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Statement of Senator John D. Rockefeller IV  on the Senate Floor
The Introduction of the Steel Industry Consolidation and
Retiree Benefits Protection Act of 2002

MR. ROCKEFELLER: Mr. President, the American steel industry will not consolidate and will not survive without relief from their unique burden of substantial retiree health care costs. Failing to assist the American steel industry with its retiree health care costs puts our industry at a tremendous disadvantage as it competes in the world markets. If we are to have a competitive, viable industry, we must not shirk our responsibility. In the case of steel in America, that means three things: tariffs under Section 201, as is provided for under our trade laws; legacy (retiree health) relief; and effective consolidation of the steel industry.

Earlier this year, the President imposed limited and temporary steel tariffs under Section 201. Today, I introduce the Steel Industry Consolidation and Retiree Benefits Protection Act of 2002 – the Steel Legacy bill. This bill provides strong incentives for consolidation in the United States steel industry by supporting companies’ retiree health care costs. This bill provides desperately needed medical care to retirees whose companies have been forced out of business by imports. This bill is critical to the preservation of the American steel industry, and it is humane to those individuals who have paid a very high price for our nation's free trade policies.

The American steel industry has been facing an unprecedented crisis since 1997, when the Asian financial crisis disrupted global steel trade and diverted much of the world’s excess steel capacity to the U.S. market. Thirty-three U.S. steel companies, representing over 40 per cent of domestic steelmaking capacity, have gone into bankruptcy since 1999, including such venerable names as Bethlehem Steel and LTV. Wheeling Pittsburgh Steel in my state is in the process of reorganizing. Many more steel companies have been forced into liquidation. Almost 50,000 steelmaking jobs have been lost in this country since the steel crisis began in 1998 – losses that come on top of hundreds of thousands of steel job losses in the two preceding decades.

The cause of this crisis in the industry is not that demand for steel has suddenly collapsed or that the competitiveness of the American steel industry has suddenly collapsed, but because foreign steelmakers have enjoyed decades of government subsidies and protection. Those foreign subsidies have created massive global steel overcapacity, and that foreign protection has ensured that most of the world’s overcapacity has been directed at the U.S. market, which has been the most open major market in the world.

The crisis our steel industry currently faces could well mean the end of steelmaking in the United States. This would have grave consequences for steel companies and steel workers, for the steel communities that depend on them, and for our nation’s industrial base and our national defense. In recognition that this could not be allowed to happen, the President announced last month that he would impose temporary Section 201 tariff measures on some steel imports. These measures will help give the U.S. steel industry some breathing room to recover. I commend the President for recognizing the importance of maintaining a domestic steel manufacturing base and for taking these steps.

Still, I think it’s essential to realize that the Section 201 measures are limited in their scope and duration:

• First, the tariffs range from 8% to 30%, far less than the level recommended by two of the ITC Commissioners and the level that I and many others in the steel industry had argued for. And these tariffs are lowered dramatically each year, and stop after only three years.
• The tariffs do not apply to all steel products. Because of this, foreign steel companies will be able to engage in circumvention measures to get around the tariffs, as they have with antidumping measures. Under the 201 relief, tariffs were imposed on some grades of steel, others were exempted altogether, numerous exemptions for specific steel products have been issued, and for the critical category of slab, a tariff rate quota has been imposed that is unlikely to have any positive effect whatsoever.
• The tariffs are not being applied across the board to all foreign steel producers; the relief exempts all steel from developing countries and from NAFTA members, who between them represent a significant portion – over a third – of overall U.S. steel imports.

We knew from the beginning of the 201 process that even in the best of circumstances, it was clear that Section 201 tariffs were going to provide only part of the solution to help the domestic steel industry respond to this crisis. But the Section 201 remedy imposed, with its exclusions and exemptions and declining tariffs, makes the need for additional measures even more compelling.

Section 201 will slow the tide of imports. But it will not resolve the other critical issues that will determine whether America’s integrated steelmaking capacity survives.

• America’s integrated steelmakers face massive "legacy costs" for retiree health and pension benefits – stemming from the dramatic reduction in the American steel industry’s active workforce over the past two decades, which in turn results from successive Administrations’ inability to negotiate an agreement for foreign governments to stop subsidizing their steelmakers. These legacy costs both hurt American steel’s international competitiveness and serve as a liability that has prevented the consolidation of the fragmented domestic steel industry.
• Industry consolidation is another issue that must be addressed: with foreign steelmakers merging to create a new level of top tier steelmakers, American steelmakers risk being permanently consigned to the second rank, with sub-scale facilities and insufficient revenues to fund the necessary investment in research and technology.
• Finally, we must take measures to mitigate the human cost of this steel crisis, particularly the cost to retirees who worked long, hard years to earn health and pension benefits for themselves and their families, but now risk seeing all that taken away because the company that pays those benefits is threatened by unfair foreign trade practices.

The bill I am introducing today, the Steel Industry Retiree Benefits Protection Act of 2002, addresses the toughest of these problems. It guarantees the health care coverage and a very limited life insurance benefit for steel industry retirees whose employer is acquired by another steelmaker or whose employer is forced to shut down because no other steelmaker will acquire it. This will ensure that in steel communities throughout the nation, no retirees will lose their critical health benefits simply because of a crisis in the global steel industry that our government failed to avert. Equally important, this bill will address retiree legacy costs in a way that will enhance our steel industry’s competitiveness, by clearing the way for the industry consolidation that is necessary and inevitable if the American steel industry is to survive.

