six months ago, houses were being sold before they were being built. Not anymore."
Like many around here, Mr. Boren is angry. He loves his hometown and thinks the government should be doing more to help US steelworkers.
"The government has let this community down twice," says Boren. "First, they shut down the air force base, and now the steel industry is hurting. The government should have done more to enforce trade and import laws. Now we have a situation where making ends meet is almost impossible, and who knows how long this will go on unless something is done."
Rep. Peter Visclosky (D) of Indiana and Sen. Jay Rockefeller (D) of West Virginia hope to get something done soon. Following a protest by thousands of steelworkers in Washington last week, the two lawmakers said they plan to introduce legislation early next month to restrict imports.
Although President Clinton vowed the US would enforce its trade laws when "imports unlawfully flood our nation" in his State of the Union address, any decisive action from the president - or from Congress - is unlikely.
For one, Treasury Secretary Robert Rubin has said that it would be a mistake to raise trade barriers during a time of global financial turmoil. Furthermore, the bill to restrict imports could run afoul of international trade agreements, and few members of Congress are expected to sign on.
Still, the administration is watching the steel situation closely. In fact, US Trade Representative Charlene Barshefsky, recently warned that if Japan's steel exports don't decline "substantially" in the month of December, the US will "self-initiate" trade action against them.
That's good news to people here, who say some sort of action is necessary. "The government desperately needs to do something," says Mr. Chase.
Paul Fuller of Blytheville hopes people in Washington will listen to that advice. After only a year at Nucor, Mr. Fuller watched his production bonus drop from 170 percent to 60 percent. He says he isn't yet financially overextended, but the cuts prevent him from spending money on "fun stuff" like restoring his Jeep.
For others, though, the impact has been more acute. Mike Reichert, who has worked in various Nucor plants for 21 years, lost nearly $15,000 last year because the furnace sat empty for two months.
"It really hit at Christmas," says Mr. Reichert, who operates a complex system of computers that control scrap steel as it falls into a 3,000 degree F. furnace. "We have three kids, and they have the same needs they had in 1997. We are budgeting ourselves, not buying expensive clothes, putting the heat on 65 degrees. We consolidated loans, too. Mentally, your attitude and morale starts to lag."