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



 
   LOST JOBS, MORE IMPORTS; UNINTENDED CONSEQUENCES OF HIGHER STEEL 
                           TARIFFS (PART II)
=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                   WASHINGTON, DC, SEPTEMBER 25, 2002

                               __________

                           Serial No. 107-71

                               __________

         Printed for the use of the Committee on Small Business






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                      COMMITTEE ON SMALL BUSINESS

                  DONALD MANZULLO, Illinois, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
ROSCOE G. BARTLETT, Maryland             California
FRANK A. LoBIONDO, New Jersey        DANNY K. DAVIS, Illinois
SUE W. KELLY, New York               BILL PASCRELL, Jr., New Jersey
STEVE CHABOT, Ohio                   DONNA M. CHRISTENSEN, Virgin 
PATRICK J. TOOMEY, Pennsylvania          Islands
JIM DeMINT, South Carolina           ROBERT A. BRADY, Pennsylvania
JOHN R. THUNE, South Dakota          TOM UDALL, New Mexico
MICHAEL PENCE, Indiana               STEPHANIE TUBBS JONES, Ohio
MIKE FERGUSON, New Jersey            CHARLES A. GONZALEZ, Texas
DARRELL E. ISSA, California          DAVID D. PHELPS, Illinois
SAM GRAVES, Missouri                 GRACE F. NAPOLITANO, California
EDWARD L. SCHROCK, Virginia          BRIAN BAIRD, Washington
FELIX J. GRUCCI, Jr., New York       MARK UDALL, Colorado
TODD W. AKIN, Missouri               JAMES R. LANGEVIN, Rhode Island
SHELLEY MOORE CAPITO, West Virginia  MIKE ROSS, Arkansas
BILL SHUSTER, Pennsylvania           BRAD CARSON, Oklahoma
                                     ANIBAL ACEVEDO-VILA, Puerto Rico
                      Doug Thomas, Staff Director
                  Phil Eskeland, Deputy Staff Director
                  Michael Day, Minority Staff Director











                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on September 25, 2002...............................     1

                               WITNESSES

Aldonas, Hon. Grant, Under Secretary for International Trade, 
  ITA, Department of Commerce....................................     4
Jenson, Jon, CAE, Vice Chairman & President, Consuming Industries 
  Trade Action Coalition.........................................    18
Friel, Jennifer Johns, President, Mid West Fabricating Co........    20
Ajax, Erick, Vice President, E.J. Ajax and Sons, Inc., Fridley, 
  MN.............................................................    22
Carlson, Jay, President, G&R Manufacturing.......................    23
Dowding, Christine, President, Dowding Industries................    24
Robinson, Brian, President of Manufacturing, Wilson Tool 
  International..................................................    26
Johns, Bob, Director of Marketing, Sheet Mill Group, Nucor 
  Corporation....................................................    28

                                APPENDIX

Opening statements:
    Manzullo, Hon. Donald........................................    33
    Toomey, Hon. Nydia...........................................    35
    Phelps, Hon. David...........................................    40
    Jones, Hon. Stephanie Tubbs..................................    42
    Smith, Hon. Nick.............................................    43
    Hobson, Hon. David...........................................    47
    Visclosky, Hon. Peter J......................................    48
    Costello, Hon. Jerry.........................................    52
    Kucinich, Hon. Dennis........................................    53
Prepared statements:
    Aldonas, Hon. Grant..........................................    55
    Jenson, Jon..................................................    62
    Friel, Jennifer Johns........................................    70
    Ajax, Erick..................................................    73
    Carlson, Jay.................................................    76
    Dowding, Christine...........................................    79
    Robinson, Brian..............................................    83
    Johns, Bob...................................................    87
Additional information:
    Letter to Hon. John Ashcroft, Attorney General, Department of 
      Justice, from Chairman Donald Manzullo, House Small 
      Business Committee.........................................    97
    Response to Letter to Hon. John Ashcroft, Attorney General, 
      Department of Justice, to Chairman Donald Manzullo, House 
      Small Business Committee...................................    98
    Spot Market Price for Steel from Purchasing Magazine.........    99
    Steel exclusion request analysis by CITAC....................   100
    Written testimony of Wes Smith, E&E Manufacturing Co., Inc...   101
    Garza, Melita M. ``Steel Tariffs Taking a Toll.'' The Chicago 
      Tribune, September 10, 2002................................   109
    King Jr., Neil. ``So Far, Steel Tariffs Do Little of What 
      President Envisioned.'' The Wall Street Journal, September 
      13, 2002...................................................   112
    Matthews, Robert Guy. ``Steel Union Seeks Changes in Pacts.'' 
      The Wall Street Journal, September 23, 2002................   114
    ``Bush Tariffs Backfire on Local Steel Users.'' Sunday 
      Rockford Register Star, July 21, 2002......................   115
    Du Pont, Pete. ``Paying a Price for Steel Tariffs.'' The 
      Washington Times, August 15, 2002..........................   123
    Letters to Committee documenting steel price increases or 
      exclusion request problems.................................   124
Statements for the record:
    Letter from Bethlehem Steel to Chairman Manzullo, October 4, 
      2002.......................................................   189
    Response to Bethlehem Steel letter...........................   192












   LOST JOBS, MORE IMPORTS; UNINTENDED CONSEQUENCES OF HIGHER STEEL 
                           TARIFFS (PART II)

                              ----------                              


                     WEDNESDAY, SEPTEMBER 25, 2002

                          House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:05 a.m. in Room 
2360, Rayburn House Office Building, Hon. Donald Manzullo, 
Chairman, presiding.
    Chairman Manzullo. We will call this meeting of the Small 
Business Committee hearing to order. What I said two months ago 
is still true today. The higher steel tariffs imposed for a 
noble purpose have been devastating America's steel user 
manufacturers.
    Some in the steel industry are doing better. We all want a 
strong and vibrant steel industry, but there are 59 jobs in the 
steel consumer sector for every one job in the steel producing 
sector in America.
    I am going to waive the reading of my opening statement 
here because I understand we are going to have about three 
votes coming up at 10:30, but I just want to take 20 seconds to 
point out to you the headline that appeared in the Rockford, 
Illinois newspaper, Sunday, July 21st--``Bush tariffs backfire 
on local steel users.''
    [The information may be found in the appendix on page 115.]
    Chairman Manzullo. What started out as something well-
intended has turned into a monstrosity. I talked to a gentleman 
in my office from National Metalwares just 20 minutes ago. He 
has lost three contracts to the Chinese because he could no 
longer be competitive because of price gouging by the U.S. 
steel manufacturers.
    Another person in my office knows of a firm that is 
trolling China for $750 million worth of production. It is all 
going offshore. It is because of the tariffs on the steel.
    I will now yield to our ranking minority member, Ms. 
Velazquez.
    [Chairman Manzullo's statement may be found in the 
appendix.]
    Ms. Velazquez. Thank you, Mr. Chairman.
    Today, we are continuing our examination of the impact the 
Bush Administration's steel tariff has had on American small 
businesses. It remains no surprise to anyone here that the core 
of American heavy industry is weak, and that our steel 
producers are in trouble.
    Burdened with crippling legacy costs and facing foreign 
competitors who dump their steel here for valuable dollars, the 
President simply has to protect American steel to give the 
industry time to consolidate and grow stronger.
    The immediate effect of the tariffs has been to shore up 
this critical component of our economy while saving thousands 
of jobs. There has been some evidence that the tariff spiked 
steel prices for some small manufacturers, despite the fact 
that steel costs remain at historic levels--low.
    Now a few months later, I believe that the conclusion made 
then that this tariff has both positively and negatively 
impacted small businesses is just as true now as it was then. I 
will say again that this issue, like any other issue we deal 
with on this Committee, is complex and containsno easy answers 
or solutions.
    It is true that some small businesses were harmed by 
increased tariffs, but others have thrived. In a diversified 
production base some companies have done well and others need 
some help. This is not a black and white issue. These 
industries are, indeed, hurting. I realize that these tariffs 
are having a negative effect, but since we are concerned with 
all small businesses, I hope we can work together to find 
solutions to the challenges that face them.
    For example, the markets have fallen. Consumer confidence 
is down, and unemployment remains a present danger. The economy 
is affecting all businesses--small and large alike. Small 
businesses face a variety of challenges. Finding solutions to 
the tariffs problems will be good, but some will find them a 
way to contain health care costs.
    Steel costs has spiked by about 40 percent since the tariff 
was imposed. This is, indeed, shocking even though steel prices 
remain below historical levels, but health care costs have 
increased even more--10 percent on average each year during the 
past decade. These price hikes burden both steel-dependent 
companies and those entirely unrelated to the steel industry.
    Nearly 40 percent of Americans without health insurance 
work for small businesses. If we could cut this cost, we will 
more than make up for the increase in steel prices that small 
manufacturers face and help cover more Americans in the 
process. The issue we are addressing today is a difficult and 
complex one. I do not doubt that some small businesses have 
been harmed by the increase in steel tariffs, though some have 
benefited.
    I look forward to addressing the challenges that all small 
businesses in America face, and I look forward to working with 
my friends on both sides to find solutions to them. Thank you, 
Mr. Chairman.
    Chairman Manzullo. I yield the time it would have taken for 
my opening statement to Mr. Toomey, and then we will go 
directly to Mr. Aldonas' testimony.
    Mr. Toomey. Thank you very much, Mr. Chairman.
    Mr. Chairman, as you know, I am a passionate believer in 
free markets and free trade. I have voted to reduce trade 
barriers and expand trade at every opportunity from the trade 
promotion authority to free trade agreements with Jordan, 
bilateral trade agreement with Vietnam and permanent normal 
trade relations with China.
    In fact, last year I held a Small Business Subcommittee 
hearing on Trade Promotion Authority and its impact on small 
business exports and farmers; and we heard from a number of 
witnesses the benefits of free trade and the opportunities it 
presents for small businesses, farmers and workers. I would 
like to thank Under Secretary Aldonas for participating in that 
hearing, and I welcome him back today.
    I am convinced when people have more freedom to exchange 
the goods and services they produce, including with people in 
other countries, all parties benefit. Unfortunately, though, 
Mr. Chairman, the world's steel market is not a free market. 
The President's temporary safeguards under Section 201 of our 
nation's trade laws will allow the steel industry the time 
needed to carry out further investments and restructuring.
    More importantly, it will give foreign governments and 
foreign steel producers an incentive to reduce their 
inefficient, subsidized excess capacity, which is really at the 
bottom of this problem. I am very sympathetic to the problems 
that small businesses are facing, and I want to be helpful in 
any way possible to ensure that small businesses in America are 
able to acquire the necessary steel products to operate their 
businesses.
    First and foremost, we are here to work with you to address 
the very legitimate concerns you are going to raise today.
    Having said that, Mr. Chairman, I must say I think our fire 
is being unfairly aimed at the domestic steel industry. It is 
not the domestic industry or the modest price recovery that is 
now occurring that is at the root of this problem. The problem, 
as the president has correctly identified, is foreign over 
capacity.
    The truth is that steel prices, prior to the President's 
steel program, were at a 20-year low. This is the result of a 
massive, worldwide over capacity in steel production, which was 
caused by foreign government policies, such as subsidization 
and protection in their home markets. The flood of steel 
imports that has resulted has cost thousands of jobs, dozens of 
bankrupt companies and the devastation of entire towns and 
communities.
    The President understood this problem, and that's why he 
initiated a three-part plan to address the steel crisis. This 
plan calls for negotiations to eliminate foreign market 
distortions; negotiations to eliminate foreign over capacity 
and investigation of the effects of steel imports on the 
domestic market under Section 201 of our trade laws.
    After the most intensive investigation in its history, the 
International Trade Commission ruled in a unanimous six to 
nothing vote that imports were the primary cause of the serious 
injury to the domestic steel industry. It is essential that we 
keep in mind that the effects of low-price imports are not just 
low-priced steel for consuming industries, but by undercutting 
the U.S. market with imports, foreign producers have put our 
domestic steel industry at risk.
    The President announced Section 201 tariffs in March 2002 
to help remedy this situation. Now I know that tariffs can 
cause harm. I believe they should only be used as an absolutely 
last alternative when all other remedies have failed, but such 
exactly was the case regarding foreign subsidized steel by 
March 2002 when the president decided that it was the only 
remaining viable option.
    The bottom line, I believe, is this. Only when they know 
that we are willing to retaliate with tariffs, can we 
realistically expect foreign governments who heavily subsidize 
their steel productions to reduce those subsidies and this 
massive distortion of the global steel market.
    Steel prices are beginning to return to normal levels, but 
prices are only now reaching the level of average steel prices 
over the last 20 years. At this point, the process must be 
given time as prices recover and the industry has an 
opportunity to restructure.
    The President also included a release valve under his 
Section 201 program. The product exclusion process was 
instituted to allow certain steel imports to enter the United 
States market duty free. The domestic industry has worked with 
the administration and its customer----
    [Mr. Toomey's statement may be found in the appendix.]
    Chairman Manzullo. Pat, how are you doing on time? I really 
want to get to the Under Secretary before the bells go off in 
15 minutes.
    Mr. Toomey. Well, I appreciate that, Mr. Chairman. I will 
just wrap up then, very quickly.
    Chairman Manzullo. Let's do it very quickly.
    Mr. Toomey. And simply make the point that many products 
are not included and not covered in the tariffs. There have 
been many exceptions, and I believe it is in everyone's 
interest--steel mills and customers--that there be a healthy 
domestic steel industry. I think this tariff decision puts us 
on that road. I thank the Chairman.
    Chairman Manzullo. Thank you very much.
    Our first witness on this panel is the Honorable Grant 
Aldonas, who is the Under Secretary of the International Trade 
Administration. I look forward to your testimony, Mr. 
Secretary.
    Mr. Aldonas. Thank you, Mr. Chairman.
    Chairman Manzullo. Can you pull the mike closer? Thank you.
    Mr. Aldonas. Absolutely. The first thing I would like to do 
is request that I submit my written statement, Mr. Chairman.
    Chairman Manzullo. The entire statement will be submitted 
to the record. We are advised, Mr. Secretary, that even though 
you have to leave, you have members of your staff that will be 
sitting here, listening to the entire testimony from the second 
panel.
    Mr. Aldonas. Absolutely.
    Chairman Manzullo. I appreciate that. Thank you.

