[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]



 
              THE STEEL INDUSTRY LEGACY RELIEF ACT OF 2002
=======================================================================



                                HEARING

                               before the

                            SUBCOMMITTEE ON
                COMMERCE, TRADE, AND CONSUMER PROTECTION

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                                   on

                               H.R. 4646

                               __________

                           SEPTEMBER 10, 2002

                               __________

                           Serial No. 107-136

                               __________

      Printed for the use of the Committee on Energy and Commerce








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                    COMMITTEE ON ENERGY AND COMMERCE

               W.J. ``BILLY'' TAUZIN, Louisiana, Chairman

MICHAEL BILIRAKIS, Florida           JOHN D. DINGELL, Michigan
JOE BARTON, Texas                    HENRY A. WAXMAN, California
FRED UPTON, Michigan                 EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               RALPH M. HALL, Texas
PAUL E. GILLMOR, Ohio                RICK BOUCHER, Virginia
JAMES C. GREENWOOD, Pennsylvania     EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California          FRANK PALLONE, Jr., New Jersey
NATHAN DEAL, Georgia                 SHERROD BROWN, Ohio
RICHARD BURR, North Carolina         BART GORDON, Tennessee
ED WHITFIELD, Kentucky               PETER DEUTSCH, Florida
GREG GANSKE, Iowa                    BOBBY L. RUSH, Illinois
CHARLIE NORWOOD, Georgia             ANNA G. ESHOO, California
BARBARA CUBIN, Wyoming               BART STUPAK, Michigan
JOHN SHIMKUS, Illinois               ELIOT L. ENGEL, New York
HEATHER WILSON, New Mexico           TOM SAWYER, Ohio
JOHN B. SHADEGG, Arizona             ALBERT R. WYNN, Maryland
CHARLES ``CHIP'' PICKERING,          GENE GREEN, Texas
Mississippi                          KAREN McCARTHY, Missouri
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
TOM DAVIS, Virginia                  THOMAS M. BARRETT, Wisconsin
ED BRYANT, Tennessee                 BILL LUTHER, Minnesota
ROBERT L. EHRLICH, Jr., Maryland     LOIS CAPPS, California
STEVE BUYER, Indiana                 MICHAEL F. DOYLE, Pennsylvania
GEORGE RADANOVICH, California        CHRISTOPHER JOHN, Louisiana
CHARLES F. BASS, New Hampshire       JANE HARMAN, California
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
GREG WALDEN, Oregon
LEE TERRY, Nebraska
ERNIE FLETCHER, Kentucky

                  David V. Marventano, Staff Director
                   James D. Barnette, General Counsel
      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

        Subcommittee on Commerce, Trade, and Consumer Protection

                    CLIFF STEARNS, Florida, Chairman

FRED UPTON, Michigan                 EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                 DIANA DeGETTE, Colorado
  Vice Chairman                      LOIS CAPPS, California
ED WHITFIELD, Kentucky               MICHAEL F. DOYLE, Pennsylvania
BARBARA CUBIN, Wyoming               CHRISTOPHER JOHN, Louisiana
JOHN SHIMKUS, Illinois               JANE HARMAN, California
JOHN B. SHADEGG, Arizona             HENRY A. WAXMAN, California
ED BRYANT, Tennessee                 EDWARD J. MARKEY, Massachusetts
GEORGE RADANOVICH, California        BART GORDON, Tennessee
CHARLES F. BASS, New Hampshire       PETER DEUTSCH, Florida
JOSEPH R. PITTS, Pennsylvania        BOBBY L. RUSH, Illinois
MARY BONO, California                ANNA G. ESHOO, California
GREG WALDEN, Oregon                  JOHN D. DINGELL, Michigan,
LEE TERRY, Nebraska                    (Ex Officio)
ERNIE FLETCHER, Kentucky
W.J. ``BILLY'' TAUZIN, Louisiana
  (Ex Officio)

                                  (ii)
















                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Broderick, Thomas J., Bethlehem Steel........................    35
    Collins, James F., Steel Manufacturers Association...........    40
    Klinefelter, William J., United Steelworkers of America......    30
Additional materal submitted for the record:
    English, Hon. Phil, a Representative in Congress from the 
      State of Pennsylvania, prepared statement of...............    54

                                 (iii)














              THE STEEL INDUSTRY LEGACY RELIEF ACT OF 2002

                              ----------                              


                      TUESDAY, SEPTEMBER 10, 2002

              House of Representatives,    
              Committee on Energy and Commerce,    
                       Subcommittee on Commerce, Trade,    
                                   and Consumer Protection,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2322, Rayburn House Office Building, Hon. Cliff Stearns 
(chairman) presiding.
    Members present: Representatives Stearns, Deal, Shimkus, 
Bryant, Walden, Terry, Capps, Doyle, Harman, Gordon, and 
Dingell (ex officio)
    Also present: Representatives Buyer, Brown, Strickland, 
Holden, Kucinich, Oberstar, Phelps, Quinn, and Visclosky.
    Staff present: Nandan Kenkeremath, majority counsel; Yong 
Choe, legislative clerk; and Amy Hall, minority professional 
staff member.
    Mr. Stearns. Good morning, and welcome to the Commerce, 
Trade, and Consumer Protection Subcommittee hearing on H.R. 
4646, the Steel Industry Legacy Relief Act of 2002.
    I wish to thank our witnesses for their appearance this 
morning, and I look forward to their testimony.
    This morning the subcommittee is examining this bill that 
is introduced and championed by the gentleman from Michigan, 
Mr. Dingell. The bill mandates the establishment of a Federal 
trust fund with a purpose of providing health and prescription 
drug benefits coverage to steel industry retirees whose former 
employers have permanently closed or been acquired by another 
company.
    This Federal trust fund will be funded by a surcharge on 
steel shipped by acquired companies, assets of the acquired 
companies, and tariffs imposed on imported steel under Section 
201 of the Trade Act of 1974. If those three funding sources 
fall short of covering the actual expenses of the fund, the 
United States Treasury is to cover the shortfall.
    Once enrolled in the program, retirees and their 
beneficiaries will receive medical and prescription drug 
coverage similar to what is being offered under Medicare and to 
Federal employees, respectively. In removing the financial 
liability that attaches to retired health benefits from the 
balance sheet of certain companies, H.R. 4646 is intended to 
permit the merging of such steel companies in the creation of a 
handful of mega steel companies.
    The bill is premised on the assumption that a highly 
consolidated steel industry is necessary, if the steel industry 
is to survive in the United States. Perhaps another way to say 
this is the steel industry is a national security issue for 
this country, and should be protected and preserved.
    There is no question that American steelworkers have borne 
the brunt of a fiercely and, at times, not so competitive 
international marketplace for steel. As steel production was 
deemed to be a critical input for economic development in the 
last 30 years, many nations embarked on cultivating their own 
steel industry at any cost. That effort, in turn, has led to a 
persistent overcapacity in the steel market.
    For example, it is estimated that in 1998 production 
capacity exceeded demand by 35 percent. As the U.S. market is 
the largest market in the world and one of the most open to 
international trade, much of the excess steel capacity found 
its way here, and in many cases at prices well below cost.
    A combination of reasons, including the persistent 
overcapacity, inefficiency in U.S. steel production, and 
changes in production techniques and demand, has progressively 
dwindled the ranks of American steel workers from 520,000 in 
1974 to approximately 145,000 today.
    The expansion and contraction of an industry with time, of 
course, is nothing new in the annals of economic history of 
this country. What is different about the American steel 
industry is that persistent overcapacity in the international 
steel markets has taken a disproportionate toll on the 
industry.
    Under the pressure of imports and with substantial 
productivity gains made by the American steelworkers, in 1980 
10 hours was required per ton of steel. Today it is 4 manhours. 
The U.S. steel industry contracted at a very fast pace in the 
eighties and in the nineties. That dramatic contraction has 
left many large integrated steel companies with substantial 
retiree health benefit liabilities that they can't service.
    On average, per every five retirees from an integrated 
steel company, there is only one current employee making 
contributions to the company's health benefit fund. That ratio 
is even higher for companies like Bethlehem Steel, one per 
seven retirees. Those liabilities have an important factor in 
over 30 U.S. steel companies seeking bankruptcy protection 
since 1997.
    Make no mistake about this, my colleagues. H.R. 4646 will 
have the Federal Government assume the financial liabilities 
associated with retiree health benefit plans of integrated 
steel companies that either sought bankruptcy protection or 
were bought out by another steel company since January 1, 2000.
    In removing that liability, the retirees are assured of 
receiving their benefits, and integrated steel firms would be 
free to merge and create a handful of mega steel corporations.
    In carefully examining this bill, we need to consider the 
best and most efficient way to assist the retirees without 
imposing a great and undetermined burden on the American 
taxpayer. As there are no caps on the Federal contribution to 
the trust fund, under this bill as drafted the extent of U.S. 
Treasury's liability is not altogether clear. At least one 
study puts the costs over the actual lifetime of workers and 
retirees at approximately $13 billion.
    I think we must be especially rigorous when examining H.R. 
4646 goal of helping the U.S. steel industry. The industry is 
not a monolith. While large integrated steel firms have sharply 
contracted, many so called mini-mills have flourished in the 
last 20 years.
    Today the mini-mills have 47 percent of the U.S. steel 
market, up from 20 percent in 1980. They tend to be more 
efficient in production of most types of steel products than 
the integrated steel companies. That is, Nucor, the largest 
mini-mill, produces 1,383 short tons per employee in 1999 
compared to 647 per employee for U.S. Steel, the largest 
integrated steel firm. H.R. 4646, as drafted, helps the 
integrated steel companies.
    Finally, as I have noted, the key problem that the industry 
faces worldwide is persistent overcapacity. We need to examine 
this issue fully, and that is why we have this hearing.
    [The prepared statement of Hon. Cliff Stearns follows:]
  Prepared Statement of Hon. Cliff Stearns, Chairman, Subcommittee on 
                Commerce, Trade, and Consumer Protection
    Good morning and welcome to the Commerce, Trade and Consumer 
Protection subcommittee hearing on H.R. 4646: The Steel Industry Legacy 
Relief Act of 2002. I wish to thank our witnesses for their appearance 
this morning and look forward to their testimony.
    This morning the subcommittee is examining H.R. 4646, a bill 
introduced and championed by the distinguished ranking member of the 
full committee, Mr. Dingell of Michigan. The Steel Legacy Relief Act of 
2002 mandates the establishment of a federal trust fund with the 
purpose of providing health and prescription drug benefit coverage to 
steel industry retirees whose former employers have permanently closed 
or been acquired by another company. This federal trust fund will be 
funded by a surcharge on steel shipped by acquired companies, assets of 
the acquired companies and tariffs imposed on imported steel under 
section 201 of the Trade Act of 1974. If those three funding sources 
fall short of covering the actual expenses of the fund, the Unites 
States treasury is to cover the shortfall. Once enrolled in the 
program, retirees and their beneficiaries will receive medical and 
prescription drug coverage similar to what is offered under Medicare 
and to federal employees respectively. In removing the financial 
liability that attaches to retiree health benefits from the balance 
sheet of certain steel companies, H.R. 4646 is intended to permit the 
merging of such steel companies and the creation of a handle full of 
mega-steel companies. The bill is premised on the assumption that a 
highly consolidated steel industry is necessary, if that industry is to 
survive in the United States.
    There is no question that American steel worker has born the brunt 
of a fiercely and at times ``not-so-competitive'' international market 
place for steel. As steel production was deemed to be a critical input 
for economic development, in the last 30 years, many nations embarked 
on cultivating their own steel industries at any cost. That effort, in 
turn, has led to a persistent overcapacity in the steel markets. For 
example, it is estimated that in 1998, production capacity exceeded 
demand by 35%. As the U.S. market is the largest market in the world 
and one of the most open to international trade, much of that excess 
capacity found its way here and in many instances at prices well below 
cost. A combination of reasons, including both the persistent 
overcapacity, inefficiencies in US steel production and changes in 
production techniques and demand, has progressively dwindled the ranks 
of American steel workers from some 520,000 in 1974 to approx. 145,000 
today.
    The expansion and contraction of an industry with time is nothing 
new in the annals of economic history. What is different about the 
American steel industry is that persistent overcapacity in the 
international steel markets has taken a disproportionate tool on the 
industry. Under the pressure of imports and with substantial 
productivity gains made by the American steel workers--in 1980 10 man 
hours was required per ton of steel, today its 4 man hours--the US 
Steel industry contracted at a very fast pace in the 1980s and 1990s. 
That dramatic contraction has left many large integrated steel 
companies with substantial retiree health benefit liabilities that they 
can't service. On average, per every five retiree from an integrated 
steel company, there is only one current employee making contributions 
to the companies health benefits fund. That ratio is even higher for 
companies like Bethlehem Steel [1 per 7 retirees]. Those liabilities 
have been an important factor in over 30 US steel companies seeking 
bankruptcy protection since 1997. H.R. 4646 will have the federal 
government assume the financial liability associated with retiree 
health benefit plans of integrated steel companies that either sought 
bankruptcy protection or were bought out by another steel company since 
January 1, 2000. In removing that liability, the retiree are assured of 
receiving their benefits and integrated steel firms would be free to 
merge and create a hand full of mega-steel corporations.
    I think it very important that we seriously consider H.R. 4646, as 
I find its objective of protecting the retirees' health benefits is not 
only commendable, but a must do. In carefully examining this bill, we 
need to consider the best and most efficient way to assist the retirees 
without imposing a great and undetermined burden on the American 
taxpayer. As there are no caps on the federal contribution to the trust 
fund, under this bill as drafted, the extent of U.S. treasury's 
liability is not clear. At least one study puts the cost over the 
actuarial lifetimes of workers and retirees at $13 billion.
    I think we must be especially rigorous when examining H.R. 4646's 
goal of helping the U.S. steel industry. The industry is not a 
monolith. While, large integrated steel firms have sharply contracted, 
small so-called mini-mills have flourished in the last 20 years. Today, 
the mini-mills have 47% of the U.S steel market up from 20% in 1980. 
They tend to be more efficient in production of most types of steel 
products than the integrated steel companies--e.g., NUCOR, the largest 
min-mill, produced 1,383 short tons per employee in 1999 compared to 
647 per employee for US Steel, the largest integrated steel firm. H.R. 
4646, as drafted, only helps the integrated steel companies. Finally, 
as I have noted, the key problem that the industry faces, worldwide, is 
persistent overcapacity. It is not clear to me how H.R. 4646 helps in 
reducing persistent overcapacity. We need also to examine that issue 
fully.
    I thank you and look forward to the testimony.

    Mr. Stearns. With that, the ranking member, the gentleman 
from Pennsylvania is recognized, Mr. Doyle.
    Mr. Doyle. Mr. Chairman, thank you very much, and I want to 
thank you for holding this hearing to discuss a bill that is 
vital to the health and quality of life of our steel workers, 
the Steel Industry Legacy Relief Act.
    Mr. Chairman, I was raised around steel. My family has 73 
years of steel in its blood. My father, my grandfather both 
worked for U.S. Steel. Both were members of the Steelworkers 
Union, and both dedicated their careers to the industry that 
helped build America.
    Western Pennsylvania, the district that I am proud to 
represent, includes generations of families that share the same 
steel making heritage that I do. This heritage has earned 
Pittsburgh and western Pennsylvania notoriety as the steel 
making capital of the world. Needless to say, the United States 
steel industry and, more importantly, those who work in it, are 
near and dear to my heart.
    Unfair trade and illegal steel dumping in our country is 
responsible for displacing over 50,000 American steelworkers in 
the last 3 years alone, and forced 34 companies into 
bankruptcy. I want to say that again. Unfair trade and illegal 
steel dumping has put 50,000 people out of work in the last 3 
years in this country and forced 34 companies into bankruptcy.
    Now this is of particular concern for me, not only because 
of the displaced workers and their families, which is 
paramount, and not only what it does to our economy, but also 
the national security implications represented by the loss of 
our domestic steel industry.
    Now my good friend and chairman--co-chairman of the steel 
caucus, Mr. Pete Visclosky from Indiana, who is with us today--
and as a matter of fact, all of these gentlemen that you see 
sitting in front of us today are to be commended, because these 
are some of the people that have been working in the front 
lines in the leadership addressing this issue and helping us 
keep it at the forefront of the agenda.
    Mr. Visclosky and my other colleagues here on the 
committee, like many other members, understand that our steel 
industry is the foundation of our Nation's economy and 
security, and allowing it to be continually threatened is 
unfair and wrong, pure and simple.
    Let me reiterate what I, members of the steel caucus, and 
industry leaders have said time and time again. Forty percent 
tariffs for 4 years on all steel products, and producers would 
level the playing field and would give the U.S. steel industry 
the full assistance it needs to get back on its feet.
    Our steel industry is threatened not because we are not 
competitive, but because the playing field isn't fair. I am 
going to say that again, too, so it gets through some people's 
heads. We are not being threatened here because we are not 
competitive. We are as competitive as anybody in the world, but 
the playing field is not fair. People are not playing by the 
rules.
    When foreign steel makers dump their excess capacity in 
this country in violation of our trade laws, they should be 
punished for it. And you know what? By the time we get around 
to punishing them, 50,000 people have lost their jobs, and 34 
steel mills are shut down. That is what our trade policies are 
doing right now.
    In March of last year President Bush gave us some good 
news. Ne announced recommendations based on the ITC and put a 
30 percent tariff on foreign steel makers who violate trade 
laws, and we applaud him for that. And these tariffs are going 
to help us make the way back for a struggling steel industry, 
and we are going to continue to keep the pressure on to stop 
the exemptions that are currently going on for some of these 
tariffs. But I strongly believe that, if we are going to save 
the domestic steel industry, then we have to empower it to be 
able to be able to consolidate and compete on a worldwide 
basis.
    We have steelworkers sitting out there that were promised a 
pension and health care benefits when they retired, but sadly, 
more and more of our domestic steel companies are declaring 
bankruptcy as a result of this illegal trade, and they are not 
able to pay these benefits, and it's a double-edged sword, 
because not only are the retirees not getting their health care 
benefits, but the; healthy steel companies that want to 
consolidate and get stronger and keep the domestic steel 
industries don't want to buy the bankrupt companies because of 
the legacy costs.
    So we've got a Catch 22 here. We can't get our domestic 
steel industry back on its feet, because we have these legacy 
costs sitting out there, and we have all these retirees that 
were promised health care benefits and they are not getting 
them.
    Now our bill, H.R. 4646, would help secure health insurance 
for several hundred thousand retirees who have already lost 
their benefits. The coverage established under H.R. 4646 would 
be similar to a Medicare level of coverage and also contain a 
prescription drug benefit, similar to those available to 
Federal employees.
    Additionally, H.R. 4646 seeks the strengthen the American 
steel industry by removing the weight of legacy costs as a 
barrier to company mergers and consolidation, and it does so in 
a manner that encourages U.S. firms to create the type of 
larger companies that can compete with Europe and Asia.
    My colleagues, the very fact that we are discussing this 
issue of basic health care coverage for retirees speaks volumes 
to the fact that Congress must act to address the health needs 
of our aging population. I don't care if you are a retired 
steelworker, a teacher, a homemaker, paying for health 
insurance is critical to maintaining a quality of life.
    One way or the other, the Federal Government is going to 
end up paying this bill, and we might as well do it in such a 
way that it allows our domestic steel industry to survive.
    Mr. Chairman, I am going to close with just one thought. I 
just read an article last week from some think tank. I can't 
think of their name or I would say it and expose them, but 
their basic premise was, you know, it would be better just to 
let these steel jobs go down the drain, because it is cheaper 
just to give them some extra unemployment compensation and 
retrain them, and let them move somewhere else.
    You know, we are going to wake up one of these days in this 
country and find out that we don't make a damn thing in this 
country anymore, and there's not going to be anybody else to 
retrain, because what are we going to retrain them for? You 
know, we are all getting so far here in America that we are not 
going to be able to eat at McDonald's anymore. So we won't have 
those burger flipper jobs anymore to retrain these workers for, 
and if this country doesn't wake up to its trade policies, and 
if this country doesn't start producing a product, I don't know 
what is going to happen to our children and grandchildren.
    It's time for us to do something, not only for these 
retirees but to save a basic industry that we can't let go down 
the drain for national security purposes and the good of our 
children.
    With that, I will yield back my time.
    Mr. Stearns. I thank the gentleman. The gentleman from 
Georgia, Mr. Deal.
    Mr. Deal. Thank you, Mr. Chairman, and I want to thank my 
colleagues who are here today to express their interest in this 
bill. We, obviously, will hear some interesting testimony, and 
I look forward to that.
    The statistics as to the number of lost jobs and the 
financial impact on regions of our country are certainly 
impressive. As someone who comes from the textile belt, 
however, of our country, I would have to tell you that the 
number of lost jobs that you talk about pale in significance to 
the number of lost jobs in the textile industry that has 
devastated the old textile belt of the south.
    We have done nothing to help those people, absolutely 
nothing. Unfortunately, they did not have many of the benefits 
that steelworkers had. Many of them did not even have any kind 
of retirement health care plans in place. Many of them were 
women who predominantly made up the workforce in the textile 
industry in the far part of my Congressional district, which is 
the mountain areas of north Georgia. They are in remote parts 
of a State where transportation and access sometimes is 
difficult, and it is very difficult to attract new industries 
to come in and replace those jobs.
    So there are many other ramifications of the issue that we 
are talking about here today that exceed far beyond the scope 
of simply the steel industry itself, and it appears that we do 
live in a very delicate and sometimes complicated world by way 
of trade rules and agreements.
    I might just add, even though you applaud the efforts of 
the President, and I voted for it, with regard to the 
imposition of tariffs as they were imposed on foreign steel 
imports, I want to tell you that my Congressional district, 
which is the largest exporter of poultry products, and Russia 
being the largest importer of poultry products from the United 
States put an embargo, and are still persisting in artificial 
reasons why they will not buy American poultry.
    So for every advantage, there is sometimes a disadvantage, 
and it depends on where you live. It depends on what your 
products are and what your constituency depends on to make 
their livelihood.
    So I look with interest at the proposition that is before 
us. I, too, have concerns about are we setting a precedent in 
which we must now assume the responsibility for everyone who is 
adversely affected by any trade situation that ever occurs in 
this country. If we are, then we have opened what may very well 
be a very large box, because it is far beyond the scope of what 
this bill contemplates here today.
    Thank you for holding the hearing, Mr. Chairman. I look 
forward to the testimony.
    Mr. Stearns. I thank the gentleman. The author of the bill, 
the gentleman from Michigan, Mr. Dingell.
    Mr. Dingell. Mr. Chairman, I will ask unanimous consent to 
revise and extend my remarks in lieu of an opening statement.
    Mr. Stearns. Unanimous consent is so ordered.
    Mr. Dingell. I strongly support H.R. 4646. I commend you 
for holding this hearing today, Mr. Chairman, and I express to 
you my thanks. This is a piece of legislation which is urgently 
needed by this country, and it is a piece of legislation which 
may very well be an example of what it is we should be doing, 
for example, for the textile industry and other industries 
which are being hurt by unfair foreign competition which is 
decimating our industries and hurting our workers and our 
economy.
    I again commend you for your fine opening statement, Mr. 
Chairman, and with that I ask unanimous consent to revise and 
extend my remarks in the record.
    Mr. Stearns. Unanimous consent so ordered, and I thank the 
gentleman.
    [The prepared statement of Hon. John D. Dingell follows:]
    Prepared Statement of Hon. John D. Dingell, a Representative in 
                  Congress from the State of Michigan
    Mr. Chairman, last March President Bush imposed a 30 percent tariff 
on foreign steel imports because foreign steel companies had dumped 
steel into this country at unreasonably low prices and had injured our 
domestic industry. This was not the 40 percent recommended by the steel 
industry and workers, but it was a step in the right direction. His 
decision, however, did not address two key challenges facing the 
American steel industry: (1) excess foreign capacity and, more 
critically, (2) steel legacy costs.
    My colleagues on the Steel Caucus and I, after working with the 
steel industry and workers, drafted bipartisan legislation that will 
solve the steel legacy problem by providing health care benefits for 
steelworkers and their families, save American steelworker jobs, and 
guarantee that our national security is not comprised by the 
elimination of the domestic steel industry. The Steel Industry Legacy 
Relief Act of 2002, H.R. 4646, has been cosponsored by 172 members. I 
thank my colleagues in the Steel Caucus, some of whom have joined us 
today, for their diligent work on behalf of H.R. 4646. I also thank the 
steel companies and their workers for their invaluable help.
    Under H.R. 4646, the Federal Government would create and support a 
program of health insurance for the retirees of steel, iron ore, and 
coke companies. Once enrolled in the program, retirees and their 
spouses or dependents would receive major medical and prescription drug 
coverage. In the absence of a universal national health care system, 
this legislation is critical. It would provide a guarantee of health 
care to a group likely to find private insurance unaffordable or 
unavailable elsewhere.
    First, the bill would secure health insurance for retirees who have 
lost, or will soon lose, all retiree benefits. Second, the bill seeks 
to strengthen the American steel industry by removing the weight of 
``legacy costs'' as a barrier to merging of American steel companies. 
Third, this legislation seeks a preference for American steel companies 
provided by a ``right of first refusal'' on the purchase of American 
steel companies by other existing steel companies.
    I would like to take a moment to mention that it is not solely the 
steel industry struggling with legacy costs, though the steel industry 
has been particularly hard hit for reasons we will hear about today. I 
have testimony from General Motors that I would like to submit for the 
record, which makes some very important points in particular about 
things we could do to help all companies with legacy costs such as 
expand health insurance coverage, improve upon existing retiree 
coverage by adding a Medicare drug benefit, and address cost drivers in 
health insurance like the escalating costs of prescription drugs.
    Mr. Chairman, the American steel industry is struggling. We cannot 
afford to have this sector of our economy fail. At times of war, we 
must remember that the steel industry has been and is the backbone of 
the American economy. Steel provides us with the material we need to 
make the planes, tanks, and ships necessary to defend America and 
enforce peace. I thank the Chairman for holding this hearing, and look 
forward to the passage of this important legislation.
                                 ______
                                 
