[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



 
  IMPACT OF THE SECTION 201 SAFEGUARD ACTION ON CERTAIN STEEL PRODUCTS

=======================================================================

                                HEARING

                               before the

                         SUBCOMMITTEE ON TRADE

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 26, 2003

                               __________

                           Serial No. 108-15

                               __________

         Printed for the use of the Committee on Ways and Means








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                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
E. CLAY SHAW, JR., Florida           FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut        ROBERT T. MATSUI, California
AMO HOUGHTON, New York               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM MCCRERY, Louisiana               JIM MCDERMOTT, Washington
DAVE CAMP, Michigan                  GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. MCNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia                 JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio                    XAVIER BECERRA, California
PHIL ENGLISH, Pennsylvania           LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona               EARL POMEROY, North Dakota
JERRY WELLER, Illinois               MAX SANDLIN, Texas
KENNY C. HULSHOF, Missouri           STEPHANIE TUBBS JONES, Ohio
SCOTT MCINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia

                    Allison H. Giles, Chief of Staff

                  Janice Mays, Minority Chief Counsel

                                 ______

                         Subcommittee on Trade

                  PHILIP M. CRANE, Illinois, Chairman

E. CLAY SHAW, JR., Florida           SANDER M. LEVIN, Michigan
AMO HOUGHTON, New York               CHARLES B. RANGEL, New York
DAVE CAMP, Michigan                  RICHARD E. NEAL, Massachusetts
JIM RAMSTAD, Minnesota               WILLIAM J. JEFFERSON, Louisiana
JENNIFER DUNN, Washington            XAVIER BECERRA, California
WALLY HERGER, California             JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania
JIM NUSSLE, Iowa

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.





                            C O N T E N T S

                               __________

                                                                   Page

Advisory of March 17, 2003, announcing the hearing...............     2

                               WITNESSES

Acevedo-Vila, Hon. Anibal, a Representative in Congress from the 
  Commonwealth of Puerto Rico....................................    33
A.J. Rose Manufacturing Company, David Pritchard.................    50
American Electroplaters & Surface Finishers, James M. ``Jim'' 
  Jones..........................................................   138
American Iron and Steel Institute, Andrew Sharkey................    80
Bakersfield Tank Company, Paul Nixon.............................    40
Bradford Research, Charles A. Bradford...........................   122
Campbell, James O., International Longshoremen's Association No. 
  3000...........................................................   130
Coalition for the Advancement of Michigan Tooling Industries, 
  Laurie Moncrief................................................   135
Committee on Pipe and Tube Imports 201 Coalition, Peter Dooner...    97
Connors, Charles W., Magneco/Metrel..............................    94
DiMicco, Dan, Nucor Corporation..................................    74
Dixie Industrial Finishing Company, James M. ``Jim'' Jones.......   138
Dooner, Peter, Committee on Pipe and Tube Imports 201 Coalition, 
  and Wheatland Tube Company.....................................    97
E&E Manufacturing Company, Wes Smith.............................    52
Georgia Industry Association, James M. ``Jim'' Jones.............   138
Gerard, Leo W., United Steelworkers of America...................    90
Hoekstra, Hon. Peter, a Representative in Congress from the State 
  of Michigan....................................................    11
International Longshoremen's Association Local No. 3000, James O. 
  Campbell.......................................................   130
Jones, James M. ``Jim,'' National Association of Metal Finishers, 
  Metal Finishing Suppliers Association, American Electroplaters 
  & Surface Finishers, and Georgia Industry Association, and 
  Dixie Industrial Finishing Company.............................   138
Knollenberg, Hon. Joe, a Representative in Congress from the 
  State of Michigan..............................................    13
Kucinich, Hon. Dennis J., a Representative in Congress from the 
  State of Ohio..................................................    30
Leuliette, Timothy D., Metaldyne Corporation.....................    43
MacLean-Fogg Company, Timothy N. Taylor..........................    37
Magneco/Metrel, Charles W. Connors...............................    94
Manzullo, Hon. Donald A., a Representative in Congress from the 
  State of Illinois..............................................    19
McCotter, Hon. Thaddeus G., a Representative in Congress from the 
  State of Michigan..............................................    27
Metaldyne Corporation, Timothy D. Leuliette......................    43
Metal Finishing Suppliers Association, James M. ``Jim'' Jones....   138
Moncrief, Laurie, Schmald Tool & Die, and Coalition for the 
  Advancement of Michigan Tooling Industries.....................   135
National Association of Metal Finishers, James M. ``Jim'' Jones..   138
Ney, Hon. Robert W., a Representative in Congress from the State 
  of Ohio........................................................    31
Niemand, Walter A., Texas Free Trade Coalition, and West Gulf 
  Maritime Association...........................................   132
Nixon, Paul, Bakersfield Tank Company............................    40
Nucor Corporation, Dan DiMicco...................................    74
Port of New Orleans, David P. Schulingkamp.......................   128
Pritchard, David, A.J. Rose Manufacturing Company................    50
Schmald Tool & Die, Laurie Moncrief..............................   135
Schulingkamp, David P., Port of New Orleans......................   128
Sharkey, Andrew, American Iron and Steel Institute...............    80
Smith, Wes, E&E Manufacturing Company............................    52
Strickland, Hon. Ted, a Representative in Congress from the State 
  of Ohio........................................................    25
Stupak, Hon. Bart, a Representative in Congress from the State of 
  Michigan.......................................................    22
Taylor, Timothy N., MacLean-Fogg Company.........................    37
Texas Free Trade Coalition, Walter A. Niemand....................   132
Trilla Steel Drum Corporation, Lester Trilla.....................    47
United Steelworkers of America, Leo W. Gerard....................    90
Visclosky, Hon. Peter J., a Representative in Congress from the 
  State of Indiana...............................................     8
West Gulf Maritime Association, Walter A. Niemand................   132
Wheatland Tube Company, Peter Dooner.............................    97

                       SUBMISSIONS FOR THE RECORD

Adler, Jr., William J., Stripmatic Products Inc., Cleveland, OH, 
  letter.........................................................   243
Advance Transformer Company, Rosemont, IL, Brian Dundon, letter 
  and attachments................................................   150
AllTrans Port Services, Inc., Galena Park, TX, Donna V. Rains, 
  letter.........................................................   152
American Axle & Manufacturing, Inc., Rochester Hills, MI, Jim 
  Thompson, letter...............................................   153
American Micro Steel, Inc., Watertown, CT, William A. Sullivan, 
  statement......................................................   154
Arroyo, Eric, Henry Technologies, Woodstock, IL, statement.......   198
ArvinMeritor, Inc., Troy, MI, Larry Yost, statement..............   157
Association of Cold-Rolled Strip Steel Producers, statement......   159
Association of International Automobile Manufacturers, Inc., 
  Arlington, VA, Timothy C. MacCarthy, letter....................   161
Automotive Trade Policy Council, statement.......................   163
Bates, Christopher M., Motor & Equipment Manufacturers 
  Association, Research Triangle Park, NC, statement.............   220
Berry, Hon. Marion, a Representative in Congress from the State 
  of Arkansas, statement.........................................   163
BIFMA International, Grand Rapids, MI, Thomas Reardon, statement.   164
Bliss, Sr., G.J., Metal-Matic, Inc., Minneapolis, MN, statement 
  and attachment.................................................   209
Brumfield, Wayne, Muncy Corporation, Enon, OH, letter............   224
Camp, Hon. Dave, a Representative in Congress from the State of 
  Michigan, letter and attachment................................   165
Carpenter Technology Corporation, Reading, PA, Michael L. Shor, 
  statement......................................................   179
Century Metal Products, Inc., Lowell, MA, Jeremy D. Field, letter   180
Consuming Industries Trade Action Coalition, statement...........   181
Costello, Hon. Jerry F., a Representative in Congress from the 
  State of Illinois, statement...................................   185
Dana Corporation, Toledo, OH, statement..........................   186
Delphi Corporation, Troy, MI, R. David Nelson....................    14
Dickson, Jeffrey S., KMS, Inc., West Columbia, SC, letter........   203
Dundon, Brian, Advance Transformer Company, Rosemont, IL, letter.   150
Emergency Committee for American Trade, statement................   188
Energizer Battery Company, St. Louis, MO, statement..............   191
Federal-Mogul Corporation, Southfield, MI, Ramzi Hermiz, 
  statement......................................................   194
Field, Jeremy D., Century Metal Products, Inc., Lowell, MA, 
  letter.........................................................   180
Flynn, Jack, Gross-Given Manufacturing Co., Saint Paul, MN, 
  letter.........................................................   196
Free Trade in Steel Coalition, Philadelphia, PA, Dennis Rochford, 
  letters and attachments........................................   230
Gerich, Bill, Hi-Craft Metal Products, Gardena, CA, letter.......   199
Gross-Given Manufacturing Co., Saint Paul, MN, Jack Flynn, letter   196
Guarantee Specialties, Inc., Cleveland, OH, Frank R. Makar, 
  letter.........................................................   196
Hearth, Patio, & Barbecue Association, Arlington, VA, Carter 
  Keithley, letter...............................................   197
Hedstrom Corporation, Bedford, PA, Craig S. Marton, letter.......   198
Heim, K.J., Volkert Precision Technologies Inc., Queens Village, 
  NY, letter.....................................................   247
Henry Technologies, Woodstock, IL, Eric Arroyo, statement........   198
Hermiz, Ramzi, Federal-Mogul Corporation, Southfield, MI, 
  statement......................................................   194
Hi-Craft Metal Products, Gardena, CA, Bill Gerich, letter........   199
Howell, Christopher E., Precision Metalforming Association, 
  Independence, OH, letter.......................................   228
Illinois Tool Workers, Inc., Glenview, IL, Michael J. Lynch, 
  letter.........................................................   200
Indianapolis Metal Spinning Co., Inc., Indianapolis, IN, James C. 
  Kaufman, letter................................................   203
Kahn, David J., Perfection Spring & Stamping Corp., Mt. Prospect, 
  IL, letter.....................................................   227
Kaufman, James C., Indianapolis Metal Spinning Co., Inc., 
  Indianapolis, IN, letter.......................................   203
Keat, Dennis, Su-dan Company, Inc., Rochester Hills, MI, letter..   244
Keithley, Carter, Hearth, Patio, & Barbecue Association, 
  Arlington, VA, letter..........................................   197
KMS, Inc., West Columbia, SC, Jeffrey S. Dickson, letter.........   203
Larson Tool & Stamping Company, Attleboro, MA, Daniel G. Larson, 
  letter.........................................................   204
Leutwiler, Nels R., Parkview Metal Products, Chicago, IL, 
  statement......................................................   225
Lincoln Electric Company, Cleveland, OH, John M. Stropki, Jr., 
  letter.........................................................   204
LMC Industries, Inc., Arnold, MO, Keith A. Suellentrop, letter...   205
Lynch, Michael J., Illinois Tool Workers, Inc., Glenview, IL, 
  letter.........................................................   200
MacCarthy, Timothy C., Association of International Automobile 
  Manufacturers, Inc., Arlington, VA, letter.....................   161
Macht, Linda Reichart, Tottser Tool and Manufacturing, Huntingdon 
  Valley, PA, letter.............................................   246
Makar, Frank R., Guarantee Specialties, Inc., Cleveland, OH, 
  letter.........................................................   196
Manenti, Thomas J., MiTek Industries, Inc., Chesterfield, MO, 
  letter.........................................................   216
Maritime Exchange for the Delaware River and Bay, Dennis 
  Rochford, letters and attachments..............................   232
Martin Supply Co., Sheffield, AL, Doug Ruggles, statement........   206
Marton, Craig S., Hedstrom Corporation, Bedford, PA, letter......   198
Mastercoil Spring Company, McHenry, IL, statement................   207
Matenaer Corporation, West Bend, WI, Warren Stringer, Jr., letter   209
Mautone, Louis C., Tella Tool & Manufacturing Co., Lombard, IL, 
  letter.........................................................   245
Metal-Matic, Inc., Minneapolis, MN, G.J. Bliss, Sr., statement 
  and attachment.................................................   209
MiTek Industries, Inc., Chesterfield, MO, Thomas J. Manenti, 
  letter.........................................................   216
Mitsubishi Motors North America, Inc., Normal, IL, Gary Shultz, 
  letter.........................................................   217
Mollohan, Hon. Alan B., a Representative in Congress from the 
  State of West Virginia, statement and attachment...............   218
Motor & Equipment Manufacturers Association, Research Triangle 
  Park, NC, Christopher M. Bates, statement......................   220
M.S. Willett, Inc., Cockeysville, MD, David R. Sandy, letter.....   223
Muncy Corporation, Enon, OH, Wayne Brumfield, letter.............   224
National Electrical Manufacturers Association, Rosslyn, VA, 
  statement......................................................   224
Nelson, R. David, Delphi Corporation, Troy, MI, statement........    14
Ormerod, John, Res Manufacturing Company, Milwaukee, WI, letter..   230
Parkview Metal Products, Chicago, IL, Nels R. Leutwiler, 
  statement......................................................   225
Perfection Spring & Stamping Corp., Mt. Prospect, IL, David J. 
  Kahn, letter...................................................   227
Port of Milwaukee, Milwaukee, WI, Eric C. Reinelt, letter........   227
Precision Metalforming Association, Independence, OH, Christopher 
  E. Howell, letter..............................................   228
Rains, Donna V., AllTrans Port Services, Inc., Galena Park, TX, 
  letter.........................................................   152
Reardon, Thomas, BIFMA International, Grand Rapids, MI, statement   164
Regula, Hon. Ralph, a Representative in Congress from the State 
  of Ohio, statement and attachment..............................   229
Reinelt, Eric C., Port of Milwaukee, Milwaukee, WI, letter.......   227
Res Manufacturing Company, Milwaukee, WI, John Ormerod, letter...   230
Rochford, Dennis, Free Trade in Steel Coalition, Philadelphia, 
  PA, and Maritime Exchange for the Delaware River and Bay, 
  letters and attachments........................................   230
Ruggles, Doug, Martin Supply Co., Sheffield, AL, statement.......   206
Ryan, Hon. Timothy J., a Representative in Congress from the 
  State of Ohio, statement.......................................   236
Sanda, Scott, Tro Manufacturing Co., Inc., Franklin Park, IL, 
  letter.........................................................   246
Sandy, David R., M.S. Willett, Inc., Cockeysville, MD, letter....   223
Sharp Manufacturing Company of America, Memphis, TN, Makoto 
  Takahashi, statement...........................................   236
Shor, Michael L., Carpenter Technology Corporation, Reading, PA, 
  statement......................................................   179
Shultz, Gary, Mitsubishi Motors North America, Inc., Normal, IL, 
  letter.........................................................   217
Spring Engineering and Manufacturing Corporation, Canton, MI, Tim 
  Tindall, letter................................................   237
Steel Manufacturers Association, statement.......................   238
Steel Truss & Component Association, Madison, WI:
    Keith Kinser, letter.........................................   243
    Kirk Grundahl, letter........................................   243
Stringer, Jr., Warren, Matenaer Corporation, West Bend, WI, 
  letter.........................................................   209
Stripmatic Products Inc., Cleveland, OH, William J. Adler, Jr., 
  letter.........................................................   243
Stropki, Jr., John M., Lincoln Electric Co., Cleveland, OH, 
  letter.........................................................   204
Su-dan Co., Inc., Rochester Hills, MI, Dennis Keat, letter.......   244
Suellentrop, Keith A., LMC Industries, Inc., Arnold, MO, letter..   205
Sullivan, William A., American Micro Steel, Inc., Watertown, CT, 
  statement......................................................   154
Takahashi, Makoto, Sharp Manufacturing Company of America, 
  Memphis, TN, statement.........................................   236
Tella Tool & Manufacturing Co., Lombard, IL, Louis C. Mautone, 
  letter.........................................................   245
Thompson, Jim, American Axle & Manufacturing, Inc., Rochester 
  Hills, MI, letter..............................................   153
Tindall, Tim, Spring Engineering and Manufacturing Corporation, 
  Canton, MI, letter.............................................   237
Tottser Tool and Manufacturing, Huntingdon Valley, PA, Linda 
  Reichart Macht, letter.........................................   245
Tro Manufacturing Co., Inc., Franklin Park, IL, Scott Sanda, 
  letter.........................................................   246
Tucker Industries, Bensalem, PA, Herbert Tucker, letter..........   246
Volkert Precision Technologies Inc., Queens Village, NY, K.J. 
  Heim, letter...................................................   247
Walker Corporation, Ontario, CA
    Michael R. Bermudez, letter..................................   247
    Audrey King, letter..........................................   247
Winzeler Stamping Company, Montpelier, OH, Michael D. Winzeler, 
  letter.........................................................   248
Wood Truss Council of America, Madison, WI
    Scott Arquilla, letter.......................................   248
    Kirk Grundahl, letter........................................   248
    Ryan J. Dexter, letter.......................................   248
Yost, Larry, ArvinMeritor, Inc., Troy, MI, statement.............   157
Zapp USA, statement..............................................   249


  IMPACT OF THE SECTION 201 SAFEGUARD ACTION ON CERTAIN STEEL PRODUCTS

                              ----------                              


                       WEDNESDAY, MARCH 26, 2003

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                     Subcommittee on Trade,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 10:11 a.m., in 
room 1100, Longworth House Office Building, Hon. Philip M. 
Crane (Chairman of the Subcommittee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                         SUBCOMMITTEE ON TRADE

                                                CONTACT: (202) 225-6649
FOR IMMEDIATE RELEASE
March 17, 2003
No. TR-2

                     Crane Announces Hearing on the

                  Impact of the Section 201 Safeguard

                    Action on Certain Steel Products

    Congressman Philip M. Crane (R-IL), Chairman, Subcommittee on Trade 
of the Committee on Ways and Means, today announced that the 
Subcommittee will hold a hearing on the impact of the section 201 
safeguard action on certain steel products imposed by the President on 
March 20, 2002. The hearing will take place on Wednesday, March 26, 
2003, in the Main Committee Hearing Room, 1100 Longworth House Office 
Building, beginning at 10:00 a.m.
      
    Oral testimony at this hearing will be from both invited and public 
witnesses. Witnesses are expected to include small and large steel 
consuming businesses, U.S. steel producers, and economic and financial 
analysts knowledgeable on the steel industry. Also, any individual or 
organization not scheduled for an oral appearance may submit a written 
statement for consideration by the Committee or for inclusion in the 
printed record of the hearing.
      

BACKGROUND:

      
    Acting under section 203 of the Trade Act of 1974, the President on 
March 5, 2002, announced a series of temporary trade measures to 
safeguard the U.S. steel industry against injury from imports 
(Investigation No. TA-201-73 Certain Steel Products). Steel tariffs 
ranged from 8 percent to 30 percent on nine categories of steel, and 
slab imports were subject to a Tariff Rate Quota (TRQ) of 5.4 million 
tons. The safeguard took effect on March 20, 2002, and is to be phased 
down over three years. The Administration excluded free trade agreement 
partners from the remedy (Canada, Mexico, Jordan, and Israel) and 
certain developing countries that ship less than 3 percent of total 
imports for each product category. In accordance with section 204 of 
the Trade Act of 1974, the International Trade Commission is scheduled 
to release a mid-term review of the safeguard measures by September 20, 
2003.
      
    The goal of this hearing is to promote awareness of the impact that 
the March 20, 2002, steel safeguard has had on U.S. steel consuming 
industries, domestic steel producers, and the U.S. economy, and also to 
examine whether the domestic steel industry has made adequate efforts 
to make a positive adjustment to import competition in the past year as 
required by the statute, and the efficacy of actions by the President 
to facilitate such efforts by the domestic steel industry.
      
    In announcing the hearing, Chairman Crane stated, ``The past year 
has shown us that the steel safeguard action has had wide-ranging 
effects on steel consuming industries and the U.S. economy. During this 
hearing, we will examine just how much of an impact that action has had 
on jobs in industries that are key participants in the American 
economy.''
      

FOCUS OF THE HEARING:

      
    The hearing would focus on changes in employment, wages, 
profitability, investment, sales, and productivity of steel consuming 
industries as a result of the safeguard action, whether the safeguard 
remedies affected steel prices and availability in the United States, 
and the effects of the safeguard on the domestic steel industry and the 
industry's efforts to restructure.
      

DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:

      
    Requests to be heard at the hearing must be made by telephone to 
Traci Altman or Bill Covey at (202) 225-1721 no later than the close of 
business, Thursday, March 20, 2003. The telephone request should be 
followed by a formal written request faxed to Allison Giles, Chief of 
Staff, Committee on Ways and Means, U.S. House of Representatives, 1102 
Longworth House Office Building, Washington, D.C. 20515, at (202) 225-
2610. The staff of the Subcommittee on Trade will notify by telephone 
those scheduled to appear as soon as possible after the filing 
deadline. Any questions concerning a scheduled appearance should be 
directed to the Subcommittee on Trade staff at (202) 225-6649.
      
    In view of the limited time available to hear witnesses, the 
Subcommittee may not be able to accommodate all requests to be heard. 
Those persons and organizations not scheduled for an oral appearance 
are encouraged to submit written statements for the record of the 
hearing. All persons requesting to be heard, whether they are scheduled 
for oral testimony or not, will be notified as soon as possible after 
the filing deadline.
      
    Witnesses scheduled to present oral testimony are required to 
summarize briefly their written statements in no more than five 
minutes. THE FIVE-MINUTE RULE WILL BE STRICTLY ENFORCED. The full 
written statement of each witness will be included in the printed 
record, in accordance with House Rules.
      
    In order to assure the most productive use of the limited amount of 
time available to question witnesses, all witnesses scheduled to appear 
before the Committee are required to submit 200 copies, along with an 
IBM compatible 3.5-inch diskette in WordPerfect or MS Word format, of 
their prepared statement for review by Members prior to the hearing. 
Testimony should arrive at the Subcommittee on Trade office, room 1104 
Longworth House Office Building, no later than Monday, March 24, 2003, 
in an open and searchable package 48 hours before the hearing. The U.S. 
Capitol Police will refuse sealed-packaged deliveries to all House 
Office Buildings. Failure to do so may result in the witness being 
denied the opportunity to testify in person.
      

WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE:

      
    Please Note: Due to the change in House mail policy, any person or 
organization wishing to submit a written statement for the printed 
record of the hearing should send it electronically to 
[email protected], along with a fax copy to 
(202) 225-2610, by the close of business, Wednesday, April 9, 2003. 
Those filing written statements that wish to have their statements 
distributed to the press and interested public at the hearing should 
deliver their 200 copies to the Subcommittee on Trade in room 1104 
Longworth House Office Building, in an open and searchable package 48 
hours before the hearing. The U.S. Capitol Police will refuse sealed-
packaged deliveries to all House Office Buildings.
      

FORMATTING REQUIREMENTS:

      
    Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
record or any written comments in response to a request for written 
comments must conform to the guidelines listed below. Any statement or 
exhibit not in compliance with these guidelines will not be printed, 
but will be maintained in the Committee files for review and use by the 
Committee.
      
    1. Due to the change in House mail policy, all statements and any 
accompanying exhibits for printing must be submitted electronically to 
[email protected], along with a fax copy to 
(202) 225-2610, in Word Perfect or MS Word format and MUST NOT exceed a 
total of 10 pages including attachments. Witnesses are advised that the 
Committee will rely on electronic submissions for printing the official 
hearing record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. Any statements must include a list of all clients, persons, or 
organizations on whose behalf the witness appears. A supplemental sheet 
must accompany each statement listing the name, company, address, 
telephone and fax numbers of each witness.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://waysandmeans.house.gov.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.

                                 

    Chairman CRANE. Good morning. This is a hearing of the 
Subcommittee on Trade of the Committee on Ways and Means to 
consider the impact on the past year of the President's section 
201 safeguard action on certain steel products.
    As everyone is well aware, on March 5, 2002, the President 
announced import relief measures on several categories of steel 
imports. Steel producers argue that the tariffs are necessary 
to offset distortions in world steel markets, and have helped 
the U.S. steel industry to restructure.
    Conversely, steel users contend that the tariffs have done 
far more harm than good to the U.S. manufacturing base and to 
the U.S. economy, and that tariffs have undermined their global 
competitiveness.
    Steel producers and their customers are mutually dependent 
upon one another. While steel producers will obviously look out 
for their best interests, they also need to be mindful of the 
impact their actions have on the economic health of their 
customer base. With that in mind, a complete analysis of the 
section 201 safeguard must look at effect of the tariffs on 
everyone, steel producers, steel consumers, and the U.S. 
economy as a whole.
    This is the goal of the hearing today. For my part, the 
specific question I pose is regardless of whether it was the 
right decision to impose the relief 1 year ago, have we reached 
the point where the industry has restructured or do the costs 
of the action to others outweigh the benefits?
    The debate on steel policy has been shaped by shouting and 
emotional accusations on both sides. Some producer and consumer 
relationships that go back 20 to 30 years have been destroyed 
over the issue of the section 201 tariffs, and it should not 
come to that. My hope is that this hearing will initiate a 
constructive dialog between steel producers and their 
customers.
    I look forward to hearing the testimony of our witnesses 
today, and in particular I welcome one of my constituents, Mr. 
Tim Taylor, President of MacLean Vehicle Systems in Mundelein, 
Illinois.
    I now yield to the Ranking Member of the Subcommittee, Mr. 
Levin, for any remarks he would like to make.
    [The opening statement of Chairman Crane follows:]
     Opening Statement of The Honorable Philip M. Crane, Chairman, 
Subcommittee on Trade, and a Representative in Congress from the State 
                              of Illinois
    Good Morning. This is a hearing of the Ways and Means Trade 
Subcommittee to consider the impact over the past year of the 
President's section 201 safeguard action on certain steel products.
    As everyone is well aware, on March 5 last year, the President 
announced import relief measures on several categories of steel 
imports. Steel producers argue that the tariffs are necessary to offset 
distortions in world steel markets and have helped the U.S. steel 
industry to restructure. Conversely, steel users contend that the 
tariffs have done far more harm than good to the U.S. manufacturing 
base and to the U.S. economy and that tariffs have undermined their 
global competitiveness.
    Steel producers and their customers are mutually dependent upon one 
another. While steel producers will obviously look out for their best 
interests, they also need to be mindful of the impact their actions 
have on the economic health of their customer base. With that in mind, 
a complete analysis of the section 201 safeguard must look at effect of 
the tariffs on everyone--steel producers, steel consumers, and the U.S. 
economy as a whole. This is the goal of the hearing today. For my part, 
the specific question I pose is regardless of whether it was the right 
decision to impose the relief one year ago, have we reached a point 
where the industry has restructured or the costs of the action to 
others outweigh the benefits.
    The debate on steel policy has been shaped by shouting and 
emotional accusations on both sides. Some producer and consumer 
relationships that go back 20-30 years have been destroyed over the 
issue of the 201 tariffs, and it shouldn't come to that. My hope is 
that this hearing will initiate a constructive dialogue between steel 
producers and their customers.
    I look forward to hearing the testimony of our witnesses today, and 
in particular I welcome one of my constituents, Mr. Tim Taylor, 
President of MacLean Vehicle Systems in Mundelein, IL. I now yield to 
the Ranking Minority Member of the Subcommittee, Mr. Levin, for any 
remarks he would like to make.
    Today we will hear from a number of distinguished witnesses. In the 
interest of time, I ask that you keep your oral testimony to five 
minutes, and I will strictly enforce the rule for both Committee 
Members and witnesses. We will include longer, written statements in 
the record. And now I welcome several of my colleagues who are 
interested in this issue.