      STATEMENT OF GRANT D. ALDONAS, UNDER SECRETARY FOR 
INTERNATIONAL TRADE, INTERNATIONAL TRADE ADMINISTRATION (ITA), 
                     DEPARTMENT OF COMMERCE

    Mr. Aldonas. Thank you, Mr. Chairman, Congresswoman 
Velazquez and members of the Committee for inviting me to 
testify today.
    I want to thank you, Mr. Chairman, for holding the hearing. 
Under your leadership, as you have worked together, the 
Committee has proved to be a consistent advocate for American 
small business; particularly, the many firms that represent the 
heart of U.S. manufacturing.
    One of the many points in which I know we agree is the need 
to expand export markets and level the playing field for our 
small- and medium-sized manufacturers. Trade offers substantial 
benefits to American small businesses. It is in our best 
interest to enable them to pursue free trade as small- and 
medium-sized enterprises make up 97 percent of all American 
exporters.
    I am sure that you and I also agree on the fact that we 
need to rebuild trust in our trade policy, which frankly has 
been broken over the last decade--specifically, trust between 
Congress and the Executive Branch and between government and 
the people that our policies are intended to serve.
    In the President's view we can only expect the American 
people to support an aggressive, forward-looking trade agenda 
if we can assure them that we will look out for their interest 
at the negotiation table. I am here to affirm that we are.
    There is understandably a need for a strong administration 
position on behalf of U.S. manufacturers, but I have to 
emphasize that steel lies at the heart of our manufacturing 
industry. The recent safeguard measure on steel imports 
illustrates one of the examples of the administration's 
commitment to work on behalf of the American public.
    What I want to do is really put the president's decision in 
context. The president's efforts on steel are rooted in an 
effort to restore market conditions to the steel industry, 
which has been beset for decades with government distortions. 
Our steel companies face significant challenges. Most notably, 
they must compete with state-owned and state-subsidized steel 
producers.
    I think one single statistic is always helpful to bear in 
mind when you talk about the level of distortion in the steel 
trade globally. Before the last 15 years of privatizations, 
governments owned 75 percent of the steel industry worldwide. 
That was the market in which our producers had to compete.
    Sadly, after 15 years of privatization, government still 
owned 25 percent of the industry worldwide, which is entirely 
insulated from market competition. That's the challenge that 
our guys have to compete with in a global market where, 
frankly, our duties are low. The barriers to trade are low in 
our market as they aren't in other markets. That's why we 
oftentimes become a dumping ground for steel.
    While critics of the president's action have often charged 
that the domestic steel industry is plagued by problems of its 
own making, the industry has actually proved to be very 
innovative over the last several decades. In fact, generally, 
critics of the steel policy have a tendency of think about the 
U.S. steel industry as being monolithic in that is made up 
solely of integrated firms with 70-year old technology. 
Frankly, nothing could be farther from the truth.
    Fifty percent of our steel production now comes from 
minimills using the latest electric arc furnace technology--the 
most efficient producers in the world. Many of what were 
previously integrated firms have moved in a direction of 
hanging on to their finishing facilities and now import slab 
from abroad as a way of reducing their unit costs.
    The integrated firms have, in fact, moved up the value 
chain into niches where they can sustain their existing cost 
structure and still turn a profit, but really does depend on 
the playing field being level at the end of the day, and 
ensuring that the competition in the marketplace is fair.
    Toward that end, the president put forward a long-term 
solution to the problems that plague global steel trade. While 
the emphasize of the hearing today is on the safeguard measure 
under Section 201, I want to emphasize that the first steps the 
President took--for a President who is often accused of 
unilateralism--was for the first time to bring all the steel-
producing countries of the world together to take a step toward 
eliminating excess capacity and then establishing new rules, 
new disciplines on government intervention in the market so we 
don't continue this cycle of government intervention in the 
marketplace and then a U.S. response under our trade laws.
    In the long run the administration has sought a solution to 
a more stable steel market and will benefit both producers and 
users alike by providing greater certainty. In the short term, 
however, we continue to monitor the impact of the safeguard 
measure on U.S. businesses; particularly, steel-consuming 
industries.
    We did act within the framework of the Section 201, 
including the president's initial determination, as Congressman 
Toomey has already alluded to, to provide relief where needed 
without overburdening consumers. The president established a 
process to exclude products that are not sufficiently available 
from domestic sources.
    We were very hard on the U.S. steel industry, as they will 
tell you, in that process trying to ensure that they could 
provide proof that products were, in fact, manufactured in 
commercial quantities and available before we would deny an 
exclusion request. 727 such requests have been granted, and 
each year which the safeguard is in effect, additional products 
can be considered for exclusion.
    In addition, we will continue to meet with the steel-
consuming industries to work on individual problems. In fact 
Secretary Evans and I will be meeting with small businesses 
from Ohio, Indiana, Pennsylvania, Illinois and Minnesota later 
today.
    I have to say also that the domestic steel industry has 
actually been very helpful and responsive where we have faced 
individual situations and pointed out where, for example, the 
service supply centers were jacking up prices and there was a 
way by selling direct to address the problems that consumers 
faced in the marketplace.
    Many of the exclusions that we granted, in fact, went to 
small businesses. I am just going to cite three examples--the 
Industrial Nut Corporation, a small family-run company in 
Sandusky, Ohio was granted an exclusion for large hexagon bars 
that are used as an input in precision machine nuts; Grasche, 
USA, a small company with 38 employees in North Carolina 
received an exclusion for cold rolled sheet for saw bodies; 
Stamco Industries of Euclid, Ohio is a small business supplier 
in the automotive industry and received an exclusion for hot 
rolled steel.
    The President has asked us to continue to monitor the 
impact of the steel safeguard. I'm sure the steel industry 
would agree the President has made clear that there is no free 
ride in theSection 201 process. We have consistently asked the 
steel industry to provide us with their plans for adjustment; how they 
would use the breathing space that the three years under the safeguard 
will provide and they have responded.
    We are engaged now, after a September 5th deadline, and a 
series of meeting with steel companies individually to review 
those plans, and to mark progress in terms of their adjustment. 
And I have to say, having looked at the latest news, that there 
is an awful lot of adjustment that has already taken place.
    I think what you're seeing in the marketplace right now is 
that, not only have firms gone through bankruptcy and 
reemerged, stripped of some of their previous excess capacity; 
but you are finding that a lot of companies are diversifying 
how they produce their steel in a way that will make them 
leaner and more efficient when the safeguard ends.
    In the meantime, though, the administration is still 
committed to enforcing the U.S. trade laws. We want to use them 
as a catalyst. The president has reinforced for us, as 
Secretary Evans does almost on a daily basis that our goal is 
not simply to prosecute investigations under the trade laws, 
but to try and resolve the underlying trade disputes that often 
give rise to these trade cases.
    In other words, I think the action under Section 201 is a 
catalyst to move the whole process forward on a multilateral 
front, and we will continue to use that pressure going forward 
so we can achieve an outcome that is good for both steel 
producers and users in the marketplace. Thank you, Mr. 
Chairman.
    [Mr. Aldonas' statement may be found in the appendix.]
    Chairman Manzullo. Thank you, Mr. Secretary.
    Congressman Phelps had a short opening statement that he 
wanted to read. I will yield to you, David, for that purpose.
    Mr. Phelps. Thank you, Mr. Chairman. I certainly want to 
thank you for holding this hearing, as well as the ranking 
member. It's very important that we talk about this matter.
    In my congressional district in Central Southern Illinois, 
the effects of illegal steel dumping have been devastating. I 
have to admit to you I don't relish the idea of looking the 
steel worker in the eye and seeing the fear that is 
demonstrated--the uncertainty of tomorrow.
    Many of their widows have been left with lack of health 
care provisions. Many of them that have been forced to retire 
or have retired are facing these devastating situations in 
their lives.
    Of the 31 companies that have filed for bankruptcy, four of 
those in Illinois have been included in that. Over 5,000 steel 
workers have lost their jobs in Illinois--in Central and 
Southern Illinois. This is unacceptable. When you look at the 
19th District, 27 counties, the largest geographic district 
east of the Mississippi, I can tell you these trade policies 
have done nothing but kill us.
    I can take you up and down the landscape of downstate 
Illinois and demonstrate how we've closed shop after shop.
    [Mr. Phelps's statement may be found in the appendix.]
    Chairman Manzullo. How are you coming with your opening 
statement? I want to get on with asking questions of the Under 
Secretary before we head to votes.
    Mr. Phelps. We know that the Section 201 steel tariffs 
imposed by President Bush were helpful and I applaud his 
efforts and I firmly believe they have been effective; but even 
with this elevation of prices that we are experiencing now at 
the June 2002 levels, I want to point out this is not 
inflation. It is the beginning of a market recovery.
    So we cannot afford to let our investment slide and our 
steel industry to go to waste. The tariffs are a strong step in 
the direction of economic recovery. Hopefully, the exemptions 
that were imposed will not be as great as we threatened to be. 
But we hope that the potential for the steelindustry will 
recover, and it can if we cooperate and enforce our present laws. Mr. 
Chairman, thank you.
    Chairman Manzullo. What is your time frame, Mr. Secretary?
    Mr. Aldonas. I am here as long as you want me here, Mr. 
Chairman.
    Chairman Manzullo. We have got three votes that are going 
to take at least 30 to 40 minutes. Are you okay on time?
    Mr. Aldonas. I will go and get a cup of coffee.
    Chairman Manzullo. We will take five minutes now and see 
how far we can get ourselves. Will that be all right?
    Mr. Aldonas. Sure. Absolutely.
    Chairman Manzullo. My question is about the next round of 
exclusion requests. Why that can't start immediately? Why it 
has to wait until November until the meetings begin with 
decisions expected in March?
    Mr. Aldonas. Frankly, it is to provide a little certainty 
to the market. So traditionally, what has been done in 
safeguard actions is we've established an annual process.
    So we will provide a set of exclusions. What we will do is 
we will take a look on an annual basis and see what has 
happened under those exclusions as well as see where there are 
other demands in the marketplace.
    But in some respects, the goal of the safeguard is to 
ensure that our steel industry does have some breathing space, 
and what I really mean by that, Mr. Chairman, is access to 
capital. And until the capital markets are certain about the 
underlying economic conditions, it is a little difficult for 
them to make investments. So you've seen a lot of fluctuation 
up until we close the exclusion process.
    I think things are leveling out at this points. So once the 
market sees the ground rules are set for a period of time, then 
I think it's easier for the companies to get the capital 
they're going to need to make the adjustments. We will open the 
process up again in November.
    Chairman Manzullo. What is bothering me about the 
exclusionary process, and I will be quite frank, is that the 
decisions to exclude are as political as the decision to impose 
the tariff in the first place.
    In fact, in the last round of exclusions, it was the U.S. 
steel companies that got half the exclusions and they, 
themselves, wanted cheap imported foreign steel, so they could 
take and slice that up and sell it back to the steel users--
many of whom are here today--at 30 to 40 percent price 
increases.
    Why were the U.S. steel manufacturers--the ones who 
complained about importing of steel--granted half the 
exclusions to import the very steel whose prices they said were 
wrong and which lead to the 201 situation in the first place?
    Mr. Aldonas. First, I need to take exception, Mr. Chairman, 
with the impression that this was political. I know that the 
press; particularly, in the Wall Street Journal and a number of 
other places, described the exclusion process either, A, as 
being bending over backwards for domestic political 
constituencies or alternatively, bending over backwards for our 
foreign trading partners. It was neither.
    Now the President set out a basic standard, which was we 
were going to grant exclusions where steel was not available in 
particular grades with particular chemistry in reasonably 
commercial quantities.
    The problem that the steel industry themselves face is 
there is actually no merchant market for slab any in the United 
