Los Angeles, CA
Today, American Steelworkers are the most productive in the world. In 1980, American steel companies produced a ton of steel with seven hours of work. Now, a ton of better quality steel is produced with less than three hours of work. But that dramatic accomplishment by American steelworkers was achieved at a great price—the shutdown in the 1980s of all or portions of hundreds of less efficient mills and the layoff and retirement of tens of thousands of Steelworkers.
Notwithstanding this dramatic improvement in productivity, today American Steelworkers are facing an even more severe crisis of extraordinary dimensions. Without immediate and comprehensive action, we could easily witness the permanent loss of tens of thousands of jobs and pension and insurance benefits for hundreds of thousands of retirees and their widows.
The current crisis developed rapidly beginning in 1997. The severe Asian economic recession and the collapse of the Russian economy produced a flood of imports of key manufactured products—particularly steel. Beginning in 1997 and continuing through 1998, dumped and subsidized steel imports grew dramatically until they reached close to 40 percent of the domestic steel market. This caused a precipitous decline in steel prices as companies desperately struggled for market share. The results were devastating: 10,000 steelworkers were laid off; six steel companies were driven into bankruptcy; the entire industry was substantially weakened; and the level of imports deemed "normal and acceptable" by government was once again ratcheted up.
The United States government has clearly admitted that world trade in steel is anything but fair. The Commerce Department's "Report to the President: Global Steel Trade—Structural Problems and Future Solutions" meticulously documents this situation.
The 30-year history of repeated unfair trade actions is symptomatic of underlying market-distorting practices in the global steel market.
The world steel industry is characterized by a variety of anti-competitive practices. The effect of such practices is that investment decisions as well as pricing and sales almost certainly are different from what would occur in a purely competitive market.
One way or another, steel companies around the world benefit from government practices and policies that forestall adjustments mandated by the market. As a result, market forces are not able to bring world capacity and supply in line with demand.
While sympathetic, the federal government failed to respond promptly or aggressively to deal with the problem.
After a brief respite, by the middle of 2000, imports were once again on their way to Asian economic crisis levels. This, combined with a softening in the economy, put prices into free fall. The damage that has resulted is now painfully evident. Another ten steel companies have been driven into bankruptcy, including LTV Steel, the third largest domestic steel producer. Many others are on the brink. And while three of the companies which went into bankruptcy during the 1997-98 import surge have managed to emerge from bankruptcy, a fourth, Gulf States Steel, has been forced into liquidation destroying 2,000 jobs and devastating Gadsden, Alabama, and the surrounding communities. Another, CSC, with over 1,000 employees, has announced plans to liquidate. Overall, nearly another 10,000 steelworker jobs have been affected. By the end of 2000, the steel industry operated at less than 65 percent of capacity, its lowest operating level in over 14 years. Prices for steel products are now below their level at the worst of the Asian economic crisis, and there is no relief in sight.
Moreover, the problem is immeasurably heightened by the plight of steelworker retirees who were forced to retire early because of the shutdowns in the 1980s. These retirees now face the prospect of losing the health insurance which was promised them when they retired because their companies have now gone into bankruptcy. Over 70,000 retirees depend on health insurance from steel companies which are now in bankruptcy. Over 300,000 more retirees are receiving their retiree health insurance from steel companies which are not now in bankruptcy.
Unlike the steel industry of every other country, the cost of retiree health insurance in the United States is shouldered by the steel companies themselves. The cost is a major one for American steel companies, representing nearly $1 billion a year or $15 for every ton of steel produced. In other countries, that cost is borne by the government.
The import problem has proven too difficult to deal with through the use of standard trade law measures. Reducing imports of a specific group of steel products from a specific group of countries has simply invited dumped and subsidized imports from different countries and of different steel products.
The threat to the American steel industry, Steelworker jobs and Steelworker retiree health insurance caused by illegal imports requires decisive and comprehensive action by the government.
Our government must stand up and say, without hesitation or doubt, that America will not sit idly by while one of our basic industries is destroyed, that enough is enough—Steelworkers have suffered enough, they have worked hard and played by the rules, and they have earned a right to a decent living and decent life.
We call today for legislative and executive action to counteract the threat of continued illegal imports and to cure the effects of the past unlawfully steel trade. Federal action should include the following elements:
The program must begin with a five-year period of strict import control on all steel (including stainless steel, semi-finished steel, iron ore, coke, pig iron, etc.) designed to provide an umbrella under which the industry can restructure and revitalize itself.
In order to make trade fair and protect those whose health insurance is threatened by unfair trade, the federal government should establish a mechanism to bear the cost of the downsizing of the '80s. This may be done through the proceeds of a surcharge of 2 percent (roughly $10 per ton) on all steel shipments.
Since the steel industry is a very capital intensive one and financing continued modernization has become virtually impossible because of the effects on steel companies of the illegal imports, it is necessary to establish a $10 Billion Loan Fund with the money used to revitalize the industry. The existing Steel Loan Guarantee Program is a good idea with problems that in practice made it close to useless. Measures need to be taken to correct these flaws in the new Loan Fund.
The domestic steel industry is quite fragmented, and there is a strong likelihood of industry consolidation in the years ahead. The United States could easily wind up with only three or four steel companies. The government needs to get out in front of this process and see that it happens in a way that maintains jobs and capacity. Policies need to be put in place to actively discourage mergers that do not meet the test of minimizing job and steel-making capacity losses in the context of a long-term viable entity.
Because of the defense needs of our country, special attention should be given to the extent of foreign ownership of American steel-making capacity and measures taken to ensure that a certain minimum level of steel-making capacity in the United States is controlled by domestic interests.
A strong steel industry is vital to the U.S. economy. The combined output of industries that consume steel represents over 15 percent of our Gross Domestic Product. It is critically important that strong and effective action with the elements enumerated abovebe taken in order to protect the future health of our economy.