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The SPEAKER pro tempore (Mr. CANTOR). Under the Speaker's announced policy of January 3, 2001, the gentleman from Pennsylvania (Mr. ENGLISH) is recognized for 60 minutes as the designee of the majority leader.
GENERAL LEAVE
Mr. ENGLISH. Mr. Speaker, I ask unanimous consent that all Members have 5 legislative days in which to extend their remarks on the subject of my Special Order.
The SPEAKER pro tempore. Is there objection to the request of the gentleman from Pennsylvania?
There was no objection.
Mr. ENGLISH. Mr. Speaker, I rise today as chairman of the Congressional Steel Caucus to bring before this body the grim crisis facing a major sector of our manufacturing base, a sector which if we allow it to be washed away, if we allow it to leave, if we allow it to go offshore will permanently affect our ability to manufacture within the United States. The crisis that is today facing the American steel industry is one that will be seen and has been seen in many other areas of manufacturing; and I believe in coming years if we do not resolve the steel crisis, if we do not resolve it to the satisfaction of all of those Americans who work in the industry, then I believe we run the great risk of seeing other industries challenged in a similar way.
The domestic steel industry and its current workforce, retirees and their
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I want to credit up front the Bush administration for being willing to directly take on this issue, as I will describe in a few minutes. Relief for this industry must be strong and swift in order to stave off a permanent liquidation of the domestic industry. Inaction or a weak action would silence many steel plants, destroy workers' livelihoods, affect their families and their communities while dealing a blow to our national economy and our national security.
I want to applaud the Bush administration for developing a comprehensive steel policy that began with the initiation of a much-needed 201 investigation, using a provision in our law which has been long recognized within the WTO framework. The Bush administration last year launched an investigation under the International Trade Commission to determine the causes and the likely consequences of the crisis facing domestic steel. I want to credit them for having done that, particularly since their predecessors had not been willing to launch a 201 investigation.
But the investigation part, which is now complete, is just the beginning. The 201 action needs to be followed by a concrete plan for reducing overcapacity and dealing with nonmarket forces. And the International Trade Commission's decision as it was handed down by the various commissioners gives the Bush administration the tools that it needs to deal with this problem. Again, I have to congratulate the President for his understanding of this issue and his foresight in bringing together under the OECD many of the producing nations with the objective of coming up with a way of rationalizing our global problem.
But beyond that, we must look at ways to address the industry's legacy cost and clear the way for a renaissance in the American steel industry. Ensuring the viability of the domestic steel industry is going to require a continuation of the cooperative efforts that have developed between Congress and the administration working together with both management and labor.
Let us take a look at the problem, Mr. Speaker. The fundamental cause of the current steel crisis is a massive global, but primarily foreign, overcapacity. The livelihoods of thousands of American steelworkers and their families have been devastated as 31 American steel companies have been forced into bankruptcy, largely as the result of this overcapacity and its effects. Massive foreign steel overcapacity, created and sustained by abusive government subsidies, protected markets and anticompetitive practices and nurtured by soft monetary policies have resulted in a diversion of excess steel products to the United States market. The American steel industry and its workers have over the past many years done a great deal to become more efficient, to become more productive, to become world class; and they have made the sacrifices and the capital investments necessary to do that.
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They have taken dramatic steps to reduce capacity and modernize operations, to become a high quality, low cost and efficient steel producer. They have invested more than $60 billion in steel plant modernization to become among the most productive steel producers in the world, with fewer than two man hours needed per ton of steel produced.
One of the red herrings I hear in discussion of steel issues has to do with the allegation by some of our trading partners, and even some among American opinion makers, that the whole problem is one of domestic inefficiency and inability to compete in the world market. That simply is not true. But what is needed is a leveling of the playing field and an opportunity for these companies to compete on a fair basis.
Having made that kind of investment to achieve these advances in productivity, the U.S. steel industry closed numerous inefficient mills, significantly cut jobs and reduced capacity by over 23 million tons. As a result, U.S. productivity as measured by output per worker has nearly tripled since 1980, and that effectively debunks some of the conventional wisdom. But when competing with the unfair trading practices of our foreign competitors, even this is not enough.
In 1999, foreign excess raw steel making capacity was more than two times greater than the total annual U.S. consumption of steel. That is an extraordinary disparity. Much of the world's major steel markets have formal steel import barriers to foreign steel or are subject to international market sharing arrangements by foreign steel exporters.