States. So if you are going to get slab to realign your plant, 
either you are chipping away at your own inventory, which would 
have made sense over time.
    But if you are caught short, and you want to do the realign 
and we want to continue the adjustment process in the steel 
industry in our view it made sense to grant them exclusion for 
slab from abroad. That was consistent with the original 
exceptions that the President granted for slab at the outset.
    What we have seen, frankly, is a higher demand for slab 
than we expected as a part of that process. So I would have a 
tendency to view what we did for the steel industry at the tail 
end of the exclusion process something that was consistent with 
the President's initial action in terms of providing that 
exclusion for slab because there is simply no merchant market 
for that in United States.
    Chairman Manzullo. The argument also would then apply to 
the steel users. They ended up being second-class to the steel 
producers. They wanted the very same thing. They wanted the 
bread and butter of steel so they could make their products. So 
the administration discriminated against the producers in favor 
of the manufacturers. Don't you think that is inconsistent?
    Mr. Aldonas. I don't see it that way, Mr. Chairman. Apart 
because what we really did press very hard on was whether or 
not a product was produced in the United States, and I have 
gone through the Midwest recently, what I think--a lot of the 
small businesses that I talked with would agree is that the 
steel that they use is garden variety steel that is 
manufactured in the United States.
    From the steel industry's perspective, with respect to 
slab, there is no merchant market for slab in the United 
States. The only source is abroad.
    Chairman Manzullo. That brings up another point. Mastercoil 
Spring in McHenry, Illinois filed for an exclusion and the 
response from Sumiden was an objection. Maybe the Attorney 
General should be involved in this. Because lo and behold, 
after the exclusion was denied, Sumedin sent this memo to 
Mastercoil.
    [The information may be found in the appendix on pages 146-
150.]
    Chairman Manzullo It says ``Currently Sumiden does not have 
production capacity to produce 100 percent of requirements. We 
would have to provide delivery information on an order by order 
basis.'' And the price of coil was 33 percent more; this, to 
me, is what it means to have political exclusions.
    The steel companies came in. Their statements were accepted 
as gospel. No one could go beyond the face of them. You didn't 
give the steel users the opportunity to challenge them.
    The whole system of exclusions were skewered and bent in 
favor of the objectors. And now we come back here, and my 
question to you is, when we have obvious fraud that took place 
on the part of Sumiden Wire Products Corporation out of Dixon, 
Tennessee, with a memo coming after these exclusions were 
denied, do you have the authority to go back----
    Mr. Aldonas. Sure.
    Chairman Manzullo [continuing]. And to take a look at those 
exclusions?
    Mr. Aldonas. What I have asked the----
    Chairman Manzullo. Do they have to wait until March?
    Mr. Aldonas. No. I mean, this is one of those incidents 
where, which I have said to a number of the users that I've met 
with--is where there is real evidence that the objection was 
not one that was based in fact, we will want to take a hard 
look at that.
    We didn't design this system to impose a dead weight loss 
on our consuming industries. So where they had a legitimate 
claim, we wanted to grant the exclusion where something wasn't 
being produced in the United States of that type or grade. So 
where there are instances wherethere was an objection 
registered, and in fact, that objection didn't prove to be accurate. I 
don't wand the legal finding to it.
    Chairman Manzullo. They lied.
    Mr. Aldonas. In those instances, I think we want to go back 
and take a look at them. What I have done is invite the users, 
when they have those situations, to get in touch with us 
directly because I do want----
    Chairman Manzullo. A bunch of them are going to see you 
later on this afternoon.
    Mr. Aldonas. I know that, Mr. Chairman. I do want to say, 
though, in defense of the folks who--my colleagues at the 
Commerce Department--they did an extraordinary job. You can 
appreciate that in a process like the exclusion process. You 
will get a lot of pressure from both the steel consumers and 
the steel producers.
    These guys played it right down the middle. They understood 
what the standard was that the President had announced, and 
they pressed very hard. Is it possible in instances we didn't 
go far enough? Sure. Absolutely. And we want to take a look at 
them.
    Chairman Manzullo. We have go vote. We are going to stand 
adjourned and appreciate your indulgence. Thank you.
    [Whereupon, at 10:37 a.m., the meeting was adjourned to 
reconvene at 11:15 a.m.]
    Chairman Manzullo. If all of you could please have a seat 
there, if you can find one, the hearing will be back in 
session.
    I have one more question, Mr. Secretary, and then we can 
finish up here. We also have another constituent, Arnold 
Engineering, in Marengo, Illinois. They import ARNOKROME-5C 
material and we have the same problem there. They have a 30 
percent tariff and are liable for another 8.47 percent 
antidumping duty on some very sophisticated material that is 
not made in the United States. They missed the May 20th 
deadline to file their exclusion request.
    These go on by the hundreds. I guess what I am asking you 
is probably the impossible, but we have to have a mechanism to 
process these new requests. Give me some guidance on how, 
either our office or somebody in your office that we can get 
these in. They are all urgent, but could you give me some 
guidance on this, Mr. Secretary?
    Mr. Aldonas. Well, certainly on the ones that we talked 
about before, Mr. Chairman, about situations where we are 
arguably--were mislead by a steel company's objection or they 
misfired in terms of the objection they registered, we want to 
hear about those because those are things we should address.
    They were in time. They made their application. Something 
that if the facts were not as we understood them, that is 
something that we ought to revisit. On the others, 
particularly, with respect to dumping, where the product is--in 
fact, there is an exclusion process, as I understand it, under 
the dumping laws as well. That is something where it would be a 
question of either talking with me or Faryar Shirzad, who is 
the Assistant Secretary for Import Administration.
    But as I have consistently said, Mr. Chairman, I think that 
consumers should use me as a voice in the process, and that I 
want to hear from them. When the President and the Secretary 
have talked about the need for an initiative with respect to 
manufacturing, we want to make sure we honor the fact that 
steel is at the core of that because I think that's the core of 
our manufacturing industry. But that certainly isn't to the 
exclusion of everybody else who at the Commerce Department we 
represent.
    Chairman Manzullo. I appreciate your openness. Ms. 
Velazquez?
    Ms. Velazquez. Thank you, Mr. Chairman. I thank you, Under 
Secretary Aldonas. After listening to Chairman Manzullo's 
complaints about whole exclusion process, how would you answer, 
or what type of comment can you make regarding those steel 
manufacturers who claim that the exclusion process is biased 
and unfair?
    Mr. Aldonas. I just want to clarify, Congresswoman, when 
you say steel manufacturers, do you mean the steel producers 
are saying that it's bias and unfair, or the steel consumers?
    Ms. Velazquez. Consumers.
    Mr. Aldonas. Consumers? The President laid out in his 
decision on March 5th, the standard which we would apply 
throughout the process. We were guided strictly by the 
President's standard, and that was if a product was not 
available in commercial quantities in the United States, we 
were going to grant the exclusion.
    I think our steel producers would vouch for the fact that 
we pressed very hard whenever they came in with an objection. I 
think there is instances, which the Chairman has alluded to, 
where we may not have pressed hard enough; but we really did 
press very hard to insist that we had evidence that they--not 
only they were going to produce it, and it wasn't just a 
question of saying they there capable of producing it; but I 
think actually produce it in the time frame that was relevant 
from the point of view of the consuming industry.
    So the fact that they could say, look, we can be up and 
running in two-and-a-half years, and that means we can produce 
the steel. That wasn't good enough for us. We had to say can 
you produce it now and can you satisfy the needs of the 
consumer? Otherwise, as far as we are concerned, the product is 
not made in the United States in all practical terms.
    So the bias in the system was one to use only the standard 
applied by the President, but to lean very heavily on the steel 
guys to say we really have to understand whether you can 
produce this way now in a way that is relevant, commercially, 
from the point of the consumer.
    Ms. Velazquez. How can you explain how the steel tariffs 
are part of the administration's three-year program to assist 
the steel industry?
    Mr. Aldonas. Congresswoman, it's a good question. 
Traditionally, what you are trying to do with one of these 
safeguards is you create a price wedge between what had been 
the pricing situation and what would be something more nearly 
historical market conditions. The 30-percent tariff was 
designed to do that. I have to say steel prices, while they are 
up in some categories, and up significantly in some categories, 
overall they haven't actually recovered to the historical 
levels even with the 30-percent tariff.
    In fact, looking forward toward the end of the year, steel 
prices in the spot market are already softening again because 
of softer demand and increasing imports, despite the tariffs.
    But the point was to make sure that you drove that price 
wedge in there so that the capital markets would see that there 
was a little more profitability on behalf of the steel 
companies and that they could go to the capital markets and 
look for opportunities for them to try and, either retrofit 
their existing plant to become more competitive or engage in 
mergers and acquisitions or consolidations that would make them 
leaner and more efficient.
    Ms. Velazquez. Mr. Aldonas, the Consuming Industries Trade 
Action Coalition is recommending that the administration get 
rid of the tariffs. Can you share your comments on that?
    Mr. Aldonas. Well, in my view, the tariffs the President 
put in place haven't yet served their purpose. And I look at 
that two ways. One, we haven't yet seen the kind of adjustment 
in our own industry that the breathing space is designed to 
encourage. It's happening, but it's not complete. So I think it 
is going to take some more time for that process to play out.
    The other thing is to the extent that tariffs serve as 
leverage with respect to our trading partners. We have 
accomplished a lot in the OECD negotiations, but we are nowhere 
near ourgoal. I think that we have to stay the course in terms 
of trying to ensure that other trading partners come around because, 
really, the solution to this problem in the steel industry is not the 
201. Our own steel industry will tell you that.
    Until we get to the root cause of the problem, we haven't 
really solved it. We will continue in this cycle that we go 
through every 10 years, which nobody has an interest in doing. 
I was reminded at the break that the steel industry in Paris at 
the most recent round of talks stood up and were unanimous 
about wanting to go forward with market reforms. It was only 
when the governments came to the table in the meetings later 
that we started to have trouble.
    So what I heard from industry across the board was an 
understanding that there is going to have to be adjustment in 
all countries in terms with coming to grips with the problem. 
We have a little bit more difficult time when we get the 
governments in the room to talk about that stuff.
    Ms. Velazquez. You mentioned before that access to capital 
was an important issue. Can you please expand on that?
    Mr. Aldonas. Sure. Well, first, let me say that access to 
capital isn't the only issue. The market has been working with 
brutal efficiency in terms of driving adjustment through the 
industry with 34 bankruptcies and an awful lot of plant 
closures, but with more capital available, for example, it 
allows an integrated company to realign plants that will make 
them efficient going forward.
    It allows companies to engage in acquisition strategies 
that would consolidate capacity so that what is left in the 
U.S. market is the most efficient production. It would also 
allow investment of research and development, which would allow 
all U.S. companies to move up the value chain and earn a higher 
rate of return.
    Ms. Velazquez. Mr. Aldonas, are you aware that the 
administration, through the SBA loan programs, that these 
programs have been cut--the funding has been cut?
    Mr. Aldonas. I am aware of that.
    Ms. Velazquez. Would you approach the President and 
economic advisor, Mr. Lindsey to tell that at this time is the 
wrong approach?
    Mr. Aldonas. Certainly, in terms of my own experience with 
my good friend Hector Barreto and all the work that SBA does, 
anything we can do to reinforce the SBA, but I will have to 
look into that.
    Ms. Velazquez. Yes. The administrator, believe me, he has 
done, and he is trying to do everything he can because, he as a 
businessman, understands the need for access to capital; and 
how this loans programs through SBA played an important role. 
So 40 percent of most loans in this country that are provided 
to small business come through SBA. So it is not Mr. Barreto. 
It is Mr. Lindsey and it is the President.
    Mr. Aldonas. No, all I was commenting on is the fact that I 
think Hector is doing a wonderful job. I know that on the 
export side, Hector and I have collaborated a lot. He is 
