Thank you, Mr. Chairman. Our statement is on behalf of the American Iron and Steel Institute (AISI) and its U.S. member companies, which account for over 70 percent of the raw steel produced annually in the United States. AISI represents both integrated steel producers and a substantial number of electric arc furnace producers, including Nucor, which is here today. AISI appreciates this opportunity to discuss our national steel emergency and what should be done about it.

The Crisis is Real

Let’s begin with the crisis, which even our trade adversaries admit is real. Since December 1997, 16 steel companies, which have almost 36,000 employees in the United States, have declared Chapter 11 bankruptcy; 10 remain in Chapter 11; two have shut down operations completely; and additional bankruptcies are possible (Attachment 1). The number of bankruptcies alone makes clear how very serious this crisis has become.

There are other elements as well that make this particular crisis more profound and more serious than what occurred in 1998.

• Many U.S. steel company stocks are at record lows -- and last year, America’s integrated steel producers lost nearly 80 percent of their stock market value.
  
  
• With few exceptions, the financial markets have decided apparently not to allocate any more capital to the steel industry.
  
  
• An estimated 5,000 more U.S. steelworkers have lost their jobs over the past year, bringing the total of jobs lost since 1998 to approximately 15,000.
  
  
• Steel company financial losses continue to mount. Many steel companies suffered sizable losses in the fourth quarter of last year. Many will suffer large losses again in the first quarter of this year.
  
  
• Steel orders remain depressed.
  
  
• Steel prices remain at record lows.
  
  
• Steel capacity utilization so far this year is only 80 percent.
  
  
• Steel inventories remain excessive.

The Cause is Global Overcapacity and Foreign Trade-Distorting Practices

The main cause of this crisis lies outside U.S. borders. The problem is global steel overcapacity. At present, foreign excess capacity is more than twice total annual steel consumption in the United States (Attachment 2). And foreign governments too often have been part of the problem, not the solution. And this sometimes includes even our own government, as we saw recently in the wrong-headed decision by the U.S. Export-Import Bank to help build additional hot rolled steel capacity in China.

The July 2000 Report to the President on Global Steel Trade prepared by the Department of Commerce provides a thoroughly researched analysis of how the United States became the World’s Steel Dumping Ground. It demonstrates how foreign excess steel capacity and market-distorting practices -- closed markets, subsidies, cartels and other private anticompetitive practices -- injured a world-class U.S. steel industry. What the Global Steel Trade report could not anticipate was the full extent of long-term damage from the unprecedented level of unfair steel trade in 1998 and the fact that things would be even worse by the fall of 2000.

Historic high levels of unfairly traded and disruptive steel imports are the cause of this emergency steel situation and the serious injury that continues in the U.S. steel industry. Notwithstanding record steel inventories, record low steel prices and weakening steel demand, steel imports in 2000 rose to 38 million net ton (NT), second only to 1998. This was due mainly to import "switching" from countries and products covered by trade cases to those that are not.
The problem is that the injurious unfair steel trade and market disruption have not stopped.

America remains the World’s Steel Dumping Ground. The U.S. Census Bureau reported last month that the average import value in January for many products -- including bars, coated flat rolled, pipe and tin mill products -- was below where it was in the depths of the 1998 crisis. And Purchasing Magazine has just reported that, in March, the average U.S. price of hot and cold rolled sheet is still $110-120 per ton less than what it was in May 2000 (Attachment 3).

America’s trade adversaries would claim that the problem is a lack of U.S. competitiveness. This is not true. After investing more than $60 billion in steel modernization and dramatically restructuring steel operations since 1980, the United States steel industry has been among the most cost competitive, technologically advanced, environmentally friendly steel industries in the world. The main problem is historic high levels of unfairly traded, disruptive steel imports, which have put our entire industry into a precarious position. Today, U.S. political leaders in Congress and the White House will determine the fate of the steel industry in America based on their response to our deepening structural crisis.

The Solution is a Sustained Period of Import Stability, During Which Long-Term Structural Problems Must Be Addressed

The solution is two-fold. First, there must be an immediate trade action program. The issue is no longer what steel import levels are this month or next. America’s steel industry simply cannot survive another surge of dumped, subsidized and disruptive steel imports six, 12 or 18 months down the road. We require a sustained period of import stability to recover from the serious damage that has already occurred.

We call upon the Administration to use a Presidentially-initiated steel industry-wide Section 201 case, or through other similar means available to the President, to provide, without delay, effective, comprehensive, temporary quantitative restraints. The restraints should reduce finished steel imports across-the-board from non-NAFTA countries to pre-crisis levels, and they should remain in force until the fundamental structural problems have been successfully addressed, up to the maximum period allowed by law. These restraints must not, however, replace antidumping and countervailing duty relief. To do so would be to reward those foreign producers who have been the most egregious offenders of our WTO-sanctioned trade laws.