 Prepared Statement of L.L. Williams, Executive Director, Health Care 
                Initiatives, General Motors Corporation
    Mr. Chairman, Ranking Member Towns, and distinguished Subcommittee 
Members, I am L.L. ``Woody'' Williams, Executive Director of Health 
Care Initiatives at General Motors (GM). It is an honor to submit this 
statement as you consider Ranking Member Dingell's legislation to 
address the health care ``legacy costs'' of steel manufacturers. We 
applaud Mr. Dingell for bringing this issue before the Subcommittee and 
urge the Subcommittee to consider developing policies that respond more 
broadly to other industries that face similar financing and 
administrative challenges for the provision of post retirement 
benefits.
    Recognizing that the witnesses you have invited to testify before 
you will focus predominantly on the steel industry crisis, our comments 
are designed to address the broader challenges that many other 
industries face, with a particular focus on the GM experience. Like 
many other companies, we are concerned about succeeding in an ever-
increasingly competitive world marketplace without some significant 
relief from our current liabilities. Further, our testimony is intended 
to highlight our belief that the preservation of current retiree health 
benefits is directly linked to our ability to work with you and others 
to pass Federal policies that expand coverage and constrain cost 
growth.
    Retiree Health Care and Legacy Costs. In the 1960s, 1970s and some 
of the 1980s, there was a relatively constant increase in the number of 
companies offering retiree health plans. By the early 1980s, well over 
80 percent of large and medium sized companies were offering employees 
some type of retiree health benefits. This benefit emerged as a result 
of many factors, including: (1) evolving labor-management contract 
negotiations; (2) the relative affordability of providing these 
benefits when there were initially small numbers of retirees; (3) the 
fact that such plans filled the void of coverage for benefits like 
prescription drug insurance that were not (and still are not) covered 
by Medicare; and (4) the fact that provision of such generous benefits 
made it possible for employers to appropriately offer early retirement 
options without fear of being targeted by age discrimination 
suits.1
---------------------------------------------------------------------------
    \1\ Testimony of Dr. Sylvester J. Schieber, Ph.D., Committee on 
Education and the Workforce, Subcommittee on Employer-Employee 
Relations, Hearing on ``Assessing Retiree Health Legacy Costs: Is 
America Prepared for a Healthy Retirement?'' May 16, 2002.
---------------------------------------------------------------------------
    Today, a very different picture has emerged. According to a just-
released Kaiser Family Foundation study, the percentage of large 
employers offering coverage has been cut almost in half, from 66 
percent in 1988 to 34 percent in 2002 2. In recent years, 
the trend has been for employers to not offer such coverage to new 
hires or those who have not yet retired. The reasons for this trend are 
relatively simple: the increasing cost and utilization of care, the 
costs associated with those retirees who are already eligible, the fear 
of future demographic change and its accompanying costs and, of course, 
the negative impact these costs have on the ability of these employers 
to compete in a world market.
---------------------------------------------------------------------------
    \2\ Kaiser Family Foundation and Health Research and Educational 
Trust, Employer Health Benefits: 2002 Annual Survey, September 2002.
---------------------------------------------------------------------------
    Notwithstanding this trend towards reducing retiree health 
coverage, many employers have maintained this coverage along with the 
accompanying tens of billions of dollars in liabilities. In fact, 
according to Watson Wyatt Worldwide, the top ten companies with retiree 
health legacy costs have outstanding liabilities associated with these 
costs in excess of $150 billion. Because of our older and larger 
workforce, GM's retiree health legacy costs actually account for over 
one-third of this amount ($52.5 billion).
    It is important to stress that retiree health benefits are 
extremely important to those fortunate enough to receive them. They 
generally provide very comprehensive coverage, and serve over a quarter 
of the nation's seniors, far more than Medicaid (10 percent), Medigap 
(7 percent), or Medicare Plus Choice managed care (approximately 15 
percent).3 However, without some assistance to continue to 
do so, there is little doubt that the trend of benefit elimination or 
reduced coverage will continue or even accelerate.
---------------------------------------------------------------------------
    \3\ Laschober, et al., Health Affairs, February 2002.
---------------------------------------------------------------------------
    General Motors and Retiree Health. At GM, we are proud of our 
employees and their productivity. We believe they have earned and 
deserve appropriate and fair compensation in return for their service. 
Not surprisingly, then, our workforce tends to stay with us for 
extended periods of time. The current average length of service for our 
active hourly employees is 22.6 years, which also means that virtually 
all of our workers qualify for and receive retiree health coverage.
    GM's retiree health bill, however, is simply unsustainable. Like 
many other companies, we have seen our retiree health legacy costs rise 
at alarming rates, since we originally started subsidizing this 
coverage in 1961. Just over a decade ago, our post-retirement liability 
(the projected cost of our current and future retiree health 
populations) was $33 billion. Our liability has now increased by over 
60 percent, to $52.5 billion, as the number of eligible retirees has 
increased from 340,000 to 425,000 from 1991 to 2001.
    Similar to a number of other long-lasting business enterprises, GM 
is a mature company with a mature workforce. The fact that we have one 
of the lowest turnover rates in the large business sector is something 
of which we are proud. However, it has also contributed to the fact 
that we now have far more retirees (about 425,000) than active 
employees (approximately 181,000). Such a ratio of retirees to workers 
is extremely difficult to sustain, and has and will continue to require 
company, and Federal policy intervention.
    We are now spending over $3 billion a year in health care costs for 
our hourly workforce. These costs represent only a portion of GM's 
overall health care expenditures, but still are equivalent to about 
$800 per vehicle. At a time when we are competing with car companies 
all over the world that have little or no retiree health liabilities, 
this represents an extraordinary and sometimes excessively burdensome 
challenge.
    Clearly, one of the largest drivers of these costs in recent years 
has been our coverage of prescription drugs (and the fact that Medicare 
provides no defined outpatient prescription drug benefit). Despite our 
use of state-of-the-art management techniques that promote the most 
appropriate and cost-effective use of prescription drugs, our 
pharmaceutical bill continues to grow at a rate of 15 to 20 percent a 
year--more than quadrupling the general inflation rate. Such drug cost 
increases are driven by a host of factors, including higher 
utilization, direct to consumer advertising, price increases of 
pharmaceutical products currently on the market, and the delay of 
generic competition.
    While I will not go into detail on all of these problems here, as 
we have testified earlier in the year on this subject, I do want to 
briefly highlight our frustrations with the lack of generic competition 
in the marketplace. In the last several years, as prescription drug 
patents have expired, purchasers such as GM have planned and budgeted 
for generic drug competition to reduce costs and increase enrollee 
choice. Such competition is critical to effective pharmaceutical 
benefit management programs, as generic competition reduces costs by 50 
to 60 percent for most drugs. Time and again, however, purchasers such 
as us have underestimated liability related to drug costs, as many 
pharmaceutical companies effectively extend their market exclusivity 
through the automatic and repeated use of the 30-month market 
exclusivity stay, included in the Hatch-Waxman Act.
    At GM the so-called ``ever-greening'' of the patents of five 
products designed to treat ulcers, cholesterol, diabetes, allergies and 
depression has increased GM's pharmaceutical costs for these five drugs 
alone by over $142 million. Even more ominous is our fear that this 
trend will continue and likely grow worse. For example, without new 
legislation, we now estimate that if just five pharmaceutical 
``blockbuster'' product patents that are currently scheduled to expire 
are extended for 3years, GM will see increases in our prescription drug 
bill in excess of $204 million during the period, much of it for our 
retirees.
    GM's Response to the Retiree Health Challenge. GM supports pursuing 
a two-pronged strategy in addressing this challenge. First, we are 
working internally and with outside sources to implement purchasing and 
quality assurance initiatives aimed at ensuring that our annual multi-
billion dollar health investment is being spent wisely and achieving 
positive medical outcomes for our active and retired workforce. Second, 
we are partnering with coalitions to urge appropriate and bipartisan 
legislative intervention that would modernize Medicare benefits and 
constrain cost growth (particularly for prescription drugs), and 
improve the level of care all Americans receive. The following outlines 
our efforts in these areas:
    (1) Prudent purchasing of health care with emphasis on medical 
outcomes. GM is proud of our collaborative working relationship with 
our union partners to improve quality, health status, and value. We 
both recognize that our multi-billion dollar investment must yield a 
much greater health outcome dividend, and that patients and their 
families, as well as health care providers, must become more sensitive 
to costs and value. To that end, we have implemented the following:
 Community Initiatives. Focuses on five high GM employee 
        population areas in collaboration with multiple stakeholders to 
        drive quality improvement, reduce duplicative services, 
        emphasize best practices that generate positive clinical 
        outcomes, reduce unnecessary capacity expansion, and provide 
        public information on provider performance to help consumers 
        select the best providers.
 Wellness and prevention. GM provides its employees and 
        retirees the largest corporate wellness program in the world, 
        known as ``LifeSteps.'' Its purpose is to identify controllable 
        health risks, improve overall health knowledge, and help 
        beneficiaries modify their lifestyles and reduce health risks. 
        Recently, 14 percent of certain employees with high health 
        risks moved to a lower risk designation as a result of using 
        Lifesteps. Lifesteps services include health risk appraisals, 
        counseling and support, fitness facilities, education programs, 
        health fairs, and more.
 Quality-based value purchasing. The GM core strategy for 
        managing health plan benefit cost is through accountability and 
        providing assistance for quality improvement and reduction of 
        waste in the health care system. GM has a rigorous quality 
        performance measurement system for its health plans, providing 
        quality information to its employees and retirees to help them 
        in their selection of health plans. Salaried employees and 
        retirees have financial incentives to select the best 
        performing health plans on the basis of quality as well as cost 
        (higher quality plans cost the beneficiary less). This has 
        resulted in considerable migration to better and more cost 
        efficient plans and has been a driver for significant quality 
        improvement. In addition, we help providers and health plans 
        improve quality and manage costs through our supplier 
        development activities, where we send teams to hospitals, 
        health plans and other health care organizations to help them 
        improve processes.
 Prescription Drug Management. GM has a dedicated team working 
        on prescription drug quality and cost, led by a full time 
        clinical pharmacist. Some initiatives include: the development 
        of a pharmacy network, generic drug education and incentives 
        (including multi-tiered co-payment benefit designs that 
        encourage consumers to be more cost conscious), beneficiary and 
        physician education, optimal dosing, and appropriate use of 
        antibiotic safety initiatives.
 National private/public collaborations on patient safety. GM 
        has played a leadership role in establishing, supporting, and 
        staffing multiple health policy coalitions designed to develop 
        and implement quality and outcomes data and standards to 
        modernize the delivery system. Organizational memberships and 
        participation include the National Quality Forum, the Leapfrog 
        Group, and the Foundation for Accountability (FACCT).
    We are convinced that these initiatives have made major 
contributions toward improving the health care delivery system by 
promoting improved medical outcomes and assuring greater cost 
efficiencies. Preliminary data indicates that this investment is 
beginning to provide a return in terms of medical outcomes and cost 
savings. More specifically, GM's efforts relative to cervical cancer 
screenings have resulted in a 51% increase in screenings over a 3-year 
period. Efforts to promote use of a Beta-Blocker after an Acute 
Myocardial Infarction to reduce the chances of a subsequent heart 
attack have resulted in a 26% increase in Beta-Blocker use over the 
same time frame. However, notwithstanding these encouraging trends, 
health care cost growth for retiree health expenditures still remains 
at more than 3 times the general inflation rate, and simply cannot be 
maintained for any length of time.
    (2) Encouraging bipartisan collaboration on long-overdue 
legislation to expand coverage and constrain costs. No matter how 
successful we are at using our purchasing leverage to improve health 
care and constrain costs, we at GM remain convinced that we will be 
unable to maintain a comprehensive and similarly affordable 
prescription drug benefit for our retirees without Federal intervention 
on a Medicare prescription drug benefit and on legislation to eliminate 
barriers to generic competition. Specifically, we urge the Congress to 
not adjourn this year without passing:
    A meaningful, affordable, and optional Medicare drug benefit. A 
well-designed Medicare drug benefit would not only provide coverage to 
the millions of seniors without insurance, it would stabilize the 
coverage for those who do. If designed appropriately, a bipartisan 
Medicare benefit could significantly reduce some of the liabilities of 
retiree health plans, thus making it more likely they would be retained 
into the future. We believe that any Medicare benefit should meet the 
following principles:

 First, a Medicare drug benefit should be universal in nature. 
        All Medicare beneficiaries should have the choice of an 
        affordable drug benefit. The Medicare program has largely been 
        a success, representing the only population in this nation with 
        the benefit of universal coverage. Moreover, fully half of 
        those seniors without coverage have incomes over 200 percent of 
        the poverty level. Further, of those seniors who do have 
        coverage today, many have extremely limited coverage or are at 
        risk of losing their good coverage because of cost. Addressing 
        this problem effectively, therefore, means designing a 
        universal benefit.
 Second, a Medicare prescription drug benefit should be 
        meaningful and affordable to both beneficiaries and taxpayers. 
        To ensure a stable and accessible drug benefit that is 
        voluntarily chosen by all beneficiaries, it will be necessary 
        to design a substantive benefit that has an affordable premium. 
        This will require a significant investment of federal dollars. 
        We well recognize, however, that Congress has to achieve a 
        bipartisan consensus around what level of federal dollars are 
        available for such an investment, and clearly resources are not 
        infinite. This underscores the importance of a well-managed, 
        cost-effective prescription drug benefit.
 Third, the design of the Medicare prescription drug benefit 
        must be oriented toward achieving positive medical outcomes and 
        value. Just as important as designing an affordable, 
        meaningful, and universal drug benefit is managing it well. To 
        that end, the benefit should be designed to encourage 
        appropriate use of high-quality, cost-effective generic 
        medications, require cost-sharing that guards against excessive 
        and inappropriate utilization, and integrate state-of-the-art 
        pharmacy management techniques that ensure the use of high-
        quality, high-value pharmaceuticals.
 Lastly, a prescription drug benefit should provide incentives 
        for employers who are already financing prescription drug 
        coverage for Medicare-eligible individuals to continue to do 
        so. We recognize that the Congress may not be able to afford 
        the same level of benefits that many leading retiree health 
        plans provide to their beneficiaries, but it should provide a 
        much-needed floor of protection. As such, it should ensure that 
        employers and health plans currently providing drug coverage 
        can design benefits to wrap around Medicare. In addition, for 
        those retiree health plans that choose to maintain their 
        current plan, they should receive direct financial subsidies 
        that are equivalent to the value of the underlying Medicare 
        benefit. Such policies would appropriately avoid penalizing 
        firms who have generously and voluntarily provided such 
        coverage and slow the recent trend of companies withdrawing 
        their benefits for these populations.
    Hatch-Waxman reforms that eliminate barriers to generic 
competition.  S. 812, the Greater Access to Affordable Pharmaceuticals 
Act, was designed to help curtail inappropriate uses of legal loopholes 
in the Hatch-Waxman Act that lead to extensions of market exclusivity 
of brand-name pharmaceutical products that effectively block generic 
competition. These abuses must be stopped this year, or GM and 
employers like us will have to incur untold tens of millions of dollars 
in excessive and unpredictable pharmaceutical costs, thus making the 
financial viability of our retiree health plan even more precarious. 
Important facts:

 The Congressional Budget Office (CBO) projects that S. 812 
        will save tens of billions of dollars if enacted into law. CBO 
        estimates that S. 812 and its House companion bills (H.R.5272 
        and H.R.5311) will save at least $60 billion over the next 10 
        years for private and public purchasers.
 This legislation easily gained bipartisan Senate approval. 
        Earlier this summer, the Senate passed S. 812--by an 
        overwhelmingly bipartisan 78-21 vote.
 Broad-based coalitions of consumers, businesses, labor, 
        Governors, and health plans strongly support H.R. 5272 and H.R. 
        5311. Business for Affordable Medicine, the Coalition for a 
        Competitive Pharmaceutical Market (CCPM), and RxHealth Value 
        all represent broad-based and non-partisan constituencies who 
        are strongly supporting this legislation; the only major 
        opponent to these bills is the pharmaceutical manufacturing 
        industry.
 These coalitions are committed to and supportive of 
        pharmaceutical research and development and strong protections 
        for patents. They have concluded, however, that certain 
        practices employed by some brand-name companies have 
        effectively misdirected their attention away from true 
        innovation and new product development and towards preservation 
        of old innovations.
                               conclusion
    We well recognize the immediate retiree health legacy challenges 
the steel industry faces and commend the Subcommittee for working to 
address them. We know you are well aware, however, that there are other 
sectors of the business community that are confronting similar 
challenges that may be most effectively addressed by more comprehensive 
policy interventions.
    We sincerely believe that our aggressive management of our retiree 
health costs, combined with thoughtful Federal policy intervention, 
could make a real difference in moderating cost growth and making it 
possible for companies like GM to maintain a comprehensive retiree 
health benefit. Failure to succeed in this area, however, will only 
result in a smaller number of employers providing such coverage to a 
smaller number of employees. Such an outcome could effectively cost-
shift either to individuals or Federal and State governments. From our 
perspective, neither one of these two options is advisable or 
desirable.
    If policymakers desire to see us continue to provide the level of 
support we have done in the past, we will need assistance. In the 
absence of such help, it would be disingenuous for us to suggest that 
we will be able to afford the post-retirement benefits we have to this 
point. Regardless, there is little doubt that we will need to implement 
more aggressive cost management techniques, which by themselves may not 
be sufficiently effective, but may be our only short-term tool should 
the Congress fail to act this year.
    We are proud that the retiree health benefits that we have provided 
to date have made a difference in hundreds of thousands of lives. We 
look forward to working with you, Mr. Chairman, Ranking Member Dingell, 
and all the Members of the Subcommittee as you work to address the 
legacy costs associated with retiree health plans.
    Thank you for your consideration of our views.