                                 

    Mr. LEVIN. Thank you very much, Mr. Chairman. I join you in 
saying that it is appropriate that we be holding this hearing 
on this truly important trade issue.
    With the ever growing expansion of international trade, and 
its importance not only to our Nation and the world economy, it 
is also important to domestic policies and regulations. I think 
one takes that view unless one has a totally laissez-faire 
attitude toward trade policy.
    That means an active congressional role in shaping trade 
policy is critical. This requires vigorous oversight by 
Congress and is best exercised, at least initially, at the 
Subcommittee level where we have an opportunity to delve, as we 
will today, into issues in greater depth.
    So, I hope that this signals, our hearing today, that this 
Subcommittee will be taking a more active role in helping to 
shape the activities of the full Committee and Congress. The 
hearing today is on a subject that clearly deserves active 
congressional oversight. I hope it will proceed, and the 
Chairman has indicated this now, as objectively as possible, 
digging into the facts and avoiding rigid prejudgments.
    That is why I was concerned, with other colleagues, by some 
aspects of the recent section 332 request to the U.S. 
International Trade Commission (ITC) coming from the Chairman 
of our Committee, the tenor of which indicated a clear 
predisposition against the steel safeguard relief. I believe 
that, in general, accurate, comprehensive, and balanced 
information is the servant of good policy. I think that the 
information requested in the section 332 letter, while useful, 
needs to be balanced by consideration of all relevant facts and 
issues.
    I favored use in 2001 of the safeguard mechanism.
    I viewed it as a necessary response to a series of clear 
events and necessary to the maintenance of a vibrant domestic 
steel industry. In 1998, in the wake of the Asian financial 
crisis and economic crises in Russia and Latin America, steel 
imports flooded into the open U.S. market in unprecedented 
levels, a 30-percent increase in just 1 year.
    In 1999, the market stabilized somewhat, largely as a 
result of successful anti-dumping and countervailing duty cases 
brought by the industry, but between 1998 and 2001 steel 
imports remained at historically high levels.
    Additionally, and perhaps most importantly, the continuing 
high levels of imports meant that steel prices in the United 
States never fully recovered and, in fact, hit historic lows, 
in some cases dramatically so, in 2001.
    The conditions were unsustainable, as evidenced by the 
tumult in the domestic steel industry. During the period 1997 
to 2002, 31 companies in the U.S. steel industry went bankrupt, 
almost one-third of the U.S. steel-making capacity, including 
some of our largest producers. Tens of thousands of U.S. 
workers lost their jobs, hundreds of thousands had their health 
and retirement benefits put in jeopardy.
    If this is not the kind of crisis that the safeguard relief 
was created for, it is unclear what is.
    In March 2002, after intensive investigation by the ITC, as 
we know, which examined the impact of proposed relief on the 
steel consuming industries, the Administration put in place the 
steel safeguard relief. The initial safeguard relief included 
extensive exclusions and exemptions. For instance, several 
million tons of slab could enter free of any import relief, as 
could all steel imports from about 100 countries, some of which 
are major producers, and all imports from any source of 104 
different steel products, including about 750,000 tons from 
South Korea.
    In the ensuing months, the Administration exempted several 
hundred additional steel products from relief. In fact, before 
the latest round of steel exclusions last week, about 60 
percent of all steel imports entered the United States 
completely free of the safeguard relief. Last week there were 
some additional exclusions announced.
    So, today we need to examine the ongoing impact of the 
steel safeguard relief and the concerns of the domestic steel 
industry and the steel consuming industries in light of these 
exclusions. I anticipate we will hear today about the impact of 
the tariffs on prices and steel supply in the United States. I 
hope that we will have some discussion about the impact of 
these exclusions.
    As stated above, accurate and comprehensive and balanced 
information is critical in crafting policy. So, let me just say 
one last thing, as we meet, Mr. Chairman. The decision of a 
World Trade Organization (WTO) panel is likely being issued. It 
is very possible that during this hearing its exact details 
will become known to all of us.
    If this occurs today, and that is supposedly going to 
happen, I simply want to urge that we remember that any 
decision of the panel of the WTO will be subject to appeal, no 
matter what its contents and no matter who ``wins'' and who 
``loses.'' So, I hope that the hearing today, its importance, 
will not be undercut by any decision from the WTO.
    We need, as we are doing today, to sit down, to hear 
testimony, and to consider the impact of this safeguard action, 
both on the steel producers and the consumers of steel in this 
country. Thank you, Mr. Chairman.
    [The opening statement of Mr. Levin follows:]
Opening Statement of The Honorable Sander M. Levin, a Representative in 
                  Congress from the State of Michigan
    I am glad that the Trade Subcommittee is holding a hearing on this 
important trade issue.
    With the ever-growing expansion of international trade and its 
importance not only to the U.S. and world economies, but also to 
domestic policies and regulations, unless one takes a laissez faire 
attitude toward trade policy, an active Congressional role in the 
shaping of trade policy is critical. This requires vigorous 
Congressional oversight. This oversight is best exercised, at least 
initially, at the subcommittee level, where we have an opportunity to 
delve into issues in greater depth. So, I am pleased that the Trade 
Subcommittee is holding this hearing today, and I hope that this 
signals that the Subcommittee will be taking a more active role in 
helping to shape the activities of the Committee.
    The hearing today is on a subject that clearly deserves active 
Congressional oversight. I hope that it will proceed as objectively as 
possible, digging into the facts and avoiding rigid pre-judgments. That 
is why I was concerned by some aspects of the recent ``section 332'' 
request to the ITC coming from the Chairman of the Committee, the tenor 
of which indicated a clear predisposition against the steel safeguard 
relief. I believe that, in general, accurate, comprehensive, and 
balanced information is the servant of good policy. I think that the 
information requested in the 332 letter, while useful, needs to be 
balanced by a consideration of all relevant facts and issues.
    I favored use in 2001 of the safeguard mechanism; I viewed it as 
the necessary response to a series of clear events and necessary to the 
maintenance of a vibrant domestic steel industry. In 1998, in the wake 
of the Asian financial crisis and economic crises in Russia and Latin 
America, steel imports flooded into the open United States market in 
unprecedented levels--a 30% increase in just one year. In 1999, the 
market stabilized somewhat, largely as a result of successful anti-
dumping and countervailing duty cases brought by the industry, but 
between 1998 and 2001, steel imports remained at historically high 
levels.
    Additionally, and perhaps more importantly, the continuing high 
levels of imports meant that steel prices in the U.S. never fully 
recovered, and in fact hit historic lows--in some cases dramatically 
so--in 2001. The conditions were unsustainable, as evidenced by the 
tumult in the domestic steel industry. During the period from 1997 to 
the March 2002, 31 companies in the U.S. steel industry went bankrupt--
almost one third of U.S. steel-making capacity--including some of the 
largest U.S. steel producers. Tens of thousands of U.S. workers lost 
their jobs; hundreds of thousands had their health and retirement 
benefits put in jeopardy. If this is not the kind of crisis that the 
safeguard relief was created for, I am not sure what is.
    In March of 2002, after an intensive investigation by the ITC, 
which examined the impact of proposed relief on the steel-consuming 
industries, the Administration put in place the steel safeguard relief. 
The initial safeguard relief included extensive exclusions and 
exemptions. For instance, several million tons of slab could enter free 
of any import relief, as could all steel imports from about 100 
countries some of which are major steel producers, and all imports from 
any source of 104 different steel products (including about 750,000 
tons from South Korea). In the ensuing months, the Administration 
exempted several hundred additional steel products from relief, many 
over the objections of the U.S. steel-producing industry. In fact, 
before the latest round of steel exclusions last week, about 60% of all 
steel imports entered the United States completely free of the 
safeguard relief. Last week, the Administration announced an additional 
295 exclusions, about a third of which were opposed by the domestic 
industry.
    Today we need to examine the ongoing impact of the steel safeguard 
relief and the concerns of the domestic steel industry and the steel-
consuming industries in light of these exclusions. I anticipate that we 
will hear today about the impact of the tariffs on prices and steel 
supply in America. I hope that we will have some discussion about the 
impact of the exclusions on these issues, and perhaps how they relate, 
as well, to the fact that steel imports actually increased between 2001 
and 2002.
    As stated above, accurate, comprehensive, and balanced information 
is helpful in crafting policy. I am particularly concerned that some of 
the information circulated on the impact of the steel tariffs does not 
meet some, if not all, of these tests. In particular, I have heard the 
claim that there have been 200,000 job losses resulting from the steel 
safeguard relief alleged in a study by one of the interest groups. I 
read with interest the op-ed in the Financial Times--a source that is 
no friend to the safeguard relief--suggesting that the conclusions 
announced by the study were not supported by data from that study. I 
will leave it to the Financial Times to discuss whether or not the 
``devil is in the details,'' so I submit for the record today the 
Financial Times article and I hope that we can keep our testimony to 
the facts, rather than to allegations that may or may not be supported 
by sound economics.
    Thank you.

                                 

    Chairman CRANE. Thank you. Today, we will hear from a 
number of distinguished witnesses and in the interest of time, 
I ask that you keep your oral testimony to 5 minutes and I will 
strictly enforce the rule for both Committee Members and 
witnesses. We will include longer written statements for the 
record. Also, we will break for lunch at 12:00 noon for 
approximately 1 hour.
    Now, I welcome several of my colleagues who are interested 
in this issue and yield the first 5 minutes to our 
distinguished colleague from Indiana, Mr. Visclosky.

STATEMENT OF THE HONORABLE PETER J. VISCLOSKY, A REPRESENTATIVE 
             IN CONGRESS FROM THE STATE OF INDIANA

    Mr. VISCLOSKY. Thank you very much, Mr. Chairman.
    Mr. Chairman, I appreciate your holding a hearing today and 
would point out that when, in October 2001, the ITC unanimously 
found that serious injury had occurred because of trading 
practices by our trading partners, the Government of the United 
States of America had a responsibility to act.
    What were these serious injuries? We have seen a closure of 
American steel-making capacity of 34.5 million tons since 1977. 
At the time of war, we ought to keep in mind that we are the 
only developed nation on the planet Earth who can now not meet 
its own current demand in an average economic year.
    What was that serious injury? It represented the loss of 
thousands of jobs in communities across America. Each one of 
those jobs represents a household of an American citizen we are 
to help economically.
    In my district alone, the question raised by the Chair 
initially is has consolidation been completed? Should the 
program be removed? One, the program has not yet been 
completed. As it is completed throughout the remainder of this 
year, I would tell the Chair, that another 1,500 to 4,000 
people in my Congressional District are going to lose their 
economic life because of what the industry is doing to comply 
with the Administration's request. Each one of those is an 
American citizen.
    Tens of thousands of American citizens who were promised 
health care in their retirement years have been sent letters 
saying you are not going to receive it. That is American steel-
making capacity. That as Americans' defense. That is an 
American citizens.
    As far as the tariffs that have been put into place, I 
would point out they were placed with precision. You had steel 
products excluded by the ITC. You had free trade partners, such 
as Mexico and Canada, excluded. You had the domestic industry 
work with the U.S. Department of Commerce to exclude more than 
200 products in the original proposal. An additional 1,000, as 
Mr. Levin has pointed out, have also been excluded.
    Have prices in America firmed? Yes, because previously 
American producers could not sell a ton of steel for what they 
produced it, despite the efficiencies they have secured over 
the last two decades because their throat was being slashed. I 
would point out that the price for hot-rolled product today is 
still below the 22-year average for those products. That the 
price for cold-rolled is still below the 22-year average for 
those products.
    Ultimately, I am concerned that if the program is changed, 
the Administration loses its one lever as far as the 
fundamental issue that still needs to be addressed, and that is 
the reduction of the 268 million excess tons internationally. 
If our training partners have a scent that we are going to back 
off of this program they will not negotiate in good faith and 
an extremely difficult proposition for the Administration, that 
I believe they have pursued in good faith, is going to become 
impossible. At that point, we might as well forget having a 
domestic steel industry.
    The Chair asks two questions in his opening remarks and I 
would respond, in conclusion, by saying restructuring has not 
yet been completed. Have all of the benefits that the 
Administration, and we in Congress who have supported, been 
achieved by the industry? Certainly not, but I would also point 
out that earlier this month we have already lost 20 percent of 
the benefit because the program was imposed with a sliding 
scale.
    The ITC unanimously found serious injury. We have a 
responsibility to redress that injury and to assure that no 
additional American worker is injured in the future.
    I thank the Chair and would excuse myself, if that is 
permissible. I am a Ranking Member on another Subcommittee and 
our hearing started at 10:00 a.m.
    [The prepared statement of Mr. Visclosky follows:]
  Statement of The Honorable Peter J. Visclosky, a Representative in 
                   Congress from the State of Indiana
    Mr. Chairman, Mr. Levin, and Members of the Committee, I appreciate 
the opportunity to testify before you today regarding the positive 
impact of the President's steel program and specifically the remedy 
imposed by the President under section 201 of our trade laws.
    Since last March, when the President's section 201 remedy was 
implemented, the domestic industry has made real progress toward again 
becoming a viable industry, meeting the needs of our steel consuming 
industries, and providing good jobs in communities across the United 
States. In brief, prices have recovered--although they remain below 20-
year averages, supply both from domestic producers and imports is more 
than ample to meet domestic consumption demands, and the industry is 
undergoing critical restructuring.
    The President's remedy was the correct solution to address the 
injury to the domestic steel industry caused by the import crisis and 
the excess global steel capacity at the root of it. It was the right 
program in March, 2002, and it continues to be the right program today. 
We in Congress who saw firsthand the devastating effects of the steel 
crisis in our communities know that this program must be continued for 
the entire three-year term to have its full positive effect.
    While the President's steel program has brought critically 
important relief to the domestic steel industry, it has not unduly 
harmed consumers. First, many steel products were excluded from the 
International Trade Commission (ITC) findings and therefore not subject 
to relief. Second, 201 tariffs were not imposed on steel imported from 
our free trade partners, namely Mexico, Canada, Israel and Jordan, as 
well as from most developing countries. Third, the domestic industry 
worked with the Department of Commerce during the investigation to 
exclude almost 200 products from the scope of the investigation. 
Fourth, after the remedy was implemented, the Department also excluded 
more than 1,000 additional products at the direct request of consumers 
and foreign producers. In total, steel imports covered by section 201 
tariff represent only about 5 percent of apparent domestic consumption 
of steel.
    Prior to the imposition of the 201 remedy, steel prices were at 
unsustainable levels and often below the cost of production for even 
the world's most efficient producers. Clearly, consumers could not 
expect that prices could be sustained at those levels. Since the 
imposition of the 201 remedy, prices have recovered, yet the recovery 
has been modest. Prices remain below 20-year averages, and have 
actually declined since last summer. In addition, steel prices have 
increased at a greater rate in foreign markets than they have in the 
United States. It is patently absurd to suggest that U.S. businesses 
would move abroad because of a temporary steel tariff, especially when 
steel prices are rising more rapidly in foreign markets than in the 
United States.
    Steel imports have remained robust. Steel imports were actually 
higher in 2002, after the imposition of the remedy, than in 2001. As a 
result of the 201 relief, domestic production has been put back on line 
and capacity utilization has increased. The fact is that there is ample 
supply to meet our domestic consumption needs.
    The President's remedy has been effective thus far, and must be 
supported by Congress in the face of opposition from foreign producers 
so that it can have its full remedial effect. It is our right under the 
World Trade Organization (WTO) agreements to protect industries 
collapsing under the weight of foreign imports. The ITC conducted one 
of the most exhaustive safeguard investigations in the history of the 
WTO, and correctly found, by a unanimous vote, that the domestic steel 
industry had been seriously injured as a result of high levels of low-
priced steel imports. We should not second guess the ITC and the 
President.
    Contrary to the claims of the opposition, this safeguard measure is 
not only the right thing to do for an industry under siege, but is 
explicitly provided for under the terms of the WTO agreements. 
International rules allow countries to maintain the ability to respond 
to serious and unforeseen economic dislocations, and protect their 
industries against predatory actions from foreign companies or 
countries. The problem is that the WTO dispute settlement body has 
rejected every 201 remedy imposed by any country. This demonstrates 
that we have a problem with how the WTO dispute settlement system is 
working more than demonstrating any problems with this 201 remedy.
    The President's 201 remedy plan was an enormous step toward 
correcting the problems that ail the U.S. and global steel markets, but 
it will be rendered meaningless unless it is allowed to continue for 
the full term of three years. Congress must stand by the President's 
remedy and help foster a marketplace where the domestic industry, one 
of the strongest and most efficient steel industries in the world, can 
actually thrive.

                                 

    Chairman CRANE. Absolutely and we thank the gentleman for 
his participation and his presentation. Now, the Honorable 
Peter Hoekstra.

STATEMENT OF THE HONORABLE PETER HOEKSTRA, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. HOEKSTRA. Thank you, Mr. Chairman. Thank you for 
allowing me to testify on section 201 this morning.
    My testimony today regards the unintended but harmful 
consequences of section 201, which impose a tariff of up to 30 
percent on certain categories of imported steel products. These 
unintended consequences affect the thousands of workers 
throughout the country who process steel, bend steel, and 
fabricate it for use. They are now forced to use--or what they 
are finding is that they are losing their jobs to foreign 
competitors whose products are built with perhaps cheaper 
steel. When those products come to the United States, there are 
no tariffs imposed.
    The President introduced these measures in March 2001 to 
give U.S. steel producers breathing space to restructure and 
adjust to import competition. Unfortunately, section 201 
tariffs have wreaked havoc with steel consumers and processors 
by causing dramatically higher prices, some as much as 50 
percent or more, long lead times, broken contracts, and a short 
supply of steel in the United States, which has made U.S. steel 
manufacturing users uncompetitive with foreign steel users. 
Eliminating the tariffs would level the playingfield for U.S. 
steel consumers, which are losing much of their customer base 
as a result of the economic impact of these tariffs.
    Under section 204 of the Trade Act of 1974 (P.L. 93-618), 
the President is required to hold a midpoint review (MPR) for 
measures imposed for more than 3 years. The section 201 
safeguards run for 3 years and 1 day. The MPR starts with a 
monitoring report prepared by the ITC and is due to the 
President in mid-September 2003. I am encouraged that the 
Committee on Ways and Means has requested that the ITC include 
in its report an additional fact-finding investigation.
    I believe that the results of these studies will validate 
the claims of U.S. steel using manufacturers that imposing 
these tariffs is creating an anti-competitive environment and 
driving many companies out of business. The damage caused by 
the economic disruption to steel manufacturers is spreading 
throughout the economy.
    This is especially troublesome with many steel using 
manufacturers experiencing the worst business climate in 30 
years. It is feared that many steel using businesses will not 
survive the next 3 years. We do know that customers and jobs 
lost will be very, very difficult, if not impossible to 
reclaim.
    The office furniture industry in Michigan's Second 
Congressional District has laid off thousands upon thousands of 
workers in the past 2 years and closed several production 
facilities. Many of these jobs are being lost to foreign 
producers of steel-containing products. Once lost, the jobs 
will not come back.
    In the State of Michigan, there are 794,795 steel-consuming 
jobs and 11,744 steel-producing jobs. That is a ratio of 68 to 
1. Some of the larger steel-consuming jobs in Michigan, 
including transportation equipment, industrial machinery and 
equipment, and fabricating metal products are fighting for 
their very survival. In Michigan's Second Congressional 
District there are at least 46,000 steel-consuming jobs, 
scarcely any steel-producing jobs exist in the district.
    The President is authorized to amend or terminate the 
safeguard action if he finds that its effectiveness has been 
impaired by changed economic circumstances when he conducts the 
MPR. Since the administration could not have foreseen the 
drastic impact of imposing steel tariffs on steel consumers, I 
believe that the President should use the MPR as an opportunity 
to end them. The market should dictate the price of steel, not 
the government.
    Thank you for the opportunity to testify.
    [The prepared statement of Mr. Hoekstra follows:]
Statement of The Honorable Peter Hoekstra, a Representative in Congress 
                       from the State of Michigan
    Mr. Chairman, thank you for allowing me to testify on Section 201 
Safeguard Action on Certain Steel Products. I appreciate the 
opportunity to speak before the House Ways and Means Committee as it 
examines the impact of steel tariffs on U.S. steel consuming 
industries, which are vital components of the U.S. economy and 
Michigan's Second Congressional District.
    My testimony today regards the unintended, but harmful consequences 
of these safeguards, which imposed tariffs of up to 30 percent on 
certain categories of imported steel products in an effort to restrict 
imports.
    The President introduced the measures in March 2002 to give U.S. 
steel producers ``breathing space'' to restructure and adjust to import 
competition. Unfortunately, the safeguards have wreaked havoc with 
steel consumers by causing dramatically higher prices--some as much as 
50 percent or more--long lead times, broken contracts, and a short 
supply of steel in the United States, which has made U.S. steel 
manufacturing users uncompetitive with foreign steel users.
    Eliminating the tariffs would level the playing field for U.S. 
steel consumers and therefore benefit domestic steel producers, which 
are losing much of their customer base as a result of the economic 
impact of these tariffs.
    Under section 204 of the Trade Act of 1974, the President is 
required to hold a ``mid-point review'' (MPR) for measures imposed for 
more than three years. The section 201 safeguards run for three years 
and one day. The MPR starts with a monitoring report prepared by the 
International Trade Commission (ITC) and is due to the President in 
mid-September 2003.
    I am encouraged that the House Ways and Means Committee has 
requested that the ITC include in its report an additional fact-finding 
investigation. The additional report will examine competitive 
conditions facing steel-consuming industries in the United States with 
respect to the tariffs imposed by the President and to foreign 
competitors not subject to such measures.
    I believe that the results of these studies will validate the 
claims of U.S. steel-using manufacturers that imposing tariffs is 
creating an anti-competitive environment and driving many companies out 
of business.
    The damage caused by the economic disruption to steel manufacturers 
is spreading throughout the economy because of impacts to major 
industries such as automobile manufacturers and furniture producers. 
This is especially troublesome with many steel-using manufacturers 
experiencing the worst business climate in 30 years.
    It is feared that many steel using businesses will not survive 
three years of tariffs.
    The office furniture industry in Michigan's Second Congressional 
District has laid off thousands upon thousands of workers in the past 
two years and closed several production facilities over the past 18 
months. Many of these jobs are being lost to foreign producers of 
steel-containing products, and they won't come back.
    In the state of Michigan, there are 794,795 steel-consuming jobs 
and 11,744 steel-producing jobs, a ratio of 68 to one. Some of the 
larger steel-consuming jobs in Michigan including transportation 
equipment (300,837 jobs), industrial machinery and equipment (133,017 
jobs), and fabricated metal products (130,588 jobs).
    In the Michigan's Second Congressional District, there are at least 
46,245 steel-consuming jobs. Scarcely any steel-producing jobs exist in 
the district.
    The President is authorized to amend or terminate the safeguard 
action if he finds that its effectiveness has been impaired by changed 
economic circumstances when he conducts the mid-point review.
    Since the Administration could not have foreseen the drastic impact 
of imposing steel tariffs, I believe that the President should use the 
MPR as an opportunity to end them.
    The market should dictate the price of steel, not the government.
    Thank you for your consideration of my testimony. I would be happy 
to answer any questions.

                                 

    Chairman CRANE. I thank you for your testimony. Now the 
Honorable Joe Knollenberg.

STATEMENT OF THE HONORABLE JOE KNOLLENBERG, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. KNOLLENBERG. Good morning, Mr. Chairman and Members of 
the Subcommittee. I want to thank Chairman Thomas, and 
certainly Chairman Crane, and all the Members of the 
Subcommittee, for the effort they put into investigating this 
issue.
    I want to commend Chairman Crane for assembling a truly 
balanced series of witnesses for this hearing. I know that both 
steel consumers and steel producers have a great deal to say 
about the subject.
    As many of you know, I am the sponsor of the resolution 
about the steel safeguard program known as House Concurrent 
Resolution 23. Many of the Members of this Subcommittee are 
cosponsors and there currently are 72 cosponsors total.
    My resolution urges the President to direct the ITC to 
report on the steel tariffs impact on steel producers and steel 
consumers during the mid-term review. The ITC, as you know, is 
required to review the steel tariffs and report to the 
President on their effects in September of this year. While the 
ITC must listen to the steel consumers, it is in no way 
required by law to report to the President on what they heard 
from the consumers. Much like this Subcommittee, I am seeking a 
balanced and full review of how the steel tariffs are affecting 
our economy.
    Today I am happy to say the request in my resolution has 
been fulfilled. Last week, Chairman Thomas sent a letter to the 
ITC to initiate a section 332 investigation, which means that 
the ITC will conduct an investigation on the impact of the 
steel tariffs on steel producers and on steel consumers. This 
will ensure that the full economic effects of the tariffs are 
examined. All parties involved in this issue should welcome 
this investigation and welcome the opportunity to present the 
facts to the ITC and the President. Nobody should be afraid of 
the facts. This investigation will simply put all of the 
information on the table.
    Let me briefly tell you about my Congressional District. 
The Ninth Congressional District in Michigan is home to more 
than 1,500 manufacturing establishments, 93 percent of which 
employ less than 100 people. These establishments represent 
nearly 21 percent of my district's work force.
    One of the companies headquartered in my district is 
America's largest automotive supplier, Delphi Automotive. 
Several thousand of my constituents are Delphi employees. On 
behalf of Delphi, I would like to submit their testimony for 
today's hearing for the record. You will see Delphi describe 
the pain that the steel tariffs have caused the company.
    [The information follows:]
    Statement of R. David Nelson, Delphi Corporation, Troy, Michigan
    Mr. Chairman, thank you for holding this hearing on this critical 
economic issue. I am pleased to provide written testimony for the 
record on the impact of the Steel Safeguard Program on Delphi.
    Delphi Corporation is a world leader in mobile electronics and 
transportation components and systems technology. Delphi has 
approximately 192,000 employees globally, and 60,000 in twelve U.S. 
States, including Michigan, Ohio, Indiana, Wisconsin and New York.
    Along with our trade association, the Motor and Equipment 
Manufacturers Association (MEMA), Delphi supports Rep. Joe Knollenberg 
(R-MI) and the 68 cosponsors of House Concurrent Resolution 23, who 
have called on the International Trade Commission (ITC) to include an 
analysis of the impacts of the steel tariffs on consumers as part of 
the program's mid-term review. Delphi's Chairman, Chief Executive 
Officer and President, J.T. Battenberg III joined 19 other automotive 
supplier Chief Executive Officers in sending a letter to President Bush 
last year describing our industry's concerns about the program.
    Delphi's steel purchases are being affected both directly and 
indirectly through the present tariff program. We currently purchase $1 
billion in steel annually, including $200 million in direct steel 
requirements and $800 million in steel related components. Over 98% of 
our direct steel purchasing is from domestic suppliers.
    The most significant impact to Delphi is with our suppliers, many 
of who are smaller companies that have been affected by steel pricing 
increases in the range of 5% to 30%. Like Delphi, these suppliers 
cannot pass-on the price increases to their consumers, nor do they have 
the ability to leverage away price increases delivered by the steel 
industry.
    Today's U.S. automotive supplier industry is dependent on reliable 
and competitive materials to survive. The automotive industry's 
original equipment manufacturers demand high quality products at 
competitive prices and ``just-in-time'' delivery. Any disruption of 
this system jeopardizes Delphi's relationship with our consumers and 
our suppliers, many of whom are small and mid-sized manufacturers 
already challenged by the struggling economy.
    As the largest automotive supplier in the country, Delphi is 
particularly susceptible to disruptions and price increases. Consumer 
demands for lower prices coupled with the increased cost of steel have 
left little room to maneuver for either Delphi or our supplier base.
    The final factor I want to address is the lead-time inherent in the 
production process of the automotive industry. Today, automotive 
suppliers are making decisions that will impact job sourcing and 
production for the next 10 years or more. The consequence of this is 
that if Delphi or another supplier is forced to move production outside 
the United States due to raw material or other costs, it is likely that 
those jobs will never come back.
    In conclusion, the negative impacts from the steel tariffs are 
already hurting Delphi and our suppliers. The present economic 
situation finds the automobile industry on the down-slope, thus 
damaging the automotive supplier industry. By raising the prices of 
steel--an intrinsic component in the manufacturing of parts--the cycle 
only grows more vicious. The business decisions Delphi makes today will 
impact the economy for the next 10 years or more.
    In closing, I want to thank the Committee for holding this hearing, 
and for urging the ITC to consider consumer issues during the upcoming 
review. You are to be commended on your efforts in solving this problem 
and allowing steel consumers a voice in the Administration's decision 
whether to continue the steel tariff program.

                                 

    Mr. Chairman, I would also like to submit for the record a 
letter from the Motor and Equipment Manufacturer's Association 
sent to President Bush and signed by 25 of the leading 
automotive suppliers in the country.
    [The information follows:]

                      Motor and Equipment Manufacturers Association
                       Research Triangle Park, North Carolina 27709
                                                     March 20, 2003

The President
The White House
1600 Pennsylvania Avenue, NW
Washington, DC 20500

Dear Mr. President:

    March 20, 2003 marks the 1-year anniversary of the enactment of the 
section 201 steel tariffs. As we approach this date, the Motor and 
Equipment Manufacturers Association (MEMA) seeks to emphasize the 
ongoing economic hardships faced by American manufacturers of 
automotive parts and components resulting from the section 201 steel 
tariffs. The automotive supplier industry encompasses thousands of 
large, medium and small companies in all 50 States, directly employing 
2.2 million Americans. Thousands of these jobs are located in 
Pennsylvania, Ohio, Illinois, Indiana and West Virginia, as well as 
Michigan. Automotive suppliers are one of this nation's leading 
consumers of steel. The average vehicle sold in the U.S. contains more 
than 1,810 pounds of steel parts and, historically, suppliers have 
purchased the overwhelming majority of their steel from U.S. mills.
    Our message, Mr. President, is that the effects of the section 201 
steel tariffs on automotive suppliers, as well as other steel 
consumers, requires careful and expeditious examination in the upcoming 
section 201 Mid-Term Review, as proposed in House Concurrent Resolution 
23. The steel tariffs are seriously damaging U.S. automotive suppliers 
as well as other American manufacturers and, as a result, are damaging 
the American economy as a whole.
    Our industry has experienced significant losses over the past year 
as a result of the tariffs, at a particularly sensitive time for our 
industry as well as the U.S. economy. Upon the implementation of the 
section 201 tariffs our companies suddenly faced widespread steel 
shortages, delivery delays and quality problems. This uncertainty was 
exacerbated by steep and sudden increases in raw material costs ranging 
as high as 65 percent on items such as hot rolled and cold rolled 
sheet. Recent reports indicate that certain U.S. steel producers are 
seeking additional price increases of up to 10 percent. This will be 
placed on top of the steel industry's present pricing structure for 
auto suppliers; a burden that we cannot sustain.
    Most U.S. automotive suppliers are under firm cost reduction 
mandates and cannot pass higher raw material costs or production costs 
forward to their customers. Nevertheless, in the last year many of our 
customers have shifted from U.S. to foreign sources of automotive parts 
and components to reduce their exposure to the uncertainty created by 
the section 201 steel tariffs. Based on our experience in 2002, it is 
clear that imports of intermediate and finished products, and the 
related job losses from that shift of sourcing, will continue to grow. 
The steel tariffs are also forcing large, Tier-1 auto suppliers to 
shift from manufacturing or buying automotive components and assemblies 
in the United States to foreign sources of supply. Several companies 
are now debating the permanent relocation of manufacturing facilities 
to other countries to avoid the disruption caused by the steel tariffs 
and to remain internationally competitive.
    In late 2002, MEMA gathered data from 17 select automotive parts 
suppliers to assess the financial and business impact of the steel 
tariffs on the industry. Our survey of this sample set of 17 companies 
indicated losses in 2002 of $122 million directly attributable to 
higher steel prices. Additional losses of $12 million in 2002 were 
reported due to longer lead times and delivery problems arising from 
the steel tariffs. Our sample set of only 17 automotive suppliers 
projected a staggering cumulative cost of $224 million in 2003 due to 
increased steel prices alone. This small sample points to far greater 
financial and employment losses and lost competitiveness throughout the 
American automotive industry, as well as other steel-consuming sectors.
    Many automotive suppliers have sought relief under the 
Administration's exclusion process. Obtaining exclusions, however, has 
proved to be an expensive and complex legal and regulatory process, 
essentially out of reach for many small and even medium sized 
automotive suppliers. The exclusion process has provided little relief 
to steel consumers in our industry as a whole due to our heavy reliance 
on domestically produced steel products.
    We clearly believe that it was not the Administration's intent to 
damage the international competitiveness of our industry or to cause 
job losses in American manufacturing; yet, the current situation poses 
those very risks for our companies and other steel consuming industries 
in this nation. The Administration is now facing a critical opportunity 
to re-examine the effects of the section 201 steel tariffs and to 
assess the effect of the tariffs on both steel producers and steel 
consumers. Automotive suppliers, together with appliance manufacturers, 
toolmakers, stampers, maritime manufacturers, and many other steel 
consuming industries strongly support House Concurrent Resolution 23. 
Introduced by Congressman Joe Knollenberg of Michigan on January 29, 
this Resolution has drawn the support of 69 Republican and Democratic 
cosponsors. Many of these lawmakers represent both steel producing and 
steel consuming constituents, yet they all recognize the need to expand 
the scope of the section 201 Mid-Term Review to ensure that the costs 
and benefits to steel producers and steel consumers can be assessed in 
concert. On March 20, 2003, we also welcomed the introduction of Senate 
Concurrent Resolution 27 by Sens. Christopher Bond, Chuck Hagel, Peter 
Fitzgerald and Mary Landrieu. SCR 27 reinforces our petition for the 
inclusion of steel consumers in the Mid-Term Review. We urge the 
Administration's prompt consideration and support for these two 
Resolutions.
    Thank you for the opportunity to express our views on this critical 
issue.