Mr. Chairman, the U.S. steel industry deserves a sustained period of import stability. In 2000, the United States imported 22.9 million NT of finished steel from non-NAFTA countries, versus 20.8 million NT in 1999, 28.6 million NT in 1998 and an average 16.3 million NT in 1994-97, the four years prior to the 1998 import surge (Attachment 4). In 2000, non-NAFTA finished steel import market share was 17.3 percent, compared to 16.3 percent in 1999, 21.7 percent in 1998 and an average 14.1 percent in 1994-97.

To help illustrate why we need a comprehensive steel import solution, we can look at the finished steel import surges that occurred in last year (Attachment 5). There were import surges last year from many countries, including Thailand (up 116 percent), the Ukraine (up 109 percent), Poland (up 109 percent), China (up 79 percent), India (up 69 percent), Turkey (up 66 percent) and Taiwan (up 31 percent). There were also surges in many finished product lines last year, including oil country goods (up 323 percent), standard pipe (up 49 percent), galvanized sheet and strip (up 38 percent), structural shapes (up 37 percent), cold finished bars (up 35 percent) and hot rolled sheets (up 19 percent). At the same time, we can also look at the trade relief that exists – for example, in major flat rolled categories, and show the extent to which an ongoing threat exists, because many foreign suppliers remain uncovered by any restraint (Attachment 6).

The key point in considering the AISI’s proposed trade program is that we are not just asking for trade protection. It’s essential that we use this period of sustained import stability to address long-term structural problems. In this regard, the U.S. government should do two things to help avoid future crises. It should negotiate with other governments and coordinate with NAFTA partners to address global steel overcapacity and other long-term structural problems. And it should enact policies that promote the consolidation and further restructuring of our domestic steel industry.
With respect to further domestic restructuring, views continue to differ on what the proper role of government should be, if any, in the process. Speaking for US Steel, we believe strongly that the embedded health care and other legacy costs constitute a major impediment to further consolidation in our industry. We also believe that companies must compete in the marketplace based on price and quality – and that those who cannot do so without special loan programs or extraordinary political considerations must be allowed to close their doors so that market forces are not further distorted.

In addition, it is essential to recognize three key points about the issue of domestic restructuring.

• First, unlike the situation in much the rest of the world – where national steel industries produce far more than consume domestically, this is not the case for the United States and the NAFTA region as a whole.
  
  
• Second, the U.S. steel industry, whether integrated or electric arc furnace, is today vastly different from the industry of two decades ago. Today, the United States is the world’s center in terms of applying 21st century steelmaking technology, and there have been massive self-efforts to modernize and restructure facilities since 1980. Industry production capability, notwithstanding the recent additions of new world-class capacity, has been cut by over 15 percent. Industry employment has declined by two-thirds. Industry labor productivity has more than doubled, due to 4.8 percent annual gain in labor productivity, which has far exceeded the all-manufacturing average. And we have dramatically improved product quality.
  
  
• Third, and this is especially important: regardless of what additional restructuring, consolidation and modernization takes place at home, the U.S. market will continue to be abused by foreign producers -- unless steel industries offshore address their serious structural problems. To encourage positive adjustment abroad, additional steps must be taken in four areas.

First, because restructuring must be global and not just in the U.S. market, we need to reduce global steel overcapacity and eliminate foreign trade-distorting practices, which are the root causes of the current steel crisis. The U.S. government must:

• take the lead in efforts to get all governments and governmental organizations out of the business of funding additional steel capacity;
  
  
• explore the willingness of trading partners to engage in new talks to achieve an international steel agreement that does not weaken U.S. trade laws; and
  
  
• attack the structural problems of uneconomic global steel capacity, foreign steel markets closed to imports, foreign government steel subsidies and private anti-competitive practices including international steel cartel behavior.

Second, to ensure that U.S. trade laws are not further weakened, AISI calls for the Administration and Congress to respond forcefully to continued foreign government abuse of WTO dispute settlement procedures in trade law cases; a firm commitment from the Administration that antidumping law will be kept off the negotiating agenda of a new WTO round; and continued rejection of trade law weakening of any kind. This includes, of course, rejection of any effort to repeal or overturn the WTO-consistent Continued Dumping Offset (CDO) provision enacted into law last year.

Third, we need to strengthen our trade laws and trade law enforcement up to the limits allowed by the WTO -- and reject any weakening of U.S. trade laws. To ensure that competitive U.S. steel producers and others are not further harmed by unfair and disruptive imports, AISI calls for the political appointment of people who believe in the trade laws and their proper enforcement; immediate procedural changes to enhance the effectiveness of trade laws; more vigorous enforcement of trade laws and customs rules; and enactment of positive provisions to ensure that U.S. trade laws are as strong as what the WTO allows.

Fourth, we need to provide enhanced "early warning" on steel imports. If America’s NAFTA partners can adopt meaningful early warning systems with respect to steel imports, so can the United States. It’s time to enact a Canadian-style, "real time" steel import notification system. As in Canada, the system should not be a burden to administrators or participants, and steel import certificates should be automatically granted, subject to a nominal fee and updated weekly on the Internet.

Mr. Chairman, AISI and its U.S. members appreciate the continued support of the Congressional Steel Caucus, and look forward to working closely with you to help ensure a lasting solution to our national steel emergency.