    Mr. Stearns. Mr. Shimkus, the gentleman from Indiana.
    Mr. Shimkus. Thank you, Mr. Chairman. As an original co-
sponsor of H.R. 4646, I am looking forward to examining the 
effects that this legislation may have on the industry and 
those retirees which may benefit.
    I have two who consent to let their names be used. Mr. 
Clark was employed by Laclede Steel. When Laclede filed 
bankruptcy, he lost his health insurance coverage. He and his 
wife both suffer from preexisting conditions that prevent them 
from purchasing regular health insurance coverage. So they must 
apply for coverage under the CHIP program in Illinois. Due to 
the high cost, it is unaffordable.
    He was employed by Laclede for 38 years. He states that, 
due to the age of several employees and retirees, it is 
difficult to find insurance, and what you do find has a very 
high premium.
    Another constituent, Thomas Smith. Mr. Smith contacted us 
because he was a salaried retired employee of Laclede and was 
told he had no health insurance coverage. His wife had been 
hospitalized and was not aware there was no coverage. He had 
elected COBRA, but because the general American plan was self-
funded, there was no money to pay for claims. Mr. Smith's only 
recourse for insurance coverage was the CHIP program, again.
    We all know, especially those of us who represent the steel 
industry, what countless years of allowing unfair dumping of 
steel by foreign countries have done to our industry, and that 
directly relates to workers. You know, I applaud what the 
administration has recently done, but with a caveat and a 
concern. You got to do it the full way, and you got to do it 
for the full duration.
    We will continue to work with the administration to make 
sure that there's protection. This is a critical piece of the 
lobbying that we did on behalf of the steel industry. So what 
we got wasn't even half a loaf. It was maybe a third of a loaf, 
because we didn't get the 40 percent. We didn't get the 4 
years, and we didn't get the legacy costs.
    So we just need to continue to move on this piece of 
legislation. I applaud the chairman and, really, my colleagues 
on the other side, the ranking member of the subcommittee and 
the full committee, for helping us move this piece of 
legislation expeditiously, and I look forward to moving upward 
through the full committee process to the floor.
    I think we are going to have a lot of emotional testimony 
like we have heard so far, and the examples that I have gotten 
will go throughout the country of folks who have lost their 
livelihood and their jobs and their health insurance. You know, 
my prayer is that we can just do the right thing, come the end 
of the day.
    With that, I yield back the balance of my time.
    Mr. Stearns. Thank the gentleman from Illinois. The 
gentlelady from California.
    Ms. Capps. Thank you for holding this hearing, Mr. 
Chairman, and I am pleased that the subcommittee is turning its 
attention to legislation that will help restore health care 
benefits to thousands of steel industry retirees and their 
dependents. I am very honored to be sitting next to the ranking 
member of this subcommittee and to associate myself with his 
remarks, coming from years of living within that industry and 
seeing what has happened to it.
    Mr. Chairman, the current steel crisis has forced 33 
American steel companies into bankruptcy since the end of 1997. 
Seventeen steel companies have completely shut down and, as a 
result, as has been stated, over 125,000 retirees have lost 
their medical benefits.
    These men and women devoted their entire lives to producing 
the steel that has ensured our national defense and our 
security abroad, and through no fault of their own they have 
found the medical benefits promised to them completely wiped 
out. Hundreds of thousands more are at risk.
    Mr. Chairman, this is why we must act now and pass the 
Steel Industry Legacy Relief Act. This bill will set up a trust 
fund to ensure the health care and provide a prescription drug 
benefit for these steel retirees. It will also reform the 
industry by making bankrupt and failing American steel 
companies more appealing to acquisition.
    This legislation enjoys bipartisan support, support of the 
steel unions, and endorsement from many in the industry. As the 
ranking member of the full committee has stated, it is a model 
that could be used without the field of other industries as 
well. It will foster the recovery of the American steel 
industry. It will provide health care to uninsured retirees, 
and it will protect our national defense.
    I look forward to working with all the members of this 
committee to pass this critical legislation. Again, Mr. 
Chairman, I thank you for holding this hearing, and I look 
forward to the testimony of our witnesses. I yield back.
    Mr. Stearns. Thank you. And the gentleman from Nebraska, 
Mr. Terry.
    Mr. Terry. Thank you, Mr. Chairman. I can understand 
ranking member Dingell's motivation and the plethora of co-
sponsors to this bill--their sympathy for this bill. A lot of 
industries have felt the effects of stagnant economic activity. 
Aviation industry, textiles, as we heard from our colleague, 
mining, logging, telecommunications, manufacturing in general, 
and other sectors have encountered the results of both 
international trade competition as well as a slow domestic 
economy. But is that enough to establish a Federal health care 
system above and beyond what Medicare beneficiaries receive for 
retired workers for one particular industry? I disagree. I 
don't think so.
    Bethlehem Steel is here today in favor of this bill, and I 
understand why. Under competitive trade conditions, plus the 
introduction of heavy labor agreements, Bethlehem is an example 
of a domestic industry feeling the effects of the slow economy. 
Bethlehem wants health care coverage for its retirees paid for 
by U.S. taxpayers, because Bethlehem and its workers produce 
steel, which is the backbone of our economy. But what about the 
workers of Valmont, a manufacturing plant about one mile from 
my residence, within my district, that uses steel and makes it 
into products like telephone poles, irrigation equipment, wind 
energy?
    What about them? What about Balen Manufacturing that uses 
that same steel, or Lozur Corporation who have told me 
personally over the August break of their horror stories about 
the increase in steel costs as well as significant delays in 
receiving the steel that has placed them at a significant 
economic disadvantage, which may displace some of their workers 
now? Those are my constituents that may be laid off because of 
the current conditions in the steel industry being passed to 
them.
    Business is down, but Valmont, Balen, Lozur, in all of my 
discussions with them, did not once ask the Federal Government 
to take over the health care benefits of their workers. They in 
turn try and set up management tools to deal with the issue.
    Yes, they want us to have to deal with the steel issue so 
that they don't have to absorb those significant increases in a 
short period of time when they are unable to pass those costs 
on to their customers.
    Now I could go on and on about the retirees in my district 
alone who were dealt the short end of this economy stick: 
Qwest, Avaya--who has laid off about 50 percent of their 
manufacturing employees--Enron: all companies with significant 
presences in my district, and all undergoing financial woes and 
layoffs which hurt the remainder of their employees and their 
retirees.
    These employees demand and deserve fairness. They demand 
and deserve transparency. However, they are not demanding that 
the government take over their health care with a Cadillac 
plan.
    I look forward to the hearing and learning why this is 
absolutely necessary, and why we are even having these 
hearings. I look forward to the testimony, Mr. Chairman.
    Mr. Stearns. The gentleman from Tennessee, Mr. Gordon.
    Mr. Gordon. Thank you, Mr. Chairman. I am also a co-sponsor 
of this legislation, and I think that I will just make my 
remarks part of the record so we can move forward and hear from 
our witnesses. Thank you.
    Mr. Stearns. I thank the gentleman.
    What the procedure is going to be now, we are going to go 
to the members of the full committee. Oh, Mr. Walden, I'm 
sorry.
    Mr. Walden is recognized.
    Mr. Walden. Thank you very much, Mr. Chairman. I appreciate 
the fact that we are having this hearing today, and I look 
forward to the testimony as well.
    As I sat here listening to some of the other testimony, it 
hit me as well during the August break that there are a number 
of other industries now that are paying the price for the steel 
decision, and in many cases it is agriculture, and I represent 
a very agricultural district.
    I also represent a district that has some of the remaining 
aluminum industry production capability, and they have been 
hard hit as well, and certainly, the timber industry in my 
district has suffered mightily at the hands of the Federal 
Government and its decisions and changed policies.
    So I have some concerns about this legislation. I look 
forward to hearing the testimony and reading it as well, and 
then I will make up my mind at that point. Thank you, Mr. 
Chairman.
    Mr. Stearns. Thank you. Let me just explain what the 
procedure will be. We are going to go to the members of the 
full committee in priority as they arrived, and then we will go 
to the individuals who have asked to speak, other members who 
are not a member of the committee, but I wanted to afford them 
an opportunity to speak. I would like them, since we have a 
great number of them, to limit it to 3 minutes, if you would, 
and then we can go through all of you, and this is sort of an 
opportunity for each of you to participate.
    So with that, we will go to Mr. Strickland for his 
statement.
    Mr. Strickland. Thank you, Mr. Chairman. I applaud Ranking 
Member Dingell, Congressman LaHood, and Congressman Visclosky 
for introducing this vital piece of legislation.
    We will hear today about the more than 124,000 retired 
steelworkers who have, through no fault of their own, lost 
their health benefits in the last 5 years. My father, who died 
at 92 years of age, who worked in the steel mills for 46 years, 
lost his health benefits as a result of a company--steel 
company bankruptcy. But we will also hear about the more than 
500,000 retirees' health care benefits that are at risk.
    This legislation will ensure that retired steelworkers have 
health care. It will save the American steel jobs, and it will 
secure our national defense. I hope this hearing draws 
attention to these urgent needs.
    Still, legacy pensions and health care costs are the single 
greatest barrier to restructuring the U.S. steel industry, so 
that it can compete in the world market. Every year the 
domestic steel industry pays an estimated $965 million for 
retiree benefits. These burdensome costs make it nearly 
impossible for steel companies to survive when cheap foreign 
steel is illegally dumped into this country.
    The legacy costs are also a barrier to industry 
consolidation, which is critical for international 
competitiveness. This legislation is a lifeline for retired 
steelworkers and their families who are not yet Medicare 
eligible, and who are left without health benefits due to a 
steel company's closing or merger.
    Health insurance coverage is especially important for near-
elderly Americans between age 55 and 65 who are at risk of 
serious illness for adults which arise with age. It is also 
important for those younger than 65 who are not Medicare 
eligible.
    This legislation addresses this problem for steel retirees, 
providing them with Medicare level health coverage plus a 
prescription drug benefit until they become eligible for 
Medicare. This legislation also addresses the health insurance 
steel legacy costs of retirees who were not included in trade 
adjustment assistance aid that was provided to steelworkers 
this year in the Trade Act.
    Additionally, I am pleased that the Trade Act did include 
these provisions. While I am pleased, I fear that the benefits 
provided are inadequate, since workers receiving these benefits 
must seek health coverage in the individual market for high 
risk pools.
    This legislation underscores the serious problems faced by 
all who are uninsured in this country. Specifically, the bill 
underscores the need to address under-insurance as well as un-
insurance on two levels. First, the proposal highlights how 
important it is to add a prescription drug benefit to Medicare 
and, second, it illustrates the need to help the growing number 
of all Americans who lack health insurance.
    As we face the reality that the staggering number of 
steelworkers, retirees and their families are left without 
benefits, we understand that we cannot just simply stand by and 
watch a trade crisis rage, pillage, plunder, loot, utterly 
destroy the retirement of an entire generation of steelworkers.
    I urge that this legislation move quickly and that we pass 
it into law and resolve this national crisis. I yield back my 
time.
    Mr. Stearns. Thank the gentlemen. The gentleman from Ohio, 
Mr. Brown.
    Mr. Brown. I thank the chairman. I will ask to have my 
entire statement in the record.
    Mr. Stearns. By unanimous consent, so ordered.
    Mr. Brown. Thank you. I thank Mr. Dingell, Mr. Visclosky 
here today, and Mr. LaHood for their leadership on this bill. 
The U.S., as we know, has become the steel dumping ground at 
the expense of U.S. jobs, the expense of our economy, the 
expense of our communities.
    We important 39 million tons of steel, more than double the 
16 million tons we imported as recently as 11 years ago. Steel 
prices, as we know, are below 1998 levels. Since 1997, 34 steel 
companies have declared bankruptcy, 17 since January 2001, 
including LTV in Cleveland, RTI in Lorraine, Ohio, CSC in 
Warren, Ohio. Unfair trade has victimized an entire generation 
of steelworkers who depended on this industry for their 
pensions and for their health benefits.
    The President's decision to implement 201 tariff remedy, if 
not a panacea, at least seemed like a step in the right 
direction, but then the administration sold us out by approving 
almost 730 tariff exclusions, making 201 almost meaningless. 
This is the same administration that pushed through by one vote 
in December the fast track legislation which will accelerate 
the exodus of jobs from the United States to south of the 
border, and the same administration who pushed through fast 
track a second time just a month and a half ago by two votes, 
twisting arms, making last minute calls, making this their 
payback to corporate American because they had to sign the 
Corporate Accountability Act.
    It's the same Republican leadership that has blocked the 
Steel Revitalization Act, H.R. 808, even though Mr. Quinn and 
many members of this committee in both parties have signed onto 
this legislation, a strong majority of members of Congress have 
signed onto the legislation, supporting the legislation. 
Clearly, we would have an overwhelming vote in support of the 
Steel Revitalization Act, but again it is blocked by Republican 
leadership.
    Mr. Chairman, in order to do what this body needs to do to 
help Mr. Deal's textiles, to help the chairman's tomato and 
winter vegetables, the industry in his district, steel and auto 
in my part of the country, it is time we passed legislation 
such as H.R. 4646. It's time we passed legislation such as the 
Steel Revitalization Act. It's time we stopped passing trade 
agreements that are creating--that are digging a deeper and 
deeper hole for American jobs and American business. I thank 
the chairman.
    Mr. Stearns. Thank the gentleman. We are going to now go to 
the individuals who are not members of the full committee and, 
obviously, not the subcommittee. We will go with the gentleman 
from Minnesota first, Mr. Oberstar. Welcome, and we look 
forward to your 3 minutes, if you can.
    Mr. Oberstar. Thank you very much, Mr. Chairman. I will 
submit a statement for the record, and speak from the heart 
momentarily. I appreciated your opening statement. I thought it 
was a very strong definition of the case, although I thought 
you were a little wobbly on the conclusion. We'll try to 
reinforce your position.
    Mr. Stearns. If the gentleman will yield just for a second, 
we are trying to extend goodwill to get this hearing in place 
so that we can determine the facts, and I know you as a member 
will not jump to necessarily conclusions without hearing from 
our witnesses.
    Mr. Oberstar. That's why we are here; to strengthen you and 
shore you up on the conclusions, and I'll say to my colleague 
from Georgia, this is not a zero sum game. It's not, if one 
wins, the other loses. We in the rust belt have stood with 
textiles. They were the first to feel the impact of foreign 
imports, unfairly traded products, both textiles and the needle 
trades; and this gentleman, for years before the gentleman was 
a member of the body, supported every measure to protect and 
defend the textile industry of America against unfairly traded 
imports as the textiles moved from New England to the southern 
States, offshore to the Caribbean and now to the Pacific Rim. 
It's a textbook example of what is wrong with our trade policy, 
and we all need to stand together.
    What we are seeing here in this legislation is maybe the 
last stages of a 30 year inexorable process under which the 
steel industry has come under assault from, first, the European 
Community, then the Soviet Bloc, now Third World countries who 
have added steel capacity. We have trigger price mechanism in 
the Carter Administration, voluntary restraint agreements under 
the Reagan years, Clinton negotiations. The Bush Administration 
has come forward with the Section 201 Steel Remedy Plan, and 
yet in the early 1980's we lost 280,000 jobs directly in steel, 
980,000 associated jobs, and now these additional jobs that 
have been cited.
    What we did in 1972-73 was to respond to the problem of the 
loss of steel industry by creating the Employee Retirement 
Security Act, ERISA, that established the Pension Benefit 
Guaranty Corporation to protect retirement income. That has 
worked well, 3,000 such plans are now under the protection of 
PBGC.
    What we want to do is take one step further and, if we need 
to include textiles in it, we will find a way to do that. If we 
need to include the farm sector, we will do it. We voted for 
the farm bill. We voted to protect corn and wheat and other 
sectors of our--as a national security interest. Steel is also 
a national security interest. Let us all pull together on this 
initiative, and remember that Russian and Ukraine and Japanese 
and Taiwanese and Indonesian workers don't pay into our Social 
Security retirement program and don't pay into our Medicare 
fund. It's American workers who do.
    Mr. Stearns. I thank the gentleman.
    The gentleman from New York, Mr. Quinn.
    Mr. Quinn. Thank you, Mr. Chairman. I would ask unanimous 
consent to submit written testimony. Without objection, so 
ordered. Thank you very much. I want to associate myself with 
the remarks of my fellow T&I committee member, Mr. Oberstar.
    To take my 3 minutes to talk from the heart, I guess, a 
little bit more than prepared text and to be helpful to other 
members of the committee, the purpose this morning is to gather 
information.
    My father is a retired steelworker. He is 75 years old. I 
worked in the steel mills of western New York for 3 or 4 
summers in college. In my district we have about 1200 active 
steelworkers and 14,000 retired steelworkers, and I guess all I 
would like to say, Mr. Chairman, as you review this and it 
makes its way through the full committee, is something I have 
said when Pete Visclosky and I in these past 4, 5, 6 years now, 
Peter, worked on the steel quota bill 3 years ago and H.R. 808 
last year, is that there are real faces to these figures and 
numbers. There are real people out there we are dealing with 
and we are talking about trying to help.
    This is an issue where the companies and the unions have 
come together. They are going to testify today, as they have 
for many years here through the steel caucus. So it is not 
necessarily a problem where management and labor have any 
difficulties. They are together on this issue more than 
anything else.
    I guess from my perspective this is one of those issues 
where we have to stand together as Republicans and Democrats We 
did in the past. The only way we will be successful is if we do 
it again. I think the President showed enormous courage last 
year addressing the tariff side of this problem, 
notwithstanding the exemptions that my friend from Ohio 
mentions this morning.
    I don't think it is particularly helpful to be talking 
about selling people out and to be criticizing one party or the 
other at this point in time. I think we would be better off 
trying to find ways where we can enlighten this subcommittee 
and the full committee to get ourselves politically, like we do 
on transportation, so many issues, to get to a solution.
    I will tell you that in my father and mother's case, 75 and 
74 years old as a retired steelworker, the fact that they may 
lose their health insurance just about makes them ill. The fact 
that they get up every morning and worry about the fact that 
they are not going to have health insurance almost works the 
opposite, almost gives them so much stress and so much 
discomfort and so much worry that it is going to make them ill, 
and they are going to have to access that in a short period of 
time anyway.
    So in my situation, not only because of my personal 
involvement but because of the folks that I represent, and 
notwithstanding our farm bill and the other ways we can help, I 
suggest and I submit this morning, besides the written 
testimony, that we must find some ways to help this industry.
    There were real faces last evening in Buffalo, New York. 
There was a meeting of retired steelworkers, packed, standing 
room only. The president of the company was there from 
Bethlehem Steel. He is there willing to answer questions and 
find solutions, and I think that is what we ought to be about 
here, not criticizing each other but finding some ways for some 
solutions.
    I really appreciate the opportunity that the subcommittee 
has allowed members off the committee to be here.
    Finally, I just want to thank the staff who sent me up a 
note earlier, and the note says, ``Mr. Quinn, if you wish, you 
may move to the majority side at your convenience.'' You know, 
I got to tell you, when I came up here to sit down, I didn't 
even think which side I should sit on, and that's the approach 
we should take. This isn't one where we got political sides to 
take. This is one where we need to find a solution, and I'll 
sit or stand anywhere in this city to get us a solution. Thank 
you. I yield back.
    Mr. Shimkus [presiding]. And I thank my colleague from New 
York. Now I want to recognize a member of the full committee, 
Mr. Buyer, for an opening statement. He is recognized for 4 
minutes.
    Mr. Buyer. Thanks. I will just be brief. I came here 
because I want to listen to this, and I agree with Jack. Moving 
toward a solution to this is very difficult, and it is very 
challenging, because it is industry specific.
    The steel industry is not the only industry that may lose a 
job or may have a family in crisis, and that is what our 
challenge is. And because there are other industries out there, 
they are saying, well, why are you being biased toward steel? 
It's a nice question to ask.
    Mr. Oberstar's comment about national security--it's true. 
These countries out there that are whopping us upside the head, 
these Third World countries--you know, if we are going to say, 
Steve, we want to form a new country, what are some things that 
we need? You need a steel industry. You really do.
    When you talk about the top ten things that you need, you 
need a steel industry. So I am very supportive of what the 
President did with regard to steel. I am very cognizant, being 
from Indiana, having a lot of steel, having some mini-mills, 
having a huge agricultural base, about the impact and the 
destabilizing influences that have occurred in an economy when 
you take action to protect a particular industry.
    The legacy cost issue is very difficult for us. It is 
challenging, and I want all of you to know that, because if you 
take one action for one industry, believe me, in this town 
everybody else gets in line. So we have to be very cognizant of 
that, and we have to be very careful.
    With that, I just wanted to share that with you, and I 
wanted to come here today to be a good listener. I yield back.
    Mr. Shimkus. The gentleman yields back his time. Now under 
the Chair's prerogative, I will mention that I am going to 
introduce to you a chairman of the steel caucus, a co-chair. 
The other co-chair is doing Ways and Means Committee work, 
Congressman Phil English, and he was quite upset that he wasn't 
able to manage both at the same time. So I send his regards, 
and those of you in the steel industry know of his fervent work 
on this behalf.
    Now it gives me great pleasure to recognize the other co-
chair of the steel caucus, Congressman Visclosky from Indiana, 
recognized for 3 minutes.
    Mr. Visclosky. Mr. Chairman, thank you very much for the 
recognition, and I do want to thank Chairman Stearns, the 
ranking member, and all of the members of the subcommittee for 
holding this, the first hearing that I am aware of after 21 
months in the 107th Congress on a specific steel issue.
    I am very grateful from the bottom of my heart, because 
while this is the first hearing that is being held in this 
Congress, I do think, and I would reference the Gary Post 
Tribune headline from last December, that we are on our last 
legs as far as the steel industry is concerned.
    There have been a number of, from my perspective, red 
herrings raised today, including the price increases in steel. 
I would submit for the record information from the Purchasing 
Magazine Transaction Price Service that would indicate that hot 
rolled steel, cold rolled steel, hot rolled plate and cold 
finished bar are today selling anywhere from 3 to 22 percent 
below what their prices were in June 1997, but I would like to 
make four specific points on the underlying legislation itself.
    The first is this is for health care. My good friend and 
colleague from Indiana raised a key issue. Why steelworkers? 
Why should they be treated differently than anyone else? Other 
people have lost jobs because of a soft economy. Other people 
have lost jobs because of trade imbalances.
    The point that distinguishes steelworkers from everyone 
else is we have a unanimous decision from the International 
Trade Commission last fall that illegally traded steel caused 
the collapse of this industry, and that decision was so 
pertinent and so moving, it caused the President of the United 
States on March 5 of this year to impose tariffs for 3 years.
    I would assume that the President would not have acted 
unless he was convinced by that ITC determination that illegal 
actions have caused this problem. If we find for textiles, 
other manufacturers, member of the agricultural community or 
any other individual worker in the United States that they have 
lost their job because our laws have been violated, then we 
should help them, too; and if we haven't, then shame on us.
    This is not a Cadillac. If you want to see a Cadillac, you 
ought to look at the bill that Mr. Quinn and I introduced in 
March of last year, H.R. 808. We offered Title II which 
included legacy costs relief on four different occasions last 
fall. We were denied success four times, and the cost estimate 
was about $800 million a year, because we wanted essentially to 
replace every lost benefit.
    This is a far cry from that, and I would hesitate to go out 
in that hallway and ask any Medicare recipient whether or not 
they thought that they were on a Cadillac system.
    The chairman in his opening remarks mentioned the estimated 
cost of $13 billion. I also think that is a very dated figure, 
given the fact that this is a very measured proposal that I 
want to thank Mr. Dingell and Mr. LaHood for introducing this 
bill.
    Finally, the administration, in issuing those tariffs, said 
that the industry has an obligation to consolidate. They cannot 
consolidate, and we cannot have a vital, integrated industry 
that we need for our national defense, if we do not in some 
way, shape or form address the issue of legacy costs relief.
    I would ask that the subcommittee carefully consider this. 
I assume improvements can always be made, but I would also ask 
that action be taken, and I thank the chairman for his 
courtesy.
    [The prepared statement of Hon. Peter J. Visclosky 
follows:]
  Prepared Statement of Hon. Peter J. Visclosky, a Representative in 
                   Congress from the State of Indiana
    Mr. Chairman, Mr. Ranking Member, members of the Subcommittee on 
Commerce, Trade, and Consumer Protection, and distinguished members of 
the Committee on Energy and Commerce, I appreciate the opportunity to 
speak today at this hearing on H.R. 4646, the Steel Industry Legacy 
Relief Act of 2002.
    While I deeply appreciate this hearing being held and view it as a 
start in addressing the legacy costs problems of domestic steel 
companies, I do urge the committee to act and report the legislation as 
soon as possible.
    More than 124,000 retired steelworkers have lost their healthcare 
benefits in the last five years as the direct result of repeated steel 
import surges. Foreign steelmakers have produced massive excess 
capacity and dumped it onto the U.S. market, selling it at prices below 
the cost of production. This illegally traded steel has heightened the 
crisis in the American steel industry. The lost jobs have resulted in 
great suffering and hardship, not only for those workers and their 
families, but also for their communities, and indeed for our economy as 
a whole. H.R. 4646 is not a special gift for steelworkers or the 
industry; it merely provides needed compensation to hard-working men 
and women, who were hurt by the economic crimes committed by our 
trading partners. It also encourages and facilitates the rational 
consolidation of the industry pursuant to the President's request.
    The legislation introduced by Mr. Dingell and Mr. LaHood is 
moderate in comparison to similar measures. Title II of H.R. 808, the 
Steel Revitalization Act, introduced March 2001 by Mr. Quinn and 
myself, estimated to have cost $800 million a year. While a cost 
estimate for H.R. 4646 is unavailable due to the inability to estimate 
revenues to be collected from the tariffs, I believe H.R. 4646 would 
cost less to the taxpayers than H.R. 808 or S. 2189, the Steel Industry 
Consolidation and Retiree Benefits Protection Act, currently pending 
consideration in the Senate.
    H.R. 4646 is partially funded from the revenue from the recent 
Section 201 steel tariffs and from a one-time $5 per ton of annual 
capacity payment on acquired steel-making assets and the existing of 
retiree health care funds from participating companies. It's benefits 
would also be more moderate than those contained in H.R. 808 or S. 
2189.