            Sincerely,

                                               Christopher M. Bates
                              President and Chief Executive Officer

                                                      Ronald Cutler
                               Vice President, Automotive Marketing
                                                 TRW Automotive and
                                      Chairman, Motor and Equipment
                                   Manufacturers Association (MEMA)

                                                 Lawrence A. Denton
                              President and Chief Executive Officer
                                  Dura Automotive Systems, Inc. and
          Chairman, Original Equipment Suppliers Association (OESA)

                                                 Charles E. Johnson
                              President and Chief Executive Officer
                                                 Transpro, Inc. and
                                   Chairman, Automotive Aftermarket
                                       Suppliers Association (AASA)

                                                J.T. Battenberg III
                    Chairman, Chief Executive Officer and President
                                                 Delphi Corporation
                                                           Troy, MI

                                                     John Doddridge
                               Chairman and Chief Executive Officer
                                               Intermet Corporation
                                                           Troy, MI

                                                         John Plant
                              President and Chief Executive Officer
                                                     TRW Automotive
                                                        Livonia, MI

                                               Timothy D. Leuliette
                    Chairman, President and Chief Executive Officer
                                              Metaldyne Corporation
                                                       Plymouth, MI

                                                         Larry Yost
                               Chairman and Chief Executive Officer
                                                 ArvinMeritor, Inc.
                                                           Troy, MI

                                                   Edward E. Zimmer
                              President and Chief Executive Officer
                                        Electronic Controls Company
                                                          Boise, ID

                                                Joseph Magliochetti
                                            Chairman, President and
                                            Chief Executive Officer
                                                   Dana Corporation
                                                         Toledo, OH
                                                  Joachim V. Hirsch
                                            Chairman, President and
                                            Chief Executive Officer
                                          Textron Fastening Systems

                                                     Grant H. Beard
                              President and Chief Executive Officer
                                                 TriMas Corporation
                                               Bloomfield Hills, MI

                                                   Joel D. Robinson
                              President and Chief Operating Officer
                                    American Axle and Manufacturing
                                                        Detroit, MI

                                                   Ronald I. Parker
                               Chairman and Chief Executive Officer
                                       Indian Head Industries, Inc.
                                                      Charlotte, NC

                                                      Thomas Mowatt
                                                          President
                                                      Champion Labs
                                                         Albion, IL

                                                  Joseph V. Borruso
                              President and Chief Executive Officer
                                          Hella North America, Inc.
                                                       Plymouth, MI

                                                   William J. Laule
                                            Chief Executive Officer
                                                      TI Automotive
                                                         Warren, MI

                                                         Jeff Romig
                      Vice President, Strategic Resource Management
                                                  Eaton Corporation
                                                      Cleveland, OH

                                                   Wallace E. Smith
                                                          President
                                                  E&E Manufacturing
                                                       Plymouth, MI

                                                          D.W. Shaw
                                                          President
                                             Means Industries, Inc.
                                                        Saginaw, MI

                                                 Timothy L. Tindall
                                                          President
                               Spring Engineering and Manufacturing
                                                         Canton, MI

                                                     Lawrence Sills
                                                           Chairman
                                      Standard Motor Products, Inc.
                                               Long Island City, NY

                                               William D. Grote III
                              President and Chief Executive Officer
                                             Grote Industries, Inc.
                                                        Madison, IN

                                                 Dennis M. Welvaert
                                           Executive Vice President
                                                Dayco Products, LLC
                                                          Tulsa, OK

                                 

    Chairman CRANE. Without objection, so ordered.
    Mr. KNOLLENBERG. Thank you. This letter describes the 
financial losses attributed to the steel tariffs, which is in 
the hundreds of millions. Like my resolution, this letter urges 
the President to direct the ITC to fully consider the effects 
of the steel tariffs on steel-consuming companies during the 
mid-term review.
    When the tariffs were announced in March 2002, we all knew 
that steel-consuming companies would feel the pain, but we did 
not know how bad the pain would be. Sadly, the increased prices 
and supply disruptions came in more rapidly and severely than 
anyone could predict, including the Administration.
    A strong manufacturing base is critical to our Nation's 
economy. These are already difficult times for manufacturers 
and the steel tariffs are making them tougher. Steel-consuming 
companies are global. They need access to their product inputs 
at the global market price because they have to sell their 
finished products in global markets.
    I have heard from company after company that the current 
environment is causing them to rethink their future here in the 
United States. They are contemplating moving their 
manufacturing operations overseas in order to remain globally 
competitive. If steel consumers cannot get inputs in the United 
States at global market prices, then they have to look 
overseas. It is a business decision, pure and simple. When 
those jobs move overseas, they are not coming back.
    I do not want to see this happen anymore than it already 
has. Everyone wants a strong domestic steel industry and this 
is clearly stated in my resolution. I am glad the health of the 
steel companies is improving, but the process of consolidation 
that is occurring under the protection of tariffs is happening 
at the expense of the customer base.
    What good will the tariffs have achieved if there are no 
customers left to buy steel from U.S. steel companies?
    I want to thank Chairman Crane and the Members of this 
Subcommittee again for holding this important hearing. Our 
economic policymaking should be based on what is right for the 
whole economy, including the whole manufacturing sector. Let us 
not lose sight of that important point.
    Again, Mr. Chairman, I want to thank you very kindly for 
the opportunity to appear here today.
    [The prepared statement of Mr. Knollenberg follows:]
    Statement of The Honorable Joe Knollenberg, a Representative in 
                  Congress from the State of Michigan
    Good morning, Mr. Chairman and Members of the Subcommittee. I want 
to thank Chairman Thomas, Chairman Crane and the Members of the 
Subcommittee for investigating this issue.
    I want to commend Chairman Crane for assembling a truly balanced 
series of witnesses for this hearing. I know that both steel consumers 
and steel producers have a great deal to say about this issue.
    As many of you know, I am the sponsor of a resolution about this 
very issue--H. Con. Res. 23. Many of the Members of this Subcommittee 
are cosponsors. My resolution urges the President to require the 
International Trade Commission to report on the steel tariffs' impact 
on steel consumers. The ITC is required to review these steel tariffs 
and report to the President on their effects in September of this year. 
But while the ITC must listen to the steel consumers, it is in no way 
required by law to report on what they heard to the President. Much 
like this Subcommittee, I was seeking a balanced and full review of how 
the steel tariffs are affecting our economy.
    I am happy to say the request in my resolution has been fulfilled.
    Last week, Chairman Thomas initiated a 332 investigation, which 
means that the ITC will conduct an investigation to examine the impact 
of the steel tariffs on steel producers AND consumers. This will ensure 
the whole economic picture of this issue will be examined.
    And we should all be grateful that this 332 investigation will be 
included in the same document as the mid-term review and that these 
reports will be made public. This means that the President, when he is 
considering whether to extend the steel tariffs in September, will have 
both reports in his hands and he can truly weigh the full economic 
costs of his decision.
    All parties involved in this issue should commend Chairman Thomas 
for this action, and welcome the opportunity to present the facts to 
the ITC and the President. Neither steel consumers nor steel producers 
should be afraid of the facts. This investigation will simply put all 
the information on the table.
    Let me tell you a little about my congressional district. The Ninth 
Congressional District in Michigan is home to more than 1,500 
manufacturing establishments, 93 percent of whom employ less than 100 
people. These establishments represent nearly 21 percent of the 
district's workforce. The numbers are similar for Michigan as a whole, 
and many States in the Midwest.
    Since the Steel Safeguard Program was implemented just over a year 
ago, manufacturers throughout my district have been telling me of steel 
price increases, supply shortages, and quality problems. The steel 
consumers panel can tell you much more forcefully and specifically than 
I can about their struggles. Unfortunately, their stories are not 
unique.
    When the tariffs were announced in March 2002, we all knew steel-
consuming companies would feel the pain. But we didn't know how bad the 
pain would be. Sadly, the increased prices and supply disruptions came 
in more rapidly and severely than anyone predicted--including the 
Administration.
    A strong manufacturing base is critical to our Nation's economy. 
But these are already difficult times for manufacturers and the steel 
tariffs are making them tougher. Steel consuming companies are global. 
They need access to their product inputs at the global market price 
because they have to sell their finished products in global markets.
    I have heard from company after company that the current 
environment is causing them to rethink their future here in the United 
States. They are contemplating moving their manufacturing operations 
overseas in order to remain globally competitive. If steel consumers 
can't get inputs in the United States at global market prices, then 
they have to look overseas. It's a business decision pure and simple.
    And when those jobs move overseas, they are not coming back. I 
don't want to see this happen any more than it already has.
    Everyone wants a strong domestic steel industry, and this is 
clearly stated in my resolution. I'm glad the health of the steel 
companies is improving. But the process of consolidation that is 
occurring under the protection of tariffs is happening at the expense 
of its customer base. What good will the tariffs have achieved if there 
are no customers left to buy steel from U.S. steel companies?
    I want to thank Chairman Crane and the Members of the Subcommittee 
again for holding this important hearing. The strength of our economy 
is not based on one sector. Neither should our economic policymaking. 
Let's not forget the little guys who make our economy run. Thank you.

                                 

    Chairman CRANE. Thank you for participating. Our next 
witness is my good friend and neighbor, the Honorable Don 
Manzullo.

STATEMENT OF THE HONORABLE DONALD A. MANZULLO, A REPRESENTATIVE 
             IN CONGRESS FROM THE STATE OF ILLINOIS

    Mr. MANZULLO. Thank you, Mr. Chairman, Mr. Ranking Member.
    I represent Rockford, Illinois, which is at the top of the 
State. Rockford has a manufacturing base of 25 percent which is 
double or triple the amount of manufacturing base in most 
cities. Our unemployment rate is at about 8.7 percent, pushing 
9 percent. In 1981, Rockford, Illinois led the Nation in 
unemployment at 24.9 percent.
    Traditionally known as the tool and die center and the 
fastener center of the world, our city obviously is extremely 
dependent upon the utilization of steel from various sources.
    The small manufacturers are already under a tremendous 
amount of pressure as a result of the high regulatory burden, 
the overvalued dollar, the fact that there is a lack of 
capital, and also double digit increases in health care 
premiums. So, now they are facing stiff competition from China. 
We lost 5,000 Motorola jobs within a matter of a year or a 
year-and-a-half, we could lose in our district probably another 
10,000 jobs if things do not turn around within the next 2 
years.
    When I go back home, my people hand me resumes and ask me 
if I know of any opportunities where they can work. They are 
the steel-consuming industry. They are the fabricators, the 
people that take the steel and make it into different products. 
So, they are at the brunt of the problem with a tremendous 
increase in the cost of steel.
    Everybody agreed, including the steel users, back at the 
ITC hearing a year-and-a-half ago, that there is a need to keep 
a strong steel manufacturing base in this country. The 
testimony then that came from the steel manufacturers is that 
at most there would be an increase of between 7 and 9 percent 
in the cost of steel to the steel users.
    The problem is that the cost of raw steel to the people in 
my district has gone up anywhere between 25 and 79 percent. Let 
me give to you an anomaly of a facility that is located in the 
Speaker's district. It is National Hardware. National Hardware 
is that last American manufacturer of hardware left. They are 
the last ones. They are the only ones that are left. There are 
900 people that work at National Hardware in the Speaker's 
district, Mr. Evans' district, and people who live in my 
district. They are struggling.
    The cost of their domestic steel, because they want 100 
percent domestic content, has gone up 25 percent. That is 
uncalled for. That means the steel companies are gouging. That 
means the promise to keep the increase of steel as a result of 
protection from 7 to 9 percent has gone unheralded.
    That is the problem with this whole scenario; there has to 
be some type of balance. If the steel producers continue to 
charge these types of prices for what they call profit 
recovery, then they will knock out of business the very 
customers that they are in the process of selling their 
products to.
    So, that is where the problem is. They are charging too 
much for the steel. If you keep the steel price increase 
modest, then it will work for everybody because that is how 
this whole thing was intended.
    We also had the anomaly of where I am working to try to 
keep our titanium industry in this country. Why the Secretary 
of the Air Force signed a waiver to allow Russian titanium to 
be used on our military jets, closing down titanium mills in 
this country.
    You ask yourself, what type of intervention is this where 
everybody ends up losing?
    I am just very much concerned that we have to find a 
balance here somewhere and the peas have to be on the knives of 
the steel producers that charge these outrageous increases.
    The steel producers themselves are breaking written 
contracts with the steel users, and saying if you do not like 
our increase in the price of steel, then go somewhere else, 
holding the little guys hostage. This has to come to an end.
    That is why I support Mr. Knollenberg's legislation, 
because it goes right down the middle and it tries to help out 
the steel producers while at the same time maintaining a 
reasonable price of steel for our users. I thank you for the 
opportunity to testify.
    [The prepared statement of Mr. Manzullo follows:]
  Statement of The Honorable Donald A. Manzullo, a Representative in 
                  Congress from the State of Illinois
    Mr. Chairman, Mr. Ranking Minority Member, Members of the 
Subcommittee, the area of the Nation that I am privileged to represent 
is in dire distress. This past January, the unemployment rate in the 
three counties forming the center of the 16th District of Illinois 
reached 8.7 percent, the highest level in 11 years. This is one-third 
above the Nation's unemployment rate of 5.8 percent. Only 25 cities out 
of 331 metropolitan areas in the entire Nation have a higher 
unemployment rate than Rockford, Illinois. In the past four years, 
8,000 factory jobs have been eliminated in Boone, Ogle, and Winnebago 
Counties--the heart of the Rock River Valley.
    How did this happen? Rockford, unlike most other cities, is 
disproportionately dependent upon the manufacturing sector for its 
economic livelihood. Twenty-five percent of Rockford's economy--double 
the average for most American cities--relies upon a healthy 
manufacturing base. The vast majority of these manufacturing jobs are 
located in small firms of 30 to 50 person tool and die shops or 
machining facilities.
    These small manufacturing facilities were already struggling 
against a high regulatory and tax burden. They were fighting against an 
overvalued U.S. dollar. They were fighting a serious credit crunch as 
banks would not extend credit to them--in some cases, banks were 
recalling loans demanding immediate repayment. They were fighting 
double-digit health care premium increases, making it extremely 
difficult to continue extending coverage to themselves and their 
workers. They were fighting to save their businesses as their larger 
customers were moving production overseas, mostly to China, taking 
their supply chain foreign shores. Then, to top it all, their steel 
supplier informs them of record increases on the price of their raw 
material, blaming it on Washington, and their customer refuses to 
accept any price increase or else they'll go offshore to purchase their 
product.
    Last year, as Chairman of the Small Business Committee, I held two 
hearings documenting the devastating impact these higher steel tariffs 
were having on an overwhelming number of small manufacturers. I concede 
that the steel industry and their suppliers have been temporarily 
helped in the past year by these tariffs. The section 201 safeguard 
protection has granted short-term stability to these manufacturers but 
at an enormous cost. The decision has created extreme instability for 
the vast majority of small manufacturers, particularly upon those rely 
on a steady supply of steel. These manufacturers dominate the 16th 
District of Illinois and many other Congressional districts across the 
Nation.
    This is not a problem just facing Rockford-based manufacturers. The 
problems of Rockford are representative of the crisis in manufacturing 
across this Nation. As a follow-up to the hearings the Small Business 
Committee held last year, I sent a questionnaire last January to all 
those who contacted the Committee on this issue to get an update. I 
received a 17 percent response rate. These companies experienced an 
average 25 percent increase in the price of their steel, one going as 
high as 71 percent. Sixty-two percent of the respondent companies 
experienced broken contracts from their steel supplier. Over half of 
the respondents can demonstrate that their company lost business to 
foreign competitors because of the higher price of steel in the United 
States. Finally, a third of the companies that responded experienced 
job layoffs or reduced work hours, some as high as 50 percent of their 
entire workforce.
    Mr. Chairman, we all want a strong and vibrant steel industry. But 
when we've already lost 200,000 manufacturing jobs--more than are 
employed in the entire steel industry--due primarily to higher steel 
prices in 2002, I cannot help but conclude that the Section 201 
Safeguard Action is an overwhelming failure. Illinois was the fifth 
largest State in terms of job loss because of this decision. Nearly 
10,000 Illinois workers at facilities like A-American Machine in 
Rockford, which laid off 15 workers over the past year, lost their jobs 
last year due to higher steel prices. Small manufacturers and their 
workers are hurting from arbitrary price hikes and supply shortages. 
They are also losing their global competitiveness, as foreign companies 
are able to import finished goods made with steel bought at world 
market prices, undercutting American small manufacturers. There's got 
to be a better way to solve the problems facing the steel industry.
    I commend this Committee for requesting the International Trade 
Commission to examine the steel safeguard's effects on steel-using 
manufacturers in time for the mid-point review next September. This 
information is critical to developing a complete picture of the steel 
tariff decision, which should provide sufficient rationale for the 
President to rescind these tariffs as soon as possible.
    We all need to step back and take a deep breath in order to 
reexamine fundamental assumptions. We cannot have the problems of one 
sector pushed onto other key sectors of our economy, many of which are 
vital to our defense industrial base. This is also not a union/non-
union issue. Last year, the Small Business Committee heard from many 
local labor union officials--including representatives from the United 
Steel Workers of America--who argued against the higher steel tariffs. 
We need a comprehensive manufacturing revitalization agenda to help all 
industrial sectors, not pit part of our industrial base against 
another. Much of my energy for the rest of this Congress will be 
dedicated to this initiative. I ask you to join me in this effort. 
Thank you very much, Mr. Chairman.

                                 

    Chairman CRANE. I thank the gentleman for his testimony. 
Now the Honorable Bart Stupak.

  STATEMENT OF THE HONORABLE BART STUPAK, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. STUPAK. Thank you, Mr. Chairman, Ranking Member Levin, 
and the rest of the Committee Members. Thank you for the 
opportunity to be here.
    I will disagree with my last colleagues who spoke in favor 
of reviewing the section 201 action, because I believe the 
Administration's section 201 action 18 months ago was 
absolutely critical and came not a moment too soon. The future 
of our domestic U.S. steel industry was being jeopardized as 
steel companies were going into bankruptcy by the droves due to 
the flood of the under-priced foreign imports.
    In fact, Mr. Chairman, just looking at my blackberry here, 
yesterday Bethlehem Steel, which has agreed to be bought by 
International Steel Group (ISG) for $1.5 billion, won a U.S. 
Bankruptcy Court permission to eliminate health care and life 
insurance benefits for its retirees. About 90,000 retirees and 
their spouses will be affected by the March 31, 2003 cutoff of 
the benefits.
    The point I am making with this news story that just came 
out yesterday is the effect of the flood of under-priced 
foreign steel in this country continues to hurt us today. As we 
see here, 90,000 Americans losing their benefits, health and 
life insurance benefits.
    So, while some people complain about the tariffs and the 
quotas that was put forth, I did not think they went far 
enough. The tariffs on slab steel, which I am particularly 
concerned about, as well as those other areas in this industry, 
have allowed the U.S. industry to stabilize its downward 
spiral. Companies have been able to charge market price. We 
still do not produce enough to meet our own needs here in the 
country. There have been many consolidation efforts, and some 
of the companies are starting to plan for the future.
    In my northern Michigan district, which is home to two of 
the last few iron ore mines in this Nation that supply iron ore 
to our steel companies, our mines experienced shutdowns as a 
result of the depressed demand and industry bankruptcies, and 
hundreds of our workers were forced out of work.
    The section 201 remedy gave renewed hope to our troubled 
mines. As a result of the section 201, Cleveland Cliffs, the 
majority owner and operator of the Empire and Tilden Mines in 
my district, have been able to re-open the mines and resume 
partial production. Cleveland Cliffs has been making efforts to 
consolidate the ownership of the mines, as other traditional 
steel company owners sell their interest and concentrate on 
making steel.
    Some of my colleagues and industry groups have recently 
suggested the section 201 remedies should be terminated at 
midterm. I could not disagree more. To do so would wholly 
obviate any progress that the industry has achieved.
    The ITC set forth a 3-year remedy for a reason. In its 
judgment, following a thorough investigation that considered 
comments from every angle, including consumer groups, and it 
decided upon a 3-year remedy in order to preserve the domestic 
steel industry. The President reviewed this decision and agreed 
with the need for relief to the steel industry. That decision 
was correct, and nothing has changed to justify a departure 
from that plan.
    In addition, both last year and as recently as last week, 
the Administration has granted numerous exclusions to steel 
products from the steel safeguard remedy. In 2002, 727 products 
were excluded from the tariffs. Last week another 295 products 
were excluded. Clearly abundant consideration has been given to 
the concerns of the steel consumers and these exclusions have 
been given to accommodate their needs.
    In fact, 79 percent of imported steel products are not 
covered by the section 201 tariffs. These facts clearly 
contradict those who argue that the voice of the consumer is 
not being heard.
    Mr. Chairman, I am further concerned about those who call 
for terminating section 201 remedies would once again allow the 
unchecked flow of foreign below market priced steel imports at 
a time when our Nation's security is ever more important. The 
prices at the gas pump around the country, as we have seen them 
fluctuate in the last 2 weeks, should be a clear signal that we 
should not rely on other countries for our vital products. To 
put this country in a position where the domestic steel 
industry may not survive, so that we would need to rely on 
foreign steel, is totally unthinkable. Our national defense and 
our Nation's infrastructure cannot be made dependent on foreign 
steel providers.
    I thank the Subcommittee for the time to allow me to 
testify and hope you will give strong consideration to the 
testimony. We must allow the tariffs to continue to work so we 
can preserve and protect the U.S. steel industry.
    With that, Mr. Chairman, I would yield back the balance of 
my time.
    [The prepared statement of Mr. Stupak follows:]
 Statement of The Honorable Bart Stupak, a Representative in Congress 
                       from the State of Michigan
    Mr. Chairman, and Ranking Member Levin from my home State of 
Michigan, I appreciate the opportunity to come before you and testify 
about the important subject of the 201 Safeguard Action. I would also 
like to acknowledge the Members of the Subcommittee who have been 
supporters of the steel industry through their work on the Steel 
Caucus.
    The Administration's action in instituting the section 201 tariffs 
was absolutely critical and came not a moment too soon. The future of 
our domestic U.S. steel industry was being jeopardized as steel 
companies were going into bankruptcy by the droves due to floods of 
under-priced foreign imports.
    While the tariffs were not quite at the level I would have hoped 
for in the case of steel slabs, and were not straight tariffs but 
rather tariff rate quotas, nevertheless, the tariffs on slabs as well 
as other areas of the industry have allowed the U.S. industry to 
stabilize its downward spiral.
    Companies have been able to charge market prices, to start 
consolidation efforts, and to plan for the future. My district in 
northern Michigan is home to 2 of the last few iron ore mines in this 
Nation that supply our steel companies.
    Our mines experienced shut-downs as a result of depressed demand 
and industry bankruptcies, and hundreds of workers were forced out of 
work while the mines were idled. The 201 remedy, however, gave renewed 
hope to our troubled mines. As a result of the 201, Cleveland Cliffs, 
the majority owner and operator of the Empire and the Tilden mines in 
my district, has been able to reopen the mines and resume partial 
production.
    Cleveland Cliffs has been making efforts to consolidate the 
ownership of the mines as the other traditional steel company owners 
sell their interest and concentrate on making steel.
    Cleveland Cliffs has been focusing its own efforts on restoring 
capacity production to the mines, and improving efficiency. While one 
unfortunate result has been a downsizing of the workforce, I am hopeful 
that Cleveland Cliffs efforts will benefit the long term survival of 
the mines, and the surrounding industries and communities that depend 
on these iron ore mines for their own survival.
    Some industry groups have recently suggested that the section 201 
remedies should be terminated at the mid-term review. I could not 
disagree more. To do so would wholly obviate any progress that the 
industry has achieved.
    The International Trade Commission set forth a 3 year remedy for a 
reason: in its judgment, following a thorough investigation that 
considered comments from every angle, including consumer groups, and it 
decided upon a 3 year remedy in order to preserve the domestic steel 
industry. The President reviewed this decision and agreed with the need 
for relief to the steel industry. That decision was correct, and 
nothing has changed to justify a departure from that plan.
    If anything, I am concerned regarding the scheduled phase-in of 
reductions of the tariff rate quotas during this second year of the 
remedy from a 30% tariff on slab imports above 5.4 million tons, to a 
24% tariff on imports above 5.9 million tons. More foreign slab steel 
will be allowed to flow into the United States under the second year 
quota, and foreign slab steel that comes in above the quota will be 
subject to a lesser tariff in this second year. Any critics of the 
remedies should be satisfied with these phase-ins, rather than seeking 
to deal the steel industry a mortal blow by terminating the section 201 
remedies.
    In addition, both last year and as recently as last week the 
Administration has granted numerous exclusions to steel products from 
the steel safeguard remedy. In 2002, 727 products were excluded, and 
last week, another 295 products were excluded. Clearly, abundant 
consideration has been given to the concerns of steel consumers, and 
these exclusions have been given to accommodate their needs. In fact, 
79% of imported steel products are not covered by the section 201 
tariffs. These facts clearly contradict those who argue that the voice 
of consumers is not being heard.
    I am further disturbed that those who call for terminating the 
section 201 remedies would allow once again the unchecked flow of 
foreign, below-market priced steel imports, at a time when our national 
security is ever more important.
    The prices at the gas tanks around the country should be a clear 
signal that we should not rely on other countries for vital products. 
To put this country in a position where the domestic steel industry may 
not survive, so that we would need to rely on foreign steel, is totally 
unthinkable. Our national defense and our Nation's infrastructure 
cannot be made dependent on foreign steel providers.
    I thank the Subcommittee for allowing me to testify, and I hope 
that you will give strong consideration to my testimony--we must allow 
these tariffs to continue to work, so that we can preserve and protect 
our U.S. steel industry.

                                 

    Chairman CRANE. I thank you for your participation. Now the 
Honorable Ted Strickland.

STATEMENT OF THE HONORABLE TED STRICKLAND, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF OHIO

    Mr. STRICKLAND. Mr. Chairman and Ranking Member Levin, 
thank you for the opportunity to be here today to express my 
strong support for the President's decision last year to impose 
temporary safeguards to help the steel industry adjust to 
imports surges that began in 1998.
    The section 201 relief is working. I think the President's 
steel tariff remedy, without a doubt, should stay in place for 
its full 3-year term or we risk dependency on foreign steel 
sources.
    Over the past 20 years, the U.S. steel industry has 
invested tens of billions of dollars to modernize facilities 
and eliminate inefficient capacity, but these changes have not 
been pain-free. The U.S. Department of Labor, Bureau of Labor 
Statistics indicates that steel jobs have declined by more than 
50,000 since 1998. The State of Ohio has felt that pain, losing 
over one-third of its steel jobs since 1998.
    These numbers underscore the human element in this debate 
about tariffs and it is important because we cannot afford to 
lose this skilled work force. The steel industry serves as the 
cornerstone for our national defense and a shift away from the 
President's steel program could do irreparable damage to this 
industry and its work force.
    Now some opponents of the steel program might claim that 
the domestic steel industry is largely responsible for its own 
problems and that relief is futile. I would like to remind 
these critics that a vast majority of steel production outside 
the United States is governed by cartels or funded by 
subsidies. These practices by foreign competitors result in 
enormous levels of excess capacity which lower domestic prices 
and, in fact, lead to historically low prices at home in the 
late nineties. These low prices, in turn, denied the domestic 
industry the means to make critical investments in technology, 
equipment, and training needed to ensure that the U.S. industry 
can compete in the global market.
    Today, over 30 American steel companies have gone into 
bankruptcy. Relief is not futile. It is not a leap to assume 
that weakening or revoking the section 201 relief before the 
end of the full 3-year period could lead to a new surge of 
imports causing another drop in prices and another decline in 
industry profitability. This makes no sense at a time when the 
industry is on the road to recovery.
    I would like to take this opportunity to share with you 
information about a specific steel company in my Ohio district. 
Wheeling-Pittsburgh Steel Corporation operates steel mills in 
the upper Ohio valley, employing approximately 3,800 workers in 
Ohio, West Virginia, and Pennsylvania. About 20,000 retiree 
families depend on the company for health care. The company is 
one of the 30-plus steel companies that declared bankruptcy in 
the last 5 years.
    It has benefited from the President's steel program. 
Wheeling-Pittsburgh has restructured in order to be more 
competitive. Hourly workers have taken voluntary wage 
concessions and the company recently laid off over 100 
managers. Presently, the company is relying on the approval of 
a $250 million loan guaranty from the Emergency Steel Loan 
Guarantee Board so that it can modernize its operations and 
emerge from bankruptcy.
    Wheeling-Pittsburgh also happens to be an important source 
of materials that are currently being used in the war zone. It 
is companies like Wheeling-Pittsburgh that enable defense and 
construction work to be completed around the United States in 
emergency and compressed timetables that allow just-in-time 
deliveries.
    If the Emergency Steel Loan Guarantee Board makes a 
favorable decision, and I pray to God that they do, I am 
confident that Wheeling-Pittsburgh could continue to play a 
significant role in this Nation's steel production and our 
national defense. It is just the kind of company we need as a 
part of our Nation's industrial base.
    However, if we discontinue section 201 remedy before the 3-
year term is up, I fear we cut short this and other companies 
efforts to be viable. Now is simply not the time to abandon 
programs critical to the continued revitalization of this 
Nation's steel industry.
    Since the section 201 relief was implemented, a number of 
companies have returned to profitability and other companies 
have shown significant improvements. Recovery will take time. 
The President's program should stay in place for the full 3-
year term or, in the long run, I think we will regret decisions 
that send our steel workers home and our steel industry 
overseas.
    I thank you for the opportunity to speak before you this 
morning.
    [The prepared statement of Mr. Strickland follows:]
Statement of The Honorable Ted Strickland, a Representative in Congress 
                         from the State of Ohio
    Mr. Chairman, thank you for the opportunity to be here today and to 
express my strong support for the President's decision last year to 
impose temporary safeguards to help the steel industry adjust to import 
surges that began in 1998. I think the section 201 relief is working. 
And, I think the President's steel tariff remedy, without a doubt, 
should stay in place for its full three-year term or we risk dependency 
on foreign steel sources.
    Over the past 20 years, the U.S. steel industry has invested tens 
of billions of dollars to modernize facilities and eliminate 
inefficient capacity. But these changes have not been pain free. Bureau 
of Labor Statistics indicate that steel jobs have declined by more than 
50,000 since 1998. The state of Ohio has felt that pain, losing over 
one-third of its steel jobs since 1998. These statistics underscore the 
human element in this debate about tariffs, and this is important 
because we cannot afford to lose this skilled workforce. The steel 
industry serves as the cornerstone for our national defense, and a 
shift away from the President's steel program could do irreparable 
damage to this industry and its workforce.
    Some opponents of the steel program might claim that the domestic 
steel industry is largely responsible for its own problems and relief 
is futile. I would like to remind those critics that a vast majority of 
steel production outside the United States is governed by cartels or 
funded by subsidies. These practices by foreign competitors result in 
enormous levels of excess capacity which lower domestic prices and, in 
fact, led to historically low prices at home in the late 90's. These 
low prices in turn deny the domestic steel industry the means to make 
critical investments in technology, equipment and training needed to 
ensure that the U.S. steel industry can compete in the global market. 
Today, over 30 American steel companies have gone into bankruptcy.
    Relief is not futile. It is not a leap to assume that weakening or 
revoking the 201 relief before the end of the full three-year period 
could lead to a new surge of imports causing another drop in prices and 
another decline in industry profitability. This makes no sense at a 
time when the industry is on the road to recovery.
    I would like to take this opportunity to share with you information 
about a specific steel company in my Ohio district. Wheeling-Pittsburgh 
Steel Corporation operates steel mills in the upper Ohio Valley 
employing approximately 3,800 workers in Ohio, West Virginia and 
Pennsylvania. About 20,000 retiree families depend on the company for 
health care. The company is one of the 30-plus steel companies that 
declared bankruptcy in the last five years, but it has benefitted from 
the President's steel program. Wheeling-Pitt has restructured in order 
to be more competitive. Hourly workers have taken voluntary wage 
concessions, and the company recently laid off 100 managers. Presently, 
the company is relying on the approval of a $250 million loan guarantee 
from the Emergency Steel Loan Guarantee Board so that it can modernize 
its operations and emerge from bankruptcy successfully. Wheeling Pitt 
also happens to be an important source of materials that are currently 
in use in the war zone. It is companies like Wheeling-Pitt that enable 
defense and construction work to be completed around the United States 
in emergency and compressed time tables that allow just in time 
deliveries.
    If the Emergency Steel Loan Board makes a favorable decision, I am 
confident Wheeling-Pitt could continue to play a significant role in 
this Nation's steel production and our national defense. It is just the 
kind of company we need as a part of our Nation's industrial base. 
However, if we discontinue the section 201 remedy before the 3-year 
term is up, I fear we cut short this, and other companies' efforts to 
be viable international competitors into the future.
    Now is simply not the time to abandon programs critical to the 
continued revitalization of this Nation's steel industry. Since the 
section 201 relief was implemented, a number of companies have returned 
to profitability and other companies have shown significant 
improvements. Recovery will take time and the President's program 
should stay in place for the full three-year term or in the long-run, I 
think we will regret decisions that send our steelworkers home and our 
steel industry overseas.