The mechanics of the bill are fairly simple. A Federal trust fund will be established that will assume the retirees’ health care and life insurance costs for steel, iron ore, and coke producers, and those who transport steel mill products for steelmaking operations –

• that are acquired by another company;
• that are in bankruptcy and attempted unsuccessfully to be acquired by another company, and thus have been closed, or are in imminent danger of closing, or have been unable to be acquired for at least two years;
• that are in bankruptcy and sell a significant steelmaking operation to another company; or, finally,
• in order to ensure that the assumption of legacy costs does not distort competition within the domestic steel industry, if a significant portion of the entire industry’s legacy costs have been assumed by the Federal trust fund, all steel industry retirees and beneficiaries would be eligible to be covered by the program.

The money for the Fund to pay for these legacy costs will come from the following:

• steel tariff revenues;
• an acquired steelmaker’s retiree health care trust fund assets;
• payments for 10 years by the qualified steel company of $5 per ton of steelmaking capacity, subject to the bill’s provisions;
• retiree premiums; and,
• and appropriated funds if necessary.

In order to simplify the management of the program, retiree health benefits assumed by the Fund will be limited to Federal Blue Cross/Blue Shield health benefits – a fair and reasonable standard of health coverage. Life insurance will be limited to a one-time payment of $5,000 dollars. The program will be administered by the Secretary of Commerce and by Trustees who are designated by both management and labor.

This bill is supported by both the integrated steelmakers and by the steel unions, who understand what it will take to save the American steel industry. They know that legacy costs have been the major barrier to consolidation of the American steel market and that it is critical that we resolve that problem if we are to preserve retiree health benefits and an integrated domestic steel industry. I am introducing this legislation with my partner as Co-Chair of the Senate Steel Caucus, Senator Specter. We have a history of working together on issues that are vital to the core industries in our states and the workers who have helped fuel and build this nation. I am pleased that Senators Wellstone, Durbin, Mikulski, Sarbanes, and Dayton, and the distinguished Senate Majority Leader, who have long been champions of retirees and workers health care issues, join me today as cosponsors. We have also worked in close consultation with our colleagues on the House side, especially members of the House Steel Caucus, who share our concern that these critical legacy cost issues be addressed.

But, make no mistake, this steel legacy legislation will not happen without the active involvement of the President. This bill is fair, it is pro-competition, and there is a broad consensus that legacy cost legislation like this is absolutely necessary if we are to preserve integrated steelmaking in the United States, as well as the communities and businesses that depend on those facilities. But realistically, a program like this is only going to be enacted with the strong support and active engagement of the President.

The President's announcement of his decision on Section 201 tariffs last month was an encouraging sign that the President was committed to the preservation of the American steel industry, and his recognition that, if equipped with the right tools and competing in a fair market, the domestic steel industry can regain its former role as the world’s leader. I surely hope so. But I know that without President Bush’s support for a legacy cost bill, the Section 201 tariffs he announced last month will not be enough, and we will witness the erosion of a vital national asset – the American steel industry.

I appeal to the President to maintain his personal interest in the well-being of our steel industry. It is vital to our nation's economy and to our defense capability. I encourage the President to lead on this issue because surely, in these times, without his support and quick involvement, we will not be able to get a bill through this Congress. I hope the Administration will work with us here in the Senate to pass a legacy cost bill that will ensure fairness for America’s retired steelworkers and a competitive future for America’s integrated steel industry. We need legacy cost legislation like that outlined in the bill I am submitting today, if we are to preserve the U.S. steel industry. I urge my colleagues to join me in supporting this bill.

Mr. President, I ask unanimous consent that this bill be printed in the record.

________________________________________________

May 8, 2002

The Honorable George W. Bush
President of the United States
1600 Pennsylvania Avenue, NW
Washington, D.C. 20500

Dear Mr. President,

We are very concerned about reports that the Administration is considering granting a significant number of additional product exclusions from the Section 201 remedy on steel. We strongly supported your decision in March 2002 to impose tariffs of up to 30 percent on steel products under Section 201. This remedy to the steel crisis caused by record imports was warranted and entirely necessary if we are to preserve our domestic steelmaking capability. But unjustified exclusions will undermine the beneficial impact of the Section 201 remedy, by allowing significant volumes of low-priced imports to continue to flood the U.S. market.

The principal purpose of exclusions to safeguards relief is to ensure that U.S. consumers do not have to pay additional tariffs on imported goods for which there is no domestic competition. Indeed, many in Congress support, and the U.S. industry has agreed not to oppose, exclusions for products where no competing product can be produced domestically. While it is appropriate to grant exclusions in such cases, in as large and competitive an economy as ours, we need to analyze carefully any claims that for a given product, no U.S.-made production is available. Many times there appear to be no domestic suppliers of a product because domestic manufacturers have been driven from the market by unfair dumping or import surges, but in fact domestic manufacturers are eager to resume production if our trade laws can provide some stability in the market. Product exclusions cannot be used as a loophole to defeat the purpose of trade remedies.

What is particularly troubling to us, though, are recent press reports indicating that the Administration may grant many additional product exclusions to foreign countries and foreign steelmakers who have been critical of your actions. This would dangerously undermine your efforts to ensure free and fair trade.

Granting excessive exclusions for products that are available from domestic sources will dramatically undermine the effectiveness of your remedy, and cause additional injury to the domestic steel industry

It is our understanding that nearly 200 exclusions have already been granted for products that are not currently made by domestic producers. It is also our understanding that between these product exclusions, country of origin exemptions (for NAFTA members and developing countries) and two further exclusions designed to permit the tariff-free importation of one million metric tons of steel from Korean and Australian producers, more than one-third of U.S. flat-rolled imports are not covered by the 201 remedy you imposed last month.

Mr. President, the Section 201 remedy you announced in March could provide substantial relief to our steel industry if it is allowed to work. We urge you to prevent the weakening of your 201 remedy by granting unmerited exclusions.

Sincerely,

John D. Rockefeller IV