    Opponents of H.R. 4646 say the measure is purely a gift and 
steelworkers should only be provided with catastrophic health care and 
only for a limited time. I believe their concerns are unfounded. First, 
the level of health care coverage that would be provided by H.R. 4646 
is catastrophic coverage. It offers little more than Medicare level 
coverage. Second, the number of people able to participate in the 
program created by H.R. 4646 is limited, as too is the enrollment 
period. Additionally, many among these hard working men and women turn 
65 everyday, qualifying them for Medicare, which would replace an 
overwhelming majority of the benefits provided by H.R. 4646, therefore, 
lowering the draw from the trust fund established by the bill.
    The Administration understands the need for consolidation among the 
domestic steel companies and has called for it. Last week the Commerce 
Department received confidential progress reports from the industry on 
consolidation. Without the legacy relief contained in H.R 4646, 
rational consolidation among domestic integrated firms will be 
impossible. H.R. 4646 would help companies to consolidate, by helping 
many of them avoid bankruptcy and helping hard-working employees keep 
their jobs, preventing an unneeded, additional burden on our economy.
    I again applaud the subcommittee's work and for holding this 
hearing. I urge the committee to report H.R. 4646.

                                                  STEEL PRICES
----------------------------------------------------------------------------------------------------------------
                                                   Dollars per Ton                           % Increase
                                 -------------------------------------------------------------------------------
             Product                                                                 Jan 02    Jun 01    Jun 97
                                    June      March    January    June      June     to Jun    to Jun    to Jun
                                    2002      2002      2002      2001      1997       02        02        02
----------------------------------------------------------------------------------------------------------------
Hot Rolled Steel................       340       260       220       240       350        55        42        -3
Cold Rolled.....................       435       370       320       340       480        36        28        -9
Hot Rolled Plate................       320       250       250       297       410        28         8       -22
Cold Finished Bar, SBQ..........       460       440       415       440       489        11         5        -6
----------------------------------------------------------------------------------------------------------------
Source: Purchasing Magazine Transaction Price Service.


    Mr. Shimkus. The gentleman's time has expired. Now the 
Chair recognizes my colleague from Illinois, Congressman David 
Phelps, for 3 minutes.
    Mr. Phelps. Thank you, Mr. Chairman. I, too, want to joint 
the members in thanking Chairman Stearns and anyone else who 
had anything to do with letting us have this opportunity today 
to discuss this very important issue. Mr. Dingell and Mr. 
Visclosky certainly have afforded us great leadership to get us 
where we are here today.
    First, to find a solution we have to acknowledge there is a 
problem, and many have not ever acknowledged that. 
Unfortunately, some things are so obvious that you can ignore, 
I guess, in some respects.
    I ask unanimous consent to present my written statement for 
the record, which I won't read.
    Mr. Shimkus. Without objection, so ordered.
    Mr. Phelps. But I am very much an original co-sponsor and 
in very much support of H.R. 4646 and what it does in its 
entirety.
    If you have ever looked into the eyes of a steelworker 
that's lost their job, you can understand the devastation, and 
especially if you look at home at many of the widows and the 
people they have left with the staggering cost of trying to 
survive. Not only have you seen the steelworkers devastated by 
the loss of jobs and retirement benefits and to keep themselves 
healthy at a time in their life when it is most vulnerable, but 
you have seen the slip of pride, the will to live even in some 
of these people's stories.
    They have great self-esteem in the craft that they have 
perfected through 20, 30, 40 years, some of them. I know the 
stories. They don't so much fear the tariffs that we are going 
to defeat, and are in the midst of. Many of these are veterans 
of wars, the greatest generation that brought us here. You look 
into their eyes. We want to talk about Iraq and other things 
that we are doing. They don't have fear, those people. You know 
what they fear most is how our own countrymen can pass policies 
that take away their pride and their way of being independent 
where they don't have to rely on a handout instead of a hand 
up.
    That's the people I've met in central and southern 
Illinois. Over 5,000 jobs have gone over 30-some-odd steel 
companies taking bankruptcy, and four of those are in Illinois. 
Inexcusably, it could have been avoided. Illegal dumping: 
Citizens are asking how could we let corporate people keep 
involving illegal activity without having some caution or call 
their hand to duty.
    That is why we are here, I hope, in a bipartisan manner. We 
should be. Let me tell you one story before I forget, and then 
get out of here.
    The only fluor spar mine in all of the United States is in 
my little one county, Hardin County, district, 5,000 people in 
the whole county, 300-some-odd jobs left there. My predecessor, 
former Congressman Glen Pechard, when I was a State 
Representative, both represented that area. They left, went to 
China. We pleaded with them.
    Some people had 30-some-odd years, 6 months away form 
retirement benefits, their spouses in bed with devastating 
diseases, taking hundreds of thousands of dollars to try to pay 
the medical bills and the prescription drugs just to take away 
the pain. Can you stay a little longer or can we work out 
something through State and Federal resources to keep you here? 
They went to China.
    We don't use less fluor spar for medicinal and for 
industrial purposes. We use more. You know what they pay those 
workers over there, 68 cents an hour, and those people under 
the company of Ozark Mahoney that sold out to this big 
conglomerate overseas worked 30-some-odd years, were there 60-
75 years almost in Hardin County, is gone. And those people are 
on unemployment.
    That is what we are facing today, those kind of challenges. 
Unless we have the courage to step in and take up for our own, 
in God's name, where will we be tomorrow? Thank you.
    [The prepared statement of Hon. David Phelps follows:]
    Prepared Statement of Hon. David D. Phelps, a Representative in 
                  Congress from the State of Illinois
    I would like to thank the committee for giving the me the 
opportunity to speak in support of the Steel Industry Legacy Relief 
Act. I also would like to echo my colleagues remarks in support of this 
worthwhile legislation and thank Congressman Dingell and Visclosky for 
their dedication and hard work on this issue.
    The American steel industry and steelworkers are in the midst of 
the worst crisis in many years due to the continued illegal dumping 
into this country of foreign-made steel. Thousands of steelworkers have 
lost their jobs and countless more are in jeopardy. In my Congressional 
District in Central and Southern Illinois, the effects have been 
devastating.
    As a result of foreign dumped steel since 1998, 31 steel companies 
have filed for bankruptcy nationwide. Of these, four are located in 
Illinois, which has caused over 5,000 Illinois steelworkers to lose 
their jobs. I have seen firsthand the devastation this has brought to 
the area.
    I have visited steel mills and attended rally's where I had the 
opportunity to discuss the concerns of steelworkers and retirees.
    The survival of the steel industry and the rights of steelworkers 
is something I have been actively fighting for. I am pleased President 
Bush implemented a tariff on the flood of injurious steel imports, but 
if the steel industry is going to be saved then legacy costs for 
retiree health care must be dealt with. This will not only prevent a 
human tragedy of enormous scope from being perpetuated, but it will 
encourage the kind of rational and consolidation that will allow the 
steel industry to revitalize itself.
    I am a proud original cosponsor of the legislation we are talking 
about today. H.R. 4646, provides healthcare benefits for Steelworker 
retirees if a company fails or files for bankruptcy.
    This bill will provide health insurance for the retirees of steel, 
iron ore, and coke companies. These firms have either been driven out 
of business or severely threatened by the recent steel import crisis. 
Once enrolled in the program, retirees and their beneficiaries will 
receive major medical and prescription drug coverage. Medical coverage 
would be similar to Medicare benefits, and the prescription drug 
coverage would be similar to benefits included in the federal plan and 
the Blue Cross/Blue Shield Standard Plan.
    In addition to securing health insurance for retirees, the bill 
seeks to strengthen the American steel industry and the surviving steel 
companies. This removes the weight of ``legacy costs'' as a barrier to 
their merging, but does so in ways that encourage American firms to 
create the kinds of larger companies now operating in Europe and Asia.
    Lastly, this legislation seeks a preference for American steel 
companies. This is provided by a ``right of first refusal'' on the 
purchase of other American steel companies to other existing steel 
companies.
    By helping the industry survive, this legislation supports the 
Domestic steel industry which is vital for national defense. In is in 
our military and national security interest for the United States to 
have a strong steel industry for the future.
    Now is the time to stand up for steel and American steelworkers! 
This legislation provides real relief for steelworkers and the steel 
industry.I hope that this hearing will bring us one step closer helping 
the steel industry and its workers. Thank you again, for giving me the 
opportunity to speak on behalf of steelworkers in Illinois and across 
America.

    Mr. Shimkus. The gentleman's time is expired.
    I want to recognize Congressman Doyle.
    Mr. Doyle. Thank you, Mr. Chairman. Now Congressman Tim 
Holden, who is a co-sponsor of this legislation and has worked 
hard on this, wanted to speak today and was here briefly, but 
got called away on other business, and I ask unanimous consent 
that his remarks be made part of the record.
    Mr. Shimkus. Without objection, so ordered.
    [The prepared statement of Hon. Tim Holden follows:]
  Prepared Statement of Hon. Tim Holden, a Representative in Congress 
                     from the State of Pennsylvania
    Mr. Chairman, members of the Subcommittee, thank you for holding 
this important hearing today. I am pleased to join my colleagues on 
this panel to testify before you on the importance of resolving the 
legacy problem in the steel industry and to ensure that our nation's 
steelworkers are treated fairly.
    The steel industry has been the backbone of manufacturing in this 
nation since before the industrial revolution. It is an industry rich 
in history and deeply rooted with pride. Today, however, it is an 
industry in trouble. Many workers, retirees, and dependents are faced 
with the possibility of losing healthcare benefits and pensions.
    I applaud the President's decision earlier this year to implement 
temporary tariffs, which will give the industry some breathing room to 
restructure its operations to compete effectively in the global 
environment. Tariffs, however, are not enough.
    As a matter of fairness, we must help the working families in the 
industry who find themselves without jobs, healthcare and pensions. We 
need to address the legacy cost issue.
    Here in the United States, we operate under an employee-based 
healthcare system. That means when companies go bankrupt or liquidate, 
workers are at risk of losing their healthcare benefits. To date, I 
believe 35 steel companies nationwide have filed for bankruptcy. Seven 
of those companies are located in my home State of Pennsylvania. Ohio, 
West Virginia and Indiana, along with Pennsylvania, are some of the 
hardest hit states. Our steelworkers went from collecting paychecks to 
unemployment and many of our rural communities have never recovered. My 
state has lost approximately 10, 000 jobs since 1998 and there are 
well-over 100,000 retirees and dependents whose healthcare and pensions 
precariously hang in the balance.
    While this hearing is not about unfair trade practices, I think it 
is important to note that many of these retired steel workers were 
forced into retirement when industry restructuring driven by unfair 
trade caused the elimination of their jobs.
    Our lack of enforcement of trade laws is a big reason we find 
ourselves in the current situation. We allowed for this legacy crisis 
to develop and we must act responsibly to fix it.
    I am proud to be an original cosponsor of the Steel Industry Legacy 
Relief Act because it provides just compensation for the unfair trade 
practices that we failed to stop.
    The bill's primary focus, as you know Mr. Chairman, is to secure 
healthcare coverage for the several hundred thousand retirees who 
either already have, or soon will lose their healthcare and other 
retirement benefits. Once their former employer companies have enrolled 
in the program, retirees and their dependents will receive medical and 
prescription drug coverage.
    Another important goal of the bill is to strengthen the remaining 
steel industry by removing the legacy cost-burden while encouraging 
American firms to create the kinds of larger companies now operating in 
Europe and Asia.
    Action is needed right now, Mr. Chairman, to preserve pension and 
health benefits to steel retirees. Unfair trade should not be allowed 
to discriminate against an entire generation of Americans who 
contributed greatly to this country's success.
    Once again, I applaud this Subcommittee for holding this hearing 
today and thank you for the opportunity to appear before on this 
critical issue for Pennsylvania and for the entire nation.

    Mr. Doyle. Thank you, Mr. Chairman.
    Mr. Shimkus. I am at a loss. Congressman Harman just showed 
up. She is a member of the subcommittee, and I have to 
recognize her for 3 minutes.
    Ms. Harman. I have less than that, Mr. Chairman.
    Mr. Shimkus. Great.
    Ms. Harman. I just want to make a 30 second comment, which 
is that I understand quite well the legacy costs associated 
with industry downturns, closures, and consolidations. The 
aerospace industry which I represent in southern California has 
experienced similar painful convulsions over the last decade.
    Indeed, it is interesting to note that both Boeing and 
Lockheed-Martin are among the top 25 companies with the largest 
legacy costs. I know that the solutions are not easy, and I 
compliment our ranking member, Mr. Dingell, for putting forward 
a proposal for dealing with steel's legacy costs.
    I think this hearing is critical to help answer important 
policy questions underlying the bill: the overall cost to 
taxpayers, the competitive advantages some steel companies 
would garner as a result of this proposal and, at its heart, 
the type and quality of health and retirement benefits and the 
recognition we should give to Americans who have spent their 
entire lives in an industry like the steel industry.
    I just want to commend my friend, Mr. Phelps, for his 
passion and to thank you, Mr. Chairman, for holding the 
hearing. I yield back.
    Mr. Shimkus. The gentlewoman yields back. I ask unanimous 
consent that Congressman LaHood, who is a co-sponsor of the 
legislation, statement to be submitted to the record.
    [The prepared statement of Hon. Ray LaHood follows:]
  Prepared Statement of Hon. Ray LaHood, a Representative in Congress 
                       from the State of Illinois
    Thank you for the opportunity to present this testimony regarding 
the Steel Industry Legacy Relief Act of 2002 to the Subcommittee. This 
legislation will protect the retirement of steelworkers who have 
devoted their entire careers to produce the steel that ensures our 
national defense and security. Over 125,000 steelworker retirees have 
already lost their health care benefits, and thousands more are at 
risk. Over 85,000 of these lost their benefits in March when LTV steel 
closed its doors. I represent former employees of the LTV plant in 
Hennepin, Illinois, one of the most modern and efficient steel plants 
in the world. Retired steelworkers in central Illinois have lost their 
health care coverage and suffered reduced pensions as well, which 
severely limits their ability to pay for health care coverage on their 
own.
    This bill will set up a trust fund to provide health coverage and a 
prescription drug benefit to steel retirees whose former employers have 
permanently closed or been acquired by another company. It will be 
funded by a surcharge on steel shipped by acquired companies, assets of 
the acquired companies, and tariffs imposed by President Bush on 
imported steel. Once enrolled in the program, retirees and their 
beneficiaries will receive major medical and prescription drug coverage 
similar to what is offered to federal employees.
    The cost of health care and insurance is rising at an alarming rate 
each year. Many retirees find themselves unable to afford the 
prescription drugs they need, and that often will save their lives. 
Steelworker retirees are often receiving reduced pensions, which can 
make the need to purchase health insurance even more difficult, 
particularly when it is an unplanned expense. Health care is among the 
most important issues before Congress, and I believe we can play a part 
in making sure that these retirees receive the benefits that were 
promised to them.
    A second, but extremely important, benefit of this legislation is 
that it will remove the burden of costly retiree medical benefits that 
often discourage stronger steel companies from buying those in 
bankruptcy. Acquisitions and mergers are necessary to transform 
American steel companies from relatively small producers into a 
consolidated market force that can compete with the large corporations 
currently operating in Europe and Asia. Without this transformation of 
our domestic industry thousands more steelworker jobs are at risk.
    It is in our military and national security interest for the United 
States to have a strong steel industry for years to come, and to 
protect our workers who are suffering through no fault of their own. We 
need to support this vital industry and its retirees. I urge your 
support of H.R. 4646, the Steel Industry Legacy Relief Act of 2002.

    Mr. Shimkus. Now I recognize my friend and colleague from 
the State of Ohio, Mr. Kucinich, for 3 minutes.
    Mr. Kucinich. Thank you very much, Mr. Chairman. I ask 
unanimous consent to have my statement put in the record.
    Mr. Shimkus. Without objection, so ordered.
    Mr. Kucinich. I am very proud of my colleagues who have 
worked on this issue over the last few years, and I support 
this legislation and urge its passage.
    People who work their entire lives with the promise of 
health care benefits in their golden years should have those 
benefits protected by our government, because when you get down 
to it, they weren't working just for themselves. They were 
working for their families. They were working for their 
company, and they were working for America. They were working 
to protect this Nation by keeping intact our industrial base 
with their labor.
    Now think about this. Day in and day out, working in these 
fiery furnaces 20, 30, 40 years. It's tough, back breaking work 
that most of us sitting at these tables, healthy as we may be, 
would find it very difficult to do.
    Now the travails of the constituents of my good friends 
from Florida and Georgia and Nebraska who spoke earlier are 
well taken, and they should be of concern to us. The cause of 
Florida and Georgia and Nebraska should be the concerns of all 
of us, just as the cause of our steel communities should be the 
concerns of our friends from Georgia, Nebraska, and Florida. We 
cannot afford to be pitted against each other, because we could 
lose it all in this country.
    It was said years ago about a house divided. Well, a house 
divided against itself cannot stand, whether such division is 
over civil rights or economic rights. The issue of legacy 
costs, which we are here to address and which we should 
address, really reflects a need for an American economic policy 
and a new American manufacturing policy to recreate our 
strategic industrial base of steel, automotive and aerospace, 
to have a strategic manufacturing policy, to have a strategic 
policy in textiles, in agriculture and other areas, to have a 
trade policy which understands how our economic position in 
this country is being eroded by NAFTA, by GATT, by the World 
Trade Organization, by the International Monetary Fund.
    You know, I have sat in hearing after hearing, Mr. 
Chairman, and I have heard people come and testify and say, 
well, we have overcapacity in this country. Well, it wasn't our 
steelworkers who committed that overcapacity who created it. It 
was the World Bank. It was the International Monetary Fund who 
created circumstances that helped to shift jobs out of this 
country. And then they pitted our workers against workers in 
other countries.
    This is an opportunity for this Congress to begin to 
correct some wrongs, some basic defects in the way this country 
has proceeded over the last few years. We need to begin anew. 
This is the chance to begin anew. Give the steelworkers their 
legacy costs. Protect these health care benefits, and let's 
make a new beginning here toward a new America where we can 
make sure that everyone who labors by the sweat of their brow 
will in their senior years be affirmed and made whole. Thank 
you.
    [The prepared statement of Hon. Dennis Kucinich follows:]
  Prepared Statement of Hon. Dennis J. Kucinich, a Representative in 
                    Congress from the State of Ohio
    Mr. Chairman, thank you for the opportunity to testify today.
    The bill we have introduced, the Dingell-Lahood Steel Legacy Relief 
Act, will ensure that all retirees of all troubled steel companies--
companies that have closed, companies that are bankrupt, companies that 
are being acquired--will have for themselves and their families health 
benefits equivalent to what's provided by Medicare, and a prescription 
drug benefit similar to the Blue Cross/Blue Shield program.
    To do this, this bipartisan bill sets up a trust fund in the 
Treasury Department that taps steel import duty receipts, the assets of 
government-assumed retiree health care plans, and a portion of the 
profits made by healthy steel companies that benefit from this program.
    The Act ensures that the United States will not stand by and watch 
while thousands and thousands of workers who helped build this country 
are left unable to take care of themselves and their families. It is a 
critical step in our ongoing efforts to help the steel industry and 
steel workers, and in many ways it is a mark of how far we have come in 
that effort.
    We pushed a long time for the Administration to initiate a Section 
201 steel investigation, and finally last year we got one.
    We pushed the International Trade Commission to recognize the 
devastating effect of steel imports through a finding of injury, and we 
got it.
    We gathered with 25,000 steelworkers on the ellipse to make sure 
the President imposed an effective remedy, an effective tariff, to help 
stem the tide of imports. He did.
    Many of us have spent countless hours trying to save steel 
companies in our districts that are on the brink. In my hometown of 
Cleveland, our entire community--steelworkers, local government, state 
government, businesses, churches, citizens--coalesced to keep LTV from 
shutting the doors on our steel mills forever. And we won--the mills 
remain, and a new owner will keep them running.
    And now we are all stepping forward--the Steelworkers, steel 
companies, Members of Congress--to ensure that men and women who have 
given 20, 30, even 40 years of their lives to the manufacture of steel 
are not left behind.
    Now it is the Committee on Energy and Commerce's turn to finish the 
job. Please pass the Steel Legacy Act out of this committee and 
encourage leadership to bring it to the floor so the steelworkers can 
enjoy a healthy retirement.
    Thank you.