                                 

    Chairman CRANE. I thank the gentleman for his 
participation. Now, the Honorable Thaddeus McCotter.

      STATEMENT OF THE HONORABLE THADDEUS G. MCCOTTER, A 
     REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN

    Mr. McCOTTER. Mr. Chairman and Members of the Committee, 
thank you for the chance to share with you one of the 
challenges facing many of the families and employers at my 
Eleventh District home in the Western Wayne and Oakland County 
suburbs of Detroit.
    Mr. Chairman, manufacturing moves Michigan. The auto 
industry makes the world's finest cars. Primary, secondary, and 
tertiary suppliers provide quality parts. Tool and die shops 
provide the equipment to make it all possible. Defense 
manufacturers provide vital parts for the fighters, airlift and 
tanker aircraft liberating Iraq.
    Yet in these uncertain economic times of falling demand and 
rising prices, the manufacturing sector has seen the layoff of 
thousands of employees and the loss of too jobs overseas. These 
companies, both large and small, count on other suppliers to 
provide the raw materials to make their ventures run. Often, 
this material is steel, and now steel itself poses a real 
problem.
    True, our Nation's steel industry is also suffering 
tremendous economic hardship. Consequently, the steel tariff of 
2000 was implemented to bolster the U.S. steel industry and 
protect American jobs. Only now, however, are we just beginning 
to recognize the impact of these actions. Clearly, as is often 
the case when government presents a solution, we now face a 
well-intentioned policy's unintended consequences.
    Tim Tindall, owner of Spring Engineering, a steel consumer 
in Canton, Michigan and in my district, said it sadly and 
succinctly. The tariffs made us uncompetitive overnight. I have 
had an opportunity to visit Tim and meet with his workers. He 
has many bright, highly skilled employees producing quality 
parts and adding to our economy, as do other steel consumers 
such as Wes Smith and Jim Heller, whose family founded 
employers employ so many family breadwinners in my district.
    These people are resourceful and they can weather whatever 
the natural forces of our economy sends their way. In this 
instance one of their problems is not caused by an economic 
swing, but instead by a policy imposed upon them. Due in large 
part of the steel tariff, in some instances, small 
manufacturers have seen steel prices rise more than 70 percent.
    Thus, steel users face arbitrary allocations and shortages 
of product. Steel producers are breaking existing contracts and 
forcing customers to renegotiate at higher rates. Small 
manufacturers throughout southeast Michigan have been forced to 
cope with these issues while trying to stay afloat amid an 
economic down turn. From their perspective, some larger 
businesses have the flexibility of simply expanding operations 
overseas, where they can escape the tariffs. When those jobs 
leave our shores, they are gone for good.
    Mr. Chairman, we must take into account the real world 
impact the tariff is having on workers who depend on steel. We 
simply cannot afford to lose these jobs.
    Ninety-five percent of all manufacturers are considered 
small or medium-sized businesses. They account for more than $1 
trillion in receipts. Even a conservative multiplier effect 
shows a significant impact manufacturing has across our 
country. One million dollars in manufacturing sales equates to 
eight manufacturing jobs and six service jobs. The same $1 
million in service sector orders only creates 3.5 service 
sector jobs.
    The ITC must complete a mid-term review of the steel tariff 
by September 2003. The voices of Michigan workers worried about 
their future and worried about their sector must be heard in 
the review, which is why I am supporting legislation offered by 
my colleague, Joe Knollenberg, calling for just such 
consideration.
    Mr. Chairman, I appreciate the opportunity to share with 
you my concerns, for they are the concerns of the men and women 
who every day must contend with the steel tariff as a direct 
threat to their economic security and ultimate survival. These 
stories are too common in my district and in our country. We 
cannot afford to let these stories be the last chapter and the 
storied history of American manufacturing.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. McCotter follows:]
 Statement of The Honorable Thaddeus G. McCotter, a Representative in 
                  Congress from the State of Michigan
    Mr. Chairman and Members of the Committee, I appreciate the 
opportunity to join you today to share with you the challenges facing 
many of the families and employers in my home district in the western 
suburbs of Detroit. If you were to visit my district and meet with some 
of families who work there, you would find one simple, common thread 
running throughout the region.
    Manufacturing moves Michigan. Final assembly of some of the world's 
finest cars. Primary, secondary, and tertiary suppliers providing 
quality parts. Tool and die shops to provide the equipment to make it 
all possible. And even defense manufacturers providing vital parts for 
the fighters, airlift, and tanker aircraft liberating Iraq as we speak.
    With the downturn and uncertainty facing our economy, the 
manufacturing sector has been especially hard hit, laying off thousands 
and sending many jobs overseas. Falling demand and rising prices are 
taking a toll.
    These companies--both large and small--count on other suppliers to 
provide the raw materials to make their ventures run. Often, this 
material is steel. And too often, steel is causing some real problems 
for families across Michigan.
    I recognize our Nation's steel industry is suffering under a great 
period of economic hardship.
    Though the steel tariff of 2002 was designed to bolster the U.S. 
steel industry and protect American jobs, we are now just beginning to 
recognize the impact of these actions. As is often the case when 
government presents a solution, we are now facing unintended 
consequences.
    Tim Tindall, owner of Spring Engineering, a steel consumer in 
Canton, Michigan said it best recently when he said ``The tariffs made 
us uncompetitive overnight.'' I have had an opportunity to visit Tim 
and meet with his workers. He has many bright, highly skilled employees 
producing quality parts and adding to our economy.
    They are resourceful and they can weather whatever the natural 
forces of our economy sends their way. But I am growing frustrated when 
I realize more and more of their problems are not caused by the 
economic swings but instead by policies we have brought upon ourselves.
    Thanks, in large part, to the steel tariff, small manufacturers 
have seen steel prices rise more than 70% in certain instances. Steel 
users face arbitrary allocations and shortages of product. Steel 
producers are breaking existing contracts and forcing customers to 
renegotiate at higher rates.
    Small manufacturers throughout Southeast Michigan have been forced 
to deal with these issues while trying stay afloat amid an economic 
downturn.
    From their perspective, some larger businesses have the flexibility 
of simply expanding operations overseas where they can escape the 
tariffs--when those jobs leave our shores, they are gone for good.
    Mr. Chairman, we must take into account the real-world impact the 
tariff is having on workers who depend on steel. We simply cannot 
afford to lose these jobs:
    95% of all manufacturers are considered small or medium sized 
businesses. They account for more than $1 trillion in receipts--even a 
conservative multiplier effect shows us the significant impact 
manufacturing has across our economy. $1 million in manufacturing sales 
equates to 8 manufacturing jobs and 6 service jobs--the same $1 million 
in service sector orders only creates 3.5 service jobs.
    The International Trade Commission must complete a mid-term review 
of the steel tariff by September 2003. The voices of Michigan workers 
worried about their future and worried about their sector must be heard 
in the review. Which is why I am supporting legislation offered by my 
colleague, Joe Knollenberg, calling for just such consideration.
    Mr. Chairman, I appreciate the opportunity to share with you my 
concerns. But listen not to me or my colleagues here on this panel, 
listen to the men and women who fight these battles everyday, who must 
contend with the steel tariff as a direct threat their to the employees 
they lead.
    Their stories are far too common in my district and in America 
today. We cannot afford to let them continue.
    Thank you very much.

                                 

    Chairman CRANE. Thank you, Mr. McCotter. Now the Honorable 
Dennis Kucinich.

STATEMENT OF THE HONORABLE DENNIS J. KUCINICH, A REPRESENTATIVE 
               IN CONGRESS FROM THE STATE OF OHIO

    Mr. KUCINICH. Thank you very much, Mr. Chairman.
    America needs a healthy domestic steel industry and we must 
protect the steel workers who built up this great Nation. 
Between 1997 and 2002, America's steel industry and its workers 
were under attack by foreign companies illegally dumping steel 
into the American economy, sending 35 steel companies into 
bankruptcy and costing 54,000 industry employees their jobs.
    As a result, I am proud of the efforts of the Steel Caucus, 
which continually advocated for the Administration to initiate 
a section 201 steel investigation into these imports. We also 
succeeded in pushing the ITC to recognize the devastating 
effect of steel imports through a finding of injury. We even 
gathered with 25,000 steel workers on the ellipse to make sure 
the President imposed an effective tariff to help stem the tide 
of imports.
    One year later this remedy is working, and it must be 
continued. In my hometown of Cleveland it has helped us find a 
new owner to keep our steel mills running. Industrywide, since 
the section 201 relief was implemented, domestic steel is 
beginning to see signs of a recovery. Domestic producers have 
experienced incremental improvements in revenues, operating 
income, and capacity utilization.
    Additionally, the industry has made significant progress 
toward restructuring and consolidation. The ISG, which came 
into existence following its purchase of LTV Steel, has agreed 
to acquire the assets of Bethlehem Steel. U.S. Steel announced 
plans to purchase National Steel. Section 201 relief, if 
allowed to run its course, will result in a more competitive 
domestic industry.
    The tariffs have also caused a modest price recovery in the 
industry. Prices for hot-rolled steel rose from historic lows 
of only $210 per ton in December 2001 to around $300 per ton 
today. Even so, prices for all major flat-rolled products are 
still below 20-year historical averages and steel imports will 
remain approximately 25 percent of the market.
    The tariffs are a good start and they must be allowed to 
continue. The United States has finally made clear that is no 
longer willing to serve as the world's steel dumping ground. 
The United States also made clear that the domestic security of 
our country requires a strong and viable domestic steel 
supplier base. Only the continuation of the section 201 tariffs 
will mitigate the harm of unfairly traded imports and assist 
the industry in a critical recovery. Keep the steel tariffs 
working.
    Thank you, Mr. Chairman. I yield back.
    [The prepared statement of Mr. Kucinich follows:]
  Statement of The Honorable Dennis J. Kucinich, a Representative in 
                    Congress from the State of Ohio
    America needs a healthy domestic steel industry and we must protect 
the steelworkers who built up this great Nation.
    But between 1997 and 2002, America's steel industry and its workers 
were under attack by foreign companies illegally dumping steel into the 
American economy, sending 35 steel companies into bankruptcy and 
costing 54,000 industry employees their jobs.
    As a result, I am proud of the efforts of the Steel Caucus, which 
continually advocated for the Administration to initiate a section 201 
steel investigation into these imports.
    We also succeeded in pushing the International Trade Commission to 
recognize the devastating effect of steel imports through a finding of 
injury. We even gathered with 25,000 steelworkers on the ellipse to 
make sure the President imposed an effective tariff to help stem the 
tide of imports.
    One year later, this remedy is working and it must be continued. In 
my hometown of Cleveland, it helped us find a new owner to keep our 
steel mills running. Industrywide, since the section 201 relief was 
implemented, domestic steel is beginning to see signs of a recovery: 
domestic producers have experienced incremental improvements in 
revenues, operating income, and capacity utilization.
    Additionally, the industry has made significant progress toward 
restructuring and consolidation. The International Steel Group (ISG), 
which came into existence following its purchase of LTV, has agreed to 
acquire the assets of Bethlehem Steel. U.S. Steel announced plans to 
purchase National Steel. Section 201 relief, if allowed to run its 
course, will result in a more competitive domestic industry.
    The tariffs have also caused a modest price recovery in the 
industry. Prices for hot rolled steel rose from historic lows of only 
$210 per ton in December 2001 to around $300 per ton today. But even 
so, prices for all major flat rolled products are still below 20-year 
historical averages, and steel imports still remain approximately 25 
percent of the market.
    The tariffs were a good start, and they must be allowed to 
continue. The United States has finally made clear that it is no longer 
willing to serve as the World's Steel Dumping Ground. The United States 
has also made clear that the national security of our country requires 
a strong and viable domestic steel supplier base. Only the continuation 
of the 201 tariffs will mitigate the harm of unfairly traded imports 
and assist the industry in a critical recovery. Keep the steel tariffs 
working!

                                 

    Chairman CRANE. Thank you. Now the Honorable Bob Ney.

 STATEMENT OF THE HONORABLE ROBERT W. NEY, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF OHIO

    Mr. NEY. Thank you, Chairman Crane and other colleagues. 
Thank you for calling this hearing this morning. On behalf of 
my constituents, I want to thank the Chairman for providing me 
the opportunity to submit testimony regarding steel imports.
    For years, our jobs have been washing away in a flood of 
cheap dumped foreign steel. Until the Bush Administration, 
these calls for help fell on deaf ears. Thankfully, President 
Bush took a good look and formally recognized the damage being 
done to our domestic steel industry. On March 5, 2002, the 
President imposed tariff relief for a period of 3 years. One 
year later, the President's steel program is working. It is 
critical to the continued success of the President's plan that 
tariff relief remain in effect for its full term.
    I have been engaged in this important issue for a number of 
years. U.S. steel companies such as Wheeling-Pittsburgh Steel 
Corporation and Weirton Steel Corporation in Weirton, West 
Virginia, have made tremendous efforts to remain competitive in 
the world market. That includes labor and management. They have 
worked together to make some very difficult and tough 
decisions. Wages have been cut. The number of workers and 
managers have been reduced. New efficiencies and technologies 
have been pursued. Bonds have been restructured to reduce 
interest expense and avoid bankruptcy.
    Despite these sacrifices and improvements, these steel 
companies were still suffering from illegally dumped foreign 
steel prior to the intervention of President Bush. Since 
implementation of the section 201 tariff relief, several 
positive trends have occurred. The industry has made 
significant progress toward consolidation and these efforts 
will continue. The international talks on overcapacity and 
subsidies are making real progress.
    In addition, domestic producers have enjoyed improvements 
in revenues, operating income, and capacity utilization. A 
number of companies have returned to profitability, while 
others have showed significant improvement even though they 
have not yet become profitable, but we trust that they will.
    There have, however, been significant surges of imports 
from certain excluded countries, and to the extent there is any 
concern about the program, it is that too many imports could be 
undermining relief. In fact, imports of flat-rolled steel 
increased substantially after imposition of section 201 
measures in 2002, as compared to the same period in 2001.
    Therefore, the section 201 tariff measures must be fully 
enforced if our industry is to arrive at a successful 
conclusion. While recovery will take time, the President's plan 
has allowed the industry to make a real start.
    I would note, in the overall picture, it is very own 
difficult to say that we should be competitive when we are 
dealing with countries that used maybe World Bank money or used 
government subsidies to produce steel at $400 a ton, but yet 
sell it on our market at $100 a ton. We still have made the 
industry, with the management and laborers working together, 
have still fought the good fight to keep themselves alive.
    I have no doubt in my mind that, had the President not done 
the section 201, and had the President, in fact, not done the 
30 percent tariff, at least one of our corporations would have 
lost probably 3,000-some jobs, and the workers would have been 
out on the street well over a year ago.
    So, we are trying to keep our head above water with some 
real unfair competition. It is hard to compete against 
countries that work their people and give them 1 day off and 10 
cents an hour, but we have managed to try to do that. So, we 
need the support. Thank you.
    [The prepared statement of Mr. Ney follows:]
Statement of The Honorable Robert W. Ney, a Representative in Congress 
                         from the State of Ohio
    Chairman Crane and other colleagues, thank you for calling this 
hearing this morning.
    On behalf of my constituents, I want to thank the Chairman for 
providing me the opportunity to submit testimony regarding steel 
imports. For years our jobs have been washing away in a flood of cheap, 
dumped foreign steel. Until the Bush Administration, these calls for 
help fell on deaf ears. Thankfully, President Bush took a good long 
look and formally recognized the damage being done to our domestic 
steel industry. On March 5, 2002, the President imposed tariff relief 
for a period of three years. One year later, the President's steel 
program is working. It is critical to the continued success of the 
President's plan that tariff relief remain in effect for its full term.
    Unlike some others, I have been engaged in this important issue for 
a number of years. U.S. steel companies, such as Wheeling-Pittsburgh 
Steel Corporation and Weirton Steel Corporation, have made tremendous 
efforts to remain competitive in the world market. Labor and management 
have worked together to make tough decisions. Wages have been cut; the 
number of workers and mangers has been reduced; new efficiencies and 
technologies have been pursued; bonds have been restructured to reduce 
interest expense and avoid bankruptcy. Despite these sacrifices and 
improvements, these steel companies were still suffering from illegally 
dumped foreign steel.
    Since implementation of section 201 tariff relief, several positive 
trends have occurred. The industry has made significant progress toward 
consolidation, and these efforts will continue. The international talks 
on overcapacity and subsidies are making real progress. In addition, 
domestic producers have enjoyed improvements in revenues, operating 
income, and capacity utilization. A number of companies have returned 
to profitability, while others have shown significant improvement even 
though they have not yet become profitable.
    There have however been significant surges of imports from certain 
excluded countries, and, to the extent there is any concern about the 
program, it is that too many imports could be undermining relief. In 
fact, imports of flat-rolled steel increased substantially after 
imposition of section 201 measures in 2002, as compared to the same 
period in 2001. Therefore, the section 201 tariff measures must be 
fully enforced if our industry is to arrive at a successful conclusion. 
While recovery will take time, the President's plan has allowed the 
industry to make a real start.

                                 

    Chairman CRANE. Thank you, Mr. Ney. Now our final witness, 
the Honorable Anibal Acevedo-Vila.

       STATEMENT OF THE HONORABLE ANIBAL ACEVEDO-VILA, A 
REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF PUERTO RICO

    Mr. ACEVEDO-VILA. Good morning, Mr. Chairman, Ranking 
Member Levin, and Members of the Committee.
    I am pleased to have this opportunity to testify in support 
of import relief for Puerto Rican manufacturers who are 
unfairly burdened by trade remedies designed for mainland 
markets but which, in certain circumstances, have unintended 
consequences for our island economy.
    I want to recognize the presence here of Mr. Victor 
Gonzales, President of Mateco and Vice President of Celta 
Agencies, Inc., two Puerto Rican corporations involved in the 
importation, finishing and sale of steel rebar in Puerto Rico.
    As a matter of principal, I believe in free but fair trade 
with all of our trading partners. Puerto Rico's largest market 
is the mainland United States, with whom we are the eighth 
largest trading partner, generating over 270,000 jobs in the 
U.S. mainland.
    However, in certain cases, for reasons of geography and 
cost, we must rely on imports from our neighbors in the 
Caribbean and the other regions. One important example is in 
small-sized steel rebar used in the housing construction 
industry in Puerto Rico. Mills on the United States mainland 
historically have supplied less than 3 percent of Puerto Rico's 
requirements. Even after the imposition of section 201 
remedies, domestic mills are still supplying less than 4 
percent of Puerto Rico's requirements.
    The 12 percent additional duty mandated by these sanctions 
significantly increases the cost of building needed housing in 
Puerto Rico while providing marginal, if any, benefit to 
domestic steel producers.
    The majority of imported rebar to Puerto Rico is in smaller 
sizes, principally for the use in the construction of low 
income residential housing in Puerto Rico. Housing in tropical 
climates such as Puerto Rico must be built of concrete to 
withstand hurricanes, earthquakes and pests. These cast 
concrete structures employ smaller rebar size. Therefore, low 
income residential construction in Puerto Rico depends on an 
adequate supply of this smaller sized rebar and there is not 
rebar production on the island.
    The steel section 201 measures implemented last year have 
had a very negative effect on Puerto Rico's ability to source 
rebar from traditional and highly efficient foreign suppliers. 
The impact is having a very tangible effect on low income 
housing in Puerto Rico. They are adding between $2,000 to 
$3,000 to the cost of a low income home.
    U.S. rebar producers were never significant suppliers of 
rebar to Puerto Rico, before or after the steel section 201 
measures. This is because U.S. mills are not an option for 
rebar supply. The United States does not and cannot meet the 
demand for smaller sized rebar in Puerto Rico. U.S. mills 
concentrate on producing larger sized rebar for use in the 
commercial construction projects including highways, office 
buildings, bridges or nuclear reactors.
    U.S. Customs statistics confirmed that U.S. mainland 
shipments to Puerto Rico are insignificant and unable to meet 
the demand. Before the steel section 201 measures in 2001, U.S. 
shipments represented only 2.8 percent of all rebar shipments 
into Puerto Rico in 2001. After section 201, measures represent 
only 3.7 percent of all rebar shipments into Puerto Rico.
    Only three U.S. mills can supply rebar in smaller sizes to 
Puerto Rico, SMI Steel Products, Nucor and Gerdau, but their 
capacity to do so is very limited. Despite efforts to find 
suppliers of rebar for the Puerto Rico housing market, there is 
insufficient amounts available domestically. U.S. mills do not 
have sufficient production to accommodate demand for larger 
diameter rebar, much less to satisfy the Puerto Rican low 
income market niche for smaller rebar.
    Puerto Rico currently purchases its small-sized rebar from 
foreign suppliers, but like U.S. mills many foreign mills are 
not set up to efficiently produce smaller sized rebar and 
cannot provide adequate supply.
    There are exceptions. Venezuelan rebar, for example, is 
efficient and is geared toward smaller sized rebar. Venezuelan 
used to be a primary supplier to Puerto Rico. Venezuela is now 
subject to section 201 tariffs and not excluded as a developing 
country. Venezuela's request for exclusion of some limited 
amounts of rebar from the section 201 measures in order to 
supply Puerto Rico's tropical housing market was rejected by 
the United States last week because U.S. producers insisted to 
the Federal Government that they can supply Puerto Rico's 
demand.
    I am here to say that this has not been the case. As of 
last week, Puerto Rican importers have still been unable to 
obtain adequate supply from U.S. producers.
    In 2003, it is estimated that Puerto Rico will require 
approximately 300,000 tons of rebar and the low income housing 
market is predicted to grow over the next year. Puerto Rico's 
low income housing market and construction industry should not 
be penalized for trade remedies designed to protect a U.S. 
industry that does not and will not supply our demand. Thank 
you.
    [The prepared statement of Mr. Acevedo-Vila follows:]
  Statement of The Honorable Anibal Acevedo-Vila, a Representative in 
             Congress from the Commonwealth of Puerto Rico
    Good morning Mr. Chairman, Ranking Member Levin and Members of the 
Committee. I am Resident Commissioner Acevedo-Vila, the Representative 
of Puerto Rico in Congress. On behalf of Governor Sila Calderon, her 
Secretary of Commerce and Economic Development, Milton Segarra, who is 
with me today, I am pleased to have this opportunity to testify in 
support of import relief for Puerto Rican manufacturers who are 
unfairly burdened by trade remedies designed for mainland markets but 
which, in certain circumstances, have unintended consequences for our 
island economy. In addition to the Calderon Administration, I want to 
recognize Victor L. Gonzalez, President of Mateco, and Vice President 
of Celta Agencies, Inc., two Puerto Rican corporations involved in the 
importation, finishing and sale of rebar in Puerto Rico.
    As a matter of principle, I believe in free but fair trade with all 
of our trading partners. Puerto Rico's largest market is the United 
States, with whom we are the eighth largest trading partner, generating 
over 270,000 jobs on the U.S. mainland. However, in certain cases, for 
reasons of geography and cost, we must rely on imports from our 
neighbors in the region.
    One important example is in small-sized steel rebar used in the 
housing construction industry in Puerto Rico. Mills on the United 
States mainland historically have supplied less than 3 percent of 
Puerto Rico's requirements. Even after the imposition of the section 
201 remedies, domestic mills are still supplying less than 4 percent of 
Puerto Rico's requirements. The 12 percent additional duty mandated by 
these sanctions thus significantly increases the cost of building 
needed housing in Puerto Rico while providing marginal, if any, 
benefits to domestic steel producers.
    The majority of imported rebar to Puerto Rico is in smaller sizes 
principally for use in the construction of low-income residential 
housing in Puerto Rico. Housing in tropical climates, such as Puerto 
Rico, must be built of concrete to withstand hurricanes, earthquakes 
and pests and these cast-concrete structures employ smaller rebar 
sizes. Therefore, low-income residential construction in Puerto Rico 
depends on an adequate supply of this smaller sized rebar and there is 
no rebar production on the island.
    The Steel 201 measures implemented last year have had a very 
negative effect on Puerto Rico's ability to source rebar from 
traditional and highly efficient foreign suppliers. Their impact is 
having a very tangible effect on low-income housing in Puerto Rico: 
They are adding $2,000 to $3,000 to the cost of a low-income home.
    U.S. rebar producers were never significant suppliers of rebar to 
Puerto Rico--before or after the Steel 201 measures. This is because 
U.S. mills are not an option for rebar supply. The U.S. does not and 
cannot meet the demand for smaller size rebar in Puerto Rico. U.S. 
mills concentrate on producing larger-sized rebar for use in commercial 
construction projects, including highways, office buildings, bridges or 
nuclear reactors. Moreover, shipments to Puerto Rico from the U.S. 
mainland must be made on Jones Act fleet, and this increases the price 
of U.S. rebar almost 20%, making the cost of U.S. rebar prohibitive. 
Thus, the U.S. mainland shipments to Puerto Rico generally are made to 
satisfy Buy America requirements.
    U.S. Customs statistics confirm that U.S. mainland shipments to 
Puerto Rico are insignificant and unable to meet demand. Before the 
Steel 201 measures in 2001, U.S. shipments represented only 2.8 percent 
of all rebar shipments into Puerto Rico during 2001 and, after the 
Steel 201 measures represented only 3.7 percent of all rebar shipments 
into Puerto Rico.
    Only 3 U.S. mills can supply rebar in smaller sizes to Puerto Rico: 
SMI, NUCOR and Gerdau (Ameristeel), but their capacity to do so is very 
limited.
    I want the Subcommittee to understand that despite efforts to find 
suppliers of rebar for the Puerto Rican housing market, that there is 
insufficient amounts available domestically. U.S. mills do not have 
sufficient production to accommodate demand for large diameter rebar, 
and much less to satisfy the Puerto Rican low-income market niche for 
smaller rebar. U.S. mills have their hands full supplying added demand 
created by the reduction in steel imports in the continental USA. In 
sum, all mills have claimed that they are already at capacity in 
supplying existing customers and cannot provide any rebar beyond the 
very limited amounts they are already offering.
    Puerto Rico currently purchases small size rebar from foreign 
suppliers. But, like U.S. mills, many foreign mills are not set up to 
efficiently produce smaller-sized rebar and cannot provide adequate 
supply. There are exceptions. Venezuelan rebar production, for example, 
is efficient and is geared towards smaller sized rebar. Venezuela used 
to be a primary supplier to Puerto Rico, and they shipped to meet 
demand when the Puerto Rican housing market was booming in 1996-1997. 
Because of these shipments, Venezuela is now subject to 201 tariffs and 
not excluded as a developing country. Venezuela's request for exclusion 
of some limited amounts of rebar from the 201 measures in order to 
supply Puerto Rico was rejected by the U.S. last week because U.S. 
producers insist to the U.S. Government that they can supply Puerto 
Rico's demands. I am here to say this has not been the case. As of last 
week, Puerto Rican importers have still been unable to obtain adequate 
supply from U.S. producers.
    Let me give you a sense of the situation of the current market for 
rebar in Puerto Rico due to the 201 measures. Last week, an 
international trader brought into San Juan a ship with 5,000 tons of 
smaller rebar from Gerdau's Uruguayan mill. This is a small, 
inefficient mill set up to take care of the Uruguayan market, now 
capable of exporting because the section 201 measures exempted Uruguay. 
It is no wonder that Gerdau-Ameristeel is one of the strongest 
proponents of shutting an efficient producer like Venezuela out the 
Puerto Rican market.
    The Subcommittee should be aware that since Mateco has price 
contracts for 75% of Puerto Rico's annual capacity and these prices are 
set for the duration of a project (usually one year), Mateco has to 
absorb the price increases of the section 201 safeguards. Mateco pays 
the section 201 additional 12% to U.S. Customs if they buy from a non-
exempt country or a 12% higher price to the exempt country as they 
charge more for their rebar when it is to be shipped to the USA.
    In closing, I ask you to consider what lies ahead. In 2003, it is 
estimated that Puerto Rico will require approximately 300,000 tons of 
rebar, and the low-income housing market is predicted to grow over the 
next few years.
    Section 201 has limited foreign sources of smaller-sized rebar into 
Puerto Rico, creating unnecessary shortages and a windfall to the 
foreign mills lucky enough to win what can be described as the ``201 
lottery.'' Ultimately, it is the end-users and Puerto Rican consumers 
who are paying the price for the free trade distortions created by the 
201 measures. Puerto Rico's low-income housing market and construction 
industry should not be penalized for trade remedies designed to protect 
a U.S. industry that does not and will not supply our demand.
    Thank you.

                                 

    Chairman CRANE. I thank you for your participation, Anibal, 
and I thank all of our colleagues for their participation. Now 
I would like to invite our next panel: Timothy Taylor, 
President, MacLean Vehicle Systems, MacLean-Fogg Company, 
Mundelein, Illinois; Paul Nixon, President, Bakersfield Tank 
Company, Bakersfield, California; Timothy Leuliette, Chairman, 
President and Chief Executive Officer (CEO), Metaldyne 
Corporation, Plymouth, Michigan; Lester Trilla, President, 
Trilla Steel Drum Corporation, Chicago, Illinois; Robert 
Pritchard, President and Chief Executive Officer, A.J. Rose 
Manufacturing Company, Avon, Ohio, on behalf of the Consuming 
Industries Trade Action Coalition; and Wes Smith, President and 
Chief Executive Officer, E&E Manufacturing, Plymouth, Michigan.
    Before we get started here, I am going to yield to my 
distinguished colleague, the Chairman of the Committee on Ways 
and Means, the Honorable Bill Thomas.
    Chairman THOMAS. Thank you very much, Mr. Chairman.
    While the panel members are finding their seats I want to 
compliment you and the Subcommittee. When you have the list of 
distinguished Members in terms of a good cross-section of those 
concerned with this issue, this panel of consumers to a certain 
extent, and then producers, followed by third parties, it is 
this kind of extensive hearing that lays the groundwork for us 
to monitor those decisions made in front of the WTO and, in 
fact, to it assist in making sure that this policy is concluded 
in the most successful way possible.
    I am here for a brief introduction, and it may be out of 
order, but I do not want to disrupt the Committee any more than 
I am. I do thank the Committee for that indulgence. I wanted to 
just underscore the fact that Paul Nixon has come from 
Bakersfield. It happens to be in my district. More importantly, 
I think he is very representative of those people who produce 
very needed and useful products, are consumers of steel 
product, and of particular kind of steel product, as you might 
guess from the name of his company, the Bakersfield Tank 
Company. I believe it will be a useful contribution to 
understand the full and complete impact on both sides for the 
producer and the consumer.
    Mr. Chairman, I want to thank you. Thank you Paul. Thank 
you very much for coming back. We look forward to all of your 
testimony and making a record that allows us to make the best 
possible decision in a very difficult area. Thank you, Mr. 
Chairman.
    Chairman CRANE. Thank you. Let me remind the panelists that 
each Member's oral presentation is to be limited to 5 minutes. 
You will see the red light go on after 5 minutes. Any written 
statement, however, will be made a part of the permanent 
record. The same principle applies for Members of the Committee 
when we get to questions. Now I would like to yield to Timothy 
Taylor, President of MacLean Vehicle Systems and a constituent.