somebody who you can have a lot of confidence in, but I am 
happy to take the message back. I will raise it with Secretary 
Evans this afternoon.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Chairman Manzullo. Congresswoman Tubbs-Jones.
    Ms. Tubbs-Jones. Thank you, Mr. Chairman. Good morning. 
Just in case people don't know, I hail from the great city of 
Cleveland, the home of LTV Steel. The home of many small steel 
manufacturing companies, and we have gone through a significant 
loss of jobs and restructuring and reworking with regard to the 
steel industry. I have offered several pieces of legislation 
trying to address the issue of legacy costs on behalf of the 
steel industry.
    I wonder, Mr. Aldonas, what is your position on legacy 
costs and how do we pay for the legacy of great people who have 
worked in the steel industry forever and ever and ever and 
deserve to have some type of retirement program that would 
cover their health care costs?
    [Ms. Tubbs-Jones's statement may be found in the appendix.]
    Mr. Aldonas. Well, my instinct is always to say what is 
available already. And when we look hard at the legacy cost 
question, what we found was--and let me break it down. With 
those folks who were over 65 and already retired, the Pension 
Benefit Guarantee Corporation would take up 97 percent of their 
pension.
    They would have Medicare, Medicaid and low cost insurance 
programs, Medigap, available to them from the government. And 
then, with the folks who were 45 to 65, who--I think it's 
reasonable to say they should still find work elsewhere during 
that period of their lives as you and I are going to have to 
do.
    To the extent that you could help them in the interim with 
their health care costs, it is pretty clear that under the 
Department of Labor's National Emergency Grants, you could make 
block grants to communities to try and address that particular 
issue.
    So in fact, when we looked at it from the point of view of 
the administration, it looked like there was a panoply of 
programs available from the U.S. government that could actually 
help address that without having to provide additional money 
from the Congress.
    The other point I think is fair to say is that----
    Ms. Tubbs-Jones. Let me stop right here for a minute. Are 
you saying there are programs that could, in fact, cover those 
costs in communities like the City of Cleveland, but that's a 
``could.'' That is not that you're committing--that the 
administration is committing dollars for that purpose, correct?
    Mr. Aldonas. No. What we have said is we are interesting in 
trying to work with communities on that.
    Ms. Tubbs-Jones. No, go back.
    Mr. Aldonas. What you asked me, Congresswoman, was what 
was----
    Ms. Tubbs-Jones. Will you answer my question, sir? The 
question--answer my question. The question is that you could do 
that. You are not committed to doing that, have you, sir?
    Mr. Aldonas. The question you asked me was whether----
    Ms. Tubbs-Jones. No, answer that question. You could do it, 
could you not, sir? Excuse me, Mr. Chairman, I am going to be 
kind.
    Chairman Manzullo. I would instruct you to let the witness 
answer the question.
    Ms. Tubbs-Jones. But he doesn't want to answer the 
question, but you could, correct?
    Chairman Manzullo. Give him the opportunity to do so, 
please.
    Ms. Tubbs-Jones. Mr. Chairman, thank you.
    Mr. Aldonas. But we have not had anyone take us up on that, 
and this was a subject of a great deal of discussion at the 
time the President took the action under 201.
    Ms. Tubbs-Jones. You haven't had anyone come to you and 
say, okay, that the legacy costs are significant and we're 
applying to you to take over those legacy costs through those 
programs, is that correct?
    Mr. Aldonas. What we have had is a number of companies that 
have come and said to the Pension Benefit Guarantee Corporation 
that we want you to take over the pension costs. That has taken 
place. In fact, the PBGC has actually been proactive in many 
instances in removing the legacy costs from certain companies 
since they act in some sense as a steward of the pension 
program. So that action has taken place.
    I was actually discussing more narrowly the point about the 
Labor Department programs, and in that case I don't purport to 
speak for the Labor Department. I know that the programs are 
available, and that it was clear to many of the folks we were 
talking to, including the steel workers unions, that those were 
possibilities.
    I don't know whether any community has actually come 
forward and asked for national emergency capital.
    Ms. Tubbs-Jones. Before you said no one had asked, did you 
not, sir, in your answers?
    Mr. Aldonas. To the best of my recollection, no one has 
asked for that----
    Ms. Tubbs-Jones. You can represent that?
    Mr. Aldonas. I just did.
    Ms. Tubbs-Jones. But you are not speaking for the 
Department of Labor?
    Mr. Aldonas. No.
    Ms. Tubbs-Jones. Let me ask another question, okay? If you 
will allow me.
    Mr. Aldonas. Yes.
    Ms. Tubbs-Jones. In addition to legacy costs, there are 
small businesses who believe that, as a result of the tariffs 
being imposed, that their businesses are suffering. When you 
look at tariffs, is there a way in which small business can be 
successful or benefit as well as the larger steel industry can 
benefit? And if so, what is that balance or twix-between that 
we can weigh in to do so?
    Mr. Aldonas. I think the answer is it depends on their 
pricing power in the marketplace. Small businesses that are 
stuck between a service supply center, which is not a steel 
producer, but acts a middleman who is jacking up prices on the 
one hand; and they buy in very small quantities, isn't going to 
have any market power with respect to their supplier.
    On the other hand, they are not likely to have a lot of 
market power with respect to the upstream industry--the auto 
industry, for example, to whom they sell. They are going to be 
caught in a vise. Where small business have more a market nitch 
where their product is more unique and things like that, and 
they have the pricing power, I think they can pass the price 
on.
    A point to make is that prices are already starting to 
abate in the steel industry. So if you look forward to the 
fourth quarter, you can already see spot prices starting to 
soften, which I hope, which in addition to exclusions will 
provide some relief to small businesses.
    Ms. Tubbs-Jones. I don't want to presume that small 
business is jacking the prices as you have said. I am sure 
there are some small businesses who have succeeded out----
    Mr. Aldonas. That is not what I said, Congresswoman. What I 
said was service supply centers who are middlemen between the 
steel producers and the small businesses where the consuming 
industries are reading the market and driving the prices up 
higher than that which steel producers are selling in the 
marketplace.
    Ms. Tubbs-Jones. You know what, I don't want to take my 
time to read back what you said, but I know that you said that 
small businesses are jacking up prices.
    Mr. Aldonas. I did not.
    Ms. Tubbs-Jones. Let me finish, and just let me finish.
    Chairman Manzullo. You are out of time here.
    Ms. Tubbs-Jones. I am out time. So let me complete with 
this, sir. I don't want to presume that there are small 
businesses across this country who are not doing the job that 
they think are--they are not true business people who are 
engaging in conduct that would be inappropriate. So I am going 
to be there fighting on their behalf, sir.
    Mr. Aldonas. Wonderful.
    Chairman Manzullo. I guess as the Chairman, I have the last 
comment. Thank you, Mr. Secretary. We have in our book of steel 
correspondence, Mr. Secretary, letters from steel manufacturing 
users, accompanied with letters from the steel suppliers, and 
the steel suppliers, the middle men are attaching letters 
coming directly from the steel manufacturers.
    One of them is Bethlehem Steel. I would just like to 
mention names because I like to hold people accountable. I 
really would challenge the statement that the so-called middle 
men, or the steel suppliers, are responsible for gouging. The 
steel companies call it profit recovery.
    I have written to the Attorney General. He has not had the 
kindness to answer my letter yet asking for an investigation 
for collusion, and anti-trust, monolopolistic type of 
practices.
    [The information may be found in appendix on pages 97-98.]
    Chairman Manzullo. It has not happened. I can show you. In 
fact, you have the latest steel correspondence book, I would 
you track in there exactly the fact that it is the steel 
manufacturers themselves break a contract with the steel 
suppliers, saying, sorry, we are breaking the contract and the 
steel suppliers have to pass that bad news on to the steel 
users.
    You had a comment?
    Ms. Velazquez. You just mentioned that the Attorney General 
didn't respond. He hasn't responded?
    Chairman Manzullo. No, he has not responded.
    Ms. Velazquez. So maybe we need to subpoena him.
    Chairman Manzullo. Well, let me take that under 
consideration.
    [Note for the Record: The Justice Department responded on 
October 3, 2002. See page 98.]
    Chairman Manzullo.Mr. Secretary, I want to thank you for 
your indulgence, and to thank you for being here. I thank you 
also for the willingness to work with us on those exclusions 
that obviously fell through the cracks.
    Mr. Aldonas. Thank you for the opportunity.
    Chairman Manzullo. Thank you, again. You are excused.
    [Recess.]
    Chairman Manzullo. We have the second panel here. 
Congressman Nick Smith, would you like to introduce your 
constituent. Your statement will be made a part of the record.
    Mr. Smith. Thank you, Mr. Chairman, thank you. I do welcome 
Christine Dowding from Dowding Industries here.
    Just let me briefly say that the high tariffs in Michigan 
and many other parts are having the result of losing jobs and 
driving business out. Just for the statistics, for every one 
person working in the steel-producing industry, there is 57 
people working in the steel-using industry.
    The economist in Michigan suggest that we are going to lose 
6 to 10 jobs for every 1 job we save in steel-producing. With 
that, it's my honor to introduce Chris Dowding, president of 
Dowding Industries and Dowding Industries is a 36-year-old 
family-owned stamping business that employs about 140 workers 
in my district. I am very proud to have Chris here today.
    I might add that many of the steel-using industries have 
come to me. They would like to be added to the 700-odd 
exemptions that the administration has already made on giving 
exemptions for some of the steel for particular industries that 
causes great distortion.
    I have a Fortune 500 company that is threatening to move 
out. This is one company that is under duress because of the 
problems of the tariffs. I applaud the Committee for holding 
this hearing and certainly welcome Chris Dowding, who is the 
president of Dowding Industries. So thank you.
    [Mr. Smith's statement may be found in the appendix.]
    Chairman Manzullo. We appreciate your participation. 
Congressman Hobson, you alsohave a constituent that is here 
today.
    Mr. Hobson. Thank you, Mr. Chairman. First of all, let me 
say to you, Mr. Chairman and members of this Committee, I 
really appreciate all the hearings you have had relating to 
small business. As you know, we have had a couple of other 
areas where we have worked together to try to improve things 
for small business, and I really appreciate the proactive 
stance you have taken, not just for this hearing, but with a 
couple of other issues that we have taken on and your 
championship of that.
    I, today, want to introduce my constituent Jennifer John 
Friel, President of Midwest Fabricating in Amanda, Ohio. I have 
toured this facility and seen first-hand how hard it has been 
for this company to operate in these uncertain times. Midwest 
is representative of other small businesses that drive my 
state's economy.
    Most are family-owned and operated, and I think there are a 
couple in this room besides Midwest, and they are vital to our 
local communities just like a lot of other small businesses. I 
am a small businessman by background myself.
    Nick Smith was talking about the business as it affects 
Michigan, and the steel-consuming businesses, such as Midwest 
have 20 employees in the State of Ohio for every 1 that is a 
steel-production job. So we have a lot of people that are 
involved in the manufacturing side of this.
    But the interesting thing about this is that Midwest is 
incurring a lot of problems because of these tariffs, and 
hasn't purchased any imported steel. This is occurring not only 
there, but other people in this room from our district are 
having the same problem.
    I think the tariffs were well-intended, but I think they 
are creating new problems without solving the old one. If they 
were designed to save our nation's steel producers, who is 
going to rescue Midwest and other companies as they suffer from 
these tariffs?
    The other thing I would like to say, and I can't say this 
for Midwest, but I have seen those letters that you referred to 
before where people just broke the contract and they just said 
if you want you, you are going to pay it. We don't care what 
agreements we made before. That's the deal. I think that's a 
terrible way to do business in our society. I don't think it 
should be stood for. With that, at this point, introduce 
Jennifer to all of you.
    She runs a wonderful company in Fairfield County, Ohio. She 
has a couple of locations there. Thank you for allowing these 
people to come in and tell their stories.
    [Mr. Hobson's statement may be found in the appendix.]
    Chairman Manzullo. Thank you for participating. You are 
both welcome to sit on the panel as long as you can, and we 
will go from there.
    Our first witness is Jon Jenson, President of the Consuming 
Industries Trade Action Coalition. We look forward to your 
testimony.
    Mr. Hobson. He is from Ohio, also; but he is not from my 
district or Stephanie's.
    Chairman Manzullo. Okay. That's great.