    Mr. Shimkus. I thank my colleague from Ohio. The Chair 
wants to announce that there are a series of three votes on the 
floor. It is probably good timing, which means the politicians 
are done speaking.
    We will recess for approximately 30 minutes for us to go 
over and have our votes, and then we will have testimony from 
our invited guests.
    With that, the Chair now recesses the subcommittee.
    [Brief recess.]
    Mr. Stearns. The subcommittee will reconvene.
    Additional statements submitted for the record follow:]
 Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee 
                         on Energy and Commerce
    Thank you Mr. Chairman, I commend you for holding this hearing and 
I commend the Ranking Member, Mr. Dingell, for his leadership on this 
issue. The steel industry has been adversely affected, by among other 
things, unfair trade practices. The resulting financial distress 
creates problems for both employees and, in some cases retirees. Under 
H.R. 4646, the ``Steel Industry Legacy Relief Act of 2002,'' the 
federal government would create and support a new program of health 
insurance for the retirees of steel, iron ore, and coal companies. 
These firms have either been driven out of business or severely 
threatened by the recent steel import crisis. Once enrolled in the 
program, retirees and their beneficiaries would receive major medical 
and prescription drug coverage under a new government program.
    I have a number of questions about the proposal that are worth 
examining today. Most importantly, what are the circumstances affecting 
the steel industry that justify the precedent for a public health 
insurance program for steel industry retirees only? There are many 
distressed industries in the country, including the mining and airline 
industries. Why is the steel industry a special case?
    Second, why is Medicare an insufficient safety net for retirees who 
are 65 or older? I understand that the companies' health insurance 
benefit package may have been quite rich. However, on what basis should 
we provide a prescription drug benefit for one class of retirees and 
not for other retirees? We just had that debate at the Committee 
several months ago in the context of our Medicare markup.
    Finally, what are the budgetary implications of such a program? Our 
budget numbers are changing rapidly--and not for the better. How will 
this bill affect other health care debates?
    I hope this hearing begins to address some of these issues. I once 
again commend Mr. Dingell for his great passion and commitment to this 
issue and look forward to hearing from the witnesses.
                                 ______
                                 
 Prepared Statement of Hon. Bart Stupak, a Representative in Congress 
                       from the State of Michigan
    I would like to thank the Subcommittee for holding this hearing 
today on this issue that is so critical to our steel industry. Back in 
May I stood with my colleagues from the Steel Caucus and the sponsors 
of this legislation, Mr. Dingell, Mr. Visclosky and Mr. LaHood, as this 
bill was introduced, and we called for speedy action on this issue. 
This hearing is an important step, and I hope that we can advance H.R. 
4646 as quickly as possible. As a member of the full Committee I pledge 
to do whatever I can to assist in this effort.
    Relief of legacy costs and a solution to the health care crisis 
faced by steelworker retirees are desperately needed. Between January 
1998 and April 2002, nearly 50,000 steelworkers lost jobs, a 20% 
decline in employment in this sector. Tens of thousands of retirees who 
put in years of hard honest work have come to find that their health 
care benefits are not secure, or have been totally wiped out.
    We cannot let this continue a moment longer. We must step in to 
help these workers and their families who have dedicated their lives to 
the backbone of American industry, American steel and this bill will do 
that.
    I am also pleased that this bill includes the iron ore industry and 
its steelworkers in the solution. I represent northern Michigan, which 
is home to 2 iron ore mines, the Empire and the Tilden, that have 
suffered greatly because of the crisis to the steel industry that they 
serve. I fight hard for the steel industry with the rest of my 
colleagues on the Steel Caucus, but I also always make sure that the 
iron ore industry has a fighter as well, because a domestic iron ore 
industry is just as critical to our national security and national 
defense as a healthy steel industry.
    I worked to insert a technical fix into the bill so that the $5 
surcharge that will be on each ton of steel by a qualifying steel 
company will not apply to iron ore companies. This is because while 
steel may sell for $400 a ton, so that a $5 surcharge is eminently 
reasonable, iron ore only sells for around $30 a ton. A $5 surcharge 
would be a heavy and disproportionate burden on an iron ore company 
that may come under this system. Therefore, H.R. 4646 contains a 
separate, proportional 30 cent rate for iron ore, so that the iron ore 
industry can also be ensured relief under this bill, if it is needed.
    I also have worked very hard to ensure our steelworkers get a fair 
shake in their health care costs. In the recent Medicare markup, I 
offered an amendment--voted against by all Republicans--that would have 
made steelworkers eligible for the same benefits that retired coal 
workers receive under the Coal Act. These benefits include prescription 
drug costs capped at $50 per year per family out-of-pocket costs. My 
amendment would have also made sure that our retirees are not forced 
into a drug benefits system they do not want.
    H.R. 4646 is a comprehensive bill that will help all segments of 
the steel industry as it fights back against the unfair trade that 
brought on the current crisis. I am pleased to be an original cosponsor 
of the legislation, and look forward to a mark-up in the near future.
    Thank you.
                                 ______
                                 
   Prepared Statement of Hon. Jerry F. Costello, a Representative in 
                  Congress from the State of Illinois
    Mr. Chairman and Mr. Ranking Member, thank you for the opportunity 
to testify today at this hearing on H.R. 4646, the Steel Industry 
Legacy Relief Act of 2002.
    Almost 125,000 retired steel workers have lost their healthcare 
benefits in the last five years, as the United States has become the 
dumping ground for the world's excess steel products. The dumped 
foreign steel is sold at prices below the cost of production, and is a 
significant factor in the current near-crisis status of the American 
steel industry. Since 1997, over 31 steel companies have filed for 
bankruptcy, with over 33,000 steel workers having lost their jobs. The 
impact of these steel companies closing can be felt in communities 
across the nation, including communities in my Congressional District, 
where one company has closed because of bankruptcy and one other is 
operating while reorganizing in bankruptcy.
    H.R. 4646 will help ease some of the hardships faced by creating 
and supporting a health insurance program for steel retirees. Under the 
legislation, qualified retirees and their dependents would be eligible 
for catastrophic health insurance as well as a prescription drug 
benefit. In addition to providing basic health insurance for these 
retirees--who have lost there jobs through no fault of their own but 
rather unfair trade practices--the legislation will also help the steel 
industry.
    The legislation strengthens the American steel industry by 
addressing legacy costs. These legacy costs are often seen as a barrier 
to the consolidation of the steel industry, a step that is recognized 
as a necessity for a strong American steel industry in the future.
    Mr. Chairman, this is a good bill that will help both retirees and 
the steel industry. We should be holding a vote on this legislation, 
not a hearing. The time for a hearing was months ago. I urge the 
subcommittee to pass this legislation, move it through the full 
committee, and get it before the full House of Representatives, so we 
can get it over to the Senate. Time is of the essence--there are people 
in great need of help. It is imperative that Congress pass this 
legislation this year.

    Mr. Stearns. I thought we would start with our witnesses, 
if they would come forward. Members will be coming in, and you 
have been very patient during our three votes, and we want to 
continue to have your open testimony and, at the same time, the 
members will be able to ask questions after each of you.
    So I welcome each of you to come before us: Mr. Bill 
Klinefelter, Assistant to the President, United Steelworkers of 
America; Mr. Thomas Broderick, Manager, Total Health Programs, 
Bethlehem Steel; and Mr. James Collins, Senior Advisor and 
Former President, Steel Manufacturers Association.
    We give each of you 5 minutes for your opening statement. 
We appreciate your patience, and welcome. Mr. Klinefelter, we 
will start with you.

  STATEMENTS OF WILLIAM J. KLINEFELTER, UNITED STEELWORKERS OF 
  AMERICA; THOMAS J. BRODERICK, BETHLEHEM STEEL; AND JAMES F. 
            COLLINS, STEEL MANUFACTURERS ASSOCIATION

    Mr. Klinefelter. Good morning, Mr. Chairman. I want to 
thank you and the majority for holding these hearings. I think 
that they are very important to get on the record what is going 
on in the basic steel industry and what needs to be done.
    I would like my statement to be submitted to the record, 
and I will summarize as much as I possibly can in this 
statement.
    Mr. Stearns. By unanimous consent, so ordered.
    Mr. Klinefelter. I think it is important to realize that 
there is a story that stretches out in basic steel that has a 
beginning, a middle, and where we are today. The beginning is 
back in the late 1970's, early 1980's.
    I remember testifying before the Energy and Commerce 
Committee back then when we were told, and experts were telling 
us, that the problem with the steel industry in the United 
States and why it couldn't compete with the Japanese and 
couldn't compete with the Europeans was because we couldn't 
make Japanese quality steel and that this was a problem of bad 
relationships with the union. This was a problem with bad 
management. This was a problem of lack of investment. This was 
a whole range of problems in the domestic steel industry that, 
if they were corrected, would solve the problem of the basic 
steel industry.
    Well, the story since the 1980's is a story of success in 
the basic steel industry in the United States. It is the story 
of the investment of $50 billion into renewing that industry 
and to making it more productive. It is the story of closer 
labor relations between the union and the companies to increase 
the productivity and efficiency.
    Back in the bad old days, as they were called, they used to 
take 10 manhours per ton to make a ton of steel. Now we are 
down to around 2 manhours per ton. I would say that a 
productivity increase of 175 percent is one tremendous landmark 
for any industry in the United States to achieve.
    So after the investments, after the relationship 
improvement with the steelworkers union, what is the problem? 
Well, the problem is that for 20 years we have had a failed 
trade policy in relationship to steel. What happens is that we 
have a round, a surge of imports coming into the United States, 
and these imports weaken the industry, because prices go down, 
profits go down. The industry is weakened.
    Then we file a whole bunch of cases under the anti-dumping 
laws or the countervailing duty laws, and these cases 
temporarily plug that hole, but they only do it for one product 
line. They only do it against a number of countries. They are 
not comprehensive. They don't deal with the problem--the trade 
problem in a comprehensive way.
    So what happens is you see the production in that steel 
product move from this country to another country, and the 
problem of imports, cheap imports, into the United States 
undermines the prices of steel in the United States continues, 
and it has continued off and on, unabated, for 20 years--for 20 
years.
    Now we come to why we are here today. Following that line 
of progression, we come to 1997, and we all know what happened 
in 1997. There was the Asian collapse of the monetary markets, 
the Asian currencies, and there was failed IMF policies, 
brutally failed IMF policies which guided those countries, such 
as Korea and Thailand and Indonesia, to go to an export 
oriented price.
    Now Korea, as we all know, has 40 million tons of capacity 
of steel. If Asia is no longer bringing the steel in, if growth 
is not there, this steel needs to go someplace. So Korean steel 
starts coming to the United States. Japanese steel starts 
coming to the United States, Thai steel, Indonesian steel. And 
because there was no place to put the Russian steel--and let's 
face it, the Russians have this gigantic steel industry which 
they probably--they don't need at the moment anyway, because 
they are not a consumer society, and they no longer build tanks 
to come into Europe--they have tremendous overcapacity as well.
    So in that crisis, we began to see a tremendous surge of 
steel into the United States, and by August 1998, I believe it 
was, our market was penetrated to the tune of 40 percent, a 40 
percent penetration. If that had been allowed to continue, the 
basic steel industry as we know it in the United States would 
no longer exist.
    Now what happened was we filed cases, and the cases gave us 
some temporary relief. But as I've said before, the shift began 
in 1999, and we were back with the same problem that we had, 
but we are back with a far weaker industry. This industry gets 
weaker each time this flood of imports continues.
    What happened was is what we have today. We have these 35 
companies in bankruptcy. We have the fact that these other 
companies are teetering on the brink. Well, when we got 
together and we said how are we going to solve this problem, we 
said there were three things that needed to be done, and I'll 
say this very quickly, three things. Then I'll answer 
questions.
    Three things that needed to be done: No. 1, we had to 
control imports. That is the 201. The 201 needs to stay in 
place. It needs to stay in place for the duration, and we can't 
have anymore of these exemptions given to our trading partners.
    Number 2, we had to deal with the legacy cost issue, which 
was retiree health care. Number 3, the union and management 
would get together, negotiate, and try to make the industry 
more efficient.
    The basis of all this was, and the consensus of all this 
was, we need a consolidation. Unless we have all three legs of 
the stool--unless we have all three legs of the stool, it falls 
over. It will not happen. We will have destroyed the basic 
steel industry in this country, and that has to be a national 
security consideration.
    Thank you.
    [The prepared statement of William J. Klinefelter follows:]
Prepared Statement of William J. Klinefelter, Legislative and Political 
                Director, United Steelworkers of America
    Mr. Chairman, Ranking Member Doyle, and distinguished members of 
the Subcommittee, thank you for holding this hearing today to examine 
H.R. 4646, the Steel Industry Legacy Relief Act of 2002. This 
legislation is of vital interest and importance to several hundred 
thousand steelworkers and retired steelworkers across the nation who 
have either already lost their health insurance benefits due to the 
bankruptcy of their employers or whose health insurance benefits are 
jeopardized because of the crisis in the steel industry. We appreciate 
the opportunity to appear before you today to explain the urgent need 
for this legislation.
    The American steel industry has been devastated by a flood of 
foreign steel, much of which has been illegally ``dumped'' in the 
United States' market over the past five years. Steel imports rose from 
31 million tons or 25 percent of domestic consumption in 1997 to 41 
million tons in 1998. Steel imports captured nearly 40 percent of the 
market. As a consequence of the flood of foreign steel into the U.S. 
market, domestic steel prices collapsed to record low levels. The price 
of hot-rolled steel, the largest volume product, fell from an average 
price of $340 per ton in 1997 to $260 per ton in December 1998, and to 
$210 per ton in December 2001. Since 1998, 35 companies have declared 
bankruptcy and 17 of those firms have ceased production. Some 50,600 
steelworkers have lost their jobs. More than 100,000 steelworker 
retirees have lost their health care benefits. Another 500,000 
retirees' health care benefits are at risk with the possibility of 
further liquidations in the steel industry.
    Following one of the most intensive investigations in its history, 
the U.S. International Trade Commission (ITC), an independent federal 
agency, found that imports had ``seriously damaged'' domestic steel 
producers. The Commission recommended that tariffs and quotas be 
applied to 16 of 33 steel import product categories. In March, 
President Bush ordered tariffs imposed on 14 of 33 product categories 
starting as high as 30 percent this year, but declining to 24 percent 
next year and 18 percent in the third year with regular tariffs 
resuming in the fourth year. Several countries, including Canada, 
Mexico, and nearly all developing countries, were completely exempted 
by the President from the Section 201 tariffs.
    Our steelworkers and the steel industry applauded the President's 
decision last March to impose Section 201 tariffs. Unfortunately, 
however, subsequent decisions by the Bush Administration to grant 
hundreds of exemptions from the Section 201 tariffs have had the effect 
of diluting the intended benefit of the original decision. While some 
exemptions were warranted based on the fact that certain products were 
not produced domestically, too many of the exemptions which have been 
granted by the Administration have been approved for no good reason. 
ITC Commissioner Hilman estimated that before the exemptions the 
Section 201 tariffs would apply to only about 29 percent of all steel 
imports. Given the fact that the Administration has already exempted 
approximately 25 percent of the tariffs which it imposed last March, 
the tariffs now apply to even less than 29 percent of imports.
    At the end of 1999, American steel's retiree health care benefit 
obligation totaled an estimated $13 billion. Health care benefits for 
600,000 retired steelworkers, surviving spouses, and dependents cost 
domestic steel producers an estimated $965 million or $9 per ton of 
steel shipped. The average steel company has approximately three 
retirees for every active employee--nearly triple the ratio for most 
other basic manufacturing companies. Several steel companies have 
retiree health care costs that are substantially higher than the 
industry average. Our active members and retirees are concentrated most 
heavily in Pennsylvania, Ohio, Indiana, Maryland, Illinois, West 
Virginia, Minnesota, and Michigan, but they live all across the nation.
    In the U.S. up to now, we have made a public policy choice in favor 
of employment-based health insurance coverage rather than guaranteed 
national health insurance. This means that when an employer goes 
bankrupt or liquidates its operations, workers and retirees are at risk 
of losing their health insurance and access to health care services. 
Regrettably, tens of thousands of steelworkers and retirees from LTV, 
Acme, Laclede, Gulf States, CSC, Northwestern Steel and Wire, and 
numerous other steel companies are now facing this terrible prospect.
    Who is being hurt in this crisis?
    People like Gertrude Misterka of Baltimore, Maryland. Gertrude's 
late husband, Charles, worked for Bethlehem Steel at Sparrows Point for 
30 years. Through his Steelworkers union contract, he was able to earn 
a pension and health care benefits. He died in 1996. His wife is a 
diabetic and insulin-dependent. She also suffers from hypertension and 
asthma and is on numerous medications. Gertrude is 65 years old now and 
is eligible for Medicare, which pays 80 percent for her diabetic 
monitoring machine. But Medicare pays nothing for her outpatient 
prescription drugs, which are increasing in cost while her income from 
her late husband's pension and Social Security is fixed. Over 14 
months, Gertrude's medications cost her $936.53 out of pocket. However, 
if she did not have health insurance, these same medications would have 
cost her $6,716.16 (based on information she received from her 
pharmacist).
    Steelworker Bob Rankin worked at the former LTV Steel company in 
Cleveland, Ohio for 34 years before his plant shutdown. He and his wife 
have a 10-year old son born with a brain injury. When Bob's son was two 
years old, Bob was told that his son probably would not be able to 
speak or communicate with other people. Fortunately, Bob and his wife 
discovered a hospital in Philadelphia, which has provided his son with 
intensive therapy. Bob's health insurance paid for 85 to 90 percent of 
the costs associated with his son's care. His son has progressed to the 
point where he is now enrolled in a regular school program. Without 
Bob's health insurance through LTV Steel, this never would have been 
possible.
    The fact is that today there are several thousand steelworkers, 
retirees, spouses, and dependents--your constituents--who have lost 
their union-negotiated health care benefits through no fault of their 
own. Many have resorted to stretching out their prescriptions by 
cutting their pills in half or simply skipping a day's medication. Some 
of these people are dependent upon heart medication, cancer medication, 
diabetes medication, or other treatments in order to live.
    One of the great myths about the health care benefits of 
steelworkers and our retirees is that they have so-called ``Cadillac'' 
benefits and that they pay little or nothing for their health care. 
This is simply not true. Benefits to steel industry workers and 
retirees are equivalent and, in some cases, more modest, than benefits 
provided to retirees from other basic manufacturing companies such as 
Alcoa, Boeing, and General Motors. These plans typically include cost 
containment provisions, such as deductibles, co-payments, pre-
certification requirements, coordination with Medicare, and incentives 
to utilize managed care. Most of our retirees pay monthly premiums from 
25 to 40 percent of their retiree health care benefits, plus several 
hundred dollars a year in deductibles and co-payments. Retiree premiums 
for major medical coverage vary by employer due to differences in 
demographics, regional health care costs, utilization, and design of 
the plan. The United Steelworkers of America estimates that the average 
major medical premium during 2001 was approximately $200 per month for 
a non-Medicare eligible couple and $150 a month for a Medicare-eligible 
couple.
    American steel's international competitors do not bear a similar 
burden. In one form or another, foreign steel producers' retiree health 
care costs are offset by government subsidies. In Japan, the government 
provides government-backed insurance programs. Government subsidies 
cover some administrative costs and contributions to Japan's health 
care programs for the elderly. In the United Kingdom, the UK's National 
Health Service is 85 to 95 percent funded from general taxation with 
the remainder coming from employer and employee contributions. In 
Germany, health care is financed through a combination of payroll 
taxes, local, state, and federal taxes, co-payments, and out-of-pocket 
expenses, along with private insurance. Insurance funds with heavy 
loads of retired members receive government subsidies. In Russia, de 
facto government subsidies exist. While Russian steel companies 
theoretically pay for workers' health care, the national and local 
governments allow companies not to pay their bills--including taxes and 
even wages. At the end of 1998, Russian steel companies owed an 
estimated $836 million in taxes. According to the Commerce Department's 
report on the steel industry, the Russian governments' systematic 
failure to force large enterprises to pay these taxes and wages amounts 
to a massive subsidy.
    The U.S. is the only country in the industrial world in which the 
health care benefits of retirees are not assumed by government to 
facilitate consolidation in one form or another. It is now very clear 
that American steelworker retirees stand to be hit twice by the 
collapse of the steel industry since a majority of them were forced 
into retirement (350,000--many prematurely) during the massive 
restructuring of the steel industry during the late 1970s and the 
1980s. First, they lost their jobs before they were ready to retire, 
and now they may lose their health care and a significant portion of 
their pensions now that they are ready to retire. Our own government's 
inadequate enforcement of our trade laws is the principal reason that 
steelworkers' and steelworker retirees' health care benefits are now at 
risk.
    Because our government has allowed this unlevel and unfair trade 
environment to develop and consume our industry, the government now has 
a responsibility to our steelworkers and retirees and to the steel 
industry to help craft a solution to this problem.
    Why do we need H.R. 4646?
    Because retirees under age 65 and older active employees who have 
been displaced by plant shutdowns are not yet covered by Medicare. They 
cannot purchase COBRA continuation coverage because companies are not 
obligated to provide COBRA continuation coverage when they terminate 
health care coverage for active employees. Steel companies which have 
filed for Chapter 7 bankruptcy (i.e., liquidation) have already moved 
to terminate health care plans for their workers and retirees. They 
cannot afford COBRA premiums even when such coverage is available. They 
cannot afford commercially-available private health insurance. Many 
cannot meet insurability requirements (and may not have continuous 
coverage under HIPAA). Many have difficulty in finding new jobs that 
pay similar wages or benefits.
    One bright spot in an otherwise gloomy picture is that the 
recently-passed Trade Adjustment Assistance (TAA) Reauthorization Act, 
which was included in the fast track trade authority bill, includes a 
provision which makes some steel industry retirees eligible for a 65 
percent tax credit for the purchase of health care. The new provision 
applies to persons between the ages of 55 and 65 who are not yet 
eligible for Medicare.
    So why do we still need H.R. 4646?
    Because Medicare has significant gaps in its coverage. Medicare 
also has significant deductibles and co-payments. As of today, there is 
no coverage for expensive outpatient prescription drugs. Also, health 
care providers often do not accept Medicare reimbursement rates as full 
payment, at which point they go after the retiree for full payment. 
Medicare Supplemental Insurance (``Medigap'') is available, but it is 
costly and has limited prescription drug coverage. The most 
comprehensive of the Medigap supplements (Plan J) covers only 50 
percent of prescription drug costs and limits drug benefits to $3,000 
per year. The average steelworker retiree receives a monthly pension 
benefit of less than $600 to $700 per month. Most surviving spouses 
receive monthly benefits under $200 per month. Finally, HMOs (or as 
they are sometimes referred to ``Medicare+Choice'') are available only 
in limited areas of the nation.
    Under H.R. 4646, the federal government would create and support a 
program of health insurance for the retirees of steel, iron ore, and 
coke companies. Once enrolled in the program, retirees and their 
beneficiaries will receive major medical and prescription drug 
coverage. The primary aim of this bill is, of course, to secure 
continued health care coverage for several hundred thousand steel 
industry retirees who have or will soon lose all retiree benefits. But 
secondly, the bill aims to strengthen the steel industry by removing 
the weight of health care ``legacy costs'' which are an impediment to 
the consolidation of the steel industry.
    H.R. 4646 would be financed from the three years of tariffs on 
steel imports announced earlier this year by the President in the 
Section 201 proceeding. Additionally, companies with VEBA (Voluntary 
Employee Benefit Association) assets that wish to participate would be 
required to transfer VEBA assets into the trust fund. A $5 per ton of 
products shipped surcharge ensures that the surviving companies 
standing to benefit from legacy cost relief also play a part in solving 
this problem. Finally, the general treasury would provide additional 
sums which might be necessary for the administration of this program.
    The Steel Industry Legacy Relief Act of 2002 rests on two 
fundamental assumptions: that a trade crisis should not be allowed to 
completely ruin the retirement of an entire generation of steelworkers; 
and that it is in our national security interest for the United States 
to have a strong steel industry for years to come.
    In announcing his decision to provide relief under Section 201 to 
the steel industry, the President deferred going on further to address 
the urgent issue of steel industry legacy costs. The Administration has 
made it clear that it believes this is a matter which must be 
determined by Congress. That is why the United Steelworkers of America 
is working with our friends in Congress to pass this much-needed 
legislation. We applaud the authors of the bill, Representatives 
Dingell and LaHood, and the 175 members of the House who are currently 
cosponsoring this legislation. We will work relentlessly with both the 
House and Senate until this problem is solved and until our steel 
industry retirees receive the health care coverage which they deserve.
    Thank you.