 STATEMENT OF TIMOTHY N. TAYLOR, PRESIDENT OF MACLEAN VEHICLE 
       SYSTEMS, MACLEAN-FOGG COMPANY, MUNDELEIN, ILLINOIS

    Mr. TAYLOR. Thank you, Mr. Chairman and Members of the 
Subcommittee for the opportunity to speak to you today. I am 
President of MacLean Vehicle Systems, a wholly-owned subsidiary 
of MacLean-Fogg Company. MacLean-Fogg is a privately held 
manufacturing company based in suburban Chicago, employing 
about 2,000 people in 24 facilities, in 8 States, and 6 
countries.
    We produce fasteners and component parts for the 
automotive, transportation equipment, general industrial, 
electrical equipment, and telecommunications markets worldwide.
    Approximately 10 percent of our $400 million in annual 
sales is exported, and we import a similar amount of products 
from our facilities and suppliers in Europe, Latin America, and 
increasingly from Asia.
    The majority of products we produce at MacLean-Fogg have 
steel as a primary raw material. We purchase approximately 
50,000 tons of steel annually in our businesses. About half of 
the steel comes from the United States, 40 percent from 
Canadian producers, and the remainder from European and Asian 
producers.
    We support a strong viable, profitable steel industry. We 
prefer to buy U.S.-made steel when it is competitive in price, 
quality and delivery, but we absolutely must have access to 
globally priced steel on the same basis as our competitors 
around the world if we are to remain competitive in the 
products we produce.
    Mr. Chairman, I am also immediate past-Chairman of the 
Industrial Fasteners Institute (IFI). It is an industry trade 
group representing 85 percent of North American fastener 
production.
    As Chairman of IFI, I am very familiar with what happens 
when tariffs and other trade barriers are enacted on steel. In 
the seventies and eighties voluntary restraint agreements, 
tariffs, quotas and other trade restraints enacted to protect 
steel producers resulted in 40 percent of U.S. fastener 
manufacturing capacity disappearing or relocating offshore as a 
result of the higher U.S. steel prices that resulted from these 
protections.
    I am here today in the hope of preventing an additional, 
similar decline in the fastener industry and other steel-
consuming industries.
    This principle of economic production never changes. When a 
base raw material is protected by tariffs or other constraints, 
imports of value-added products made from that material 
increase and U.S.-based manufacturers are placed at a 
competitive disadvantage.
    What is different today is only the speed with which this 
happens. What used to take decades now takes years. What used 
to take years now takes months. In our globally competitive 
economy, production changes happen far more rapidly than they 
did 30 years ago, and I am concerned by the pace with which we 
are exporting steel consuming jobs.
    Our government has provided repeated tariff, countervailing 
duty and other protection to the large integrated steel 
producers since the seventies. Despite these ``temporary'' 
tariffs, many of the large integrated steel producers have not 
been able to earn an acceptable return. I would suggest that 
after more than 30 years of nearly continuous protection for 
the steel industry, there are structural problems in the steel 
industry that would be better solved by market forces than by 
continued government action.
    My concern is that in attempting to save jobs in the 
domestic steel industry, we have severely damaged domestic 
steel consumers. There are 50 manufacturing jobs in the 
products produced from steel for every one job in the steel-
making industry. To protect one job in steel with tariffs, we 
are placing the 50 steel-consuming jobs at risk.
    In fact, according to a recent economic study commissioned 
by the Consuming Industries Trade Action Coalition, 200,000 
jobs in products produced from steel were lost between 2001 and 
2002 in December as a result of higher steel prices brought on 
largely by the tariffs. To put that in perspective, there about 
180,000 jobs in the entire steel-producing industry.
    Let me be more specific. We have a plant in Richmond, 
Illinois that employs 19 people making steel nuts. This plant 
is the most productive fastener plant in the world. It is so 
automated these 19 people produce the equivalent of $12 million 
of sales of fasteners, which is three times the industry 
average on a per person basis.
    In our Richmond plant, our steel costs us 30 to 35 cents 
per pound. We can buy these nuts in Asia, complete and 
delivered to Chicago, for 44 cents a pound. That is because in 
Taiwan and China, steel costs 20 to 25 cents per pound. These 
19 people are likely to lose their jobs this year if this 
tariff remains in place.
    Let me say again that MacLean-Fogg supports a strong steel 
industry. We urge the removal of these tariffs at the earliest 
possible opportunity and we ask Members of Congress to support 
that goal.
    Thank you for the opportunity to appear today and I would 
be pleased answer any questions that you might have.
    [The prepared statement of Mr. Taylor follows:]
 Statement of Timothy N. Taylor, President of MacLean Vehicle Systems, 
               MacLean-Fogg Company, Mundelein, Illinois
    Mr. Chairman and Members of the Subcommittee, my name is Timothy N. 
Taylor and I am President of MacLean Vehicle Systems, a wholly-owned 
subsidiary of MacLean-Fogg Company. MacLean-Fogg is a privately held 
manufacturing company, based in suburban Chicago, employing about 2,000 
people in 24 facilities in eight States and six countries.
    We produce fasteners and component parts for the automotive, 
transportation equipment, general industrial, electrical equipment and 
telecommunications markets worldwide. Approximately 10 percent of our 
$400 million in annual sales is exported, and we import a similar 
amount of products from our own facilities and suppliers in Europe, 
Latin America, and, increasingly, Asia.
    The majority of products we produce at MacLean-Fogg have steel as a 
primary raw material. We purchase approximately 50,000 tons of steel 
annually in our businesses. About half of this steel comes from U.S. 
producers, 40% from Canadian producers and the remainder from European 
and Asian producers. We purchase wire rod in the form of finished alloy 
steel wire for our cold forming operations, hot-rolled bar, cold-rolled 
bar, and stainless steel wire rod as well as a small amount of plate 
and cold-rolled sheet steel.
    We support a strong, profitable, viable steel industry. We prefer 
to buy locally made steel when it is competitive in price, quality and 
delivery. But we must have access to globally priced steel, on the same 
basis as our competitors around the world, if we are to remain 
competitive in the markets we serve.
    Mr. Chairman, I am also Immediate Past Chairman of the Industrial 
Fasteners Institute, an industry trade group representing 85% of North 
American fastener production. As Chairman of IFI, I am very familiar 
with what happens when tariffs and other trade barriers are enacted on 
steel. In the 1970s and 80s, Voluntary Restraint Agreements, tariffs, 
quotas and other trade restraints enacted to protect steel producers 
resulted in 40% of the U.S. fastener manufacturing capacity 
disappearing or relocating offshore as a result of the higher U.S. 
steel prices that resulted from these protections. I'm here today in 
the hope of preventing an additional similar decline in the fastener 
industry and other steel-consuming industries.
    This economic principal of production never changes: when a base 
raw material is protected by tariffs or other constraints, imports of 
value-added products made from that material increase, and U.S.-based 
manufacturers are placed at a competitive disadvantage. Very shortly, 
production of those value-added products moves offshore, and those jobs 
are lost forever. What is different today is only the speed with which 
this happens. What used to take decades now takes years; what used to 
take years now takes months. In our globally competitive economy 
production changes happen far more rapidly than they did 30 years ago 
and I am concerned by the pace with which we are exporting steel 
consuming jobs.
    MacLean-Fogg has suffered steel price increases averaging 7% on 
most of our purchased steel items from both U.S. and overseas sources, 
and up to 15% on our stainless steel wire as a result of the 201 steel 
tariff implemented in March of 2002 and prior Administration actions 
implemented in 2000. That may not seem like a lot, given the 30-50% 
increases that other steel consumers have suffered, but it is more than 
enough to place us at a competitive disadvantage, especially when we 
started with a 25% disadvantage on steel costs before the 201 tariff. 
That is a fundamental point: the price of the raw material is 
irrelevant, so long as it is a global price. When it is artificially 
increased in one country, manufacturers in that country are 
disadvantaged and production moves to the lowest cost.
    We have approached our customers, primarily large automotive 
producers, who have denied our requests for relief from these increased 
raw material costs. They have threatened to replace our products with 
products originating outside of the United States if necessary. They 
have indicated that their own vehicle prices are under severe pressure 
and they are actively seeking lower cost components from other 
suppliers while at the same time demanding that we lower our prices 
further or face the loss of business to our competitors around the 
world.
    Our government has provided repeated tariff, countervailing duty 
and other protection to the large integrated steel producers since the 
1970s. Despite these numerous ``temporary'' tariffs many of the large 
integrated steel producers have not been able to earn an acceptable 
return. I would suggest that, after more than 30 years of almost 
continuous protection, there are structural problems in the steel 
industry that would be better solved by market forces than by continued 
government action.
    My concern is that in attempting to ``save'' jobs in the domestic 
steel industry, we have severely damaged domestic steel consumers. 
There are at least 50 manufacturing jobs in the products produced from 
steel for every one job in the steel making industry. To protect one 
job in steel making with tariffs we are placing the 50 steel consuming 
jobs at risk. In fact, according to a recent economic study 
commissioned by the Consuming Industries Trade Action Coalition 
(CITAC), 200,000 jobs in products produced from steel were lost between 
December of 2001 and December 2002 as a result of higher steel prices, 
brought on largely by the tariffs. To put that in perspective, there 
are only about 180,000 jobs in the entire steel producing industry.
    Faced with increasing raw material costs, and with no ability to 
recover those costs from their customers, many companies, including 
MacLean-Fogg, are buying or building factories outside of the United 
States to avoid increased raw material prices here. We have purchased 
three factories in Mainland China recently in order to have access to 
competitively priced raw materials. I cannot overemphasize the 
importance of raw material costs. Many of these products, fasteners 
included, have such low labor costs that labor is not the critical 
factor. In our fastener product lines, for example, labor is less than 
10% of the cost but steel is 30-50% of cost. Since the steel we buy is 
33% cheaper in Asia we are buying and manufacturing in Asia 
increasingly because of raw material costs, not labor.
    The products we will be buying and manufacturing in Asia include 
products produced with some sophisticated manufacturing technologies 
that without the pressure of raw material costs would best be kept in 
the United States. In other words, to remain a viable supplier to our 
customers, we are being forced to export our technology by government-
induced economic forces, such as tariffs and other imposed constraints. 
We would not need to make these decisions if we had access to 
competitively priced raw materials in the United States.
    Let me be more specific. We have a plant in Richmond, Illinois that 
employs 19 people making steel nuts. This plant is the most productive 
fastener plant in the world. It is so automated that these 19 people 
produce the equivalent of $12 million of sales value of fasteners, 
which is three times the industry average on a per person basis.
    However, the steel we buy for our Richmond plant costs $.30-$.35 
per pound today. We can buy these nuts in Asia, complete and delivered 
to Chicago, for $.44 per pound, because the same steel we buy here for 
$.30-$.35 per pound costs $.20-$.25 per pound in Taiwan and China. As a 
result, these 19 highly skilled people may well lose their jobs this 
year if the tariffs remain in place, because we will be forced to 
manufacture these nuts in Asia where we can find competitively priced 
raw materials.
    We won't make this decision because we want to. We will do this 
because, if we don't, our customers will do it for us. Mr. Chairman, 
this is a travesty of the worst sort. It is an example of the 
unintended consequences of government actions to meddle in the market. 
And, when we go offshore the steel making jobs that supply us will go 
offshore too, and none of these jobs will return once the technology is 
transferred.
    Let me say again that MacLean-Fogg supports a strong, globally 
competitive domestic steel industry. We also support a strong, globally 
competitive domestic steel-consuming manufacturing industry. In our 
view the best way to accomplish those two goals is to allow the market 
to work without undue influence from government. We therefore urge the 
removal of the tariffs at the earliest possible opportunity, and we ask 
Members of Congress to support that goal.
    Thank you for the opportunity to appear before you today. I would 
be pleased to answer any questions you may have.

                                 

    Chairman CRANE. Thank you, Mr. Taylor. Our next 
distinguished witness, President Nixon.

    STATEMENT OF PAUL NIXON, PRESIDENT AND MAJORITY OWNER, 
       BAKERSFIELD TANK COMPANY, BAKERSFIELD, CALIFORNIA

    Mr. NIXON. Thank you, Mr. Chairman and Members of the 
Subcommittee for the opportunity to speak today.
    My name is Paul Nixon and I live in Bakersfield, 
California. I am President and Majority Owner of Bakersfield 
Tank Company, a steel tank and vessel manufacturer founded in 
1980. We currently employ approximately 25 people.
    I am here to speak on behalf of my company, its employees, 
and other similarly situated small steel-consuming businesses 
about the impact of the section 201 safeguard action of March 
2002.
    I support a strong, healthy steel industry for America. I 
do not wish, nor am I qualified, to speak on the complex broad 
international trade and economic issues involved. I can only 
comment on the significant and untimely effects the section 201 
action had on the health of my business.
    We have experienced a steady rise in the cost of our steel 
materials since March 2002. The initial price increase was 
approximately 10 percent and settled at around 28 to 32 percent 
in the fall. It remains at that level today.
    We buy our materials primarily from steel distribution 
service centers. To their credit, it appeared that most of our 
suppliers used some restraint in applying the expected 
increases to existing or inbound inventories. Ultimately 
however, our costs reflect their costs and those costs have 
risen dramatically from a year earlier.
    To appreciate the true impact of these increases however, 
they must be viewed in the context of when they occurred. As is 
well documented, the overall economy has been in significant 
decline since the beginning of the year 2000. This is 
especially true in California with the crash of the tech sector 
and has been particularly pronounced since the events of 
September 11, 2001.
    In addition to a soft economy, small businesses have been 
faced with several new financial challenges in the past year. 
In California, workers compensation rates have virtually 
doubled, even for businesses with exemplary safety records.
    Health insurance for employees has increased at a rate of 
15 to 20 percent per year with an even larger increase promised 
for the upcoming renewal. I just found that was going to be 88 
percent just before I left.
    Liability insurance rates have increased 15 to 20 percent. 
There is pressure from our major customers to increase 
liability limits that will further add to the cost.
    While the perfect storm analogy has been overused, I 
believe it may be appropriate here. Given this array of 
challenges for small businesses, you can understand why we 
found the section 201 action, in our view optional, to be most 
unwelcome.
    We find that the current economy gives us little or no 
opportunity to raise prices. A typical small manufacturing 
business can realistically hope for no more than 8 to 10 
percent net profit, even in good times. We have had to absorb a 
30-percent increase in a cost component that makes up as much 
as 20 percent of our revenue. Under the best of circumstances, 
this represents up three-quarters of our net profit. Added to 
the bottom-line pressures already present, the impact of the 
tariff induced material cost increases are devastating.
    We have taken a number of steps to cope. Three key 
positions that were vacated through attrition were left 
unfilled. We have switched our health coverage to a partially 
self-insured plan, much to the displeasure of our employees. We 
have begun declining contracts that require liability limits 
greater than we can afford. Raises have been suspended for all 
management and most line employees. Needless to say, bonuses 
have been eliminated.
    We have yet to find an antidote for the section 201-related 
material cost increases. Until an economic climate returns 
which allows us to reflect some of these cost factors in our 
pricing, we simply are left to try and survive the squeeze.
    I have informally surveyed other small steel consuming 
businesses and found their experience to be similar to ours. 
Some, like us, have seen their profits erased. Others have also 
seen the loss of business to offshore producers as a result of 
downstream dumping of manufactured items.
    Our cynicism about the section 201 action is amplified by 
the realization that a number of the more well-heeled 
industries were able to obtain relief in the form of waivers. 
An elaborately funded and coordinated lobbying effort is simply 
not an option for small businesses like ours.
    For that reason, I am most appreciative of the opportunity 
to speak to you today and I would urge the Committee to 
continue to carefully monitor the adverse effects of the 
section 201 action. Thank you very much.
    [The prepared statement of Mr. Nixon follows:]
Statement of Paul Nixon, President and Majority Owner, Bakersfield Tank 
                    Company, Bakersfield, California
    My name is Paul Nixon. I live in Bakersfield, California. I am 
President and majority owner of Bakersfield Tank Company, a steel tank 
and vessel manufacturer founded in 1980. We currently employ 
approximately 25 people. I am here to speak on behalf of my company, 
its employees, and other similarly situated small steel consuming 
businesses about the impact of the Section 201 Safeguard Action of 
March 2002.
    I support a strong healthy steel industry for America. I do not 
wish, nor am I qualified, to speak on the complex broad international 
trade and economic issues involved. I can only comment on the 
significant and untimely effects the 201 action had on the health of my 
business.
    We have experienced a steady rise in the cost of our steel 
materials since March 2002. The initial price increase was 
approximately 10%, and settled at around 28% to 32% in the fall. It 
remains at that level today. We buy our material primarily from steel 
distribution service centers. To their credit, it appeared that most of 
our suppliers used some restraint in applying the expected increases to 
existing or inbound inventories. Ultimately however, our costs 
reflected their costs, and those costs had risen dramatically from a 
year earlier. To appreciate the true impact of these increases, 
however, they must be viewed in the context of when they occurred.
    As is well documented, the overall economy has been in significant 
decline since the beginning of the year 2000. This is true especially 
in California with the crash of the tech sector and has been 
particularly pronounced since the events of September 11th, 2001. In 
addition to a soft economy, small businesses have been faced with 
several new financial challenges in the past year. In California, 
workers compensation rates have virtually doubled, even for businesses 
with exemplary safety records. Health insurance for employees has 
increased at a rate of 15 to 20 percent per year with an even larger 
increase promised for the upcoming renewal. Liability insurance rates 
have increased 15% to 20%. There is pressure from our major customers 
to increase liability limits that will further add to the cost.
    While the ``Perfect Storm'' analogy has been overused, I believe it 
may be appropriate here. Given this array of challenges for small 
businesses, you can understand why we found the 201 action, in our view 
optional, to be most unwelcome. We find that the current economy gives 
us little or no opportunity to raise prices. A typical small 
manufacturing business can realistically hope for no more than 8 to 10 
percent net profit, even in good times. We have had to absorb a 30% 
increase in a cost component that makes up as much as 20% of our 
revenue. Under the best of circumstances this represents up to three-
quarters of our net profit. Added to the bottom line pressures already 
present, the impact of the Tariff induced material cost increases are 
devastating.
    We have taken a number of steps to cope:

     LThree key positions that were vacated through attrition 
and were left unfilled.
     LWe have switched our health coverage to a partially self-
insured plan, much to the displeasure of our employees.
     LWe have begun declining contracts that require liability 
limits greater than we can afford.
     LRaises have been suspended for all management and most 
line employees.
     LNeedless to say, bonuses have been eliminated.

    We have yet to find an antidote for the 201 related material cost 
increases. Until an economic climate returns which allows us to reflect 
some of these cost factors in our pricing, we simply are left to try 
and survive the squeeze.
    I have informally surveyed other small steel-consuming businesses 
and have found their experiences to be similar to ours. Some, like us, 
have seen their profits erased. Others have also seen a loss of 
business to offshore producers as a result of ``downstream dumping'' of 
manufactured items. Our cynicism about the 201 action is amplified by 
the realization that a number of the more well heeled industries were 
able to obtain relief in the form of waivers. An elaborately funded and 
coordinated lobbying effort is simply not an option for small 
businesses like ours. For that reason I am most appreciative of the 
opportunity to speak to you today. I would urge the Committee to 
continue to carefully monitor the adverse effects of the 201 action.

                                 

    Chairman CRANE. Thank you, Mr. President. Now our witness 
is Tim Leuliette.

  STATEMENT OF TIMOTHY D. LEULIETTE, CHAIRMAN, PRESIDENT, AND 
   CHIEF EXECUTIVE OFFICER, METALDYNE CORPORATION, PLYMOUTH, 
                            MICHIGAN

    Mr. LEULIETTE. Mr. Chairman and Members of the Committee, I 
would like to thank you on behalf of Metaldyne Corporation for 
the opportunity to present this testimony before you today.
    I am Chairman, President, and Chief Executive Officer of 
Metaldyne Corporation, a privately held company headquartered 
in metropolitan Detroit.
    Metaldyne and our affiliated companies employ over 11,000 
people at over 100 locations worldwide, and we had 2001 
revenues of $2.4 billion. We produce a safety critical chassis, 
engine, driveline, and transmission products to the U.S. auto 
industry.
    In terms of steel, Metaldyne has historically purchased 98 
percent of its primary raw material, special bar quality (SBQ) 
forging steel, from U.S.-based steel manufacturers. That steel 
represents a significant portion of our total cost, on some 
components as much as 50 percent. At over 380,000 tons 
annually, we are one of the largest consumers of SBQ steel in 
North America. To say that we have been negatively affected by 
the steel tariffs is an understatement. Since their inception, 
we have experienced up to 10-percent increases in our SBQ 
material cost in aggregate and up to 50 percent on specific 
items.
    We are also experiencing supply shortages domestically on 
specific grades of steel, which is forcing us to go offshore 
and pay the full 30 percent tariff in some cases. This was the 
basis for exclusion requests that were rejected by the U.S. 
Trade Representative (USTR) last week. The requests were not 
granted because we had not suffered significant steel 
unavailability in 2003 yet.
    Unfortunately, the Administration's analysis went no 
further. They do not understand, or worse choose to ignore, how 
the manufacturing supply chain works, particularly in the 
automotive sector. The truth of the matter is that domestic 
steel producers are neither approved sources, nor in some cases 
do they have the capacity or capability to supply some of our 
requirements despite what they told the Department of Commerce 
that they could.
    The net result of the tariffs is that our competitive 
position in the marketplace has been jeopardized because most 
of our customers will not accept pass-through price increases. 
In the automotive industry our customers, the vehicle 
manufacturers, require that we deliver 3 to 5 percent price 
reductions every year. Metaldyne has not had a price increase 
from our vehicle manufacturer customers since 1991. Rather, we 
have diligently implemented productivity improvements which are 
the basis of our viability as a successful supplier today.
    The point of all this is that steel tariffs have hand-
cuffed us with the highest SBQ steel prices in the world, and 
the fact is seriously threatening our competitive position as a 
global supplier.
    The door has been opened for foreign companies to compete 
for business against us. The bottom line, we have already lost 
business due to foreign competition as a result of the tariffs, 
and we are going to lose more business due to tariffs.
    We are not ones to sit around when there is work to be 
done. We are actively and aggressively pursuing alternatives to 
losing business as a result of steel tariffs. Those 
alternatives include resourcing up to 40 percent of our 
domestic steel buy to exempt countries, including Turkey and 
Brazil. We expect to achieve half of this by year end, and the 
balance in 2004.
    We are currently purchasing offshore components that before 
the implementation of the tariffs were made in the United 
States. Not only is this taking jobs and revenue away from 
Metaldyne, this is damaging our supply base.
    For example, this transmission clutch component here we 
used to make at Royal Oak, Michigan facility which is North 
America's most technically advanced hot-forging operation. We 
are now buying it in Korea. This represents a $6 million loss 
for Metaldyne and its suppliers. Our customers were unwilling 
to pay a premium for U.S. steel.
    The same principle applies to this performed differential 
gear that we have begun to purchase offshore. We made this in 
Detroit for 30 years, but now we have sourced it to Korea, $13 
million of business, for a savings of 15 percent again because 
our customers were unwilling to pay a premium for U.S. steel. 
This particular example has already cost the U.S. steel 
industry 2,500 tons of steel annually.
    These jobs will never return to the United States.
    With regard to capital investment, Metaldyne's plan for 
this year is to invest over $100 million in new equipment 
technology and facilities. Due primarily to the section 201 
tariff, 75 percent of that capital will be expensed offshore, 
including Korea, Mexico, China and the Czech Republic.
    Before I close, I would like to take a minute to share some 
employment data with you. When Metaldyne and its affiliate 
companies were formed into January 2001, we had almost 11,000 
U.S. jobs. At the beginning of 2003 we dropped to 8,500 jobs. 
We will announce today another 600 jobs that will be lost in 
Michigan, Indiana and Ohio to steel tariffs.
    In these uncertain times, we cannot afford to shirt 
production offshore and risk cutting employment in our domestic 
operations, but our customers and their customers, the American 
consumer, demand that we be globally competitive.
    On behalf of our 8,500 U.S.-based hourly employees and 
salaried employees and other steel consuming companies in the 
global automotive industry, I would like to thank Chairman 
Thomas, on behalf of the Committee on Ways and Means, for 
representing the ITC study the impact of tariffs on consumers 
and Congressman Knollenberg for his early and strong leadership 
on behalf of steel users.
    I thank you, Chairman Crane and Members of the Committee, 
for providing me with the opportunity to speak. Thank you.
    [The prepared statement of Mr. Leuliette follows:]
   Statement of Timothy D. Leuliette, Chairman, President, and Chief 
      Executive Officer, Metaldyne Corporation, Plymouth, Michigan
    Mr. Chairman and Members of the Committee, I would like to thank 
you on behalf of Metaldyne Corporation for the opportunity to present 
this testimony before you today. My name is Tim Leuliette, Chairman, 
President and CEO of Metaldyne Corporation.
    Headquartered in the metropolitan Detroit area, Metaldyne and its 
affiliate companies employ over 11,000 people at over 100 manufacturing 
locations worldwide and had 2002 revenues of $2.4 billion. Metaldyne is 
a leading global supplier of metal-based components, assemblies, and 
modules for safety-critical chassis, engine, driveline, and 
transmission applications.
    To put that into a larger perspective, Metaldyne is the 38th 
largest automotive supplier in the world according to Crain's Detroit 
Business Magazine. That means that there are some larger suppliers and 
many smaller suppliers, most of whom are being negatively impacted by 
the Section 201 Safeguard Action on Certain Steel Products. As a group, 
we are world-class competitive companies who, when faced with 
competitive issues, we take the necessary actions to retain our 
competitive positions.
    At Metaldyne, if we have to invest in new equipment and technology 
to remain competitive, we do so. Last year we invested over $100 
million into capital improvements. We will invest over $100 million 
into our business again this year. Likewise, if we have to locate a 
facility overseas to remain competitive and meet our customer's 
requirements, we do so. Unfortunately, more of our investment dollars 
and facility locations are ear-tagged for overseas as a direct result 
of the steel tariffs. I'll address that in more detail shortly. The 
point is, we allocate our assets to be globally competitive. Similarly, 
we support and in fact, our business requires a strong U.S. steel 
industry that is globally competitive.
    In terms of steel, Metaldyne purchases 98% of its primary raw 
material, Special Bar Quality (SBQ forging steel), from U.S. based 
steel manufacturers. That steel represents a significant portion of our 
total cost, in many cases in excess of 50%. At over 380,000 tons 
annually, we are one of the largest consumers of SBQ steel in North 
America.
    With that background, it would be an understatement to say that we 
have been negatively affected by the steel tariffs. Since their 
inception, we have experienced 5-10% increases in our SBQ material cost 
in aggregate and up to 50% on specific items. We are also experiencing 
supply shortages domestically on specific grades of steel which is 
forcing us to go offshore and pay the full 30% tariff in some cases. 
This was the basis for our exclusion submissions which are being 
contested by our steel suppliers who claim they can meet our 
requirements. The truth is they are neither approved sources nor, in 
most cases, do they have the capacity or capability to meet some of our 
requirements despite the fact that they told the U.S. Commerce 
Department that they can. The simple truth is that they misrepresented 
themselves to the Commerce Department at our expense.
    The net result of the tariffs is that our competitive position in 
the marketplace has been jeopardized because most of our customers will 
not accept pass-through increases. In the automotive industry, our 
customers, the vehicle manufacturers and many first tier suppliers to 
the manufacturers require that we deliver 3-5% price reductions on an 
annual basis. Metaldyne has not had a net price increase since 1991. 
Rather, we have diligently implemented productivity improvements, which 
are the basis for our viability as a successful supplier today. Those 
suppliers who have not focused on productivity improvements are no 
longer in business. The point of all this is that steel tariffs have 
hand-cuffed us with the highest steel prices in the world, and that 
fact is seriously threatening our competitive position as a global 
supplier. The door has been opened for foreign companies to compete for 
business against us. Before the tariffs, this would not have been 
possible. The bottom line, we have already lost business to foreign 
companies as a result of the tariffs and we are going to lose more . . 
. because of the tariffs.
    The same market dynamics are true for countless other suppliers 
whether they use SBQ, flat roll steel or any other category of steel 
that falls under the classification of ``Certain Steel Products'' that 
are protected by the 201 safeguard.
    As I said earlier, we are not ones to sit around when there is work 
to be done. . . .
    We are actively and aggressively pursuing alternatives to losing 
business as a result of steel tariffs. Those alternatives include:

     LResourcing up to 40% of our domestic steel buy to exempt 
countries including Turkey and Brazil. We expect to achieve half of 
this by year-end and the balance in 2004. These are long-term sourcing 
decisions that are clearly inconsistent with the Administration's 
intentions when the 201 safeguard program was initiated.
     LWe are currently purchasing offshore components that, 
before the implementation of the tariffs, were made in our U.S. 
facilities. Not only is this taking jobs and revenue away from 
Metaldyne, this is damaging our supply base as well. For example, a 
transmission clutch component that we used to make at our Royal Oak, 
Michigan facility--North America's most technologically advanced hot 
forging operation--is now being purchased in Korea. This represents a 
$6 million loss in revenues for Metaldyne and its six affected 
suppliers. The same principle applies to a preformed differential gear 
that we've begun to purchase offshore. Maybe the most devastating 
example to date is at our plant in Detroit. It is currently resourcing 
11 jobs to South Korea that account for nearly $13 million in lost 
revenue and ten Metaldyne jobs. By purchasing the preformed components 
in Korea, we're saving 15 percent compared to what we would pay for 
domestic steel. This particular example has cost the U.S. steel 
industry over 2,500 tons of steel annually, and two of its own 
employees have been cut as a result of the lost business. As a result 
of these resourcing decisions, jobs are lost at Metaldyne and our 
downstream suppliers including steel producers, tool and die makers and 
heat treatment operations. These jobs will never return to the U.S.
     LWith regard to capital investment, I mentioned earlier 
that Metaldyne's plan for this year is to invest over $100 million into 
new equipment, technology and facilities. Due primarily to the market 
environment created by section 201, 75% of that investment is ear-
marked for offshore investment, including a new manufacturing facility 
in Korea, a new sales, technical and purchasing office in China as a 
first step toward establishing manufacturing operations there, and 
additional investment in an existing facility in the Czech Republic. 
Again, that translates into jobs.