   STATEMENT OF JON JENSON, CAE, VICE CHAIRMAN & PRESIDENT, 
     CONSUMING INDUSTRIES TRADE ACTION COALITION (CITAC), 
                        INDEPENDENCE, OH

    Mr. Jenson. Mr. Chairman, the Section 201 tariffs are 
reeking havoc in the steel market for downstream manufacturers, 
despite what you are hearing today. Skyrocketing prices, 
uncertain supply due to allocations and lengthening lead times, 
broken contracts and growing quality problems are forcing steel 
users to the brink of disaster.
    We urge the administration to end this tax on steel-using 
industries as soon as possible.
    We thank you for your leadership and your continued 
attention to the steel issue. Many of the witnesses at the 
Committee's July 23rd hearing testified to the damage done by 
the steel tariffs. As you will hear from the witnesses today, 
the situation has not gotten any better. In fact, it's gotten 
much worse.
    The exodus of business to offshore manufacturers who can 
obtain steel at globally competitive prices is accelerating. 
Particularly alarming are shocking indications that more, new 
designs for parts and components for future products are being 
shopped overseas. Once this business leaves this country, it is 
not likely to return.
    Furthermore, the ripple effect of the tariffs impacts the 
companies that supply steel-using manufacturers such as service 
centers, machine tool builders, welders, finishers, platers, 
assemblers and others. The list of well-documented reasons for 
ending the steel tariffs is more compelling than ever.
    First, the tariffs are doing far more harm than good to our 
economy at a time when we can ill afford it. Second, they do 
not address the cause of the steel industry's problem, which is 
the non-competitiveness of certain integrated producers due to 
relatively high costs and operating inefficiencies.
    Third, they threaten relationships with our trading 
partners. Fourth, they interrupt critical steel imports that 
are absolutely essential since we must depend on imports to 
supply 20 to 25 percent of our domestic demand. Fifth, they 
restrict fairly as well as unfairly traded steel for which 
antidumping and countervailing duty laws exist and are widely 
used.
    Sixth, ironically, the tariffs inhibit and delay 
realization of the very goal for which they were imposed--the 
rationalization, restructuring and consolidation of non-
competitive U.S. steel capacity. How much damage must be done 
and how many U.S. jobs have to be lost before the 
administration recognizes that the steel tariffs was a mistake 
and must be lifted?
    Exclusions are not the answer. The exclusion process, the 
only mechanism for providing relief for steel users is a blunt 
instrument ill-suited for the micromanagement of the 
international steel market. It's a flawed process, inadequate, 
ineffective, inherently unfair and manipulated to the 
disadvantage of the steel user.
    The steel companies would have you believe a lot of things, 
among them that the exclusion process gutted the Section 201 
safeguard remedies. That's not the case. Steel tariffs still 
covers 75 percent of the tonnage potentially subject to the 
tariff--about 9 million tons per year.
    Furthermore, about half of the excluded tonnage is semi-
finished steel for the sole use of U.S. steel companies 
themselves. Clearly, the domestic steel industry has no basis 
to complain, and the exclusion process was seriously flawed.
    Steel producers manipulated the process by representing 
that they were ready, willing and able to supply specific 
products when that was not, in fact, the case. The process was 
neither transparent nor fair. Those applying for exclusions had 
little opportunity to rebut objections raised by the steel 
producers.
    In many cases tonnage limitations on granted exclusions 
were simply inadequate. Further, the process is fundamentally 
dysfunctional because the benefit from any exclusion goes to 
those companies that import the product first. There is no 
guarantee that the companies that actually file for the 
exclusions will receive any benefit from the exclusions at all.
    The bottom line is that even after all these and other 
problems are resolved, the product exclusion process cannot 
solve all of the dislocations caused by the steel tariffs 
because manycompanies use domestic steel and are not eligible 
for product exclusions.
    The only solution is early review and repeal of these 
tariffs. Between 1995 and 2001, steel-using manufacturers, 
mostly small businesses, added 1,255,000 new jobs to the 
economy according to the Bureau of Labor Statistics. Today, 
they employ 13 million Americans compared to less than 200,000 
in steel-producing industries.
    Chairman Manzullo. How are you doing on time?
    Mr. Jenson. One paragraph.
    Chairman Manzullo. One paragraph? Make it short.
    Mr. Jenson. It is, indeed, ironic that such an important 
generator of economic growth is being punished by our steel 
trade policy. Here is that paragraph.
    Efforts to reduce the world's excess capacity of non-
competitive steel production are laudable, but are proceeding 
at a snail's pace--maybe we will see results some day. Steel-
using manufacturers who are struggling now for their survival 
should not be held hostage to this process. They can't want 
until some day. The tariffs must be lifted now regardless of 
the progress of the OECD negotiations. Thank you.
    [Mr. Jenson's statement may be found in the appendix.]
    Chairman Manzullo. Thank you for your testimony. We are 
going to have Mr. Mark Kennedy introduce his constituent, and 
then we are going to go to Mr. Hobson's constituent for the 
next testimony. That is Jennifer Friel.
    Mr. Kennedy.
    Mr. Kennedy. I thank you much, Mr. Chairman, and thank you 
and the Committee for bringing up this very important topic.
    I think when you look at the steel tariffs that were put in 
place six months ago, they were meant to help a few; but as we 
are hearing today, they have hurt many. We oftentimes hear the 
big companies story on this, but understanding how this effects 
small job-producing companies in our districts is absolutely, 
critically important.
    I have seen this over and over, but probably no case where 
it is more real than in the case that we bring before you today 
in Wilson Tool, a manufacturer in Hugo, Minnesota outside White 
Bear Lake. We have with us, Mr. Brian Robinson, the president 
of manufacturing of this company. I have been there. I have 
seen the exclusion that they should have received, and we're 
putting 40 jobs at risk.
    We are putting export jobs at risk when we are competing 
against foreign manufacturers and we impose a cost on our steel 
fabricators that is higher than their export competitors are 
facing. We are really putting out own economic vitality at 
risk.
    So I am very pleased to have Mr. Robinson with us here 
today, and just to show how this is impacting Minnesota, we are 
also very pleased to have Erick Ajax from Minnesota here as 
well. It is a very important issue, and I applaud you for 
bringing this issue up.
    Chairman Manzullo. Thank you for your participation.
    Our next witness is Jennifer Johns Friel. We look forward 
to your testimony.