    Mr. Stearns. Thank you.
    Mr. Broderick.

                STATEMENT OF THOMAS J. BRODERICK

    Mr. Broderick. Thank you, Mr. Chairman, and members of the 
subcommittee. I am pleased to have the opportunity to testify 
in support of the Steel Industry Relief Act of 2002.
    The legislative proposal provided in H.R. 4646 will go a 
long way in providing a comprehensive solution to the steel 
industry's health care legacy problem. The domestic steel 
industry is suffering under devastating economic conditions. 
These conditions are a direct result of severe injury caused by 
an extraordinary volume of disruptive and unfairly traded 
imports that have inundated our shores since the 1970's.
    The surge of these imports that began in 1997 has forced 
about 35 domestic steel companies, including Bethlehem, into 
bankruptcy. In response to overwhelming evidence of the injury 
done to the domestic steel industry by imported steel, the ITC 
recommended, and in March President Bush implemented, safeguard 
tariffs on most flat carbon steel products.
    The effective implementation and enforcement of the 
President's safeguard tariffs is essential to the recovery of 
the domestic steel industry, but this by itself is not enough. 
Equally necessary is an adequate Federal Government assistance 
in solving the legacy problem.
    It is recognized that the steel industry must consolidate 
and rationalize facilities in order to improve its 
competitiveness and regain its global leadership position. Such 
action would not be new for Bethlehem or indeed the domestic 
industry as a whole.
    Unfortunately, one of the major and unavoidable 
consequences of our efforts--the efforts of such companies as 
Bethlehem, is the reduction in the number of employees that are 
supporting our retirees. To date the consolidation and 
rationalization have reduced the number of Bethlehem employees 
from almost 90,000 people in 1980 to approximately 13,000 
today.
    Currently Bethlehem provides health care coverage for about 
125,000 people, including about 95,000 retiree beneficiaries. 
That means, for each active employee, Bethlehem provides health 
care coverage to more than seven retirees. By comparison, there 
are currently only--there are three wage earners for each 
Medicare beneficiary. In other words, Bethlehem's situation is 
20 times worse than that of Medicare.
    In 2001, Bethlehem's total costs for health care and other 
insurance amounted to $300 million. We expect this expense to 
grow significantly as a result of prescription drug cost 
increases, as well as general health care cost inflation. The 
net present value of Bethlehem's legacy benefits, excluding 
pensions, is about $3 billion, none of which is funded.
    Another aspect of the legacy problem is pension 
obligations, which is currently underfunded by about $2 
billion. Liabilities such as these constitute a major barrier 
to the necessary consolidation within the industry.
    Why should the government feel any responsibility to 
intervene on behalf of integrated producers, rather than simply 
allow market forces to work their will? In summary, there are 
three important reasons for government action.
    First, foreign governments and foreign companies, not 
market forces, are directly responsible for much of today's 
problem. If we had the same level of government support for 
retirees as in other countries, we would compete very well 
indeed.
    Second, the U.S. Government has played a major role in 
creating the current situation. Pursuing our Nation's foreign 
policy interests, our government has done much to promote 
economic growth in Russia, China, Korea and other steel 
exporting countries over the last decade. We do not question 
the merits of these policies. We only ask the question, is it 
fair that the steel industry and our retirees bear a 
disproportionate share of these national costs?
    Third, the cost of meeting the health care needs and the 
enormous and unanticipated number of retirees and dependents is 
preventing normal market driven consolidation in the industry. 
The alternative is the bankruptcy process, which without an 
active government role in financing of the legacy costs, will 
lead to more nightmare scenarios like LTV, and result in 
hundreds of thousands of retirees, spouses, dependents and 
widows who will lose their health care coverage.
    We note that the Trade Act of 2002 provides limited relief 
for certain retirees and their beneficiaries who lose their 
health care coverage due to bankruptcy. While helpful in some 
situations, the limited relief in the Trade Act does not fully 
resolve the current health care issues in the industry.
    Bethlehem is committed to working with Congress to advance 
the solution contained in H.R. 4646. Members of the 
subcommittee are urged to keep in mind that Congress must act 
quickly. The options available to Bethlehem and other domestic 
steel companies are rapidly diminishing. Without prompt action, 
Congress will cease to have an effective opportunity to resolve 
this issue.
    The government can and should assist the steel industry 
with its legacy costs. America needs a vital industry which is 
critical to our national security and infrastructure. There 
will be further consolidation in the domestic industry, and 
with government help this process can be fair and orderly, 
reduce the possibility of massive short term job losses, and 
help prevent the destruction of the critical basic steel 
industry.
    Thank you, Mr. Chairman.
    [The prepared statement of Thomas J. Broderick follows:]
   Prepared Statement of Thomas J. Broderick, Manager, Total Health 
                 Programs, Bethlehem Steel Corporation
    Thank you, Mr. Chairman and members of the Subcommittee. I am 
pleased to have the opportunity to address the Subcommittee on the 
importance of Congressional help in solving the legacy problem in the 
domestic steel industry. The legislative solution provided in HR 4646, 
the Steel Industry Legacy Relief Act of 2002, is most urgently needed 
and upon enactment would represent an essential step in the steel 
industry's efforts to consolidate and restructure.
    Bethlehem Steel is the second largest integrated steel manufacturer 
in the United States and has been in business since 1904. Our principal 
facilities are located in Sparrows Point, Maryland; Burns Harbor, 
Indiana; and Steelton, Conshohocken and Coatesville, Pennsylvania. Our 
products include flat rolled products--including hot-rolled, cold-
rolled, coated, plate and tin products as well as rails.
    The domestic steel industry continues to suffer from the severe 
injury caused by the extraordinary volume of disruptive and unfairly 
traded imports that have been inundating our shores since the 1970s. 
The most recent surge of imports that began in late 1997 has forced 
some 35 domestic steel companies, including Bethlehem, to declare 
bankruptcy. As documented by the findings of the U.S. International 
Trade Commission (ITC) and the U.S. Department of Commerce, this 
imported steel has resulted in massive and pervasive injury to the 
domestic steel industry. This massive flow of foreign steel is the 
direct result of excess foreign steelmaking capacity--more than 250 
million metric tons--that has been created and maintained through 
market distorting practices, such as closed markets, government 
subsidies, cartels, and other market protection policies.
    In response to overwhelming evidence of the injury done to the 
domestic steel industry by imported steel, the ITC recommended, and in 
March President Bush implemented under section 201 of the Trade Act of 
1974, safeguard tariffs on most flat carbon steel products. These 
tariffs, which range up to 30 percent, were designed to give the 
domestic steel industry temporary breathing room to rationalize and 
restructure its operations in order to compete more effectively in 
response to these circumstances. We are grateful to the Administration 
for recognizing the domestic steel industry as a basic building block 
of our domestic economy and critical to our national security. We 
likewise appreciate the efforts to bring about this decision by a 
number of members on the Subcommittee, other members of the House of 
Representatives, as well as the efforts by members of the Senate.
    The effective implementation and enforcement of the President's 
safeguard tariffs, with limited exclusions, is essential to the 
recovery of the domestic steel industry, but even this by itself is not 
enough. Equally necessary is federal government assistance in solving 
the ``legacy' problem, which we define as benefits for retirees and 
their dependents. Many of these retirees lost their jobs as a result of 
restructuring driven by unfair trade.
    It is recognized that the steel industry must consolidate and 
rationalize facilities in order to improve its competitiveness and 
regain its global leadership position. Such action would not be new for 
Bethlehem or, indeed, the domestic industry as a whole. Bethlehem has a 
record of taking action to consolidate and eliminate non-competitive 
facilities. Since the early 1980s, significant consolidation and 
rationalization has taken place--Bethlehem has sold or closed a number 
of operations including: the Bethlehem, Johnstown, and Williamsport, 
Pennsylvania plants; most of the Lackawanna, New York plant; 
shipbuilding and ship repair businesses; coal and limestone operations; 
fasteners; fabricating works and coke ovens. Just last week, we 
announced the permanent closure of our pipe mill in Steelton, PA. The 
most recent consolidation efforts include our merger with Lukens in 
1998--a major step in consolidation and rationalization. As a result of 
merging these two companies, our plate mill at Sparrows Point, Maryland 
was shut down.
    Unfortunately, one of the major and unavoidable consequences of the 
efforts of companies such as Bethlehem to respond to changes in the 
marketplace is that our ratio of retired to active employees has risen 
dramatically, while the relative costs of retiree health and other non-
pension benefits have risen even more dramatically. To date, 
consolidation and rationalization have reduced the number of Bethlehem 
employees from almost 90,000 people in 1980, to less than 13,000 today. 
And Bethlehem has reduced its steelmaking capacity from 22 million tons 
in the early 1980s to 11 million tons today.
    Further consolidation and rationalization will continue to 
exacerbate the legacy cost problem. With our significantly reduced 
workforce of fewer than 13,000 people, Bethlehem provides health care 
coverage for 125,000 retirees, employees and dependents. Of these 
125,000, about 95,000 are retiree beneficiaries. This means that, for 
each active employee, Bethlehem provides health care coverage for more 
than seven retiree beneficiaries. As a point of reference, Medicare has 
three active employees for each current beneficiary.
    In 2001, Bethlehem's total cash costs for health care and other 
insurance amounted to $300 million, and this expense is expected to 
grow significantly as a result of the upward trend in prescription drug 
prices and usage, as well as general health care cost inflation. The 
net present value of Bethlehem's legacy benefits, excluding pensions, 
is $3 billion. Another aspect of the legacy problem is pension 
obligations, which currently are underfunded by $2 billion. These types 
of liabilities constitute the major barrier to necessary consolidation 
within the industry.
    Even though we have downsized our capacity and modernized many 
facilities, these legacy obligations constitute an extraordinary 
burden, having a major impact on the ability of integrated producers 
such as Bethlehem to compete and, indeed, to survive.
    As noted earlier, further consolidation and rationalization will 
certainly exacerbate this problem. In conformity with Section 1114 of 
the Bankruptcy Code, Bethlehem has requested that the Court appoint a 
Committee to represent the 95,000 retiree beneficiaries so that it may 
engage in the statutorily required dialog regarding modification of the 
current benefit programs.
    One might ask why the government should feel any responsibility to 
intervene on behalf of integrated producers, rather than simply allow 
market forces to work their will. We have submitted for the record a 
document that provides extensive and compelling background on this 
subject, ``America's Steel Crisis and the Burden of Legacy Costs.'' In 
summary, there are three important reasons for government action.
    First, foreign governments, not market forces, and foreign 
companies, not U.S. producers, are directly responsible for much of 
today's problem. If comparative advantage of companies were the 
standard, we would compete very well indeed. American steel producers 
are among the most productive in the world, with 3.6 man-hours per ton 
of steel produced.
    Second, the U.S. government has played a significant role in 
creating the current economic situation in which Bethlehem and other 
domestic integrated steel producers find themselves. We have documented 
in our trade cases the nonstop attack by foreign producers seeking 
market share in the U.S. by violating our trade laws. However, also of 
importance is that our government, over the last decade, has done much 
to promote economic growth in Russia, China, Korea and other steel-
exporting countries. It is not for us to question whether the foreign 
policy and economic goals of these U.S. policies were wise or whether 
they were attained. However, it is crystal clear that many of these 
countries decided to focus on steel production as a major export 
product--exactly as Japan did in the 1950s. Thus, whatever ``public 
benefit'' were derived for the United States, those ``benefits'' have 
come at a very real cost to the domestic steel industry.
    In addition, a number of Administrations, beginning with President 
Truman's, actively intervened during labor contract bargaining 
sessions. Not only did presidents call on the companies to end or avert 
strikes, they also pressured the companies to avoid price increases. As 
a result, costs for wages and benefits increased, while at the same 
time price improvements to cover these added expenses were strongly 
discouraged.
    Third, the cost of meeting the health care needs of this enormous 
and unanticipated number of retirees and dependents is preventing 
normal market-driven consolidation in the industry. As a practical 
matter, potential buyers cannot purchase a distressed steel company 
because the existing retiree obligations that would have to be assumed 
could not be serviced while sufficient cash flow is generated to meet 
debt and equity interests. The alternative is the bankruptcy process, 
which without an active government role in the financing of legacy 
costs, will lead to more LTVs--and result in hundreds of thousands of 
retirees, widows and other beneficiaries losing health care and other 
retirement benefits. While the PBGC offers a partial safety net for 
pension benefits, there is no comparable safety net for the health care 
benefits that would be lost.
    We note that the Trade Act of 2002, which was signed by the 
President in August, provides limited relief to certain retirees and 
their beneficiaries who lose retiree health benefits as a result of a 
bankruptcy. Title II of the Trade Act establishes a new section of the 
Internal Revenue Code that provides a 65 percent tax credit for health 
insurance costs of retirees whose pensions are being paid by the PBGC. 
The credit only applies for retirees who are at least age 55, and the 
tax credit ceases when the individual becomes eligible for Medicare (or 
certain other governmental health programs). In addition to 
establishing the tax credit, the Trade Act also creates a new Internal 
Revenue Code section 7527, which provides for a refundable credit 
mechanism in which the United States Treasury will make advance credit 
payments directly to any ``provider'' of qualified health insurance. We 
do not yet know how the mechanics of the advance payment system will 
work until the Treasury Department issues regulations to establish the 
program.
    The Trade Act relief, while helpful, is not a sufficient long-term 
solution. Only a subset of the affected retiree population is eligible 
for Trade Act relief. To be eligible for the tax credit, retirees must 
be within the age parameters outlined above and they must be receiving 
benefits from a defined benefit plan that has been assumed by the PBGC. 
No relief is provided for retirees who are not covered by a PBGC plan 
or who lose their jobs or their health benefits before retirement or 
age 55. In addition, the Act does nothing to address the prescription 
drug needs of the Medicare eligible retirees. The Trade Act relief also 
requires that retirees purchase their own health insurance, which would 
require most retirees to purchase whatever individual policy might be 
available in the retiree's state or to elect continuation coverage 
(usually referred to as ``COBRA coverage'') from their former employer. 
COBRA coverage charges may be as much as 102 percent of the premium 
cost and may be well beyond the means of many retirees. Thus, while 
helpful in some situations, the limited relief in the Trade Act does 
not resolve the current retiree health issues for our industry.
    The current high ratio of retirees to active workers was not 
something Bethlehem or other affected companies could have reasonably 
anticipated. As a result of protracted adverse impacts on our financial 
condition, Bethlehem cannot develop a satisfactory long-term solution 
without federal assistance. Trade relief alone will not be sufficient 
to reverse the current situation. Additional federal assistance is 
appropriate since the industry's financial problems have been created 
largely by foreign governments, foreign companies and federal 
government policies over time.
    There is an additional consideration that is relevant to this 
discussion: steel is critical to our national security, and it would 
not be in the best interests of our nation to be fully reliant on 
imported steel during a crisis. Steel is used not only in the 
construction of ships, tanks and other military applications, but is 
critical to our infrastructure--highways, seaports, airports and the 
delivery of major forms of energy--which also are vital to national 
security. Integrated producers, including Bethlehem, provide the 
highest quality steel for special applications. In fact, Bethlehem is 
the only domestic company with the capability to provide the special 
steel plate that was required to repair the USS Cole.
    The Steel Industry Legacy Relief Act of 2002, HR 4646, provides a 
specific legislative solution to this catastrophic health care legacy 
problem and is more comprehensive in its solution than the provisions 
provided in the Trade Act of 2002. H.R.4646 provides a safety net, 
similar to that provided for pensions by the PBGC, for steel industry 
retirees that have or will lose their company provided health insurance 
benefits. The bill allows for a number of qualifying events under which 
retirees could become eligible to receive major medical and 
prescription drug coverage. The bill offers numerous helpful 
provisions, centering on the creation of, and support for, an effective 
program of health care coverage for steel, iron ore, and coke company 
retirees.
    Congressman Visclosky deserves special commendation for his work 
with the United Steelworkers of America and major steel producers, 
including Bethlehem, to craft this legislation--legislation that is 
passable and is comparable to legislation which has been introduced by 
Senator Rockefeller.
    The bill seeks to achieve two critical objectives: solving the 
legacy cost problem facing American steel and steel related producers; 
and enabling market forces to move the industry to effective 
consolidation and restructuring by removing a major obstacle to that 
process. The results should be a significantly strengthened steel 
industry. Members of the Subcommittee need to keep in mind that 
Congress must act quickly. The options available to Bethlehem and other 
domestic steel companies are rapidly diminishing. Without prompt 
action, Congress will cease to have any effective opportunity to help 
with the resolution of this issue.
    To summarize: the recovery of the steel industry is dependent on 
the President's steel program. The first element of that program, 
temporarily preventing imports from continuing to injure the U.S. 
industry, has now been put in place. It must be noted that we have 
serious concerns with a number of the exclusions to the 201 remedy that 
have been issued to date by the Administration. Continued erosion of 
the remedy by additional exclusions for products that can be made in 
this country will further undermine the effectiveness of the 201 
remedy. Two other elements--negotiations to reduce foreign over-
capacity and negotiations to eliminate foreign market distorting 
practices--are being addressed. The final element--assisting with the 
major burden of legacy costs--has yet to be fully addressed, and unless 
it is fully addressed, the other parts of the program will not be 
adequate. As a result of large-scale restructuring in the 1980s, the 
domestic integrated industry faces a crippling problem with health care 
related legacy costs. Generally, our foreign competition does not have 
this problem. Most of our principal international competitors do not 
bear a burden for employee and retiree health costs remotely comparable 
to that which currently confronts the domestic steel industry.
    This inequity needs to be addressed. The government can and should 
assist the industry in dealing with legacy costs. America needs a 
viable steel industry. There will be further consolidation in the 
domestic industry, and with governmental help this process can be fair 
and orderly, reduce the possibility of massive job losses over short 
periods of time, and help prevent the destruction of a critical basic 
industry.

    Mr. Stearns. Thank you.
    Now, Mr. Collins, welcome.