As a result, the United States has become the dumping ground for the world's excesses of steel, effectively allowing many of our trading partners to export their economic problems to our shores. That is not fair.
The United States, to understand, are, from the standpoint of the world market, the good guys. We let in foreign steel, and normally our market is designed so we would expect to normally import about 20 percent of our steel needs. That is a good thing, and that has helped many of our trading partners. But under the current circumstances, we have seen the level of imports rise to the point that they constitute nearly one-third of our domestic market, and, in this context, the recession has been particularly painful.
As domestic steel consumption has declined, the imports have become more worrisome, and between the Sylla of imports and the Caribdis of decline and consumption, many American steel companies have fallen victim.
Obviously, Mr. Speaker, the steel industry is the victim of predatory trade practices, and we desperately need relief under Section 201 of the U.S. trade laws. The investigation, followed by a strong tariff ruling, represents a milestone in a shift toward a stronger trade policy that insists on a level playing field of trade for domestic producers. This is a huge shift in policy because this Section 201 was initiated by the administration. This initiative also gives the administration the big stick that it needs to bring those countries with excess steel capacity to the negotiating table to fix what is clearly a global problem and to rationalize the global steel market.
I realize many hearing this will wonder, how does that tie in to free trade?
Please, realize I am very strongly pro-trade, Mr. Speaker. But we need to realize that when it comes to steel, we are looking at one of the most distorted market places in the world, and the only place in steel where free trade has been in existence in recent years has been, in effect, in the classroom.
Initiating a broad 201 investigation by the administration firmly underscores the commitment to protecting our steel industry from unfair imports. This administration has clearly shown its willingness to stand up for steel, and we are beginning to see the benefits of that.
Section 201 of the Trade Act of 1974 was established to address cases where domestic industries have been seriously injured or are threatened with serious injury by increased imports. This is allowed under the WTO framework, and it is clearly one of our legitimate trade policy options.
Once petitioned by the impacted industry, Congressional committee or segment of the administration, the ITC determines whether a product is being imported at levels that have or could harm the domestic industry. Section 201 does not require a finding of unfair trade practice, but, rather, depends only on a finding that increased imports are damaging the industry.
In this case, the International Trade Commission determined that damage has indeed occurred and made recommendations for tariffs to the President. The President will make the final decision whether to provide relief and the nature of the relief, meaning granting relief is completely discretionary.
The March 6 deadline for the Bush Administration to make that decision is fast approaching. I call upon the President to look at the needs of our domestic industry, recognize the scope of this problem, and recognize that if
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It is now up to the President to end the abuse of the American market by enacting a strong remedy such as those recommended by Commissioners Bragg and Devaney. Strong relief is necessary in order to return steel prices to their normal pre-crisis levels, and allow American steel companies to make the necessary investments to remain viable and competitive in the future, while providing good-paying jobs for the American worker.
Tariff rates must be substantial in order to ensure that import prices return to market-based levels. The Section 201 remedy must be enforced for at least 4 years to allow the domestic steel industry to make the necessary adjustments to import competition. A shorter duration, I feel, will be ineffective.
Section 201 relief must not replace existing orders under the anti-dumping and countervailing duty laws. Those hard-won concessions under our laws, won by those domestic companies, need to be left in place. If these orders were set aside, any remedy will perversely reward those foreign producers that engage in unfair trade. That is something, Mr. Speaker, we do not in any case want to do.
I believe that relief needs to be comprehensive. We need to apply a consistent tariff-based remedy across all that is essential to the domestic industry and as representing the only fair way to impose relief.
Disallowing the continued abuse of the open U.S. market will give the President the leverage needed during multilateral steel talks and force foreign producers to cut back excess production capacity.
The imposition of tariffs for a 4 year period will demonstrate to foreign producers and governments that the administration is serious about addressing the problem of foreign excess steel capacity. Any talks that are conducted without enforcement capabilities will lack the incentives needed to achieve measurable results.
An effective remedy is the only way to stimulate foreign governments and steel producers to make the difficult decisions that U.S. producers already have made to modernize, eliminate inefficient capacity, and bring stability and balance to the global steel market.
Increases in steel prices have minimal effect on the price of end products because steel constitutes only a small share of the total cost of most products that contain steel. Accordingly, we need not be overly concerned that by providing a measure of fairness to American steel, we are making steel products that we manufacture uncompetitive.
For a typical American car, for example, the increase caused by the imposition of a 40 percent tariff would be about $60. For a refrigerator, the increase would be about $3. That is something that we can afford to pay.