    Mr. Chairman, regardless of what the steel industry will tell you, 
what I have just shared with you are the facts with regard to the 
impact of section 201 on Metaldyne specifically and other automotive 
steel consumers in general. They are the facts. They are undisputable, 
and I do not believe for one minute that these were the intended 
consequences of the Administration. The steel industry will try to tell 
you otherwise with a lot of words and phrases that need to be 
questioned.
    Catch phrases such as:

     L``Illegally dumped steel''--make them prove it item by 
item. Two years ago, the steel producers reduced market capacity for 
SBQ steel by 30 percent, and today they are simply reaping the 
financial benefits of section 201 at Metaldyne's expense.
     L``Artificially low prices'' or ``Prices have returned to 
normal levels''--By whose determination the market or steel producers, 
we have not had a net price increase since 1991, we'd be happy to go 
back to 1997 pricing.
     L``Far below historic levels''--join the club and get 
competitive like we have. At the end of the day, the price of domestic 
steel is irrelevant, we deal in a global market place, and what matters 
is the cost of steel on a global basis.
     L``Record imports in 2002''--How much of that is purchased 
by U.S. steel producers under exemption for re-processing and resale at 
tariff inflated prices?
     L``Where are the profits going?''--We do not see the 
reinvestment in technology or the drive to become more globally 
competitive.

    At the end of the day, there is only one reason why section 201 
must be reversed immediately. It is costing us U.S. manufacturing jobs 
that will never return. By some estimates, 201 has already cost more 
jobs in the steel consuming segment (over 200,000) than even exist in 
the U.S. steel industry (178,000). And it has only just begun.
    Lastly, I'd like to tell you about the President of the UAW 
bargaining unit at our Royal Oak, Michigan facility. He represents the 
hourly employees at the most automated, technologically advanced hot 
forging operation in North America. These workers are among the most 
efficient in the world, operating $15 million automated forging 
presses. His membership has, and will continue to lose jobs, not 
because they are not productive or because their wages are non-
competitive. He is losing membership because section 201 has forced us 
to buy the most expensive steel in the world and opened the door to 
foreign competition and our response is to purchase offshore and 
accelerate our plans to manufacture offshore. And the irony of all of 
this is that every job lost in the steel consuming segment will not 
save one single job in the steel producing segment. In fact, if other 
companies like Metaldyne look to offshore alternatives, the U.S. steel 
industry will be in worse shape than before the tariff program began.
    Before I close, I'd like to take a minute to share some employment 
data with you. When Metaldyne and its affiliate companies were formed 
in January 2001, we had almost 11,000 U.S.-based employees. At the 
beginning of 2003, our U.S employment dropped to about 8,500, and in 
the next 60 days, we expect to lose about another 600 hourly and 
salaried workers in the U.S. due in part to the steel tariffs, and in 
part to decreased domestic auto production in the face of this 
uncertain economy.
    In these uncertain times, we cannot afford to shift production 
overseas and risk cutting employment at our domestic operations. Even 
when domestic auto production increases, if the steel tariffs are still 
in effect, we will be forced to restore our manufacturing operations in 
countries that allow us to be globally competitive.
    On behalf of Metaldyne and our 8,500 U.S. based salaried and hourly 
employees, both represented and not represent, and on behalf of all 
other steel consuming companies in the global automotive industry, I 
thank you Mr. Chairman and Members of the Committee for providing me 
with the opportunity to testify.

                                 

    Chairman CRANE. Thank you. Mr. Trilla.

   STATEMENT OF LESTER TRILLA, PRESIDENT AND CHIEF EXECUTIVE 
   OFFICER, TRILLA STEEL DRUM CORPORATION, CHICAGO, ILLINOIS

    Mr. TRILLA. Thank you. Mr. Chairman and Members of the 
Subcommittee, thank for the honor of appearing before you today 
to discuss the impact of the steel section 201 tariffs on 
steel-consuming industries.
    My name is Lester Trilla. I am President and Chief 
Executive Officer of Trilla Steel Drum Corporation, which is 
located in Chicago. We are a leading manufacturer of new steel 
drums used in filling and transportation of a variety of 
products, including hazardous materials. We employ 
approximately 50 union employees. Trilla is a third generation 
family-owned business.
    The steel safeguard has had significant negative 
consequences for our company. The steel tariffs have increased 
our steel costs and, by limiting us to domestic steel that does 
not work well in our machinery, have increased our production 
costs due to quality issues.
    Cold-rolled steel is the major raw material used in our 
drums and the increase in the price of steel last year 
resulting from additional tariffs, caused our steel costs to go 
up 70 to 80 percent. Prices have moderated in recent months, 
but not nearly enough to restore our competitive position.
    Moreover, we cannot get a steel product exclusion for the 
steel we need.
    Because of steel supply difficulties, we have been forced 
to increase the price of our drums over 20 percent. Some of our 
best and oldest customers have not accepted this increase and 
have moved to foreign competitors who have much lower steel 
costs. Our business today is down 30 percent.
    We are particularly saddened that the major beneficiaries 
of our lost business are steel drum manufacturers in foreign 
countries. These drums are cheaper abroad because foreign drum 
producers do not have high raw material costs as we do. We hear 
credible reports from abroad that the cold-rolled steel prices 
are lower than the ones we see by a substantial margin, which 
is probably more than 20 percent.
    Other customers have switched from steel drums altogether 
and use non-steel containers like plastic or intermediate bulk 
containers. These companies had to change their logistics 
facilities and they will never come back to steel drums 
produced by myself or anybody else in the United States.
    The loss of business has done serious damage to us, not 
only because we are a small business and not a large and 
diverse corporation that can absorb or offset these losses, but 
also because we take pride in relationships that we have built 
over the years with our customers. Many of these lost customers 
have used Trilla steel drums for over 30 years.
    Meanwhile, the tariffs have effectively cut off our 
previous source of imported steel and forced us to switch to 
domestic steel. Unfortunately, domestic steel is of a 
significantly lower quality than what we have been getting from 
our foreign suppliers. The quality of the steel feedstock is 
very important to us because our drums are used to carry very 
hazardous, dangerous and flammable products and they are 
subject to very stringent quality standards. Trilla's scrap 
rate has doubled since we had to move to completely domestic 
material.
    In addition, for the first time, we have had a problem with 
the coatings on our steel products. In the past year we have 
had almost $100,000 in claims from customers for failed 
coatings or linings, as we call them. That is directly related 
to the problems we are having with cleanliness and the quality 
of the steel. Before last May, Trilla has never had a failure 
in its coatings.
    Mr. Chairman, the steel tariffs imposed by the President 
have had an effect of making Trilla significantly less 
competitive. Steel costs in the United States skyrocketed last 
year, causing me to lose business from customers that I will 
never get back. Now, even though the prices have moderated 
somewhat, the poor quality of steel I have to use from domestic 
mills have caused other problems with customers and have 
created additional costs for us at Trilla.
    I appreciate the safeguards were supposed to help the U.S. 
steelmakers, but I do not understand why the steel consumers 
like myself and all of my union employees have to suffer.
    Thank you for the opportunity to present my views.
    [The prepared statement of Mr. Trilla follows:]
  Statement of Lester Trilla, President and Chief Executive Officer, 
            Trilla Steel Drum Corporation, Chicago, Illinois
    Mr. Chairman and Members of the Subcommittee, thank you for the 
honor of appearing before you today to discuss the impact of the steel 
201 tariffs on my business and my workers, as well as the industry in 
which we participate. My name is Lester Trilla. I am the President and 
CEO of Trilla Steel Drum Corporation, which is located in Chicago, 
Illinois. We are a leading manufacturer of new steel drums used in the 
filling and transportation of a variety of products, including 
hazardous materials. Trilla is a family-owned, family run business--
three generations of the Trilla family have built the company from a 
$500 investment in a drafty garage on the Southwest Side into a major 
Midwest supplier of more than one million 55-gallon steel drums 
annually to a diverse client base.
    The steel 201 safeguards have had significant negative consequences 
for our company. The steel tariffs have increased our steel costs, and, 
by limiting us to domestic steel that does not work as well on our 
machinery, have increased our production costs due to quality issues.
    Cold-rolled steel is the major raw material used in our drums, and 
the increase in the price of steel last year resulting from the 
additional tariffs on imported steel caused our steel costs to go up 
70-80 percent last year. Prices have moderated in recent months, but 
not nearly enough to restore our competitive position. Moreover, we 
cannot get a steel product exclusion for the steel we need.
    Because of steel supply difficulties, we have been forced to 
increase the price of our drums over 20 percent. Some of our best and 
oldest customers could not accept this increase, and have moved to our 
foreign competitors, who have much lower steel costs. As a result, we 
have lost 30 percent of our longstanding customers. We are particularly 
saddened that the major beneficiaries of our lost business are steel 
drum makers in foreign countries. The drums are cheaper abroad because 
foreign drum producers do not have as high raw material costs as we do. 
We hear credible reports that foreign cold-rolled steel prices are 
lower than the ones we see by a substantial margin, more than 20 
percent.
    Other customers have avoided the price increases by switching from 
steel drums altogether and now use non-steel containers like plastics 
and IBCs (``intermediate bulk containers''). The companies that have 
made this switch have had to change their logistics facilities, and 
will never come back to steel drums or Trilla or any drum manufacturer 
in the United States. This loss of business has been seriously damaging 
to us--not only because we are a small business, that cannot absorb 
these losses, but also because we take pride in the relationships that 
we have built over the years with our customers--many of these lost 
customers have used Trilla steel drums for thirty years and more.
    Meanwhile, the tariffs have effectively cut off our previous 
sources of imported steel and forced us to switch to domestic steel. 
Unfortunately, the domestic steel Trilla has to buy is of a 
significantly lower quality than what we had been getting from foreign 
mills. The quality of our steel feedstock is very important to us 
because our drums are used to carry very hazardous, dangerous, 
flammable products and they are subject to very stringent quality 
standards. Without getting into the technical details of drum 
production, I can say that Trilla's scrap rate has doubled since we had 
to move completely to domestic material--we get some deliveries where 
we just can't use the steel because it doesn't weld or clean properly. 
In addition, for the first time, we have had problems with coating our 
steel products. In the past year, we have had almost $100,000 in claims 
from customers for failed coatings that are directly related to the 
problems we have had with the cleanliness and quality of the steel. 
Before last May, Trilla never had a failure of its coatings.
    Mr. Chairman, all of this is to say that the steel tariffs imposed 
by the President have had the effect of making Trilla significantly 
less competitive. Steel costs in the U.S. skyrocketed last year, 
causing me to lose business from customers that I will never get back. 
Now, even though the prices have moderated somewhat, the poor quality 
of the steel that I have to use from domestic mills have caused other 
problems with the customers I have been able to keep and have created 
additional costs for Trilla. I appreciate that the safeguards were 
supposed to help the U.S. steelmakers, but I don't understand why steel 
consumers like me have to suffer.
    Thank you for this opportunity to present my views.

                                 

    Chairman CRANE. Thank you, Mr. Trilla. Mr. Pritchard.

  STATEMENT OF DAVID PRITCHARD, PRESIDENT AND CHIEF EXECUTIVE 
      OFFICER, A.J. ROSE MANUFACTURING COMPANY, AVON, OHIO

    Mr. PRITCHARD. Good morning and thank you, Mr. Chairman.
    Thank you very much for asking me to testify about the 
consequences of the steel section 201 tariffs have had on my 
company. My name is Dave Pritchard and I am President and Chief 
Executive Officer at A.J. Rose Manufacturing. A.J. Rose is 
headquartered in Avon, Ohio and we have plants for 
manufacturing in both Cleveland and Avon.
    A.J. Rose is a family-owned company with three generations 
in the business since 1922. We have approximately 370 
employees, 250 of which are members of the United Steelworkers 
Local 735. We specialize in the manufacturing of high tolerance 
metal stampings, airbag components and spun form products for 
the automotive market.
    We face all the dilemmas that the gentleman before me have 
been speaking in regard to the automotive market and the 
pricing situations. We buy hot-rolled steel flat products that 
are subject to the tariffs. We buy from both domestic and 
foreign sources. The tariffs have increased our steel prices 
dramatically. We estimate that the tariffs have added $1.1 
million to our cost of material in the last 12 months. We have 
been able to obtain price increases on only one-third of our 
products to cover that additional cost.
    The increased costs have had a devastating effect on our 
bottom line. The increased steel pricing has put us at a 
distinct disadvantage with respect to our foreign competitors.
    As a result, we have lost significant amounts of business 
to our foreign competitors and it looks like it is only going 
to get worse.
    We have lost over half a million dollars in existing 
business since the start of 2003 because one of our large 
customers did not want to pay the increased amount we now need 
to charge. This business was placed with a company in Korea 
instead, a company where steel prices are considerably less 
than the United States.
    Also, in the last year alone, we have lost approximately 
$7.5 million covering 15 contracts to competitors outside of 
the United States. These contracts were awarded simply because 
we could no longer meet our foreign competitors' prices due to 
the steel tariffs.
    This loss of $7.5 million in new contracts this year 
translates to a loss of $45 million to $60 million over the 
next few years. This is because, in our business, when you are 
awarded a contract, it generally runs for the life of the part 
in application, which could be 4, 6, 10 years even. This means 
that the loss of a job now really costs you many times the 
annual revenue in lost future sales.
    The situation shows no sign of improving. In January, our 
largest customer stated that they would no longer accept the 
cost increase the tariffs forced us apply to their pricing. 
They stated if we insisted, they would continue to pay the 
increase but it would signal the beginning of the end of our 
12-year relationship. They advised us of this in the same 
meeting they informed us that they had awarded one of our 
competitors a contract for parts that we had been told we would 
get. Prior to this time, we were the only company supplying 
this customer with this type of product in North America. The 
competitor that was awarded this business is a Canadian 
company.
    In addition, a Canadian customer of ours that has accepted 
one-half of the increased costs from the tariffs has been 
demanding that we use Canadian steel and Canadian tool shops to 
produce products for them. Over the past 30 days, they have 
been actively soliciting bids for parts that we make for them 
from Canadian and Chinese firms.
    This loss of business has had a significant impact on our 
day-to-day operations. Due to the loss of orders, we have had 
to lay off over 33 people in the past 12 months--10 of those 
since the start of 2003.
    In addition, our cash flow and operating loan situation has 
become tenuous. We have scheduled a meeting with our bank to 
discuss our deteriorating financial condition. This is the 
first time in 35 years that I have been involved with A.J. Rose 
that I have ever had to have a conversation like this with a 
bank.
    We, and our suppliers, used the product exclusion process 
to try to soften the negative effects of the tariffs. While we 
had some degree of success in obtaining product exclusions, 
these product exclusions have only provided us with very 
limited relief. The basic problem remains--the tariffs have 
made it virtually impossible for us to compete with our foreign 
competitors.
    This constant threat to our business is very real and will 
get worse if we are forced to continue to pay such a premium 
for the steel we need to run our business.
    We sincerely hope that these tariffs can be lifted as soon 
as possible. Thank you.
    [The prepared statement of Mr. Pritchard follows:]
 Statement of David Pritchard, President and Chief Executive Officer, 
              A.J. Rose Manufacturing Company, Avon, Ohio
    Good morning. Thank you very much for asking me to testify about 
the consequences the steel 201 tariffs have had on my company. My name 
is Dave Pritchard, and I am President and CEO at A.J. Rose 
Manufacturing Company. A.J. Rose, headquartered in Avon, OH, is a 
family-owned company, with three generations in the business since 
1922. We have approximately 370 employees, 250 of which are members of 
the United States Steel Workers' Local #735. We specialize in 
manufacturing tight tolerance metal stampings, air bag components, and 
spun-formed products for the automotive market.
    We buy hot-rolled steel flat products that are subject to the 
tariffs. We buy from both domestic and foreign sources. We estimate 
that the tariffs have added 1.1 million to our cost of material in the 
last 12 months. We have been able to obtain price increases on only 
one-third of our products to cover that additional cost. The increased 
costs have had a devastating effect on our bottom line. The increased 
steel pricing has put us at a distinct competitive disadvantage with 
respect to our foreign competitors. As a result, we have lost a 
significant amount of business to our foreign competitors and it looks 
like it is only going to get worse.
    We have lost over a half a million dollars in existing business 
since the start of 2003 because one of our big customers did not want 
to pay the increased amounts we now need to charge. This business was 
placed with a company in Korea instead--a country where steel prices 
are considerably less than the U.S.
    Also, in the last year alone, we have lost approximately 7.5 
million in new orders (15 contracts) to competitors outside of the 
United States. These contracts were awarded simply because we could no 
longer meet our foreign competitors' prices due to the steel tariffs. 
This loss of 7.5 million in new contracts this year translates into a 
loss of 45 to 60 million over the next few years. This is because in 
our business, when you are awarded a contract, it generally runs for 
the life of the part in application (approximately 4 years). This means 
that the loss of a job now really costs you many times the annual 
revenue in lost future sales.
    The situation shows no sign of improving. In January, our largest 
customer (MACI) stated that they would no longer accept the cost 
increase the tariffs forced us to apply to their pricing. They stated 
that if we insisted, they would continue to pay the increase but that 
it would signal the ``beginning of the end of our 12 year 
relationship.'' They advised us of this in the same meeting they 
informed us that they had just awarded one of our competitors a 
contract for a part we were told we would get. Prior to this, we were 
the only company supplying MACI with this type of product in North 
America. The competitor that was awarded this business is a Canadian 
company.
    In addition, a Canadian customer that has accepted one-half of the 
increased cost from the tariffs, has been demanding that we use 
Canadian steel and Canadian tool shops to produce products for them. 
Over the past 30 days, they have been actively soliciting bids for the 
parts we make for them from Canadian and Chinese firms.
    This loss of business has had a significant impact on our day to 
day operations. Due to the loss of orders we have had to lay off 33 
people in the past 12 months--10 of those, since the start of 2003. In 
addition, our cash flow and operating loan situation has become 
tenuous. We have scheduled a meeting with our bank to discuss our 
deteriorating financial condition. This is the first time in the 35 
years I have been involved with A.J. Rose that I have ever had to have 
a conversation like this.
    We, and our supplier, used the product exclusion process to try to 
soften the negative effects of the tariffs. While we had some degree of 
success in obtaining product exclusions, these product exclusions have 
only provided us with very limited relief. The basic problem remains--
the tariffs have made it virtually impossible for us to compete with 
our foreign competitors.
    This constant threat to our business is very real and will get 
worse if we are forced to continue to pay such a premium for the steel 
we need to run our business. We sincerely hope that these tariffs can 
be lifted as soon as possible.
    Thank you. I will take any questions you might have.

                                 

    Chairman CRANE. Thank you. As you know, the bells have gone 
off indicating votes over on the floor. We are going to break 
for lunch after these votes and then reconvene at 1:00 p.m. Mr. 
Smith, can you put off your testimony until 1:00 p.m.?
    Mr. SMITH. Absolutely.
    Chairman CRANE. All right. Then we will have your testimony 
and then we will get to questions of the entire panel. With 
that, thank you all, and the hearing stands in recess subject 
to the call of the Chair.
    [Whereupon, at 11:36 a.m., the hearing recessed, to 
reconvene at 1:00 p.m., the same day.]
    Chairman CRANE. We are sorry for a little bit of delay 
here, but we would now like to hear from Mr. Wes Smith, 
President and Owner of E&E Manufacturing in Plymouth, Michigan.

STATEMENT OF WES SMITH, PRESIDENT AND OWNER, E&E MANUFACTURING 
               COMPANY, INC., PLYMOUTH, MICHIGAN

    Mr. SMITH. Thank you. My name is Wes Smith and I am the 
President and Owner of E&E Manufacturing Company. I appreciate 
the opportunity to submit testimony to bring attention to the 
fact that the steel section 201 tariffs have resulted in a 
significant and negative impact on our company.
    E&E is located in Plymouth, Michigan and is a world-class 
leader in metal joining technology. It meets the needs of its 
world-class automotive customers by manufacturing heavy gauge 
stamp metal fasteners such as these, progressive die metal 
stampings such as this engine component, and high value-added 
assemblies.
    E&E was founded in 1963 by my father and provides 
meaningful employment to over 250 dedicated employees.
    Steel comprises 40 percent of our total costs of producing 
these parts. For our raw steel needs we generally have relied 
upon 6 month or yearly contracts with steel warehouses that 
obtain their supply from domestic mills, with 75 percent of our 
requirements met by one major supplier. Our relationship with 
this supplier has been positive and constructive. The day after 
the steel section 201 tariffs were imposed last March, this 
supplier broke its contract with E&E and imposed a swift and 
hefty increase in our pricing that left us in a state of shock 
and awe.
    What is ironic about this incident is that this supplier 
obtains the majority of its product from a mini-mill, not an 
integrated mill. The mini-mills have not been subject to the 
legacy costs that the integrated mills have had to suffer.
    Since February 2002, our steel costs have increased an 
average of 34 percent, which amounts to over $3.3 million. The 
consequences of the steel section 201 tariffs have impacted E&E 
in a dramatic way. Nearly half of our stamp fastener product is 
supplied to an automobile company, which has bought its 
requirements from us since 1970. This account comprises a third 
of our sales. In February 2002, E&E had to negotiate a 
significant price decrease to keep this business because our 
customer has made it clear that it has increasing options of 
purchasing its requirements from offshore sources.
    We applied to the USTR for steel exclusions on this product 
and found out on March 21, 2003 that our request was denied.
    Immediately after making this concession in 2002, at a loss 
of over half a million dollars in revenue, the steel section 
201 tariffs were imposed. We are currently negotiating another 
significant decrease for 2003.
    I fear that this illustrates the flaw and the reasoning 
underlying the steel section 201 tariffs. The assumption was 
that small businesses, the steel-consuming industry in this 
country, would not get hurt by the steel section 201 tariffs. 
We should be able to pass this cost down to our customers who 
would pass the cost on to their ultimate customer or absorb the 
costs themselves.
    It does not work this way in reality, as my example proves. 
If a component manufacturer like E&E tries to pass these 
significant increases on to its customers, those customers will 
procure their inputs from offshore sources, where the 
production is cheaper for a lot of reasons, including a raw 
material cost unfettered by significant additional tariffs.
    Our customers tell us that in this economy we need to 
compete globally. We are willing to meet that challenge but 
cannot do so with our hands tied behind our backs by having our 
government tax our largest input.
    Smaller manufacturers rely on their larger customers for 
work. However, the tariffs have been a catalyst for these 
customers to source more work overseas, which threatens our 
very existence. Of the approximately 355,000 manufacturing 
locations nationwide, 90 percent of these have less than 100 
employees and do not have either the wherewithal or the desire 
to move their operations offshore.
    Our larger customers have options and they are exercising 
their options. They can bypass the tariffs by bringing in semi-
finished components from offshore sources, which is causing 
epidemic job losses. There have been 31 consecutive months of 
job loss in the manufacturing community, with the small and 
medium manufacturing being hit the hardest.
    Many so-called scholared economists feel that the market is 
suggesting that perhaps manufacturing should go. Well, I 
consider myself a Will Rogers economist, and I think it is 
interesting to note that the United States has had a number of 
false starts toward an economic recovery.
    However, they have sputtered out due to, in large part, to 
the fact that one of our largest and most significant 
employment sectors, manufacturing, has been in an economic 
depression with the loss of over 2 million jobs in the past 2 
years.
    It is also interesting to note that there has been a 
country in this global economy that has been able to increase 
their economic prosperity by double digits. That country is 
China and they are basing their growth on manufacturing.
    Working with Plante and Moran, a regional accounting and 
consulting firm, and using an industry model that has been in 
existence for over a decade, we reviewed 13 manufacturing 
sectors whereby steel represents over 10 percent of the non-
value added input, representing 3 million jobs nationally. We 
used a debt-to-equity ratio of 3 to 1 to determine the 
threshold whereby a company's access to cash is cut off. 
Basically the banks will refuse to loan you any more money at 
that point.
    Based on this data, it is certain that manufacturing jobs, 
1.5 million by 2005, will be lost, or be in serious jeopardy, 
as a direct result of the price increases incurred from the 
steel tariffs.
    From a personal standpoint, it has been very discouraging 
that there has not been a cohesive effort by all industry 
participants, producers, consumers and the government, to find 
an appropriate solution to secure the health of the domestic 
steel industry. Their losses have simply been transferred 
disproportionately to the small and medium manufacturers who 
are the least able to cope with them.
    Quite frankly, the steel tariffs are the wrong medicine for 
a sick industry. Thank you.
    [The prepared statement of Mr. Smith follows:]
 Statement of Wes Smith, President and Owner, E&E Manufacturing, Inc., 
                           Plymouth, Michigan
    My name is Wes Smith, and I am the President and owner of E&E 
Manufacturing Co. I appreciate the opportunity to submit this testimony 
to bring attention to the fact that the steel 201 tariffs have had a 
dramatic impact on the price and availability of steel in the market, 
and have resulted in a significant and negative impact on our company.
    E&E is located in Plymouth, Michigan, and is a world-class leader 
in metal joining technology. It meets the needs of its world-class 
automotive customers by manufacturing heavy gauge stamped metal 
fasteners, progressive die metal stampings, and high value-added 
assemblies. E&E was founded in 1963, and provides meaningful employment 
to over 250 dedicated employees. Steel comprises 40 percent of our 
total cost of producing these products.
    For our raw steel needs, we generally have relied upon six-month or 
yearly contracts with steel warehouses that obtain their supply from 
domestic mills, with 75 percent of our requirements met by one major 
supplier. Our relationship with this supplier has been positive and 
constructive, but the day after the steel 201 tariffs were imposed last 
March, this supplier broke its contract with E&E and imposed a hefty 
increase on our pricing. What is ironic about this incident is that 
this supplier obtains a majority of its product from a mini-mill, not 
an integrated mill; the mini-mills have not been subjected to the 
legacy costs that the integrated mills have had to suffer. I have 
prepared a spreadsheet, which is appended to my testimony, that tracks 
the significant and sudden price increases we have been experiencing in 
our raw material purchases since the imposition of the steel tariffs. 
This analysis illustrates the significant effect these additional 
tariffs have had on the pricing and availability of steel, as well as a 
drop in our revenue. Since February of 2002, our steel costs have 
increased an average of 34 percent, which amounts to $3.3 million.
    Aside from pricing, a continued reliable supply of steel is of 
great concern to us. The lack of available steel has brought us close 
to shutting down our Original Equipment Manufacturer (OEM) and Tier One 
customers. Because of late deliveries due to capacity limitations that 
the steel mills have had since the imposition of steel tariffs, we have 
had to pay expedited freight costs in order to get our shipments in 
time so that we can deliver the final product to our customers in time. 
In addition, E&E has had to spot buy material at a significantly higher 
cost because our suppliers have failed to deliver steel we have 
ordered.
    The consequences of the steel 201 tariffs have already impacted E&E 
in a dramatic way. Nearly half of our stamped fastener product is 
supplied to an OEM, which has bought its requirements from E&E since 
the 1970's. This account comprises a third of our sales. It involves a 
proprietary product that is now subject to a reverse auction process, 
whereby the contract is auctioned off on a yearly basis. In February 
2002, E&E had to negotiate a significant price decrease to keep this 
business, because our customer has made it clear that it has the 
increasing option of purchasing its requirements from offshore sources, 
such as Chinese sources. We applied to the USTR for steel exclusions on 
this product, and found out March 21, 2003 that our request was denied. 
We are currently negotiating another significant decrease for 2003.
    Immediately after making this concession--at a loss of a half-
million dollars in revenue--the steel 201 tariffs were imposed, and the 
price spikes I described earlier hit us. At this point, it is 
absolutely out of the question for E&E to approach this customer to 
renegotiate this deal in a way that would cover the increased costs of 
our raw materials. The customer has made it abundantly clear that it 
will exercise its option to take its business offshore for this 
product. In addition, another of our largest customers told us that 
when the tariffs were imposed, they reforecast their budgets for the 
end of last year and were so upset by the numbers they saw, that they 
instructed their Purchasing Department to price all components 
currently purchased and internally manufactured to Asia.
    I fear that this illustrates the flaw in the reasoning underlying 
the steel 201 tariffs. The assumption was that the small businesses, 
the steel-consuming industries in this country, wouldn't get hurt by 
the steel 201 tariffs. We should be able to pass this cost on to our 
customers, who would pass the cost on to their ultimate consumers or 
absorb the cost themselves. But this doesn't work in reality, as my 
example proves. If a components manufacturer like E&E tries to pass 
these significant increases on to its customers, those customers will 
procure their inputs from offshore sources, where the cost of 
production is cheaper for a lot of reasons, including a raw material 
cost unfettered by significant additional tariffs. Our customers tell 
us that in this economy, we need to compete globally. We cannot, 
however, compete under the best of circumstances when our raw material 
costs are artificially inflated as a result of the steel 201 tariffs. 
We have lost other opportunities for new products that we have 
designed, and there is increased pressure placed on our customers from 
their customers to buy all their smaller components offshore. We are 
willing to meet the challenge of competing with the Asians, however, we 
cannot do that with our hands tied behind our backs by having our 
government tax our largest input by 30%.
    Smaller manufacturers rely on their larger customers for work, 
however, the tariffs have been a catalyst for these customers to source 
more work overseas, which threatens our very existence. Of 
approximately 355,000 manufacturing locations nationwide, 90% have less 
than 100 employees, and don't have either the wherewithal or desire to 
move their operations offshore. Our larger customers have options. They 
can bypass the tariffs by bringing in semi-finished components from 
offshore sources, which is causing epidemic job loss (31 straight 
months) in the manufacturing community, with the small and medium 
manufacturers being hit the hardest.
    I consider myself a ``Will Rogers economist,'' and I think it is 
interesting to note that the U.S. has had a number of false starts to 
the economic recovery, however, they have sputtered out due, in large 
part, to the fact that one of the largest and most significant 
employment sectors (manufacturing) has been in an economic depression 
with the loss of over 2 million jobs in the past 2 years. It is also 
interesting to note that there is a country in this global economy that 
has been able to increase their economic prosperity by double-digits. 
That country is China. They are basing their growth on manufacturing.
    Working with Plante & Moran, LLC, a regional consulting firm, and 
using industry models that have been in existence for over a decade, we 
reviewed 13 manufacturing sectors representing 3 million jobs 
nationally. A debt-to-equity ratio of 3-1 was determined to be the 
threshold whereby a company's access to cash is cut off. Based on this 
data, it is certain that manufacturing jobs (1.5 million by 2005) will 
be lost or in serious jeopardy as a direct result of the price 
increases incurred from the steel tariffs.
    As you can see, the price increases and supply constraint resulting 
from the steel 201 tariffs have had a significant impact on our company 
and customer base. Unintended or not, the consequences of the increased 
steel tariffs have been significantly detrimental to our company's 
ability to protect and grow meaningful manufacturing jobs.
    From a personal standpoint, it has been very discouraging. My own 
reaction, as well as that of many of my peers, has been one of ``shock 
and awe.'' The suddenness and size of the price increases seemed to 
fall on us out of the sky; it was not a gradual or predictable 
experience that you would expect from a decrease in capacity as a 
result of bankruptcies in the steel industry. Also, there has not been 
a cohesive effort by all industry participants (producers, consumers, 
and government) to find an appropriate solution to secure the health of 
the domestic steel industry. Their losses have been transferred to the 
small and medium manufacturers who have been least able to cope with 
them. Quite frankly, the steel tariffs are the wrong medicine for a 
sick industry.