                  STATEMENT OF JAMES F. COLLINS

    Mr. Collins. Thank you, Mr. Chairman. I am here on behalf 
of the Steel Manufacturers Association, 44 electric furnace 
steel companies that produce almost half the steel made in the 
United States.
    I have been involved in steel trade policy matters for 
about 33 years, starting as a government official working with 
Tony Solomon, and with the strong leadership of Wilbur Mills we 
negotiated the first voluntary restraint agreement back in 
1969. So I know something about the steel trade problem.
    Our domestic member companies, who, I emphasize, account 
for almost half the steel made in this country, strongly oppose 
the enactment of H.R. 4646 for the following reasons. One, the 
SMA and its members have long advocated that some retraining 
and health protection should be provided to steelworkers in 
transition due to permanent plant closures. This position has 
not changed. It applies strictly to closures, including those 
necessary to facilitate industry consolidation. It should be 
available only for a limited period of time until workers are 
retrained and reemployed or reach age 65 and are eligible for 
Medicare.
    In contrast, H.R. 4646 covers an entire decade and is 
estimated by the Congressional Research Service in an August 
2002 report to cost $4-$12 billion, depending upon the outcome.
    Two, additionally, it has been, and continues to be, our 
position that pension and health commitments made by steel 
companies still in operation should remain the responsibility 
of those companies rather than, we emphasize, the 
responsibility of U.S. taxpayers.
    There's been a lot of controversy over the request of some 
integrated steel companies that government assistance, using 
funds from tariffs or small contributions per ton, be given to 
those steel companies who are burdened by so called legacy 
costs. First, as a matter of principle, if the proceeds of 
tariffs are to be distributed to steel companies, they should 
be distributed to all companies found injured by imports, 
whether or not those companies have legacy costs.
    Further, the idea of all taxpayers paying for legacy costs, 
whether from funds from tariffs or general revenues, could well 
set an inappropriate precedent and result in many industries 
looking for similar assistance.
    Legacy costs are generally understood by the steel industry 
to comprise two major components, unfunded pension liabilities 
and retiree medical benefits. With respect to the retiree 
medical benefits component, these are not normally prefunded as 
pensions were supposed to be, but paid out of ongoing revenues.
    As you know, all Americans except for government employees, 
I guess, are eligible for coverage under Medicare. The failure 
of some steel companies to provide legacy retirees medical 
benefits does not mean that the retirees eligible for Medicare 
will be deprived of medical care. IT only means that, rather 
than receive medical treatment paid 100 percent by their 
employers, they will have available the more modest programs 
available under Medicare which most retired Americans, 
including me, rely on.
    Should the U.S. Government pick up the cost of a new steel 
plan comparable to government employee health coverage, it 
would be opening another area of opportunity for those who 
negotiate expensive medical plans to expect the government to 
backstop weak employers who do not ultimately pay their 
contractual obligations.
    In summary, government subsidies to some failing steel 
companies are an unacceptable public policy approach. Here are 
the principal reasons: Use of U.S. Government funds to 
subsidize a few steel companies who promised more than they 
could deliver at the expense of a majority of steel companies 
who neither need nor want such relief alters market based terms 
of competition and rewards with public funds the least 
efficient U.S. steel producers. Subsidies to selected companies 
will be a major impediment to the successful adjustment and 
rationalization of the industry.
    The root cause of problems in the world's steel industry is 
overcapacity. This has been recognized in recent negotiations 
among OECD members, and underlies the administration's strategy 
for industry relief under the current Section 201 program. The 
implementation of such subsidies would defer any possibility of 
meaningful capacity reduction worldwide, sustaining the 
inefficient companies at the heart the global problem.
    Foreign steel interests, traders, and opponents of industry 
trade relief support U.S. legacy cost relief strongly as an 
alternative to legitimate trade relief. A U.S. steel market 
recovering from predatory imports through an effective trade 
remedy will increase the ability of all steel companies to meet 
their financial obligations, but a major subsidy program for a 
few troubled steel companies could undermine effective relief 
for the entire industry, if policy officials make it a 
substitute for truly effective trade relief for the entire 
industry.
    The U.S. Government is undertaking an effort with other 
governments to establish a program to reduce excess inefficient 
steelmaking capacity worldwide. All agree this is the root 
cause of the trade problem. How can the U.S. Government provide 
subsidies to maintain its own least efficient steel producers 
while simultaneously urging the reduction of uneconomic 
capacity in many other countries? The answer is it cannot.
    There is a vital difference between subsidizing the balance 
sheets of a few steel companies by paying their legacy costs 
with a new government long term program and the provision by 
the government of a temporary health care safety net for 
retired workers who have lost protection but who are not yet 
eligible for Medicare when facilities permanently exit the 
business.
    The SMA member companies support a program of focused 
assistance directly to workers in these instances, so long as 
the closed capacity is permanently eliminated.
    Thank you, Mr. Chairman.
    [The prepared statement of James F. Collins follows:]
     Prepared Statement of James f. Collins on Behalf of The Steel 
                       Manufacturers Association
    I am James Collins, former president of the Steel Manufacturers 
Association (SMA), and currently a consultant to that organization on 
international trade and economic policy matters. The SMA consists of 44 
North American steel producers whose US members account for almost one 
half of the steel produced in the United States.
    Our domestic member companies strongly oppose the enactment of HR 
4646 for the following reasons:
    1. The SMA and its members have long advocated that some retraining 
and health protection should be provided to steelworkers in transition 
due to permanent plant closures. This position has not changed. It 
applies strictly to closures, including those necessary to facilitate 
industry consolidation. But it should be available only for a limited 
period of time until workers are retrained and reemployed. In contrast, 
HR 4646 covers an entire decade and is estimated by CRS (August 02 
report) to cost $4 to $12 billion.
    2. Additionally, it has been, and continues to be our position that 
pension and health commitments made by steel companies still in 
operation should remain the responsibility of those companies rather 
than, we emphasize, the responsibility of US taxpayers.
Legacy Issues
    There has been much controversy over the request by some integrated 
steel companies that government assistance (possibly using funds from 
any tariff levied as a result of the 201) be given to those steel 
companies who are burdened by so-called ``legacy'' costs. First, as a 
matter of principle, if the proceeds of tariffs are to be distributed 
to steel companies, they should be distributed to all companies found 
injured by imports whether or not those companies have ``legacy'' 
costs. Further, the idea of all taxpayers paying for ``legacy'' costs, 
whether from the funds from tariffs or general revenues, could well set 
an inappropriate precedent and result in many industries looking for 
similar assistance.
    ``Legacy'' costs, as generally understood by the steel industry, 
comprise two major components: unfunded pension liabilities; and 
retiree medical benefits.
    With respect to the retiree medical benefits component, these are 
not normally prefunded (as pensions were supposed to be) but paid out 
of ongoing revenues. As you know all Americans are eligible for 
coverage under Medicare and the failure of some steel companies to 
provide the ``legacy'' retirees medical benefits does not mean that the 
retirees eligible for Medicare will be deprived of medical care. It 
only means that rather than receive medical treatment paid 100 percent 
by their employer they will have available the more modest programs 
available under Medicare which most retired Americans rely on. Should 
the US Government pick up the cost of a new steel plan comparable to 
government employee health coverage, it would be opening another area 
of opportunity for unions who could negotiate expensive medical plans 
expecting government to backstop weak employers who do not ultimately 
pay their contractual obligations.
In summary:
    Government subsidies to some failing steel companies are an 
unacceptable public policy approach. Here are the principal reasons:
 Use of US Government funds to subsidize a few steel companies 
        who promised more than they could deliver, at the expense of 
        the majority of steel companies who neither need nor want such 
        relief, alters market-based terms of competition and rewards 
        with public funds the least efficient US steel producers.
 Subsidies to selected steel companies will be a major 
        impediment to the successful adjustment and rationalization of 
        the industry. The root cause of problems in the world steel 
        industry is overcapacity. This has been recognized in recent 
        negotiations among OECD members and underlies the 
        Administration's strategy for industry relief under the current 
        Section 201 program. The implementation of such subsidies would 
        undermine any possibility of meaningful capacity reduction 
        worldwide, sustaining the inefficient companies at the heart of 
        the global problem.
 Foreign steel interests, traders, and opponents of industry 
        trade relief support US legacy cost relief as an alternative to 
        legitimate trade relief.
 A US steel market recovering from predatory imports through an 
        effective trade remedy will increase the ability of all steel 
        companies to meet their financial obligations. But a major 
        subsidy program for a few troubled steel companies could 
        undermine effective relief for the entire industry, if policy 
        officials make it a substitute for truly effective trade relief 
        for the entire industry.
 The US Government is undertaking an effort with other 
        governments to establish a program to reduce excess, 
        inefficient steel-making capacity, worldwide. All agree this is 
        the root cause of the world steel trade problem. How can the US 
        Government provide subsidies to maintain its own least 
        efficient steel producers, while simultaneously urging the 
        reduction of uneconomic capacity in many other countries? The 
        answer is it cannot.
 There is a vital difference between subsidizing the balance 
        sheets of a few steel companies by paying their legacy costs 
        with a new government long term program, and the provision by 
        the Government of a temporary health care safety net for 
        retired workers who have lost protection but who are not yet 
        eligible for Medicare, when facilities permanently exit the 
        business. The SMA companies support a program of focused 
        assistance directly to workers in these instances, so long as 
        the closed capacity is permanently eliminated.
    Direct subsidies to a few US steel companies will deter the 
successful adjustment of the American steel industry. That adjustment 
will best be achieved by a substantial reduction in the 250 million 
tons of excess steel capacity that exists worldwide, and also through a 
more effective 201 trade remedy that avoids further weakening by 
exclusions. The danger of granting a few companies a Government bailout 
to fund their private obligations must be avoided, if the 
Administration is to achieve a truly effective solution to the global 
steel problem.