     STATEMENT OF JENNIFER JOHNS FRIEL, PRESIDENT, MIDWEST 
                  FABRICATING CO., AMANDA, OH

    Ms. Friel. Thank you for inviting me to participate in this 
hearing. My name is Jennifer Johns Friel, as the Congressman 
said. I'm president of Midwest Fabricating Company. Midwest is 
a leader in the cold-forming of steel wire into special 
fasteners and rods for automotive, lawn and garden applications 
as well as a magnitude of components for various industrial and 
consumer products, including appliance, highway and housing 
construction.
    Midwest Fabricating is a family-owned corporation. We were 
started in 1945, headquartered in Amanda, Ohio. We also have 
operating divisions in Lancaster, Ohio and in Santa Fe Springs, 
California. We have approximately 260 families that rely on 
Midwest for their employment.
    My company has been adversely effected by the Section 201 
tariffs on steel, even though we only buy from North American 
producers. We process an average of 20 million pounds of 
material each year, which happens to be industrial quality rod.
    The steel tariffs have prompted our suppliers to 
dramatically increase the pricing of this material, and more 
importantly, extend the lead times from a historic 4 to 6 weeks 
to upward of 12 to 14 weeks.
    The 201 remedies have caused tremendous dislocation in the 
market that have seriously affected my ability to get the steel 
I need at a reasonable price. It is very difficult to operate 
under these conditions. Our customers will not consider price 
increases; do not give us firm schedules 12 to 14 weeks in 
advance; and therefore, we are not certain that today we are 
even buying the materials that we need to supply them in the 
future.
    Here is an example of the problem that we are facing. Our 
steel supplier pushed back a quoted lead time an additional 
three weeks. Since we owed parts to an assembly line that could 
not wait three weeks for parts, we had to purchase material on 
the spot market from a supplier that we consider to be 
substandard.
    Half of the material we purchased turned out to be 
defective, resulting in contaminated material throughout out 
supply chain. The sorting, evaluation and containment costs 
that were associated with this one order caused us to lose a 
substantial amount of money.
    Obviously, we don't want to, and more importantly, cannot 
afford to, continue to repeat situations like this. It is very 
difficult to run a business when you don't have any assurance 
that you will be able to obtain the raw material you need. 
While we are doing everything that we possibly can to obtain 
the steel we need, we are very concerned that a lack of steel 
will mean that we will not be able to supply particular orders.
    The pricing and delivery environment that has developed in 
wake of this Section 201 decision is also of concern to our 
customers. After the steel tariffs were put into effect, one of 
our longstanding customers placed a huge order with a Canadian 
supplier instead of with us because the customer was concerned 
that we would not be able to get the steel we needed. Now this 
order was worth $5 million a year over an eight-year span. We 
are a $25 million company. It is a significant order to us and 
the people who work with us.
    It will be very difficult to replace this business. This 
particular part will have a life span of eight years, as I 
said. It will not come up for redesign for another eight years. 
So even if these tariffs are not taken away today, I am still 
going to be suffering way after the three years, if they last 
that long, because of what has happened with the 201 decision 
right now.
    The steel tariffs have clearly harmed many downstream 
consuming industries. The impact, I think, is spreading far 
beyond what could have been anticipated into businesses such as 
mine. We are clearly an unintended consequence. Please help me 
and the people who work with me by taking action to help lift 
these tariffs as soon as possible. I thank you.
    [Ms. Friel's statement may be found in the appendix.]
    Chairman Manzullo. Thank you for your testimony. Our next 
witness is Erick Ajax from E.J. Ajax and Sons, Inc. They are 
metal stampers out of Fridley, Minnesota. We look forward to 
your testimony.

 STATEMENT OF ERICK AJAX, VICE PRESIDENT, E.J. AJAX AND SONS, 
                       INC., FRIDLEY, MN

    Mr. Ajax. Thank you very much, Mr. Chairman, for inviting 
me to testify today. I am vice president of E.J. Ajax and Sons, 
and we primarily produce hinges and other steel parts that are 
used in the appliance industry known as the light good 
industries, and also electrical enclosures that we sell 
worldwide.
    E.J. Ajax has made a concerted effort in the last 10 years 
to be internationally competitive. In the last decade we have 
made sizable investments in the professional development and 
training of each and every one of our employees. For the last 
five years, every employee in our company--from the janitor to 
the president--has average 200 hours a year of professional 
development and job-related education so that we can compete in 
the world market.
    We put every nickel of our profit for the last decade--the 
last two decades back into our machinery and equipment and 
paying our taxes. We have been able to reduce our total cost of 
labor from over 15 percent to down under 9 percent.
    Chairman Manzullo. Why don't you take a sip of water there. 
We won't charge you for the time.
    Mr. Ajax. Thank you, Mr. Chairman. So these efforts are 
really successful in helping us compete all over the world. We 
have, up until recently, been able to export more than a third 
of the steel hinges and parts. But I have to say that the 201 
tariffs have made it very difficult for us to sell 
domestically, yet abroad.
    We primarily buy hot rolled and cold rolled steel and 
galvanized from service centers. This is the plain manila 
material that we have helped our customers engineer into their 
product, and we estimate that 70 to 80 percent of this steel is 
purchased from domestic sources and always has been.
    However, since the imposition of the 201 steel tariffs, our 
raw material lead times have gone from days to months. Most of 
our long-term contracts were also broken within weeks of 
President Bush's proclamation of imposing the steel tariffs.
    We have been forced into the spot market in many cases, and 
this uncertainty as to supply makes it very, very difficult for 
us to continue to do business. In addition, the steel tariffs 
have increased our costs from between 30 and 60 percent. Keep 
in mind that the steel that we use in the hinges that sell to 
the world market represent 50 percent--50--of our total costs.
    Since the vast majority of our customers are unwilling to 
accept the prices increases, they have turned to the world 
market. We have been successful in passing a small, and I 
emphasize a small, portion of our price increases onto our 
customers. They have clearly told us that we are shopping those 
parts so that we can remain competitive in the world 
marketplace.
    Several of our customers have already began to purchase 
parts from the other countries, and some of them are seriously 
considering moving more and more of their manufacturing out of 
the United States. We have lost several Fortune 500 companies 
out of the Minneapolis area in the last 12 months and more are 
on the way.
    One of our largest customers just told me yesterday that a 
family of parts that we sell to them was recently quoted with 
three Chinese sources at a 50 to 70 percent savings over what 
we are currently charging for the part. That is a sizable 
contract that is really is about 10 percent of our total sales.
    Since the steel imports were imposed on March 5th, we have 
had to lay off a total of 20 percent of our work force. You 
talk about having to look someone in the eye--we have a small 
family business and this is very, very difficult. I can 
attribute that 20 percent directly to the 201 steel tariffs, 
and there is the prospect of more to come.
    On behalf of the employees of E.J. Ajax, and the other 13 
million employees that consume steel, we urge you to lift these 
tariffs as soon as possible. Thank you very much, Mr. Chairman.
    [Mr. Ajax's statement may be found in the appendix.]
    Chairman Manzullo. Thank you for your compelling testimony. 
Our next witness is Jay Carlson from G&R Manufacturing, Inc. in 
Naugatuck, Connecticut.
    Mr. Carlson. Naugatuck, Connecticut. That is correct.
    Chairman Manzullo. Is Congressman Nancy Johnson your 
member?
    Mr. Carlson. She is but she is not able to be here.
    Chairman Manzullo. I understand. We look forward to your 
testimony.

    STATEMENT OF JAY CARLSON, PRESIDENT, G&R MANUFACTURING, 
                         NAUGATUCK, CT

    Mr. Carlson. I thank you for inviting me to testify this 
morning. My name is Jay Carlson, and I am president of G&R 
Manufacturing. But I have got to be honest with you----
    Chairman Manzullo. Jay, could you put the mike closer to 
your mouth when testifying? Thank you.
    Mr. Carlson. I have got to be honest. I feel like I am 
preaching to the choir here because, as I see it, anybody who 
should be listening to our testimony this morning has already 
left the room. So that's actually a little bit disheartening.
    G&R Manufacturing is located in Naugatuck, Connecticut. The 
company began operations in 1972; primarily, as a metal 
stamping house. We have grown into a full-service turn key 
manufacturing facility. G&R Manufacturing provides everything 
from basic stampings, progressive stampings, transfer press 
eyelets as well as intricate multi-component assemblies. We 
currently employ 40 workers.
    G&R requires 550 tons of steel each year. We buy our steel 
domestically through service centers. The steel tariffs imposed 
by the present in March have reduced the availability of steel 
in the market to the point that our supply of steel is not 
reliable.
    Our service centers have been put on allocation. As a 
result, we have experienced sever shortages of certain steel 
grades as well as unacceptable increases in lead times for 
others. Lead times have increased from 4 to 6 weeks to 16 weeks 
or more. The increased lead times have places some of our 
automotive customers in potential lying down situations.
    In order to avoid this situation, we have had to pay extra 
of expedited shipping and obtain our steel from alternative 
sources. This has increased our costs significantly and it 
could potentially jeopardize the quality of our products. The 
alternative sources that we have to utilize are not necessarily 
the best quality, but they are our only alternative.
    In addition, we have to face steel price increases of 40 to 
60 percent. This translates into additional costs for my 
company of $100,000 to $200,000 a year. G&R is a small business 
and cannot absorb these costs, nor do we have the power to pass 
these higher costs onto our customers. We are already competing 
in a global market that is a rather uneven playing field in 
terms of labor, health and environmental costs.
    The steel tariffs have tipped the scales even further by 
making my steel costs substantially greater than those of my 
foreign competitors. On top of all that, our foreign 
competitors are able to import their product to this country 
duty-free. As a result, G&R Manufacturing, like many other 
small- and mid-size companies has a difficult time competing 
and finds it difficult to stayin business.
    I can tell you that G&R Manufacturing's experience is not 
unique. As a founding member of the Manufacturer Leadership 
Group of Connecticut, which consist of 180 small businesses in 
the Waterbury, Connecticut area, I know that the tariffs have 
had a ripple effect. As U.S. steel-consuming industries lose 
business, so do the companies that supply those industries--
such as service centers, finishers, platers and assemblers. The 
situation is only getting worse.
    The steel 201 tariffs need to be lifted as soon as 
possible. We operate on tight margins and a very competitive 
market. The hardship of these tariffs, and our inability to 
pass on any price increases, will costs not only jobs, but will 
also affect G&R Manufacturing's ability to survive. Thank you 
again for letting me testify this morning.
    [Mr. Carlson's statement may be found in the appendix.]
    Chairman Manzullo. Thank for your testimony. Our next 
witness is Christine Dowding. Could you bring the mike closer 
to you and bring it down just a little bit there. That's fine. 
Thank you. We look forward to your testimony.

