Congress Eyes Possible Quotas on Steel Imports

Kim A. O'Connel

With the current U.S. economy softening, efforts are underway to protect the nation's steel industry by placing quotas on steel imports. It long has been assumed that enforcing quotas would boost domestic steel-consuming and steel-dependent industries such as the waste industry. But new studies are questioning whether such initiatives actually protect U.S. industries in the long-run.

On June 22, at the request of legislators and certain steel interests, President George W. Bush officially initiated an investigation of steel imports by the International Trade Commission (ITC), Washington, D.C. Bush evoked Section 201 of the 1974 Trade Act, which could allow trade restrictions such as quotas without violating World Trade Organization (WTO), Washington, D.C., rules.

“When a Section 201 investigation leads to temporary relief from import competition,” wrote U.S. Trade Representative Robert Zoellick to the ITC on behalf of the president, “it can provide time for affected industries to enhance their competitiveness and, in the long-run, restore market forces and free trade.”

In addition, new legislation, the Steel Revitalization Act of 2001, or H.R. 808, includes quotas on importing both steel in its raw form as well as products made of steel, while levying a 1.5 percent steel import tax.

However, a new report by the Consuming Industries Trade Action Coalition Foundation, Washington, D.C., states that the legislation would cost more steel industry jobs than it would preserve. According to the report, the bill protects 3,700 steel jobs, but estimated losses in the steel-consuming industries are as high as 20,000 or more. Quotas, the foundation says, would cost taxpayers between $1.35 billion and $2.89 billion a year. Furthermore, two to three times as many workers in steel-consuming industries would lose their jobs as workers further upstream in the steel industry would be protected.

The bill was introduced in March by Rep. Peter J. Visclosky, D-Ind., and, at press time, had 221 cosponsors. But three House committees — Ways and Means, Education and the Workforce, and Financial Services — have jurisdiction over portions of the legislation, which “will make it more difficult to go through regular channels,” according to Bill Sells, director of federal affairs for the Environmental Industry Associations (EIA), Washington, D.C. Currently, no hearings have been scheduled on the bill.

In early June, Visclosky sent Bush a letter asking for his aid in limiting steel imports under Section 201 — “further indication that H.R. 808 is not moving,” Sells says. Under the trade law, the president can restrict imports if the ITC determines that rising steel imports pose a substantial threat to U.S. industry. Visclosky and 39 other members of Congress asked the president to provide steel industry relief while an ITC investigation continues.

In the Senate, Sen. Paul Wellstone, D-Minn., has introduced companion legislation, S.B. 957, that has been referred to the Senate Finance Committee. “With the recent upheaval in the Senate, there has been no activity on the bill,” Sells says. However, with Democrats now in charge of the chamber and labor leaning on them for protection, hearings could be scheduled in the near future, Sells predicts.

As for the Section 201 investigation, the American Iron and Steel Institute (AISI), Washington, D.C., has expressed its support of Bush's action. “Irreparable damage already has been done by the recent unprecedented surge of imports,” says Duane R. Dunham, AISI chair and president of Bethlehem Steel, Bethlehem, Pa. “A sustained period of steel import stability is not an end in itself, but is a necessary pre-condition for facilitating industry recovery and addressing long-term structural problems, in particular the excess steel capacity off-shore and foreign market-distorting practices, which are the root causes of the current crisis.”

AISI contends that the United States needs a temporary period of constraints that reduce finished steel imports across the board, excluding North American Free Trade Agreement (NAFTA) partners Canada and Mexico; that such reductions take place for a sustained period of time; and that Section 201 relief not diminish existing relief efforts from “steel dumping” or “reward unfair trade in any way.”

But the Cato Institute's Center for Trade Policy Studies, Washington, D.C., says that Bush's action is a “steel trap” that could harm free trade. “It is flatly inconceivable,” says Brink Lindsey, the center's director, “that hemispheric or global trade talks can succeed if our position is that other countries should open their markets while all [of] our major trade barriers remain sacrosanct.”

Lindsey contends that any import quotas under Section 201 must be in place of, not in addition to, existing protectionism under anti-dumping and other “unfair” trade laws.