                                                                                          E and E Manufacturing Co., Inc., Plymouth, MI, 48170
                                                                       This package represents E&E Manufacturing direct buy, non-customer supplied material only.
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Width +/-
                                                      Ordered     .010                                      ESTIMATED    Jan-02     Monthly     Apr-02     Monthly     Jul-02     Monthly     Oct-02     Monthly     Jan-03     Monthly
                         P/N                          Gauge      unless             MATERIAL SPEC           MONTHLY      Price       Cost       Price       Cost       Price       Cost       Price       Cost       Price       Cost
                                                                 noted
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0685                                               .048/.052     2,4000                          1050SS        4,000    $34.25    $1,370.00    $34.25    $1,370.00    $41.25    $1,650.00    $49.25    $1,970.00    $41.25    $1,650.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0684                                               .048/.052     3,3000                          1050SS        5,000    $34.25    $1,712.50    $34.25    $1,712.50    $41.25    $2,062.50    $49.25    $2,462.50    $41.25    $2,062.50
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1171                                               .048/.052     4,7500                          1050SS        7,000    $34.25    $2,397.50    $34.25    $2,397.50    $41.25    $2,887.50    $41.25    $2,887.50    $41.25    $2,887.50
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1266                                               .053/.057     4,1250            SAE J1392 050 XLF HR        7,000    $20.00    $1,400.00    $25.00    $1,750.00    $25.00    $1,750.00    $28.95    $2,026.50    $22.50       $637.50
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0970                                               .054/.064     2,7000                      1008/1010 CR      1,000    $20.00       $200.00   $25.00       $250.00   $25.00       $250.00   $28.95       $289.50   $25.50       $255.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1047                                               .054/.064     8,0000             1008/1010 p o akdq CR      6,000    $20.00    $1,200.00    $25.00    $1,500.00    $25.00    $1,500.00    $28.95    $1,737.00    $25.50    $1,530.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               1008/1010 HD Galv GM6185
0994                                               .059/.066     4,7500                        70G 70GU       25,000    $21.95    $5,487.50    $21.95    $5,487.50    $28.95    $7,237.50    $28.95    $7,237.50    $27.95    $6,987.50
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     HRCQ ASTM A56
1110                                               .059/.070     5,5000                         .05-.13C,.30 M 5,000    $16.95       $847.50   $24.65    $1,232.50    $26.95    $1,347.50    $27.60    $1,380.00    $21.95    $1,097.50
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     HRCQ ASTM A56
1140                                               .059/.070    16,8500                         .05-.13C,.30 M45,000    $16.75    $7,537.50    $16.75    $7,537.50    $25.25   $11,362.50    $25.25   $11,362.50    $21.95    $9,675.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         ASTM A621 HRDQ
1227                                               .059/.067     2,2500                          0.02% C. Min  1,200    $20.00       $240.00   $25.00       $300.00   $25.00       $300.00   $28.95       $347.40   $21.50       $258.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0906                                               .060/.066     1,1000                      1008/1010 COLD R    100    $20.00        $20.00   $25.00        $25.00   $25.00        $25.00   $28.95        $28.95   $26.75        $26.75
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1245                                               .072/.084     6,2000                   1008/1010 SAE       80,000    $15.95   $12,760.00    $18.95   $15,160.00    $22.95   $18,360.00    $23.95   $19,160.00    $20.45   $16,360.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1169                                               .074/.083     7,0000       ? ASTM A622 type B HRDS ?       27,000    $17.95    $4,846.50    $20.95    $5,656.50    $22.95    $6,196.50    $23.95    $6,466.50    $21.25    $5,737.50
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1277                                               .074/.084     5,8000           ASTM A622 type B HRDS        8,000    $17.95    $1,436.00    $19.95    $1,596.00    $23.95    $1,916.00    $23.95    $1,916.00    $20.25    $1,660.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1215                                               .074/.082     5,8000               sae J1392 050 xlf        6,000    $16.75    $1,005.00    $20.95    $1,257.00    $23.25    $1,395.00    $24.20    $1,452.00    $21.50    $1,290.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1218                                               .074/.082    35,0000               sae J1392 050 xlf       70,000    $16.75   $11,725.00    $20.95   $14,665.00    $23.25   $16,275.00    $24.20   $16,940.00    $21.50   $15,050.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1221                                               .074/.082    29,2000               sae J1392 050 xlf       45,000    $16.75    $7,537.50    $20.95    $9,427.50    $23.25   $10,462.50    $24.20   $10,890.00    $21.50    $9,675.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1223                                               .074/.082    17,0000               sae J1392 050 xlf       25,000    $16.75    $4,187.50    $20.95    $5,237.50    $23.25    $5,812.50    $24.20    $6,050.00    $21.50    $5,375.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1224                                               .074/.082    17,8800               sae J1392 050 xlf       35,000    $16.75    $5,862.50    $20.95    $7,332.50    $23.25    $8,137.50    $24.20    $8,470.00    $21.50    $7,525.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1226                                               .074/.082    10,0000               sae J1392 050 xlf        7,000    $16.75    $1,172.50    $20.95    $1,466.50    $23.25    $1,627.50    $24.20    $1,694.00    $21.50    $1,505.00
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0864                                               .078/.084     2,0600                         1010 DQ          200    $15.75        $31.50   $20.50        $41.00   $20.50        $41.00   $24.45        $48.90   $22.50        $45.00
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                                                                                                     HRCQ ASTM A56
1120                                               .078/.088     3,9380                        .05-.13 C, .30  1,200    $15.75       $189.00   $20.50       $246.00   $20.50       $246.00   $24.45       $293.40   $21.00       $252.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1259                                               .078/.086    20,9500               sae J1392 050 xlk       35,000    $16.75    $5,862.50    $20.95    $7,332.50    $23.45    $8,207.50    $24.45    $8,557.50    $21.50    $7,525.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0943                                               .079/.089     2,2800                            1010          700    $15.75       $110.25   $20.50       $143.50   $20.50       $143.50   $24.45       $171.15   $21.75       $152.25
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0956                                               .079/.089     2,9100                            1010        1,400    $15.75       $220.25   $20.50       $287.00   $20.50       $287.00   $24.45       $342.30   $21.75       $304.50
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0992                                               .079/.086    11,7000              1008/1010 70g 79gm       40,000    $21.95    $8,780.00    $21.95    $8,780.00    $28.95   $11,580.00    $28.95   $11,580.00    $26.95   $10,780.00
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                                                                                         1008/1010 AKDQ
1002                                               .079/.089    14,1250                        .05 min C RB m 17,000    $15.75    $2,677.50    $20.50    $3,485.00    $20.50    $3,485.00    $24.45    $4,156.50    $19.95    $3,391.50
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                                                                                         1008/1010 AKDQ
1040                                               .079/.089    15,0000                        .05 min C RB m 23,0005   $15.75    $3,622.50    $20.50    $4,715.00    $20.50    $4,715.00    $24.45    $5,623.50    $19.95    $4,588.50
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1116                                               .079/.087    18,3000             SAE J133392 050 XLK       32,000    $16.74    $5,356.80    $20.50    $6,704.00    $22.95    $7,344.00    $23.95    $7,664.00    $21.00    $6,720.00
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1045                                               .079/.085    20,3750                    050 XLF HSLA       19,000    $16.25    $3,087.50    $20.95    $3,980.50    $22.95    $4,360.50    $23.95    $4,550.50    $20.95    $3,980.50
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1317A                                              .079/.088    21,1000              SAE J 1392 050 XLK       55,000    $20.75   $11,412.50    $20.75   $11,412.50    $25.25   $13,887.50    $25.25   $13,887.50    $20.95   $11,412.50
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0867                                               .082/.093    10,8750                    050 X F HRPO        3,000    $16.50       $495.00   $22.50       $675.00   $23.75       $712.50   $25.50       $765.00   $21.00       $630.00
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1308                                               .087/.094     7,1250                  1008/1010 AKDQ       20,000    $16.25    $3,250.00    $16.25    $3,250.00    $23.75    $4,750.00    $23.75    $4,750.00    $20.00    $4,000.00
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0890                                               .091/.097     2,6200                       1008/1010        9,000    $15.75    $1,417.50    $20.50    $1,845.00    $20.50    $1,845.00    $24.45    $2,200.50    $20.00    $1,800.00
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1239                                               .094/.102    11,5000            SAE J1392 050 XK HRS      200,000    $16.20   $32,400.00    $19.95   $39,900.00    $22.95   $45,900.00    $22.95   $45,900.50    $20.25   $40,500.00
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1044                                               .094/.102    10,6250                  1008/1010 AKDQ        7,000    $15.30    $1,071.00    $19.95    $1,396.50    $23.95    $1,676.50    $24.95    $1,746.50    $20.45    $1,431.50
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0923                                               .094/.104    11,2500                  1008/1010 AKDQ       18,000    $15.30    $2,754.00    $19.95    $3,591.00    $21.95    $3,951.00    $22.95    $4,131.00    $20.30    $3,654.00
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                                                                                      ASTM A1011 Grade CS ?
1292                                               .097/.101    18,2000                       .05-.13% C., .3  9,000    $15.95    $1,435.50    $15.95    $1,435.50    $15.95    $1,435.50    $21.95    $1,975.50    $20.00    $1,800.00
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0871                                               .097/.110    18,6100                        SAE 1010        7,500    $14.50    $1,087.50    $21.50    $1,612.50    $22.50    $1,687.50    $23.50    $1,762.50    $20.00    $1,500.00
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                                                                                                      RCQ ASTM A56
1113                                               .098/.110     1.7500                        .05-.13 C, .30  1,700    $14.50       $246.50   $29.95       $509.15   $27.50       $467.50   $24.95       $424.15   $20.00       $340.00
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 937                                               .098/.108     2.1000                          950 XF        2,500    $19.00       $475.00   $21.95       $548.75   $23.95       $598.75   $23.95       $598.75   $20.45       $511.25
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0865                                               .098/.110    22.2500                   SAE 1010 HRPO        3,500    $15.75       $551.25   $20.50       $717.50   $20.50       $717.50   $24.45       $855.75   $20.00       $700.00
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1238                                               .099/.110    13.8750            SAE J1392 050 XK HRS      215,000    $15.95   $34,292.50    $19.95   $42,892.50    $22.95   $49,342.50    $22.95   $49,342.50    $20.25   $43,537.50
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1121                                               .099/.106    31.0000                    050 XLF HSLA      140,000    $16.50   $23,100.00    $19.95   $27,930.00    $22.95   $32,130.00    $22.95   $32,130.00    $20.37   $28,518.00
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0856                                               .101/.109     4.7600                          945 XF       20,000    $14.75    $2,950.00    $19.50    $3,900.00    $21.75    $4,350.00    $23.95    $4,790.00    $20.50    $4,100.00
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0855                                               .101/.108     8.8750                            1010       22,000    $14.50    $3,190.00    $19.50    $4,290.00    $21.50    $4,730.00    $23.50    $5,170.00    $20.00    $4,400.00
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0858                                               .101/.108     9.5600                            1010       10,000    $14.50    $1,450.00    $19.50    $1,950.00    $21.50    $2,150.00    $23.50    $2,350.00    $20.00    $2,000.00
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0893                                               .102/.110     4.0000                       1008 AKDQ       10,000    $16.25    $1,625.00    $18.95    $1,895.00    $22.95    $2,295.00    $22.95    $2,295.00    $20.00    $2,000.00
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                                                      .1024/
1167                                                  .1063     12.7500                  SAE J403-1010 CR     10,000    $21.95    $2,195.00    $24.95    $2,495.00    $27.80    $2,780.00    $27.80    $2,780.00    $21.05    $2,105.00
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1000A                                              .105/.110     3.8400                   J1392 050 XLF       18,000    $16.95    $3,051.00    $19.95    $3,591.00    $23.95    $4,311.00    $23.95    $4,311.00    $20.25    $3,645.00
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1122                                               .106/.113    27.0000                    050 XLF HSLA      350,000    $16.20   $56,700.00    $19.95   $69,825.00    $22.95   $80,325.00    $22.95   $80,325.00    $20.00   $70,000.00
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1310                                               .110/.118     8.2500                  1008/1010 AKDQ       30,000    $16.25    $4,875.00    $16.25    $4,875.00    $23.75    $7,125.00    $23.75    $7,125.00    $20.00    $6,000.00
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1173                                               .110/.126     5.6250               SAE J1392 050 XLF        1,400    $14.75       $206.50   $21.50       $301.00   $23.00       $322.00   $24.50       $343.00   $20.50       $287.00
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1200                                               .110/.126     7.0000               SAE J1392 050 XLF       22,000    $14.75    $3,245.00    $21.50    $4,730.00    $23.00    $5,060.00    $24.50    $5,390.00    $20.50    $4,510.00
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1108                                               .110/.122    11.7500               SAE J1392 050 XLF       46,000    $16.49    $7,585.40    $19.95    $9,177.00    $22.95   $10,557.00    $23.95   $11,017.00    $21.00    $9,660.00
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1204                                               .110/.126    14.0000               SAE J1392 050 XLF       30,000    $16.49    $4,947.00    $19.95    $5,985.00    $22.95    $6,885.00    $23.95    $7,185.00    $21.00    $6,300.00
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1087A                                              .113/.123     6.4000         J-1392-050 XLK 13% max C      22,000    $16.95    $3,729.00    $19.95    $4,389.00    $23.95    $5,269.00    $23.95    $5,269.00    $20.50    $4,510.00
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1261                                               .114/.122    11.0000               SAE J1392 050 XLF       22,000    $16.10    $3,542.00    $19.95    $4,389.00    $23.85    $5,247.00    $23.85    $5,247.00    $20.25    $4,455.00
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1254                                               .114/.122    11.3700               SAE J1392 050 XLF       30,000    $16.10    $4,830.00    $19.95    $5,985.00    $23.85    $7,155.00    $23.85    $7,155.00    $20.25    $6,075.00
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1255                                               .114/.122    13.1500               SAE J1392 050 XLF       55,000    $16.10    $8,855.00    $19.95   $10,972.50    $23.85   $13,117.50    $23.85   $13,117.50    $20.25   $11,137.50
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1180                                               .114/.122    17.0000           SAE J1392 050-XLF HRS       35,000    $16.10    $5,635.00    $19.95    $6,982.50    $22.95    $8,032.50    $23.95    $8,382.50    $20.95    $7,332.50
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0917                                               .115/.125     8.2500         1008/1010 AKDQ .05 MIN C      65,000    $14.00    $9,100.00    $20.50   $13,325.00    $20.50   $13,325.00    $24.45   $15,892.50    $19.75   $12,837.50
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0920                                               .115/.125     8.7500         1008/1010 AKDQ .05 MIN C      35,000    $14.00    $4,900.00    $19.50    $6,825.00    $21.50    $7,525.00    $23.50    $8,225.00    $19.75    $6,912.50
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0916                                               .115/.125     8.8750         1008/1010 AKDQ .05 MIN C      65,000    $14.00    $9,100.00    $19.50   $12,675.00    $21.50   $13,975.00    $23.50   $15,275.00    $19.75   $12,837.50
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1112                                               .116/.122     5.5000                    050 XLK HSLA       68,000    $16.10   $10,948.00    $19.95   $13,566.00    $22.95   $15,606.00    $23.95   $16,286.00    $20.60   $14,008.00
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0707                                               .118/.134     2.2200                       1008/1010       33,000    $14.95    $4,933.50    $20.50    $6,765.00    $20.50    $6,765.00    $24.45    $8,068.50    $19.95    $6,583.50
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1027                                               .118/.126     7.2500        1008/1010 akdq .02 min c       52,000    $15.25    $7,930.00    $18.95    $9,854.00    $21.95   $11,414.00    $22.95   $11,934.00    $19.95   $10,374.00
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                                                                                         1008/1010 akdq
1080                                               .118/.126    10.7500                        .05 min C RB 5 85,000    $14.00   $11,900.00    $19.50   $16,575.00    $21.50   $18,275.00    $23.50   $19,975.00    $19.95   $16,957.50
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                                                                                         1008/1010 AKDQ
1079                                               .118/.126    11.2120                        .05 min C rb 5 75,000    $14.75   $11,062.50    $14.75   $11,062.50    $14.75   $11,062.50    $21.45   $16,087.50    $19.75   $14,812.50
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1090A                                              .118/.125    11.5000                       1008/1010      115,000    $15.45   $17,767.50    $18.95   $21,792.50    $22.55   $25,932.50    $22.00   $25,300.00    $19.85   $22,827.50
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1035                                               .118/.128     3.6300            MS 6000 44A GAL akdq       20,000    $22.95    $4,590.00    $26.95    $5,390.00    $29.60    $5,920.00    $29.60    $5,920.00    $27.00    $5,400.00
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1055                                               .118/.134     6.4680                   MS 264 035 sk       25,000    $14.75    $3,687.50    $19.50    $4,875.00    $21.75    $5,437.50    $23.95    $5,987.50    $19.95    $4,987.50
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1193                                               .118/.133     5.0000                  HLSA MS264-035        4,000    $16.25       $650.00   $19.95       $798.00   $23.95       $958.00   $23.95       $958.00   $20.95       $838.00
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1191                                               .118/.133    11.7500                  HLSA MS264-035       35,000    $16.25    $5,687.00    $19.95    $6,982.50    $23.95    $8,382.50    $23.95    $8,382.50    $20.95    $7,332.50
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                                                                                          050 XLF H S S
1115                                               .118/.125     6.2500                     0.3 min MN CQ     30,000    $16.25    $4,875.00    $19.95    $5,985.00    $22.95    $6,885.00    $23.95    $7,185.00    $20.50    $6,150.00
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1128                                               .118/.125     6.6000         050 XLF HSS 0.3 min MN CQ     30,000    $16.25    $4,875.00    $19.95    $5,985.00    $22.95    $6,885.00    $23.95    $7,185.00    $20.50    $6,150.00
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1004                                               .124/.134     3.0000              1008/1010 .05 MIN CARBON  1,700    $15.75       $267.75   $20.50       $348.50   $20.50       $348.50   $24.45       $415.65   $20.00       $340.00
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1294                                               .126/.136     3.5820               1008/1010 (A1011)        8,000    $14.75    $1,180.00    $14.75    $1,180.00    $14.75    $1,180.00    $21.95    $1,756.00    $20.00    $1,600.00
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0846                                               .129/.139     2.0600                            1010        2,000    $15.75       $315.00   $20.50       $410.00   $24.45       $410.00   $24.45       $489.00   $20.00       $400.00
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0624                                               .129/.139     3.0000                            1010          200    $15.75        $31.50   $20.50        $41.00   $20.50        $41.00   $24.45        $48.90   $20.00        $40.00
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0295                                               .129/.139     4.0000                            1010        1,000    $15.75       $157.50   $20.50       $205.00   $20.50       $205.00   $24.45       $244.50   $20.00       $200.00
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1197                                               .132/.143     5.5000               SAE J1392-050-XLK        9,000    $16.95    $1,525.50    $20.45    $1,840.50    $23.95    $2,155.50    $23.95    $1,155.50    $21.00    $1,890.00
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0734                                               .135/.151     1.7500                            1010        4,000    $15.75       $630.00   $20.50       $820.00   $20.50       $820.00   $24.45       $978.00   $20.50       $820.00
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0999                                               .136/.146     2.2000                       1008/1010        1,000    $15.75       $157.50   $20.50       $205.00   $20.50       $205.00   $24.45       $244.50   $20.00       $200.00
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0739                                               .136/.149     2.6500         1008/1010 AKDQ .05 MIN C     110,000    $15.00   $16,500.00    $20.50   $22,550.00    $20.50   $22,550.00    $24.45   $26,895.00    $20.00   $22,000.00
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1235                                               .149/.165    13.3120                   MS 264-035 SO       95,000    $16.45   $15,627.50    $19.95   $18,952.50    $23.95   $22,752.50    $23.95   $22,752.50    $20.50   $19,475.00
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1164A                                              .154/.161     3.2500               SAE J1392-050-XLF        5,000    $16.25       $812.50   $19.95       $997.50   $23.95    $1,197.50    $23.95    $1,197.50    $20.50    $1,025.00
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1179                                               .154/.161    18.0000                    HSLA 050 XLF       25,000    $16.25    $4,062.50    $19.95    $4,987.50    $22.95    $5,737.50    $23.95    $5,987.50    $20.50    $5,187.50
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0876                                               .156/.171     1.7500                            1010       22,000    $15.75    $3,465.00    $20.50    $4,510.00    $20.50    $4,510.00    $24.45    $5,379.00    $19.85    $4,367.00
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0678                                               .156/.171     2.5000                            1010      160,000    $15.25   $24,400.00    $20.50   $32,800.00    $20.50   $32,800.00    $24.45   $39,120.00    $19.85   $31,760.00
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1094A                                              .157/.165     7.2500                SAE J1392 050 XK       45,000    $15.95    $7,177.50    $19.95    $8,977.50    $23.95   $10,777.50    $23.95   $10,777.50    $20.50    $9,225.00
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                                                                                         1008/1010 akdq
0833                                               .188/.204     4.0150                        .05 min C RB 5  3,000    $16.45       $493.50   $20.95       $628.50   $23.95       $718.50   $23.95       $718.50   $20.95       $628.50
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0796                                               .189/.207     3.5000                            1010          700    $16.25       $113.75   $18.50       $129.50   $29.00       $203.00   $29.00       $203.00   $20.95       $146.65
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1322                                               .196/.206     4.2500                   SAE 1008/1010       15,000    $18.00    $2,700.00    $20.50    $3,075.00    $20.50    $3,075.00    $23.00    $3,450.00    $20.00    $3,000.00
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0989                                               .197/.207     2.1200                            1010        9,000    $16.25    $1,462.50    $22.45    $2,020.50    $23.95    $2,155.50    $23.95    $2,155.50    $20.95    $1,885.50
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                                                                              1008/1010 TO meet 36.2 Kn
0803                                               .197/.207     2.5600      Min Proof load per GM510-m       30,000    $16.25    $4,875.00    $18.95    $5,685.00    $22.95    $6,885.00    $22.95    $6,885.00    $20.95    $6,285.00
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                                                                              1008/1010 TO meet 36.2 Kn
0722                                               .197/.207     2.7000      Min Proof load per GM510-m        1,300    $16.25       $211.25   $19.95       $259.35   $22.95       $298.35   $22.95       $298.35   $21.45       $278.85
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                                                                              1008/1010 TO meet 36.2 Kn
0574                                               .197/.207     3.1000      Min Proof load per GM510-m      280,000    $16.24   $45,472.00    $18.95   $53,060.00    $22.95   $64,260.00    $22.95   $64,260.00    $21.45   $60,060.00
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1195                                               .197/.209    11.5000            GM6218M mpa XLF HRPO      330,000    $17.00   $56,100.00    $19.95   $65,835.00    $22.65   $74,745.00    $23.65   $78,045.00    $21.50   $70,950.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              1008/1010 TO meet 36.2 Kn
0899A                                              .200/.207     2.2000      Min Proof load per GM510-m       23,000    $16.45    $3,783.50    $18.95    $4,358.50    $22.95    $5,278.50    $22.95    $5,278.50    $21.45    $4,933.50
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0494                                               .206/.218     2.7000                            1010        7,000    $16.95    $1,186.50    $22.45    $1,571.50    $23.95    $1,675.50    $23.95    $1,676.50    $20.95    $1,466.50
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1138                                               .207/.217     6.5000              1008/1010 .05 MIN CARBON 32,000    $16.45    $5,264.00    $18.95    $6,064.00    $22.95    $7,344.00    $22.95    $7,344.00    $20.45    $6,544.00
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0972                                               .213/.224     3.6900                            1010       12,000    $14.95    $1,794.00    $21.50    $2,580.00    $22.50    $2,700.00    $23.50    $2,820.00    $20.95    $2,514.00
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0971                                               .213/.224     4.1300                            1010       30,000    $14.95    $4,485.00    $21.50    $6,450.00    $22.50    $6,750.00    $23.50    $7,050.00    $20.95    $6,285.00
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0973                                               .213/.224     4.2500                            1010       24,000    $14.95    $3,588.00    $21.50    $5,160.00    $22.50    $5,400.00    $23.50    $5,640.00    $20.95    $5,028.00
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1076                                               .215/.233     3.1000                       1008/1010       80,000    $15.45   $12,360.00    $19.95   $15,960.00    $23.25   $18,600.00    $23.25   $18,600.00    $20.45   $16,360.00
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1296                                               .215/.234     4.5000                       1008/1010       45,000    $15.45    $6,952.50    $18.95    $8,527.50    $22.95   $10,327.50    $22.95   $10,327.50    $20.45    $9,202.50
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0695                                               .217/.231     2.5000                            1010       14,000    $16.45    $2,303.00    $22.50    $3,150.00    $23.95    $3,353.00    $23.95    $3,353.00    $20.95    $2,933.00
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1194                                               .217/.227     5.0000                        SAE 1010       16,000    $16.45    $2,632.00    $22.50    $3,600.00    $25.25    $4,040.00    $25.25    $4,040.00    $20.95    $3,352.00
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                                                                              1008/1010 TO meet 19.9 Kn
1014                                               .222/.232     2.1200      Min Proof load per GM510-m       95,000    $17.25   $16,387.50    $21.45   $20,377.50    $24.95   $23,702.50    $24.95   $23,702.50    $21.95   $20,852.50
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0625                                               .228/.250     0.7870           1008/1010 EDGE ROLLED        3,000    $26.95       $808.50   $36.95    $1,108.50    $37.95    $1,138.50    $37.95    $1,138.50    $37.65    $1,129.50
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0773                                               .236/.252     1.9300              1008/1010 .05 MIN CARBON  1,000    $16.50       $165.00   $25.95       $259.50   $26.95       $269.50   $26.95       $269.50   $21.45       $214.50
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0689A                                              .236/.248     2.3600              1008/1010 .05 MIN CARBON 20,000    $15.95    $3,190.00    $19.95    $3,990.00    $23.25    $4,650.00    $23.25    $4,650.00    $20.95    $4,190.00
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0623                                               .236/.257     3.1300              1008/1010 .05 MIN CARBON  3,000    $20.00       $600.00   $22.95       $688.50   $23.25       $697.50   $23.25       $697.50   $20.95       $628.50
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1043A                                              .236/.252     2.5000                    050 XLF HSLA      140,000    $16.45   $23,030.00    $19.95   $27,930.00    $23.10   $32,340.00    $23.10   $32,340.00    $21.95   $30,730.00
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0601                                               .240/.260     2.7000                            1010       12,000    $16.25    $1,950.00    $22.95    $2,754.00    $24.65    $2,958.00    $24.65    $2,958.00    $21.95    $2,634.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0984A                                              .246/.256     3.1000              1008/1010 .05 min C       1,000    $17.00       $170.00   $19.95       $199.50   $24.65       $246.50   $24.65       $246.50   $22.50       $225.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0949                                               .248/.262     1.1800                       1008/1010        1,000    $17.00       $170.00   $19.95       $199.50   $24.65       $246.50   $24.65       $246.50   $22.95       $229.50
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0572                                               .266/.284     2.6200         1008/1010 AKDQ .05 MIN C     200,000    $15.99   $31,980.00    $20.45   $40,900.00    $23.95   $47,900.00    $23.95   $47,900.00    $21.95   $43,900.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
155                                                .268/.282     2.5000                   SAE 1008/1010        2,000    $19.00       $380.00   $20.45       $409.00   $23.95       $479.00   $23.95       $479.00   $21.95       $439.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0948                                               .276/.300     4,7500                       1008/1010       22,000    $17.05    $3,751.00    $20.45    $4,499.00    $23.95    $5,269.00    $23.95    $5,269.00    $21.95    $4,829.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1104                                               .295/.310     2,5000                 1050 XK 13 Max C HSLA 60,000    $16.95   $10,170.00    $21.45   $12,870.00    $24.65   $14,790.00    $24.65   $14,790.00    $21.95   $13,170.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0993                                               .295/.310     2,7500            950 XK HSLA FB 16-7J       30,000    $16.94    $5,082.00    $21.45    $6,435.00    $24.65    $7,395.00    $24.65    $7,395.00    $21.95    $6,585.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0995                                               .295/.310     3,5000            950 XK HSLA FB 16-7J       20,000    $16.93    $3,386.00    $21.45    $4,290.00    $24.65    $4,930.00    $24.65    $4,930.00    $21.95    $4,390.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1247a                                              .295/.311     3,0000          GM6218M Grade 340 HSLA       25,000    $16.95    $4,237.50    $21.45    $5,362.50    $24.65    $6,162.50    $24.65    $6,162.50    $21.95    $5,487.50
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1069                                               .307/.323     3,4450                       1008/1010        1,000    $18.00       $180.00   $22.00       $220.00   $24.65       $246.50   $24.65       $246.50   $22.95       $229.50
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0810                                               .331/.350     2,7500                       1010 AKDQ        1,000    $21.25       $212.50   $23.95       $239.50   $27.60       $276.00   $27.60       $276.00   $22.95       $229.50
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0885                                               .354/.372     2,4500    MS-264-50 (slit TOL +/-.020)       60,000    $19.95   $11,970.00    $19.95   $11,970.00    $26.95   $16,170.00    $26.95   $16,170.00    $24.20   $14,520.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1248                                               .354/.370     3,4500          GM6218M Grade 340 HSLA       33,000    $21.99    $7,256.70    $23.95    $7,903.50    $26.95    $8,893.50    $26.95    $8,893.50    $22.45    $7,408.50
--------------------------------------------------------------------------------------------------------------------------------             ----------             ----------             ----------             ----------
 
                                                           Monthly Total
 
                                                            for the given quarter    3,917,800              $805,152               $987,149             $1,131,011             $1,173,209             $1,030,823
                                                  --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 
                                                                   Comparison from    Jan-02
                                                   $181,997      23%
                                                   $325,859      40%
                                                   $368,057      46%
                                                      $225,672     28%
                                                  --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 
                                                                   Comparison from    Apr-02
 
                                                   $143,862      15%
                                                   $186,060      19%
                                                       $43,675      4%
                                                  --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 
                                                                   Comparison from    Jul-02
 
 
                                                    $42,198       4%
                                                     -$100,187    -9%
                                                  --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 
                                                                   Comparison from    Oct-02
 
 
 