As measured by the Commerce Department, steel's share of total cost is 0.8 percent for construction, 3.4 percent for motor vehicles and parts, 5.4 percent for other transport equipment, 6.8 percent for household appliances, 4.6 percent for electrical industrial apparatus, and, for the highest of Commerce's categories, fabricated metal products, steel's share of total cost is only 15.9 percent.
Since 1995, the price of finished goods has risen 11
percent, while the cost of steel mill products has declined 16 percent. The steel consuming industries who have suggested that relief under Section 201 will not return profitability to the domestic steel industry by raising prices, while arguing that relief will raise consumer prices to prohibitive levels, I believe are arguing an inherent contradiction. But in fact this is simply not true at all.
Their own study has found the complete opposite. A tariff rate quota would artificially set import lids of foreign steel and apply a tariff on any imports above the set limits. Such a remedy would be detrimental to the domestic carbon steel industry and its workers.
Let us look at the impact overall on the industry of this crisis. Entire American communities have been devastated by this import crisis, and we have seen that in Western Pennsylvania. In my district, which is one of the cradles of the modern steel industry in the world, we have seen a significant loss of jobs and other jobs very much at risk. Regions already experiencing hardship as a result of the current recession are being dealt a devastating blow by the massive levels of low-priced imports.
The ripple effect of each lost job in the steel sector is simply tremendous in these communities. The loss of good-paying steel industry jobs directly impacts thousands of workers in other sectors that depend on the steel industry.
The steel industry's use of goods and services in its production process generates considerable economic activity at the intermediate levels. The multiplier effect, for example, the U.S. manufacturing sector, including the steel industry, has one of the highest multiplier effects. For every $1 of a manufactured product sold to an end user, an additional $1.19 of intermediate activity is generated. The multiplier effect for the service sector is a mere 77 cents for every $1 sale.
The steel industry is a major consumer of computers and other high-tech equipment. It is also a major user of transportation industries, such as rail, trucking and shipping, and we have seen a direct impact resulting from the decline of steel on those industries.
Steel-generated demand for key raw materials, coal, coke, iron ore and limestone, provides employment in a number of regions where other jobs are scarce.
Mr. Speaker, the steel industry is also a major contributor to the U.S. tax base, including the tax base of State and local governments.
There is another issue here that is all too frequently overlooked. The steel industry is a significant asset to our national security. At a time when we are effectively at war, this ought to be central to many of our considerations. A healthy domestic steel industry is a cornerstone of our national defense. Steel is an indispensable component of many weapons and weapons systems, as well as the ships, tanks and other vehicles that carry these systems and carry our dedicated troops into battle.
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In my district, as an example, Erie Forge and Steel is the sole producer of propeller shafts that are used in Navy ships. They have had a bout with chapter XI bankruptcy, and I am glad to see they have a purchaser; and they appear ready to move on and survive. But many others are facing immediate liquidation.
The President and many other U.S. Government leaders recognize that steel and national security go hand in hand. It is vital to U.S. national economic security, and as well to our homeland security, that America does not become dangerously dependent on offshore sources of supply. For steel, for example, that goes into our energy infrastructure, such as petroleum refineries, oil and gas pipelines, storage tanks, electricity, power generating plants, electric power transmission towers and utility distribution; for steel that goes into our transportation security infrastructure, such as highways, bridges, railroads, mass transit systems, airports, seaports, and navigation systems. For the steel that goes into our health and public safety infrastructure such as dams and reservoirs, waste and sewage treatment plant facilities, and the public water supply system, and for the steel, Mr. Speaker, that goes into our commercial, industrial and institutional complexes such as manufacturing plants, schools, commercial buildings, chemical processing plants, hospitals, retail stores, hotels, houses of worship, and government buildings. We must maintain a viable domestic steel industry if our Nation is truly to be secure.
There is another issue, and we need to recognize it, and it is central to this crisis and that is the issue of legacy costs, one that does not fall evenly on all parts of the steel industry but, nevertheless, is important and vital and central and necessary to be addressed. Two decades of downsizing have created a domestic steel industry that is highly efficient with modern facilities; but the downsizing that occurred to achieve this goal has placed an enormous burden on the industry. That burden includes legacy costs.
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Health and pension liabilities for steel workers who lost their jobs or who retired and lost their jobs in some cases as a result of the massive industry downsizing which occurred especially during the 1980s. Legacy costs have put the industry overall at a competitive disadvantage versus foreign competitors whose governments assume these same costs and continue to assume these same costs through socialized medical systems. Congress, the administration, and the industry must continue to work together to address these costs which serve as a critical barrier to industry consolidation. What company is going to buy out and fold into another company if huge legacy costs come with it?