    Mr. Stearns. Thank you.
    Thank you. Well, when you come to a hearing like this and 
you try to be balanced and try to understand it, but we do 
have, obviously, two witnesses who are on one side and one 
witness on the other. Mr. Collins, you represent the mini-
mills, as I understand it.
    Mr. Collins. Right.
    Mr. Stearns. Let's take the first assumption, that having 
the ability to manufacture steel in this country is important 
to our national security. Would all three of you agree with 
that?
    Mr. Collins. Absolutely.
    Mr. Stearns. Absolutely? Okay. So if we start with that 
premise, let's work down. Now if that is true, then you could 
take the next step, that the United States government should 
take steps to protect its industry so it is viable for national 
security.
    So if we take Mr. Klinefelter's three ways to solve this 
problem, control imports, legacy costs, particularly health 
care, and management and labor working together for union, of 
those three, Mr. Collins, you mentioned control imports you 
agree with.
    Mr. Collins. Well, there are others, too, Mr. Chairman. 
Certainly, the U.S. has been the most open steel market in the 
world for 30 years, and everyone knows that, and it has been a 
dumping ground for steel.
    Mr. Stearns. So now the President went ahead and instituted 
tariffs on imports, which you agree with?
    Mr. Collins. Yes.
    Mr. Stearns. Okay. So the President has tried to help out 
in respect to Mr. Klinefelter's first point of controlling 
imports.
    The second one is really pretty much what Mr. Dingell's 
legislation is about in dealing with the legacy costs, and the 
third we can't, as a Congress, have anything to do with, which 
is namely the labor-management issue which you have to work 
out.
    The question dealing with legacy costs--let me ask Mr. 
Klinefelter and Mr. Broderick. This funding mechanism as 
proposed, when I look through it, is there any way to measure 
exactly how much money will be needed from the Federal 
Government? For example, there's not a cap, and I guess a lot 
of us are trying to understand what is the extent of our 
liability for this. That is the first question.
    The second question is: Most of my constituents are on 
Medicare. What is wrong with having steelworkers go on 
Medicare, much like the rest of the country? Now you could 
argue, well, there is no prescription drug benefit for people 
on Medicare like there is perhaps under the union plan, but I 
would submit that maybe some compromised language could work 
out to get this bill moving is that those people that are in 
retirement could be on Medicare, and that might save some 
dollars for this third legacy cost.
    In that respect, Mr. Collins mentioned that the health care 
plan that unions had would be quite a bit improved over what 
the majority of Americans have. So the two questions I have for 
you is: Should there be a cap on this, an understanding of it; 
and second of all, is it possible that the industry, the big 
steel companies, could accept the idea that their employees 
could be under Medicare like most of the rest of Americans?
    Mr. Broderick. Well, the issue of the cap--you know, I am 
sure something can be worked out regarding cap. But I think the 
issue of funding of Medicare--a lot of our retirees, first of 
all, are not eligible for Medicare.
    Mr. Stearns. And is that because they are retiring much 
younger?
    Mr. Broderick. They were removed from jobs because of 
illegal imports at an earlier age, between the age of, say, 55 
and 65, and those individuals--you cannot find insurance in the 
marketplace that is affordable. We've looked around, I know, in 
some areas. You can pay as much as $12,000 a year for 
insurance. That's if you can get it, because the marketplace 
will typically put preexisting conditions on those policies, 
and when you have a preexisting condition, I don't think you 
can find an American that's 55 years and older that does not 
have a preexisting condition on health care.
    The issue of prescription drugs and Medicare--I don't think 
you can find a senior as well in this country that would agree 
that--that would disagree that Medicare should have a 
prescription drug benefit, and we have supported those types of 
legislation efforts going forward.
    No one in their right mind would design a health care 
program today with a prescription drug benefit missing.
    Mr. Stearns. What is the idea of putting--what is wrong 
with trying to sort of put a cap or some kind of--try to 
identify what this liability is so that the taxpayers, before 
they went into something like this, would know what their 
outside liability is going to be?
    Mr. Broderick. I think, if you work with the companies and 
the union, I think a population can be identified and defined, 
and the actuaries, I am sure, could come up with a number that 
would be meaningful, that would give the taxpayers an idea of 
exactly what the net obligation would be.
    Mr. Stearns. If we agree that steel manufacture is national 
security, then people would say, okay, why don't you give us 
also health care for the industries that are having problems 
like the airline industry. A few of them have gone into 
bankruptcy, automotive industries. There's a broad group of 
industries.
    So your argument would be, because this industry is 
required for national security, that the Federal Government 
should step in and provide this legacy cost. Would that be 
the----
    Mr. Klinefelter. No.
    Mr. Stearns. That would not be the strength of your 
argument?
    Mr. Klinefelter. No. I think that the basic fundamental 
reason that we asked for this is because of what has happened 
to the industry is so unique. Through no fault of its own, it's 
been battered by these imports, which continues to all of these 
companies.
    Mr. Stearns. But if we ratchet up and prevent that dumping, 
it's just too late, and we've got to go back and rectify the 
problem?
    Mr. Klinefelter. Well, if we want stability in the 
industry, if we want this problem to go away, like I said, I 
think we have to do three things in order to make that happen, 
and all three things need to be done. One role is a 
Congressional role, and that is the passage of some kind of 
legacy costs legislation.
    I think what everyone would like to do is have a 
consolidated steel industry, integrated steel industry, which I 
think we need. You know, mini-mills are wonderful, but we need 
the capability from a strategic point of view to be able to 
make steel from beginning to end. So we need some of that 
capacity, and we want to stabilize that industry.
    Mr. Stearns. My question time is over but, Mr. Collins, is 
there anything you want to add after hearing Mr. Klinefelter?
    Mr. Collins. Yes. We agree that the steel industry of the 
future, in terms of national economic security, should consist 
of integrated producers and mini-mill producers. However, we 
don't understand why the market can't work and a company that 
goes into Chapter 7, like LTV, has plants that are savable, 
that are resuscitated and put back to work, will not contribute 
to that national security, economic security. They will.
    The only question is whether the U.S. taxpayer should pay 
for a cost that the companies and the union had negotiated with 
each other, and presumably in good faith that they should--as 
long as they stay in business, that they should retain the 
obligation to pay. There is no reason to expect the U.S. 
taxpayer to assume that burden, a burden of billions of 
dollars. But that doesn't mean we don't think there isn't a 
national health problem.
    Speaking personally, I think this country is rich enough to 
have a national prescription benefit program and a national 
health program for all its citizens, and ultimately I think 
that will come. But you don't single out segments of the 
economy, the U.S. economy, and say we are going to do this for 
this industry and this for that industry. You are going to have 
25 industries lined up, and each time you do that, if you don't 
have unanimity in the industry, as you do not in the steel 
industry--as I said, 47 percent of the shipments of this steel 
community in the United States oppose this bill. They don't 
like to see the terms of competition changed.
    They think that the managers should live up to their 
obligations to pay their liabilities and not the U.S. taxpayer.
    Mr. Klinefelter. If I could----
    Mr. Stearns. Well, my time has expired. So I am sure you 
are going to hear from the ranking member today.
    Mr. Doyle. I assure you, you are going to get a chance to 
respond to that.
    Mr. Stearns. You are going to get an equal chance. I've 
never seen him quite so energized here. So the gentleman from 
Pennsylvania.
    Mr. Doyle. Thank you, Mr. Chairman. Geez, where do I start? 
First of all, Mr. Collins, I was listening to your remarks 
regarding the health care benefits, and I think you may have 
been referring to some of the benefits that was in Senate bill 
2189, the Rockefeller bill, just for points of clarification.
    Mr. Klinefelter. You mean the 1 year extension, Mr. Doyle?
    Mr. Doyle. Yes. H.R. 4646, as I understand it, is going to 
accomplish two things. There is going to be a gap insurance. 
You know, when workers come out and they are not yet eligible 
for Medicare, there will be a benefit there that will be equal 
to or greater than--it's going to be decided by a board--
Medicare program. Then there's a prescription drug element to 
it that would be equal to the Federal employees' prescription 
drug program. Then once they turn 65, they go on Medicare.
    So I don't think it is--you know, we are not talking 
about--as we said earlier, this is not a Cadillac plan, and 
it's not as generous as the plans that existed in some of the 
other bills that, I think--you know, a part of what you 
referred to was the Rockefeller bill. So just as a point of 
clarification.
    A couple of questions, because I want to understand the 
mini-mills a little better. What percentage of the mini-mills 
are unionized?
    Mr. Collins. I can't give you an exact answer, a precise 
answer, but from my----
    Mr. Doyle. I mean, roughly. I'm not going to hold you to 
it.
    Mr. Collins. From my past experience, roughly half.
    Mr. Doyle. So 50 percent of these mini-mills are unionized. 
Do the mini-mills----
    Mr. Collins. Maybe 40 percent.
    Mr. Doyle. Forty percent? And do they offer benefits to 
their employees, health care benefits, pensions?
    Mr. Collins. Oh, yes. Yes. They all have health plans.
    Mr. Doyle. So paint a picture of a typical mini-mill worker 
versus an integrated mill worker in terms of salaries and 
benefits. I'm just trying to understand.
    Mr. Collins. Well, the mini-mills have a team concept in 
the plant whereby they move from one occupation to another so 
that no one is tied down to a particular craft. So that that 
team is able to achieve a high level of productivity, if one of 
those workers is missing, because the others can sub for that 
worker.
    Mr. Doyle. How much do you pay them, and what is their 
benefits?
    Mr. Collins. They are paid--I can't be precise on the pay, 
but the bonus system generally gives them compensation as high 
or higher than the United Steelworker pay.
    Mr. Doyle. So you are saying that people that work in mini-
mills make the same or better wages than people who work in the 
integrated mills?
    Mr. Collins. Correct.
    Mr. Doyle. Their benefits are comparable?
    Mr. Collins. Their compensation is tied to productivity, 
for the most part.
    Mr. Doyle. Nucor--a mini-mill, right?
    Mr. Collins. Right.
    Mr. Doyle. One of the biggest?
    Mr. Collins. Now isn't it true that Nucor supported in the 
Senate trade debate that they didn't oppose the amendment in 
the Senate trade debate that would have provided health care 
benefits to the steelworker retirees whose companies had shut 
down?
    Mr. Collins. Specifically, Nucor wrote a letter to Senator 
Rockefeller supporting that 1-year extension, which the mini-
mills do support. They support a year of medical benefits 
provided to unemployed steelworkers who are not eligible for 
Medicare. So during the transition while they transition to 
other jobs, to new jobs.
    Mr. Doyle. So if you support steelworker retirees getting 
their benefits who have lost their jobs because of--and I think 
the point that needs to be made clear, too: These jobs aren't 
being lost because of inefficiencies or downturns in the 
market. We are talking about jobs that are being lost because 
people are cheating. Okay? Because trade laws are being 
violated, and before we can get these guys, 30-some mills shut 
down and workers lose their jobs.
    Why would you support benefits for steelworkers that have 
lost their jobs but not benefits for people who are at risk of 
losing their jobs? In other words, do the mini-mills oppose 
consolidations of the integrated steel mills? Do you oppose 
them consolidating?
    Mr. Collins. Well, I think there's some ambivalence. I 
think where consolidation is rational, the mini-mills would 
generally support that consolidation, but you just don't put 
two underperforming mills together and expect, by putting those 
two mills together, that you've got one very good mill. We've 
told that to the Europeans.
    Mr. Doyle. What makes----
    Mr. Collins. Who have been boasting about their 
consolidations for the last 5 years.
    Mr. Doyle. What makes you think they are underperforming? 
Take away the illegal dumping. Take away all that.
    Mr. Collins. Well, we can only compare it to our own 
production in the mini-mills, Mr. Doyle, and we find that we 
have 1.5 to 2 manhours per ton, unlike what Mr. Klinefelter 
said. They have generally about 4 to 5 manhours per ton, 
because they are including the mini-mill productivity in their 
manhours.
    That gives us about $90 to $100 ton employment cost 
advantage. Also, we have achieved technological breakthroughs 
in the production of flat rolled steel that have been noted 
around the world. In addition, we are the largest recyclers in 
the world. Additionally, our btu per ton of steel produced are 
about 4-5 million btu, versus about 19 million for an 
integrated steel company per ton.
    Mr. Doyle. Okay.
    Mr. Dingell. Would the gentleman yield? On the btu's, 
American integrated steel mills use about the same number of 
btu's or less than the Europeans and the foreigners do. Isn't 
that true?
    Mr. Collins. In the integrated sector, yes, sir.
    Mr. Dingell. And with regard to the difference between the 
way--the tons, the tons--rather, the manpower per ton, the 
number of worker hours per ton, for U.S. integrated steel mills 
is at least as good as the foreigners.
    Mr. Collins. Absolutely.
    Mr. Dingell. Okay. Thank you.
    Mr. Stearns. The gentleman's time has expired. The 
gentleman from Illinois.
    Mr. Shimkus. Thank you, Mr. Chairman. A couple of things 
that I want to address. On trade adjustment assistance that was 
passed, there was--you all heard my opening statement. Let me 
start in this manner. I mentioned two of my constituents who 
had health care concerns, because they lost it on bankruptcy of 
Laclede Steel in Alton, Illinois. They are actually in another 
Congressional district, but they reside in my Congressional 
district.
    You also heard in the opening statement that they fell 
under a State insurance plan that we have gradually tried to 
expand in the S-CHIP, but it's really not as good of a plan as 
what we could do and really give them comparative health care 
coverage as what they had, maybe not the same but comparative.
    The trade adjustment assistance was a 65 percent tax credit 
to help people, but when you are unemployed, even a tax credit 
of 65 percent is very difficult. As you all know, I am a 
supporter of the legislation. I'm glad Illinois has at least 
somewhat of a safety net for these individuals, but the concern 
is still ripe out there. That is again why I--just in addition 
to this health care debate, I throw out.
    I have had a company come to me during the break, and you 
all know I am a supporter. I'm a co-sponsor of the bill. But 
I've had a company come to me from Granite City, a large steel 
community, historic--my grandfather worked for them--that 
complained that on a 50 percent increase--and this is the type 
of steel that's used in 55 gallon drums--that is causing them 
to close down their--they cannot afford to make their end 
product because of the increase in the cost. NESCO is the 
company.
    We have the statistics back in the office. We didn't bring 
them here. I wish I would have, but I had forgotten. So there 
is a concern.
    Now, Mr. Klinefelter, you did mention or someone in the 
opening statements did mention that the cost estimations of the 
increase after the tariffs were not credible. I don't know if 
you mentioned it or some other member in their opening 
statements. Can you address the concern by manufacturing 
companies who are not in the steel industry. There has been a 
resounding concern of the escalation of the cost, that it's not 
proportional to the increase in the tariff?
    Mr. Klinefelter. Well, on what the company talked of the 
increase in the cost, but let me say this about that. That is, 
that's what the 201 is all about, in many ways.
    Mr. Shimkus. And they don't deny that.
    Mr. Klinefelter. It's the getting back to the prices that 
existed in 1997.
    Mr. Shimkus. But that's not the question. The question is 
that's not proportional to the tariff. The tariff is designed 
to get it there. So if it's a 30 percent tariff, if there is a 
50 percent increase in the cost----
    Mr. Klinefelter. Well, I have to see--you know, I would 
have to see those figures to see what the factors are that go 
into that. You know, did these folks reduce their costs by that 
same proportion for their consumers?
    Mr. Shimkus. I'm a friend, okay? I'm a co-sponsor of the 
bill.
    Mr. Klinefelter. But I mean, in order to address those kind 
of unaddressable questions, you have to see the data.
    Mr. Shimkus. Well, that's the questions you are going to 
get from a lot of members as we try to move this process 
forward. We need to talk about them.
    Mr. Klinefelter. And when we have the data, we will look at 
it and address them.
    Mr. Shimkus. Well, you are encouraged to come visit my 
office, and we can work through this. Mr. Broderick?
    Mr. Broderick. I think, attributing anymore than 30 percent 
increase, the cost would be inappropriate, because that's what 
the tariff was. So we have not stopped imports from coming in 
this country. Normal market dynamics are actually starting to 
work in the steel industry, and some of what has actually 
happened is the market has tightened somewhat.
    Mr. Shimkus. Let me ask a follow-up, and I have limited 
time, and I am going to have to go. But let me ask, what about 
the administration's recent reversal--I don't know if reversal 
is a great word--change in the tariff structure, which was 
announced, what, 3 weeks ago? Can you comment on that, and were 
there items that made credible sense based upon the world 
market or----
    Mr. Broderick. I believe you are talking about the 
exemptions?
    Mr. Shimkus. Right, the new exemption list.
    Mr. Broderick. The unions and the companies, Congressman--a 
number of those exemptions, we felt, were justifiable. A lot of 
those exemptions, however, were not justifiable. We can make 
the product here in the United States. It undermines the 201 in 
a very subtle way that over time the 201 has less value as it 
covers less and less of the product that it was designed by the 
ITC to cover.
    Mr. Shimkus. Anyone else want to add to that? Let me ask 
one final question that this manufacturing company that came in 
to visit me--remember, I'm an ally here. Okay?
    Tell me the difference between the tariff issue and anti-
dumping laws and the manufacturing business, industry, has said 
it would have been better to deal with anti-dumping laws versus 
the implementation of the tariff. Am I missing something or is 
it the same?
    Mr. Klinefelter. Well, I think the fact of the matter is 
that for years we had gone to the anti-dumping and 
countervailing duty laws, and the fact of the matter is that 
they don't work. We get relief for a limited period of time on 
one kind of product and from a certain number of countries. 
What happens is, you know, it goes someplace else, because 
there is always overcapacity in the world, and it continues to 
come into the United States.
    The 201--remember this. No illegal dumping here in the 201. 
Countries aren't doing anything illegal. They are just trying 
to destroy the American steel market. It's not illegal to try 
to do that, but it's legal for the United States government to 
stop it under our trade laws, and that's what the President 
said in the 201.
    Mr. Shimkus. Had anti-dumping laws been enacted at the 
outside--you know, in the opening statements we're talking 20 
years ago. Right? When you talked about the Asian crisis and 
all that other stuff, had the anti-dumping laws been enacted 
from Day One, would we have seen a much different market today?
    Mr. Klinefelter. We had anti-dumping orders, and there were 
anti-dumping orders in place. But as I said, because they are 
not comprehensive and they don't cover all products, and they 
don't cover those products from all countries, they are 
inadequate to the task of stopping the imports.
    Mr. Shimkus. All right, thank you. I yield back my time, 
Mr. Chairman.
    Mr. Stearns. Thank you, gentlemen. The gentleman who is the 
author of the bill, Mr. Dingell.
    Mr. Dingell. Mr. Chairman, thank you, and again I thank you 
for your kindness in holding this hearing and your patience and 
your courtesy to all of us.
    Mr. Klinefelter, in my opening statement which was inserted 
into the record, and I hope everybody will read it because it 
is an excellent one, I included the testimony of Mr. L.L. 
Williams who is Executive Director of Healthcare Initiatives at 
General Motors.
    He pointed out in his comments that the American steel 
industry is not the only American industry which is affected by 
the legacy costs. These costs disadvantage almost entirely the 
entire American industry, and I think this leads me to the 
thought that perhaps we ultimately need national health 
insurance to address this kind of a problem. Is that your 
thesis?
    Mr. Klinefelter. Mr. Dingell, I feel like that we are the 
canary in the mine. We are the canary in the mine. We are here. 
We stick up like a sore thumb, because this problem is right 
upon us. But is it there for the rest of industrial America? If 
General Motors is 52.5 billion in legacy costs, you bet your 
boots it is, because Ford's got to be there, Boeing has got to 
be there. Caterpillar has got to be there. The rubber industry 
has got to be there. The aluminum industry has got to be there.
    Why? Because all of those industrial industries in the 
United States, Mr. Dingell, realized that the health care for 
retirees under the current system was totally inadequate and 
had to be supplemented, and they took on the burden of 
supplementing that, pushed, of course, by the unions to do 
that, because they wouldn't have done it out of the goodness of 
their heart. But they did take that responsibility, and now 
they are stuck in an uncompetitive situation with our trading 
partners right across the board of industrial America.
    Mr. Dingell. Now further here, Mr. Klinefelter, without 
legacy legislation, steelworkers who lose insurance coverage 
will be left to join the ranks of the uninsured. Is that not 
so?
    Mr. Klinefelter. That's correct.
    Mr. Dingell. And there are virtually no other options in 
terms of health care for these people until they reach age for 
Medicare. Is that right?
    Mr. Klinefelter. That's correct.
    Mr. Dingell. All right. Now about 125,000 steelworkers and 
retirees lost their health insurance coverage because of this 
precise situation. Is that right?
    Mr. Klinefelter. That's correct.
    Mr. Dingell. Now let's go through some of the options that 
exist for these people. Let's talk about COBRA. When a company 
like LTV or Gulf State Steel shuts down, can these retirees 
access COBRA coverage?
    Mr. Klinefelter. No COBRA coverage is available to these 
folks. It's only available--in addition, what COBRA would be 
available if the company stayed in existence is only available 
for a limited period of time, and it's very expensive.
    Mr. Dingell. And the employees pay 102 percent of the 
premium out of pocket. Is that right?
    Mr. Klinefelter. That's correct.
    Mr. Dingell. Now purchasing health care coverage in the 
individual insurance market--I gather this is difficult to come 
by, that you have tried this. Insurance companies will not 
offer coverage for older industrial workers. If they do, they 
check the employee for preexisting condition exclusions, 
exclude critical benefits or have unaffordable premiums. Is 
that a fair statement?
    Mr. Klinefelter. That's a fair statement. One of the 
problems that exists for all industrial workers, and I wouldn't 
say it was just steelworkers but all industrial workers. 
There's a certain amount of exposure and hazard in what they 
do, and over time people get very nervous about these 
preexisting conditions that may exist with these workers, and 
they become very, very difficult in the private sector to 
insure.
    Mr. Dingell. Mr. Broderick, do you accord with that 
statement?
    Mr. Broderick. That's correct.
    Mr. Dingell. Thank you. So, basically, what I am hearing 
then, gentlemen, is that without this legislation, H.R. 4646, 
these retired steelworkers would be left with no health 
insurance coverage. Is that correct?
    Mr. Klinefelter. Correct.
    Mr. Dingell. And we now know that health insurance does not 
come cheap, and it is very difficult to achieve for these 
purposes. I believe that research has shown that middle-aged 
people who were continuously uninsured over a 4-year period 
have about 1.6 times more likely--are 1.6 times or more likely 
to have major health care problems, including death, than those 
who have maintained health care during that period. Is that 
right?
    Mr. Klinefelter. Correct.
    Mr. Dingell. I would suspect that without this legacy bill, 
in the absence of national health insurance for the United 
States, there are no options for the retirees and that their 
health is going to suffer. Is that correct?
    Mr. Klinefelter. That is correct.
    Mr. Dingell. And of course, we are looking at a situation 
where, because of the enormous overhang of these matters, which 
is subsidized in most instances by foreign governments, as is 
the production of steel, for example, in India and places like 
that or in the former Soviet Union, we are looking at a 
situation where our people neither have government subsidies 
for the production of steel nor do they have government 
subsidies for the protection of the health insurance and the 
health care of the employees. Is that right?
    Mr. Klinefelter. That is correct.
    Mr. Dingell. And of course, while all this goes on, not 
only do we see subsidy of the foreign producers with regard to 
health care and with regard to production costs, but we also 
see predatory practices in which the government, in fact, 
participates both at home and with regard to the export market. 
Is that not true?
    Mr. Klinefelter. That's correct.
    Mr. Dingell. Gentlemen, thank you. Thank you, Mr. Chairman. 
You have been very courteous.
    Mr. Stearns. Thank you.
    Mr. Doyle. Very good, Mr. Chairman.
    Mr. Stearns. The gentleman yields back. Mr. Strickland.
    Mr. Strickland. Yes. I want to thank you, Mr. Chairman, for 
this hearing. I want to thank those who have provided us with 
this testimony.
    Mr. Collins, it seems to me that, if we do what you 
suggest, that will mean that there will be large numbers of 
steelworker retirees that will be without health insurance. Do 
you think that is a fair conclusion?
    Mr. Collins. I'm not sure about that. I don't know how many 
employees there are between 55 and 65, but presumably some of 
those unemployed steelworkers will rehired in other jobs and 
get medical coverage. How many, I don't know.
    Mr. Strickland. Mr. Collins, you certainly don't know much 
about the district that I represent, because we have 
exceedingly high levels of unemployment. We've got hundreds and 
hundreds of coal miners who have lost their jobs, hundreds and 
hundreds of steelworkers who have lost their jobs, and an 
economically depressed area. I don't know where these people 
are going to get jobs that are going to be jobs that provide 
health care coverage.
    So I mean, you've got a perfect right to your point of 
view, but I think it is important to point out that, if we 
follow your suggestion, that there are going to be many, many 
individuals who, through no fault of their own, are going to 
find themselves in this terrible situation where they are 
without health insurance. They are sick. They cannot afford to 
pay for the health care they need.
    Maybe that is the kind of country we are and that we are 
willing to accept that kind of human tragedy, but it seems to 
me that we've got a responsibility to try to prevent that from 
happening. And I understand that you are not responsible for 
it, but we've heard the testimony from Mr. Klinefelter and 
others.
    Mr. Klinefelter laid out the history of the conditions that 
have led us to where we are today, and it seems to me that 
there have been so many failures on the part of this government 
that we've got a responsibility now. Maybe we should have taken 
actions earlier, but we failed to do so. We have to deal with 
the present, and it seems to me that we have to deal with the 
situation we have.
    I would just like to point out two things that are beyond 
the scope of this legacy bill, which could help not just steel 
companies, but it could help the textile industry. It could 
help the agricultural industry, if we would take action. That 
is to have a comprehensive Medicare benefit that is available 
to every eligible senior citizen in this country.
    We ought to do that, and to also pass the Hatch-Waxman 
reform bill dealing with the exclusive rights of pharmaceutical 
companies to abuse, in my judgment, the patent protections they 
have.
    Would you say that those two actions, if we were to take 
them here at the Federal level, would not only help the steel 
industry but would be good for all other industries in this 
country?
    Mr. Collins. I think you've got your finger on the problem. 
This is a national problem. You don't solve a national problem 
by providing a subsidy to one-half of the American steel 
industry. The American steel industry has been complaining 
about subsidies accorded foreign steel industries around the 
world for the last 35 years. Suddenly, the United States 
government provides a $4-12 billion subsidy--in this case it's 
a health care subsidy--to its own steel companies, and then 
tries to go internationally to reduce capacity and to eliminate 
subsidies worldwide in the steel industry.
    It doesn't make sense, but there is a national problem, and 
as I said, my personal view is that this country is rich enough 
to have a national prescription drug program for everybody and 
a national health care program for everybody.
    Mr. Strickland. And I think we all agree. Mr. Klinefelter, 
would you agree that we need those two things?
    Mr. Klinefelter. Yes, I would.
    Mr. Strickland. But the fact is that Mr. Klinefelter has 
laid out the particular circumstances that have impacted the 
steel industry and the lack of appropriate action on the part 
of this government for a long period of time. Just as we 
decided to take special action to help the airline industry at 
a point in time, it seems to me that this is a particular 
industry with a particular set of historical circumstances with 
the particular need, with the particular relevance to our 
national security that gives us more than adequate 
justification for taking action which is directed toward a 
particular industry.
    That does not relieve us of the responsibility of dealing 
with all the other workers and all the other industries in this 
country, and I hope to God that we have the courage to do that. 
But in the meantime, it seems that we need to take this 
particular action.
    I want to thank you, Mr. Collins. You have been 
forthcoming. You have shared your point of view, and I think we 
have heard it, but in my judgment, the arguments of Mr. 
Klinefelter and Mr. Broderick outweigh the concerns, perhaps 
even the legitimate concerns, you have raised here.
    Thank you, Mr. Chairman.
    Mr. Stearns. I thank my colleague, and we have to go for 
three votes. So we are going to adjourn the Subcommittee on 
Commerce, Trade, and Consumer Protection, and thank all of you 
witnesses. Is there one thing you wanted to add, Mr. 
Klinefelter?
    Mr. Klinefelter. Yes, just if you would indulge me, Mr. 
Chairman. A lot of people have driven a lot of distance behind 
me from Ohio, Indiana, Illinois, West Virginia, Pennsylvania.
    Mr. Stearns. Do you want to recognize them?
    Mr. Klinefelter. If the steelworkers who are here could 
stand up?
    Mr. Stearns. Why don't all you steelworkers do that, and 
let's give them a round of applause.
    Mr. Klinefelter. Once again, Mr. Chairman, thank you very 
much for this hearing.
    Mr. Stearns. We are delighted, and we want to thank all of 
you for participating and taking your time to come down here, 
and we appreciate your participation.
    Mr. Collins. Mr. Chairman, could I also put on the record 
that we want to thank the House steel caucus for its unfailing 
leadership on the steel trade problem over the last 30 years.
    Mr. Stearns. So noted.
    Mr. Collins. And also Mr. Dingell for blocking an Energy 
Department release of irradiated scrap that would have 
inundated the American mini-mill industry. Thank you.
    Mr. Stearns. So noted, and the subcommittee is adjourned.
    [Whereupon, at 12:47 p.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:]
 Prepared Statement of Hon. Phil English, a Representative in Congress 
                     from the State of Pennsylvania
    I would like to thank the Subcommittee for holding a hearing on the 
critical issue of steel industry legacy costs. It is my pleasure to 
present testimony before the subcommittee on this issue.
    Although today's hearing only examines H.R. 4646, The Steel 
Industry Legacy Relief Act, I would like to present the subcommittee 
with another approach to dealing with the legacy cost dilemma. I am 
pleased to be able to present this testimony in lieu of a hearing 
examining both legacy cost bills currently introduced in the House: 
H.R. 4646 as well as my bill, H.R. 4574, The Steel Industry Legacy 
Relief and Transition Act.
    As the short title of H.R. 4574 suggests, it seeks to accomplish 
more than a financial bailout of the domestic industry's responsibility 
as a result of legacy costs. It actively seeks to consolidate and 
rationalize the domestic industry through incentives and regulatory 
alterations: the only realistic method to ensure its long-term 
viability and health.
    The domestic steel industry has significant unfunded pension 
liabilities as well as massive retiree health care responsibilities 
that total $13 billion and cost the steel industry almost $1 billion 
annually. These pension and health care liabilities pose a significant 
barrier to steel industry consolidation and rationalization: barriers 
that could improve the financial condition of the industry and reduce 
the adverse impact of unfairly traded foreign imports.
    There are several reasons for Congress to act. Our trading partners 
do not face these seemingly insurmountable obstacles to consolidation, 
as their governments pick up the tab for health and pension costs 
through socialized medicine and state run pension schemes. 
Additionally, our trading partners consistently engage in protectionist 
and trade distorting practices in the area of steel: further insulating 
their domestic steel industries. Without these major obstacles to 
consolidation, steel companies in foreign countries are forming mega 
steel companies which will only place U.S. steel companies at a more 
serious competitive disadvantage in relation to their global 
competitors. For example, in the European Union, ARBED, its partner 
ACERALIA and UNISOR are combining into a new company. This will create 
an enormous steel company with an annual production capacity of 46 
million tons. This new firm would have almost three times the capacity 
of the largest U.S. mill.
    Time is a major factor for the domestic steel industry, however, as 
the safeguard remedy which the President implemented in March is not 
permanent. Consolidation must occur during the window of relief offered 
by the safeguard action. This brief window will last less than three 
years from today, maybe much less.
    Working to alleviate the legacy cost burden complements the ongoing 
efforts by the Administration to level the playing field for steel: 
Section 201 relief to provide breathing room for restructuring and 
consolidation and ongoing high-level talks at the OECD to reduce 
overcapacity and market-distorting trade practices in steel world-wide. 
The Administration's efforts will have a far greater effect if, through 
removing the largest barrier to domestic consolidation and 
rationalization, America's steel industry is able to continue to lead 
by example.
    Congress has the ability to encourage consolidation and 
rationalization by providing legacy relief only to those steelmakers 
who actively acquire or rationalize. It is also important to keep in 
mind that much damage has already been done to the steel industry and 
that the retirees, surviving spouses and their dependants should not be 
left in the lurch. That is why under H.R. 4574 the federal government 
would assume the health care obligations for retirees of steel 
companies that close.
    A summary of H.R. 4574's major provisions:

 This legislation provides for federal assumption of certain 
        steel retiree health care obligations that might otherwise 
        prevent or reduce needed capacity reduction and rationalization 
        in the U.S. steel industry, or which occur as a result of 
        capacity reduction.
 Federal assistance would be triggered in three situations: 
        when all or substantially all of one U.S. steel company is 
        acquired by another domestic steel company; when production 
        capacity is reduced within 5 years of such an acquisition; and, 
        when a U.S. steel company closes.
 Acquisition. Health care obligations and assets for retirees 
        would be assumed by the federal government. Pension obligations 
        would be subject to current laws under ERISA.
 Rationalization. If an acquiring company reduces production 
        capacity within 5 years of an acquisition, the federal 
        government would assume the retiree health care assets and 
        obligations for employees of the acquiring and acquired 
        companies who leave their jobs in connection with the 
        reduction. Pension obligations would be subject to current laws 
        under ERISA.
 Closing. The federal government would assume the retiree 
        health care obligations for retirees of steel companies that 
        close on or after January 1, 2000. Pension obligations would be 
        subject to current laws under ERISA.
 Pension benefit assistance would be provided through the 
        Pension Benefit Guaranty Corporation. Retiree health care 
        benefit assistance would be provided through a new federal 
        trust fund.
 A new trust fund would be established in the Treasury 
        Department to fund steel retiree health care benefits assumed 
        by the government. The trust fund would be funded by the 
        receipts from duties on imported basic steel mill products as a 
        result of the Section 201 action, assets of retiree health care 
        plans assumed by the government, a surcharge of $5 per ton of 
        products shipped that are produced with acquired steelmaking 
        assets paid by companies that acquire assets whose retirees are 
        included in the program, and additional appropriated funds as 
        necessary.
 The Labor Department would make eligibility determinations and 
        administer the provision of retiree health benefits coverage 
        using the trust fund's receipts. Retiree benefit coverage could 
        not exceed the level provided by the employer.
 The legislation also would create a new Steel Transition Board 
        that would provide expedited antitrust review of steel company 
        acquisitions. In deciding whether to approve a transaction, the 
        Board would be required to take into account the need of the 
        domestic steel industry to adjust to global market conditions.
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