STATEMENT OF CHRISTINE DOWDING, PRESIDENT, DOWDING INDUSTRIES, 
                        EATON RAPIDS, MI

    Ms. Dowding. Thank you, Mr. Chairman. Good morning, it is, 
indeed, an honor to appear before this Committee. My name is 
Chris Dowding.
    As Mr. Smith stated, I am the president of Dowding 
Industries with locations in Eaton Rapids and Springport, 
Michigan. I am the second generation of our family business 
that my father started in 1965. We are a steel user employing 
about 150 employees.
    We purchase nearly $7 million worth of steel that is turned 
into products for the diesel and automotive markets. Our 
customers are such companies as Cummins, Caterpillar, TRW and 
Borg Warner.
    The Section 201 steel tariff is having a devastating effect 
on my business. While we as steel users want producers to be 
stateside, I, as a small business, now feel like I am David 
facing the immense statute of Goliath.
    As a small business, we do not want steel producers as our 
foe. We want to join with our fellow Americans and find 
solutions to help the ailing steel industries. Solutions that 
do not put American steel users at risk of extinction. 
Solutions that do not pit 59 user jobs against 1 producing job. 
We need to join forces with a solution that does not put us at 
odds with each other. We are in business together here.
    There are enough economic constraints facing American 
companies against global third world competition as has already 
been addressed here today, such as the rising insurance health 
care costs. Let's not sustain another. We understand that 
President Bush has closed his door to this issue, and in the 
light of the terrorism facing America, I understand the 
priority.
    However, President Bush, we pray you will open your door 
and hear the voice of the small businessman in America. I am 
fighting for the survival of not only my company, but the 
survival of my industry, for small businesses all over America. 
The heart of America is small businesses. I am fighting for the 
long-term jobs of my employees, not the next election vote. My 
concern is how do we get the message to President Bush.
    My father frequently reminds me that God has blessed our 
company when I am feeling like we don't feel so blessed, based 
on the current conditions. We worked hard to make good business 
decisions as some of our counterparts have stated here today. A 
second generation trying to pass on my father's dream. I 
graduated from Northwestern University in 1990 with a Masters 
degreein Management. We have made a commitment to come out of 
every recession better than when we went in. We have invested in our 
people through two training grants with our local community college. We 
have purchased the latest technology in the world in both laser and 
machine cutting.
    We have purchased rundown factories and invested nearly 
half a million dollars in their renovations. We have survived 
the economic downturn of the heavy-duty truck market, and we 
had to lay off 130 people. I had to look at those people in the 
face and it is horrible. We came out of it and we have 
survived, and we still employ 150 people.
    My father's dream has been to develop our community and 
provide jobs for Americans, not move our company abroad. 
However, due to the steel tariffs, we have begun conversations 
with a Mexico-based company.
    Please understand this was not in my five-year goals or 
objectives that we established just last year. However, if this 
is what it takes to keep my family business ongoing, we will 
pursue it versus the alternative, which is the elimination of 
it. We are seeing an average of 16 to 20 percent increases in 
material prices, and I have that here and I am willing to 
submit it--as much as 66 percent on some of the items to the 
tune of $50,000 per month cost impact.
    On an annualized basis, this equals more than three times 
what my company has made, entirely, in the last two years. As 
if piece price wasn't enough alone, we are now faced with 
longer lead times, premium charges, charges due to unavailable 
material. As a small business user, we buy steel through 
service centers. Before the tariffs were imposed, our lead time 
on material was two to four weeks. It is now as much as six 
months and delivery and quality are unreliable.
    We recently had a promise, and we were told, I'm sorry, we 
can't deliver that after all. I am running out of time, so I've 
got to skip to the end.
    Our customers demand 3 to 5 percent cost reductions. They 
will not allow us to increase our prices. They are making us be 
competitive with Taiwan, Vietnam and Mexico; and if we can't 
match the price, we lose the work.
    It is an un-level playing field for the small business 
users, and why does anybody think a small business user can 
play in it any better than the big steel industry.
    Mr. Chairman, we are asking for an opportunity to stay in 
business and remain competitive in the global market. Without a 
reliable, competitive supply, Dowding cannot be a successful 
small business. I am confident there is another solution to 
help the ailing steel industry without victimizing small 
business USA and their employees.
    President Bush, let's talk. Thank you, Mr. Chairman, for 
this opportunity.
    [Ms. Dowding's statement may be found in the appendix.]
    Chairman Manzullo. Thank you for your enthusiasm and 
sincerity. Our next witness is Brian Robinson from--is it 
really Ham Lake?
    Mr. Robinson. I am from Ham Lake, yes. The company is in 
Hugo.
    Chairman Manzullo. Okay, I just never heard of Ham Lake 
before. There are a thousand lakes in Minnesota and they 
stopped counting. I know the story. Brian, we look forward to 
your testimony.

STATEMENT OF BRIAN ROBINSON, PRESIDENT OF MANUFACTURING, WILSON 
            TOOL INTERNATIONAL, WHITE BEAR LAKE, MN

    Mr. Robinson. Thank you, Mr. Chairman. My name is Brian 
Robinson, and I am the president of Wilson Tool International.
    Wilson Tool of White Bear Lake, Minnesota is a 36-year-old, 
privately owned corporation that is the world's largest 
independent manufacturer of punch press and press brake 
tooling. Wilson currently has 470 employees. In October of 2000 
we employed 770 employees.
    The total reduction of over 280 employees has taken place 
since that time due to the current economic down turn and its 
devastating impact on the manufacturing sector. As I sit here 
today, I currently have 40 more jobs at risk due specifically 
to the tariffs.
    I am here to tell you that the steel exclusion process did 
not work. It has unintended consequences for further job losses 
in the manufacturing sector. Wilson Tool has applied as early 
as October 2001 for an exclusion on cold rolled steel products 
engineered into special shapes, also known as profiles.
    Wilson applied for this exclusion because we were unable to 
purchase these profiles from a domestic source. Indeed, we were 
assigned an official ``N'' number to the exclusion request, and 
reasonably assumed that our exclusion request was accepted and 
would be considered.
    Accordingly, profile shapes remain subject to the 30 
percent tariffs. It does not make any sense to impose a tariff 
on a product that is not made in the United States. It does not 
help any domestic company and it simply increases our costs and 
makes it more difficult for us to compete in the marketplace.
    Wilson Tool has always had a commitment to buy steel 
products from domestic sources whenever possible. While Wilson 
currently purchases 85 percent of its steel from domestic 
sources, Wilson has had to import these profiles because we 
have been unable to purchase this material from a domestic 
source.
    When Wilson Tool first developed a need for these profiles, 
we actively solicited bids from all U.S. steel manufacturers 
capable of producing the profiles. Wilson required 29 separate 
profiles with varying sizes and quantity limitations ranging 
from 1 U.S. ton to a maximum of 21 U.S. tons per profile per 
year. Only one domestic company submitted a bid, and it did not 
meet the requirements and quantities or scope.
    Accordingly, Wilson has had to resort to foreign producers 
and accept the bid of Boehler-Uddenholm of Austria. Wilson 
Tools has worked with Boehler over the course of the last two 
years and spent tens of thousands of dollars to develop the 
profiles to our specs. This development process was lengthy in 
part because of all the products needed to be certified and to 
go through extensive quality control.
    Again, Wilson has always made a commitment to purchase 
steel from the domestic source; but when we cannot purchase the 
steel we need from the domestic source, we do not understand 
why we should have to pay Section 201 tariffs. It makes no 
sense. If the exclusion process of the tariffs remain, it 
definitely needs to be more transparent to the smaller 
business.
    In closing, I have come to Washington to testify because 
there is something inherently flawed with the process of 
obtaining an exclusion to the Section 201 tariff.
    When small business must engage lobbyists to represent them 
or to be compelled to travel to Washington in order to advocate 
their right to be heard, or when a tariff is imposed on 
domestic manufacturers for importation of raw steel product 
only to have their foreign competition import the same steel 
product produced from the same foreign mill as a finished 
product without a tariff, then we have a problem.
    It is obvious that the exclusion process does not work. 
Therefore, the tariffs do not work; and they have caused 
unintended consequences to the manufacturing sectors. Thank 
you.
    [Mr. Robinson's statement may be found in the appendix.]
    Chairman Manzullo. Thank you. Our last witness is Bob 
Jones, who is director of Marketing, Sheet Mill Group. Oh, Bob 
Johns. I am sorry. Somebody correct his name tag there.
    Mr. Johns. It's handwritten.
    Chairman Manzullo. Johns--J-O-H-N-S?
    Mr. Johns. That's correct.
    Chairman Manzullo. I am sorry. Bob Johns, who is the 
Director of Marketing of Sheet Products of Nucor Corporation. 
We look forward to your testimony. We are going to correct your 
name plate right now.
    Mr. Johns. I feel like the fire ant at the picnic here.
    Chairman Manzullo. You are doing fine. You might want to 
pull the mike closer to you. Thank you.