While this is a time of enormous crisis for the industry, it is also a time of unique opportunity. The government often played a part in the initial negotiation of the contracts that build up legacy costs, and so the government should be willing to play a constructive role today in addressing this problem. This is a chance to facilitate important restructuring, allow for significant capacity reduction, and help create an industry poised to compete over the long run with any competitor in the world.
The administration needs to take the lead in developing a plan to address these critical legacy costs which are preventing the industry from restructuring. As chairman of the steel caucus, I think I can fairly say that on a bipartisan basis, we are prepared to work with this administration to try to address that problem.
In conclusion, we have reached a pivotal point in stabilizing the American steel industry and ensuring good-paying jobs for its workers. The Bush administration took the monumental first step, standing up for steel, by initiating a section 201 investigation, which is a critical first step in its overall steel policy. Now, I urge the administration to enact tough tariffs that will truly provide relief for a besieged industry and its struggling employees.
Many of our manufacturers face growing and cumulative competitive disadvantages in the international market. The plight of the steel industry is grim, but both Congress and the administration need to work together and work hard on a bipartisan basis to give employers the tools that they need to be competitive in the global market. Unfortunately, nothing will solve, quote unquote, today's steel crisis, because the damage is already done. Instead, we must seek to apply the lessons learned in today's crisis, put reforms into place so that nothing like this can ever happen again with steel or any other part of our manufacturing base.
Mr. Speaker, I look forward to working with the administration. I hope the President will look at this issue; and I challenge the administration to join us, come up with a creative policy for making this industry viable in the 21st century.
Mr. EHRLICH. Mr. Speaker, I want to commend my Steel Caucus colleagues, especially PHIL ENGLISH and PETE VISCLOSKY, for their efforts to resolve the steel import crisis. This is an issue of great importance to me, my constituents, and the domestic steel industry.
On June 5, 2001, domestic steel producers finally received some good news in their struggle to remain a viable, competitive industry. On that day, President George W. Bush announced a comprehensive initiative to resolve the steel crisis. As part of this important initiative, President Bush directed USTR Representative Bob Zoellick to initiate an investigation under Section 201 of the Trade Act of 1974 regarding the impact of steel imports on the U.S. steel industry.
After conducting an extensive investigation, the International Trade Commission (ITC) confirmed what I and many others have been observing for years: illegal steel imports have caused substantial injury to the American steel industry. Now that the ITC has made its recommendations (most by a unanimous vote), President Bush must decide by March 6, 2002, on the appropriate remedies for our domestic industry.
As a free trader who recently voted for Trade Promotion Authority, I believe the steel crisis provides President Bush with a unique opportunity to save an important American industry, and to put the world on notice that free trade with America does not confer the right to violate U.S. trade laws with impunity. Further, President Bush's enormous credibility and free trade credentials make him the only person capable of resolving the steel import crisis. Accordingly, I have strongly urged President Bush to impose appropriately high tariffs.
In addition to illegal steel imports, the domestic industry must also address legacy costs--the health care obligations of steelworker retirees.
Mr. Speaker, overwhelming retiree health care costs are a result of the massive layoffs that occurred during the 1970s and 1980s. During this time, labor accepted a series of downsizing agreements in exchange for commitments on health care for retirees. In addition, technological advances, which have played a part in making the U.S. steel industry more efficient, have also served to diminish the workforce. Accordingly, more steel is produced today than during World War II, with only 10 percent of the labor pool.
Today, integrated steel producers in the U.S. are at a competitive disadvantage against foreign manufacturers whose governments subsidize health care as well as other elements of their business plans. Equally important is the fact that legacy costs pose a major impediment to the consolidation and restructuring needed for our domestic steel industry to survive.
In sum, under the current financial situation, our domestic steel industry cannot remain competitive in the global market while sustaining its health care commitments. Hopefully, the International Trade Commission's (ITC) recent finding that foreign steel has been illegally imported into America and the expected imposition of high tariffs will provide a foundation for the ultimate resolution of this legacy cost issue.
Mr. Speaker, illegal foreign trade has helped drive 31 American steel companies into bankruptcy causing 16 of them to shut down, and eliminating more than 46,000 jobs. Now more than ever, I urge my colleagues to stand up for the steel industry.
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