   STATEMENT OF BOB JOHNS, DIRECTOR OF MARKETING, SHEET MILL 
            GROUP, NUCOR CORPORATION, CHARLOTTE, NC

    Mr. Johns. I am Bob Johns of Nucor Corporation. We are a 
steel mill, obviously. Perhaps one of the reasons we are here 
is that we put a slightly different view of the 201 decision 
than a lot of people, and we have been known for plain talk.
    We put it in the context of the need for free and fair 
trade. And to us, fair trade means trade according to 
international rules agreed upon by the United States and over 
100 of its trading partners, not lawless chaos.
    Our trading partners have violated the antidumping and 
countervailing duty laws with respect to steel so pervasively 
that enforcement of our trade laws is virtually impossible. As 
a result of blatant violation of international trade rules, the 
domestic steel industry was undergoing unprecedented hardships.
    The updated number of the number of bankruptcies--our count 
is 35 as of a week and a half ago. Roughly 15 million tons of 
capacity was shut down, either temporarily or permanently. I 
might add, it was fairly suddenly. Even companies like Nucor, 
which is the most efficient steel producer in the world, were 
finding it difficult in our own home market.
    Clearly, something is dysfunctional with the world steel 
market. As the result of the presence of imports sold in the 
United States in violation of international rules, steel prices 
were, as Treasury Secretary O'Neil put it just a few days ago, 
fictitiously low. I think that it is worth repeating--
fictitiously low.
    The 201 relief has had a beneficial effect on three classes 
of small businesses not invited to today's hearing--small steel 
producers, companies supplying goods and services to the steel 
industry and steel users who depend on a reliable source of 
domestic steel and don't have a problem. There are literally 
hundreds of these countries in all parts of the United States.
    There is a representative of one of these companies here 
today, Doug Ruggles of Martin Supply Company. His operation 
nearest us is in Decatur, Alabama. Mr. Ruggles, who supports 
the 201 decision, had hoped to testify before you today, but 
unfortunately, he was not invited as he does not oppose the 201 
relief.
    The Committee has not heard from any of the other hundreds 
of small companies like Martin that supply the steel industry. 
I would hope the Committee would hold a hearing that would be 
inclusive of those small businesses supporting the 201 decision 
at some point.
    Some steel consumers have blamed the 201 for rising costs, 
increased import competition, andeven the movement of 
production overseas. If you look at their claims, you will see that 
many of these problems emerged well before the president acted. The 
over valued dollar and the sluggishness of the U.S. economy have had a 
much greater effect than any 201 relief.
    At the same time, the economy data do not indicate that 201 
relief has caused either rising prices or increased 
unemployment in the general economy. Steel prices have risen 
throughout the world--and this is kind of an update for people 
that make charts.
    In China, for example--and this is as of last week--
transaction prices now for hot rolled coil are higher than they 
are in the United States. If foreign manufacturers have any 
advantages in steel costs, those advantages are more than 
offset by the higher productivity of American workers and the 
costs of moving merchandise to the United States.
    As for the exclusion process, I can attest that it was not 
only exhaustive, but exhausting probably for all parties 
involved. The U.S. government granted over one-half of the 
exclusions requested. As a result, by our count, about 5.5 
million tons remain covered by the 201 remedy. Let me qualify 
that by saying its finished product.
    The supply issue is old news. Supply is balanced in most 
products, and becoming balanced rapidly in others and prices 
have stabilized at low levels by historic measures. The 
shortage and price message is no longer connected to reality in 
the products that Nucor makes.
    The president's decision to provide relief under 201 has 
had an immediate and positive effect on hundreds of small 
businesses across the United States. I implore you to ask Doug 
Ruggles. By ensuring that the U.S. steel industry can continue 
to supply its customers' needs, it will benefit the thousands 
of small businesses using steel as well as those supplying the 
steel industry and its workers for years into the future. We do 
thank you for the opportunity to express our views.
    [Mr. Johns' statement may be found in the appendix.]
    Chairman Manzullo. Well, thank you. We corrected your name 
plate. It is extremely important. I appreciate your testimony.
    We have another vote coming up here very shortly. Mr. 
Johns, do you know how much, if any, Nucor has increased the 
price of your steel in the past six months or so? Do you have 
those figures?
    Mr. Johns. We don't have a general figure. It really 
depends on the individual product line. Where there is no 
relief afforded by the 201 there have been zero price 
increases, in fact, decreases.
    Chairman Manzullo. You have had zero price increase----
    Mr. Johns. On some products. Do you know anything about 
Nucor's breadth of products?
    Chairman Manzullo. I know that you are a mini-mill, and I 
know that you are located in Charlotte, North Carolina.
    Has anybody here bought Nucor steel?
    Ms. Friel. Yes. Actually, we were getting quotes from Nucor 
January 1st, $16.20 a hundredweight. We got a quotation last 
week $19.65 a hundredweight, which is a 21 percent increase 
from Nucor.
    Chairman Manzullo. For what type of steel?
    Ms. Friel. It was cold rolled bar.
    Chairman Manzullo. Would you want to comment on that, Mr. 
Johns?
    Mr. Johns. I can't comment on cold drawn bar because that 
is a downstream product for us. I would have to look into that. 
I represent the flat roll division, and we are predominately 
involved in the hot rolled, cold rolled and coated products.
    Chairman Manzullo. So the product to which she testified is 
an increased step after it leaves your hands. Is that what you 
are saying?
    Mr. Johns. It's a downstream product for our division.
    Chairman Manzullo. For Nucor?
    Mr. Johns. For Nucor now. I certainly would like to look 
into that, but what I would also suggest is when we see the 
term ``price increase,'' and we see it all the time, I think it 
needs to be put into context because I look at all these 
wonderful charts around the room and I see they start at a 20-
year low created by illegal dumping, and the price was 
compelled by illegal dumping.
    When you make that the start and say increase versus what 
the price was in 1982, 1989, 1996, 1997, I would suggest that 
we have had a restoration as oppose to increases.
    Chairman Manzullo. But you know 201 doesn't deal with 
dumping. It deals with surges.
    Mr. Johns. I understand that.
    Chairman Manzullo. There has been no finding that the 
foreign products that were shipped here were at predatory 
prices or that the companies shipping them had been subsidized 
by the government. That element is not here. You had used it in 
your testimony.
    Mr. Johns. No, I would take you back to the genesis of the 
201. I also stated the pervasive nature of the violation of 
U.S. trade law had resulted in--by the time the President 
looked at this issue, there were about 200 active antidumping 
orders in place--proven violations of U.S. trade law--another 
50 pending. If you put yourself in our shoes, you are looking 
at product and country switching that had no end to it.
    Chairman Manzullo. My question here is these witnesses 
here----
    Mr. Johns. If you will allow me to finish the comment.
    Chairman Manzullo. I am sorry, go ahead.
    Mr. Johns. When you are dealing with that pervasive nature 
of violation of U.S. trade law, the only mechanism you have is 
the safeguard mechanism provided by the 201.
    Chairman Manzullo. You could have enforcement of the 
dumping laws.
    Mr. Johns. It's a two-year process from the beginning to 
relief.
    Chairman Manzullo. That is correct, but it is also the 
fairest because you can end up with retroactive tariffs.
    Mr. Johns. Very seldom.
    Chairman Manzullo. If it is done right, you can, and you 
can stop the practice.
    Mr. Johns. It does not normally fall back.
    Chairman Manzullo. But we have got people here who have 
testified to the fact that they have had price increases. Mr. 
Carlson testified that he had price increases of 40 to 50 
percent. Who is responsible for that?
    Mr. Johns. I will go back to the point I made before.
    Chairman Manzullo. But a TV costs less now than they did 10 
years ago. How far are you going to go back and say they were 
at an all-time low. I don't think that is a valid argument. You 
keep going back to where it was in the good old days.
    Mr. Johns. No, this is not the good old days. We are 
talking about a 20-year average.
    Chairman Manzullo. I don't know of any industry that says, 
well, these prices are not where they were years ago. Granted, 
it's the farming industry, and everybody knows what happened 
there. That is totally subsidized and there is a huge problem 
going on there, but I just don't see your point. What you have 
here is these people are desperate.
    If they go out of business, you won't have a market to sell 
to. That is the point they are trying to make, is eventually, 
one by one, they are going to get picked off. They are going to 
get closed down by the Chinese people. In fact, at the opening 
of this hearing, National Metalwares lostthree contracts to the 
Chinese.
    If they take any more hits, they are going to be out of 
business. And as this has a domino effect, because you won't 
have anybody to sell steel to. That's what they are concerned 
about. There is a balance in here that's missing.
    Mr. Johns. There is a balance clearly missing, and that is, 
you're hitting on the fundamental issues that we ought to be 
addressing, which are currency manipulation--the value of the 
U.S. dollar and trade practices by our so-called trading 
partners.
    Chairman Manzullo. We continue to work on that, but 
unfortunately, the administration is in favor of a strong 
dollar. We are just having a very difficult time. Where are 
those letters from the steel manufacturers? Jesco Industries 
here is a steel user out of Litchfield, Michigan. Some of their 
suppliers increased their prices dramatically. Some up to 50 
percent.
    Here is a letter from Crawford Steel Company. This says 
``Due to the Section 103 decided by the government to warrant a 
30 percent tariff on flat rolled imports, we have been forced 
to raise prices across the board on your sizes. Prices from the 
domestic mills have increased from $200.10 a ton to anywhere 
from $300 to $350 a ton as an unprocessed ban.''
    [The information may be found in appendix page 153.]
    Chairman Manzullo. Buhrke Industries out of Arlington 
Heights, Illinois employs 120 people, and they got a letter 
from their intermediary, which is Viking Materials, and they 
attached to it a letter from Bethlehem Steel that says the 
following purchase orders will be increased $4.50 effective 
June 1st.
    [The information may be found in appendix pages 156-161.]
    Chairman Manzullo. They take existing purchasing orders--
existing contracts and unilaterally raised prices. Has Nucor 
raised the prices on existing contracts?
    Mr. Johns. Nucor has honored its commitments on the 
agreements that we have with customers.
    Chairman Manzullo. Good for you. That is why we don't have 
any letters in here complaining about Nucor.
    Mr. Johns. I know you were looking for one.
    Chairman Manzullo. You bet. We were. I appreciate the fact 
that we don't have any evidence here on Nucor doing any 
gouging. We do have other companies that are involved in it.
    Mr. Johns, I want to thank you for the fact that there are 
no letters in here with Nucor. I thought I ought to let you 
know this. The purpose of this hearing, and the reason that you 
are outnumbered up there, is the fact that these people have 
not had a voice. Your industry has been welcomed into the White 
House.
    Your industry has had a lot of friends on Capitol Hill 
going around talking about this. The steel users have been 
scratching around trying to bring together a bunch of little 
people. They are little people, and it's very difficult to 
bring together hundreds, if not thousands, of small 
manufacturers compared to a relatively small number of steel 
manufacturers.
    So the only forum that they have been afforded is the Small 
Business Committee, which we call the Committee of last resort. 
When nobody else will listen to the little guys. That's why we 
have so many people that represent that perspective as opposed 
to yours.
    But I just want to tell you I appreciate your testimony. I 
appreciate your honesty and appreciate your integrity.
    Mr. Johns. I would encourage you to talk to Doug Ruggles 
about the other side of the small business.
    Chairman Manzullo. I can understand it. We have also talked 
to them.
    I have got to go vote to take part in this continuing 
process of democracy. I really look forward to working with all 
of you again. Mr. Johns, my door is open to you, also. This 
Committee is adjourned.
    [Whereupon, at 12:45 p.m., the Committee was adjourned.]



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