                                                     -$142,386   -12%
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Proprietary products that are
                                                                     price sensitive to foreign competition      1,867,800           $309,340.20          $381,128.85          $436,549.35          $452,520.95          $402,376.25
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 
          12 Months Had Prices Stayed at Q1 2002      $9,661,820
 
          Actual 12 Months From 4/1/02 to 3/31/03        $12,966,575
 
          Total Cost Impact From 4/1/02 to 3/31/03      $3,304,755
 
          Percentage of Cost Impact                   34%
 
                                          E&E Manufacturing direct-buy, non-customer supplied material only


                                 

    Chairman CRANE. Thank you. Now it is time for questions. 
Let me remind my colleagues up here that we will limit that to 
5 minutes per Member and that includes the answers from our 
witnesses here who are testifying. So, if their time is eaten 
into by the questions, you have got to depend upon written 
responses at some point.
    I would start out with Mr. Taylor. You mentioned in your 
testimony that your company has purchased three factories in 
China and that material costs, not labor costs, are your 
primary motivation for moving production to China.
    Do you believe the section 201 tariffs have accelerated the 
transfer of manufacturing jobs to China?
    Mr. TAYLOR. Yes, Mr. Chairman, I believe the section 201 
tariffs have accelerated and are now in the process of further 
accelerating job losses. If the section 201 action is not 
reversed, this process will continue. The jobs that we have 
lost so far will not be the only jobs that are lost. In fact, I 
am afraid it is just the tip of the iceberg.
    The economics of our situation, and I think it is very 
similar in a lot of products that are made from steel, 30 to 50 
percent of the cost of our products, primarily the fastener 
products, are steel costs. Labor is less than 10 percent. In 
fact, in most of them, 6 to 7 percent of the cost of the 
product. Fasteners, in particular, are very highly automated 
components in today's world.
    So, raw materials drive what we do to an ever greater 
extent. We do business in Taiwan and China extensively, as well 
as Europe and South America. We know that the cost of raw 
materials, particularly cold-headed quality wire that we use 
for fasteners, is approximately one-third less in China and 
Asia, and particularly in Taiwan, than it is here in the United 
States.
    That one-third on 30 to 50 percent of the total costs, you 
can see a quick calculation of 10 to 15 percent of the total 
cost of the product driven by that raw material difference. 
Whereas regarding labor, if I had free labor, it would not be 
that great.
    Yes, the cost of raw materials is driving us to China. Our 
customers have refused to pay price increases. They have told 
us if you do not take it to China, we will take it to China, 
around you.
    We choose to at least retain the distribution portion of 
the business and we are forced to take business to China that 
otherwise would not go if we could have competitive, world 
competitive, raw materials.
    Chairman CRANE. Thank you. Several of you have expressed 
your support for a strong, profitable, and viable steel 
industry. The steel industry argues that the best way to 
achieve that is by protecting it from imports while it 
restructures. Do you believe the section 201 tariffs have 
helped or hindered industry restructuring, and why? Please, 
anyone that wants to respond, please do.
    Mr. LEULIETTE. Mr. Chairman, I believe that any time you 
have an artificial ingredient into the equation which precludes 
you from head-to-head competition, you sometimes will not step 
up to some of the changes that are necessary. In the SBQ area 
where we are focused, a couple of those mills had already 
restructured. We are very profitable and very competitive. All 
they have used the tariffs for is to have record profits at our 
expense.
    The U.S. auto industry, the supplier industry, has never 
been protected by tariffs. The supplier industry has not, and 
we have grown to be competitive.
    Over 35 of my competitors have gone bankrupt in the last 2 
years. It is a very unfortunate action and an unfortunate 
situation, but it is part of the evolution and the 
restructuring of the competitive automotive supplier industry, 
some industries hire and some restructure. We have not seen a 
significant reinvestment on the part of our suppliers during 
this section 201 period.
    Chairman CRANE. Anyone else want to comment on that 
question?
    Mr. SMITH. Mr. Chairman, we commissioned a study by a local 
college, Hillsdale College in Michigan. We did a cash flow 
analysis based on the steel section 201 tariffs in terms of 
whether steel prices had spiked in the fourth quarter of last 
year.
    Based on the cash flow projection, it was determined--we 
did not see where any significant cash was being generated 
where that moneys could be reinvested into plant and equipment. 
In other words, the steel section 201 tariffs have pretty much 
just forestalled the inevitable. We see that at the end of the 
3 years, unless there has been significant improvement in terms 
of operational efficiencies, serious reinvestment into plant 
and equipment, that the only thing that we will have done 
within that 3-year period is decimate a significant portion of 
the economy, which is the steel-consuming industries.
    We think that there are alternatives that could have been 
looked at. There are alternatives that could have really helped 
those that really needed it, the integrated mills. 
Unfortunately, those that have benefited from it the most have 
been the mini-mills.
    Chairman CRANE. Hillsdale College is one of my alma 
matters. I got my bachelor's degree at Hillsdale.
    One final question for any of you. Can you tell me how many 
people are affected by these tariffs in your company? Has this 
change in your overall competitive position resulted in any 
reductions in your work force or in a slowdown of hiring?
    Mr. PRITCHARD. Mr. Chairman, we are fairly small, I guess, 
by many standards. As I said, we have about 370 associates 
working within the business now. Within the last 12 months we 
have had to lay off 33 of those people. They were not just 
hourly workers, they were managers, engineers, all the way up 
to a top position of plant manager. It was truly an economic 
hardship situation that forced us into this.
    There is probably no harder thing that I have had to do in 
my professional career than to look at people that I have 
worked with for many years, and I had to tell them that we can 
not longer afford to have their position filled.
    This goes along with a lot of the slowdown issues that have 
been brought about within our organization by the increased 
cost and the degrading of our competitive position within the 
industry.
    Chairman CRANE. Anyone else want to comment?
    Mr. LEULIETTE. As I said in my testimony, Mr. Chairman, we 
have announced today 600 layoffs will occur in Metaldyne in the 
next 60 days. About 400 of those are directly related to either 
the product moving offshore because we cannot get the steel and 
be competitive here because of steel, or because of lost 
business that we have not been able to maintain because it has 
been resourced offshore. That is 400 jobs in 60 days, and it is 
just the tip of the iceberg.
    Chairman CRANE. Mr. Levin?
    Mr. LEVIN. Thank you, and welcome to all of you. I think it 
is important that we hear from you. Our colleagues are busy on 
other activities. We will try to convey the word to them.
    All of you have talked about the critical importance of 
manufacturing. I will not say sorry for the buzzer because I do 
not have anything to do with it.
    You have all talked very, very powerfully about the 
importance of the manufacturing base of this country and I 
think all of you know, or some of you, how strongly I feel 
about its maintenance.
    What we have here, though, is a conflict if not a clash 
among different parts of the manufacturing base of this 
country.
    By the way, when you talk about labor and it is not such an 
important part of your operation, there is a labor ingredient 
in the supply in the materials and China has an immense 
advantage over us when it comes to that.
    I am sorry, in a way, that the panels are structured so 
that we do not have part of the next panel up with you and part 
of you up with the next panel to have some kind of a contrast 
here. You come from different size companies and some of you, 
especially Mr. Leuliette, I have had the privilege of knowing 
for a good number of years. He comes, I guess, from the largest 
of the companies represented here. So, let me just say a word 
to someone who is kind of, I think, middle-sized, and just talk 
for a few minutes with Mr. Taylor.
    Two things. On page 3, you say I would suggest that after 
more than 30 years of almost continuous protection there are 
structural problems in the steel industry that would be better 
solved by market forces than by continued government action.
    Part of the problem in the steel industry is that there is 
government action in many countries involved in steel 
production. You do not have a free market. You have immense 
subsidization, and that was very much reflected in the influx 
of steel here in 1997 and 1998. A lot of it came, Russian steel 
was is heavily subsidized. It was not free market produced 
steel. The same was true, to some extent, in Korea or Brazil, 
almost everywhere.
    So, the simple formulation of free market versus government 
does not quite fit the dilemma here.
    So, let me just also, you referred to a study that was 
undertaken by the association. Let me just read to you, maybe 
you have seen it, the critique of the Financial Times on your 
study. The study showed 200,000 jobs lost in the industries 
from December 2001 to December 2002. Two hundred thousand due 
to higher steel prices. Here is what it said. It opposed the 
tariff actions. It said what the study also failed to mention 
was that all the jobs lost in 2002 actually occurred in January 
2002, 2 months before the tariffs were imposed, and when steel 
prices were near historic lows.
    Then it quotes Gary Huffbauer, who also opposed the 
tariffs, saying the claim of 200,000 jobs lost is way out of 
bounds. He estimated 5,000 to 10,000 jobs have been lost.
    I think it is higher than that. You have indicated that by 
your testimony. One thing we need to accomplish here today, and 
after this, is to try to dig out what the facts really are. To 
then find a way, if we can, to reconcile how we maintain the 
manufacturing base.
    Is steel not part of the manufacturing base of the country? 
Would any of you be satisfied if all the steel or 75 percent of 
the steel used in the United States came from outside this 
country? Would any of you? None of you? Thank you.
    Chairman CRANE. Thank you. Mr. English?
    Mr. ENGLISH. Thank you, Mr. Chairman, and I am going to 
keep my remarks brief.
    This panel is a group of business leaders who have gone 
through what a lot of manufacturers have in this economy, and I 
tend to sympathize with them. I would like to sharpen their 
testimony on a couple of specific points to maybe address my 
curiosity or speak to the credibility of the conclusion I am 
hearing here. Mr. Leuliette, I hope I am not mispronouncing 
that.
    Mr. LEULIETTE. Leuliette.
    Mr. ENGLISH. What were Metaldyne's most recent financial 
results as set forth in its most recent annual report? Are you 
not significantly more profitable than the vast majority of the 
steel industry that you have characterized as taking record 
profits at your expense?
    Mr. LEULIETTE. We are privately held, and if you notice on 
a per-share basis we had a loss last year.
    Mr. ENGLISH. I thought you had a profit of $114 million 
last year with an operating margin of over 6 percent. That is 
not accurate?
    Mr. LEULIETTE. That is not accurate. If I may, sir. I do 
not attest that we are not a profitable company. We strive to 
be profitable.
    Mr. ENGLISH. Metaldyne estimates that the higher steel 
prices would reduce profitability by $5 million, which my 
estimate was that that represented less than 0.3 percent of 
your sales last year. Is that also inaccurate?
    Mr. LEULIETTE. We had said publicly that we thought that 
with our customers that we were going to be able to recover a 
large percentage of that. That turned out not to be the case, 
which is why the layoffs are occurring today.
    Mr. ENGLISH. Mr. Trilla, before the last few years did you 
not mostly purchase your steel from U.S. steel companies? If 
so, why did you not have any failures of your coatings back 
before you began using imported steel? My recollection is that 
beginning in March 2001 imports of cold-rolled steel from Korea 
surged. Their cost, insurance, and freight price was only $299 
a ton, far less than the domestic price at the time. Is it not 
really low price that drove your decision, rather than quality?
    Mr. TRILLA. No, sir. We have traditionally bought, at 
Trilla Steel Drum, 80 percent domestic steel. I am sitting in 
Chicago, I have steel mills all over, and they are wonderful 
suppliers.
    As the quality issues started to develop, we found that 
buying steel from Korea, it would reduce our costs in 
laundering the steel, having to clean it. It gave us a better 
adhesion. Our lined drum business went up better than 100 
percent. We were rewarded with that.
    Mr. ENGLISH. Very good. When Trilla Drum and several other 
drum manufacturers apply to the U.S. Department of Justice 
Antitrust Division to establish a ``joint selling and 
purchasing company'' you asserted that ``because of the high 
cost of shipping steel drums a manufacturer, in most cases, can 
only efficiently compete for sales within a 100 to 200 mile 
radius of its plant.''
    You are now complaining that your customers have switched 
to imports which would entail, as I understand it, very high 
shipping costs. How can imports of steel drum compete in the 
United States if your statement to the Antitrust Division is 
true?
    Mr. TRILLA. I am sorry for not being clear on that issue. 
You are correct.
    The import drums that I am talking about are not being 
imported into the United States. My customers are feeling now, 
they are producing in Michigan, Illinois, Iowa, and so forth, 
and shipping bulk back to Singapore, South America, Brazil, 
back to Amsterdam in large tankers and buying their drums and 
filling their drums in these further ports and then shipping 
them back, the product drum, back here to the United States.
    Mr. ENGLISH. I appreciate your clarification.
    Mr. Taylor, I read your testimony. You conceded up front 
that, I believe, over 90 percent of the steel that you have 
been using is excluded from the President's policy. You went on 
to say that 40 percent of steel-consuming companies are moving 
production offshore. You attribute it to the single cost of 
steel prices without reference to rising health care costs, 
non-border adjustable tax system, the liability issue and the 
downstream dumping issue that Mr. Nixon mentioned, and currency 
differentials.
    Is this not putting an extraordinary burden on the factor 
of one input, which you have testified increased your costs by 
7 percent?
    Mr. TAYLOR. We buy predominately wire rod. Wire rod was 
under a Clinton Administration action prior to the section 201 
action, was not involved in the action. Wire rod was, prior to 
the Administration's action, more expensive in the United 
States, approximately 25 percent lower cost in the Asian 
countries. It is now about one-third lower cost in Asia versus 
the United States.
    There has been an overall elevation in the price of all 
steel products, an umbrella created by the tariff action. I 
happen to believe personally that that is because the steel 
companies that can, are raising prices and that they can, to 
some extent, choose to produce wire rod or bar, various 
products, depending on whether they are covered by a tariff.
    Mr. ENGLISH. We will get into that it on the next panel. 
Mr. Chairman, thank you for your patience.
    Chairman CRANE. Absolutely. Mr. Houghton?
    Mr. HOUGHTON. This is a tough issue. It is tough for you, 
tough for the steel companies. It is tough for us because we 
have got to try to figure out how to create the atmosphere 
which is better business conditions for you and the steel 
companies.
    So, you can get drowned in figures. For example, I have 
figures here which said that steel imports in 2002 actually 
increased 8 percent compared to 2001, despite the tariffs. 
Also, imports on all sheet products were 10 percent higher from 
March to November 2002.
    So, you can say well, that is a factor that you ought to 
take into consideration, but does it help the issue? How can we 
keep companies like yourselves healthy and yet, at the same 
time, not lose the steel industry?
    I know what it is like personally to be in an industry 
where there were uneconomic conditions from foreign sources 
driving me out of business. I know that in the process of 
trying to fight that that some of our customers were hurt.
    We were going out of business, not because we wanted to, 
not because we did not have the best technology, the best 
price, the best costs, the best service, but there were other 
factors working against us.
    So, how do you put these two things in balance? What would 
you say, you gentlemen, if you were the head of a steel 
company? How would you react to this?
    Mr. LEULIETTE. Let me say sir, that our customers did not 
give us that choice. Our customers said very simply that the 
American consumer was unwilling to pay a premium for U.S. 
steel. As a result of that, they could not pay us a premium for 
the components we sold the auto industry. They give us a very 
simple statement, become globally competitive or lose your 
business.
    For decades, that has been the dogma and the premise from 
which we have operated from.
    Mr. HOUGHTON. So, you would say to the U.S. steel companies 
if the economic conditions were such, too bad guys, that is 
just your tough luck and you have got to move abroad the way we 
have?
    Mr. LEULIETTE. In some cases, two of our major steel 
suppliers were U.S.-based, very competitive, and very 
profitable. They had addressed their issues long before the 
tariff came into play.
    Mr. HOUGHTON. I see. So, the ones that are not doing well, 
irrespective of the tariffs, are the ones that really have not 
cleaned up their own house?
    Mr. LEULIETTE. Well, I do not know their total operations 
but I would say that some of them have legacy issues. There is 
no question about it, this is a difficult issue, as you stated.
    The problem is that we are moving the steel industry's 
problem to the steel users, as opposed to addressing the 
problem. We have moved it because we cannot move it through.
    As one of my colleagues said before, we cannot take the 
price problem that is generated here and pass it on down the 
line. It is stopped at our level and we are squeezed.
    Mr. HOUGHTON. We are in a war now and we need all the 
strategic materials and production capacity that we can get. If 
you were economic czar of the United States, what would you 
tell the steel companies?
    Mr. SMITH. I would like to have a comment on that, if I 
could.
    The issue, I think, is that alternatives have not been 
explored, not seriously, in terms of how can we help the steel 
industry to become a viable economic power in the United States 
that it once was. Outside the fact that the steel industry has 
been the most heavily subsidized industry since the sixties, 
still nothing has really been done outside of just simply 
taxing steel.
    Mr. HOUGHTON. That is an opinion, not a fact.
    Mr. SMITH. I think it is factual.
    In terms of, the fact that an alternative has not been 
explored, one of the things that we actually proposed and it 
was not highly receptive, was that perhaps some other type of 
loan guarantee that the steel industry could use to modernize 
their facilities, to make sure at the end of the 3-year cycle, 
that they can compete globally. We need a strong U.S. steel 
industry. We recognize that. We support that.
    We are just simply asking that the pain that the steel 
industry has been suffering is not simply transferred and then 
multiplied by factor of 10 or 20 to the steel-consuming 
industries, because, in terms of the small to medium-sized 
manufactures who are the backbone and have been the economic 
engine that has driven us to prosperity in the nineties, are 
the ones that get hit the hardest because we are least able 
to--we do not have a big stick. We do not have the purchasing 
power that the big guys have.
    Mr. HOUGHTON. Could I just interrupt a minute, because my 
time is running out. I appreciate, you are doing a great job 
for your companies and I know you have got extraordinary 
economic pressures on you, but so does the steel industry. I 
really think this thing lends itself to far greater discussion. 
Thank you, Mr. Chairman. Thank you gentleman.
    Chairman CRANE. Thank you. Mr. Cardin?
    Mr. CARDIN. Thank you, Mr. Chairman.
    I want to follow up a little bit on Mr. Houghton's point 
because I think he really laid it out well. We talk statistics, 
but there is a face to this. Yesterday in Baltimore, a staff 
person of mine attended a meeting with 3,000 Bethlehem Steel 
workers whose health benefits will be terminated on March 31, 
2003 and are now faced with decisions on how to cover 
themselves for circumstances that they may not be able to find 
health insurance to cover.
    I mention that because there is a real cost to what we are 
doing here. Mr. Smith, you indicated that there had not been 
alternatives suggested. We went through a voluntary restraint 
policy where U.S. steel companies reduced their capacity 
substantially. We were misled, I think, by the international 
community, and today we have overcapacity. I think we would all 
agree on that, but the overcapacity is not in the United 
States.
    So, I guess I really want to follow up on Mr. Houghton's 
point because I am not sure exactly you have answered that 
question. We had a steel policy, and obviously it didn't work 
because our steel companies are now in bankruptcy. We can't 
produce enough steel for our own needs. We have to import 
steel.
    I am curious as to whether you think the anti-dumping and 
countervailing duty laws in the United States are right or 
wrong. Do you think we should have protection against dumped 
steel in the United States? Do you think we should have 
protection against the United States being attacked because of 
the overproduction of steel internationally? Do you think it is 
important that we have domestically produced steel in the 
United States?
    Mr. PRITCHARD. Sir, I would like to respond to that. 
Certainly I think everybody on this panel who lives and 
breathes with steel each day in their businesses wants this 
steel industry strong in this country. I know we do in 
Cleveland, and I am sure it is the same with the others.
    You are right, there has got to be a solution to this 
problem somewhere. I don't know that I--well, I am sure I am 
not bright enough to come up with that answer. I think it will 
take many more minds working on this than we have in our 
company to provide a suitable solution. I think what we can say 
is that it is evident to this group and to our segment of the 
food chain in the steel industry that the tariffs are not 
working. I think it was best put when we talk about the 3,000 
steel industry folks that are going to be losing their 
benefits; that is tragic. It is very difficult to accept for 
any----
    Mr. CARDIN. I think we all acknowledge that the imposition 
of a tariff represents a failure. I think we all would 
acknowledge that. None of us wants tariffs imposed. What we 
want to do is get fair competition, and we don't want to see 
products come into this country that are illegally subsidized.
    Mr. PRITCHARD. Right.
    Mr. CARDIN. That is what we are trying to prevent. So, you 
can say lift the tariffs and close the U.S. steel companies, 
and that is certainly one solution. That will reduce capacity. 
That will get you cheaper steel, at least in the short run. It 
will cost this country a capacity that I think is important for 
not only national defense, but also as far as our economic base 
is concerned. That is not the answer either.
    Mr. PRITCHARD. Well, sir, because the tariffs have probably 
weakened at least our segment of the economy more than any 
single thing that has happened in the last decade or more. With 
the jobs issue, one of the associates--a union associate, a 
United Steelworker associate within our business, as part of 
our United Steelworkers Union that represents them, said before 
the House Committee on Small Business something that hit me 
right between the eyes. He said, ``Why is my job less important 
than someone making the steel?''
    Mr. CARDIN. Every job is important. I guess it would be 
better if we would have had more active help from you years ago 
to strengthen our anti-dumping laws so that we didn't have to 
reach the point that we have reached today. Believe me, the 
steel companies, the steel manufacturers in this country are 
not making out well under the current circumstance. They are in 
bankruptcy. They are having to do extraordinary things. This is 
not the ideal--this is not the solution for them. I am just 
disappointed we didn't have more sensitivity to this issue 
earlier so we wouldn't be faced with the type of crisis that we 
have today in steel manufacturing. Thank you, Mr. Chairman.
    Chairman CRANE. Thank you. Mr. Jefferson?
    Mr. JEFFERSON. Thank you, Mr. Chairman. My timing is 
apparently excellent.
    I heard the testimony of the first panel and the start of 
your testimony this morning, and I think on both sides there 
are good-faith concerns and there are real concerns that this 
panel, this Congress, the President has to take into account as 
we go forward trying to make the best decision for all 
concerned.
    I know that the decision that was made doesn't have 
anything to do with the anti-dumping or countervailing laws. It 
is a separate issue; this Section 201 resolution question is a 
separate issue. It has a narrow focus, and I guess it is about 
injury in a particular sector. What you are saying today is 
that there have been some perhaps unintended consequences that 
flowed from that decision to assist industry that flowed into 
where you are. Our challenge, it seems to me, is to try to 
figure--and it wouldn't have been so bad, I guess, if the 
prices hadn't risen so much.
    If you had taken a Section 201 action and the price had 
been somewhat moderated, the price increases had been 
moderated, you wouldn't have felt the pain you feel now in your 
own industry as consumers of steel. That is fair to say, I 
think. Our job, it seems to me, is to try and figure how we 
deal with the small companies that are the price takers in this 
business, that can't pass it on to somebody else, that 
themselves are laying off people and creating problems in their 
own industry and their own business, and at the same time 
trying to find a way to deal with the realistic issues on the 
steel side.
    Now, there are lots of issues which we can do without 
condemning anybody about it. Section 201 doesn't deal with the 
legacy questions, which are major issues to restructuring. The 
President's 2002 decision asked for the steel industry to 
restructure itself, and many of them are trying to do that. The 
legacy issues and the benefit questions are hard problems as 
they are trying these restructurings.
    Nothing in Section 201 addresses those questions. Nothing 
in the President's decision addresses those. Nothing we have 
talked about today addresses those questions. Until they are 
addressed, this restructuring that is the hope of this Section 
201 process won't take place, and the unintended consequences 
you guys are facing will continue to be problems for you.
    So, I would just ask you this: When you say that you want 
to see some help for the domestic steel industry, but you at 
the same time want to make sure that it doesn't drive you out 
of business and create job losses or dislocations that are 
unfair and disproportionate in your industries--I have kind of 
given my idea of what may be some broad ways to deal with it, 
but what do--can anyone tell me how they see these two things 
being reconciled without us taking a position that you are 
right, they are wrong, or they are right and you are wrong? 
What is the best way that we can suggest to the President as he 
reviews this decision to deal with this question of these 
apparently competing sides here, but that might have some way 
to be reconciled? What is the recommendation on that?
    We have heard what you said. I think that what you have 
said is exactly right. These things have happened to ports, to 
businesses, and no one saw it coming, at least not to the 
extent they have. Now it is time to fix them so we can work on 
both sides. How can we do that and reconcile both these 
questions?
    Mr. TAYLOR. Well, I personally believe in free trade. I 
think in the long run that is the best thing for our society. 
It forces the right things to happen, and over the long run, 
those countries that are subsidizing their industries will pay 
a price. It would have been better, frankly, if we would have 
just granted direct subsidy to the industry or made loans to 
the steel industry, generally the large integrated producers, 
rather than to provide a blanket across most of the industry of 
a higher price. It would have been better spent because it 
wouldn't have forced the steel-consuming jobs out of the 
country. I don't agree that that is right, but it would have 
been better. It would have been a lesser evil.
    Mr. JEFFERSON. Would it have been better also to do quotas 
instead of the tariffs that end up with taxes on?
    Mr. TAYLOR. My experience with quotas is that it creates 
shortages and dislocations, and it might even be worse because 
then you can't even get the product to produce. It is isolated 
dislocations that provide no other remedy.
    Mr. JEFFERSON. Thank you, Mr. Chairman.
    Chairman CRANE. Thank you. Mr. Becerra?
    Mr. BECERRA. Thank you, Mr. Chairman. To the panel, thank 
you very much for your testimony. I apologize in advance that I 
was not able to attend when you were providing your remarks, 
and so you will forgive me if I ask a question that you may 
have already responded to, and if so, please just let me know. 
I will try to keep my questions brief, Mr. Chairman, and hope 
that if they have not been answered, that anyone from the panel 
would be willing to offer remarks.
    I would like to know if any of you have had to move any of 
your production facilities abroad since the imposition of the 
Section 201 tariffs.
    Mr. TAYLOR. Yes, we have. Going into the tariff period, we 
purchased about 5 percent of our production value outside of 
the country. In 1 year, that has now moved to 10 percent; in 
other words, it has doubled. It will probably double or triple 
again in the next year or two if the tariffs remain in place, 
and a proportional number of jobs will, therefore, be exported 
for our company if the tariffs remain in place.
    Mr. BECERRA. So, that doubling or the 5-percent increase in 
the production being done abroad, is that due solely to the 
tariffs?
    Mr. TAYLOR. The movement from 5 percent to 10 percent in 
the past year is due primarily to tariffs, not solely.
    Mr. BECERRA. Not solely. How big a factor were the tariffs, 
if you are saying primarily?
    Mr. TAYLOR. They were by far the largest single factor.
    Mr. BECERRA. Okay. Can you tell us to where that production 
was moved?
    Mr. TAYLOR. Most of it to Taiwan and to mainland China.
    Mr. BECERRA. Can you tell us what the tax rates, the labor 
costs, your capital costs and other raw materials might be in 
Thailand versus--did you say Thailand?
    Mr. TAYLOR. Taiwan.
    Mr. BECERRA. Taiwan.
    Mr. TAYLOR. And mainland China.
    Mr. BECERRA. Okay. In Taiwan and mainland China, can you 
give us a comparison of your different costs, labor, taxes, 
capital, other raw materials?
    Mr. TAYLOR. Labor is less than 10 percent of our total cost 
in the United States. Of course, it is lower in Taiwan. It is 
about 40 percent of the cost of labor in the United States. In 
mainland China, you might as well call it free. Labor is very, 
very low.
    Mr. BECERRA. Taxes?
    Mr. TAYLOR. Taxes and other things are roughly comparable, 
all things in. The biggest single factor in our cost base in 
most of the products we make, the cost is 30 to 50 percent raw 
material, and in those that are made from steel, which is the 
majority, 30 to 50 percent is steel. So, the steel cost issue 
is the largest of all the cost issues?
    Mr. BECERRA. Anyone else?
    Mr. LEULIETTE. As I said, I think in my testimony, we are 
moving in two ways. First of all, we are moving our steel buy 
offshore to non-tariff countries. We are moving enough of our 
steel buy that it represents half of a mill as being resourced 
offshore in the next 12 months.
    Second, we have started to move our componentry to, first 
of all, Korea; that will be followed with Mexico in about 8 
months. So, it is a process that is continuing.
    Mr. BECERRA. Anyone else? If we were to remove the Section 
201 tariffs, would you return that production here and the 
purchase?
    Mr. LEULIETTE. Some of the jobs that have gone are gone for 
good. We have made commitments. We put capital in place. I 
think the issue with Section 201 is not to bring jobs back but 
to stop the outflow of jobs.
    Mr. BECERRA. If you are to stop the outflow and it is 
because of Section 201, if Section 201 is gone, then we would 
presume that those jobs would either remain or come back.
    Mr. LEULIETTE. If we stop Section 201, there will not be a 
continual migration of jobs, but with just having invested tens 
of millions of dollars in new facilities in these countries, we 
are not going to lock them up, walk away, and come back here. 
We have trained people. We have put new facilities in place. It 
is a long-term investment.
    In this particular business, those are 10-, 20-year 
commitments. They are not 6-month commitments.
    Mr. BECERRA. Same thing, Mr. Taylor?
    Mr. TAYLOR. Absolutely.
    Mr. BECERRA. So, that production that is left probably 
would not return even if Section 201 were removed.
    Mr. TAYLOR. That is right. Once it is gone, it is very 
unlikely that it would come back. There would have to be some 
major dislocation. You have to understand there has to be a 
significant cost differential--I would place that in the 
vicinity of 8 or 10 percent--to cause a company to want to go 
through the trouble and the pain of moving facilities. Often it 
causes quality problems, delivery disruptions. You don't do 
that lightly, but once you have done it, now you need another 
barrier to go back. The way I see it, it is unlikely, barring 
some major disruption, that that increment would be created.
    Mr. BECERRA. I thank you.
    Mr. TAYLOR. They are not coming back.
    Mr. BECERRA. I thank you for the testimony, although I will 
mention that it sounds like you are making long-term decisions 
while Section 201 is meant to be a short-term relief. So, I 
would be concerned that you might be mixing apples and oranges 
here, because it seems like you are trying to make long-term 
decisions, which every company must do to meet its bottom line, 
whereas Section 201 is trying to address a short-term problem. 
Thank you, Mr. Chairman.
    Chairman CRANE. Mr. Houghton.
    Mr. HOUGHTON. I would just like to add something very 
briefly. I wonder whether we are not talking about the wrong 
issue. Section 201 has come and it will go. You will still have 
the basic pressures. I think the pressures on your industry, on 
the steel industry, are going to be such that if we don't think 
through what it is to have this precious asset we have, which 
is our market, then we are all going down the drain.
    Chairman CRANE. Let me express appreciation to all of you 
for your appearance and your testimony and your patience in 
letting us take that break of 1 hour and 20 minutes.
    I just got a New York Times release here, and a couple of 
our witnesses in the next panel are quoted from their testimony 
before us at the Subcommittee on Trade meeting. I didn't 
realize they had already spoken. Apparently they are not going 
to appear in the next panel.
    At any rate, the focus of the article, though, is about how 
the United States said Wednesday it would appeal a preliminary 
WTO ruling against steep steel tariffs imposed last year by 
President Bush and that the trade body's final ruling was not 
changed. So, I thought I would just give you the latest update 
with regard to where we stand with the WTO.
    With that, I want to again express appreciation to all of 
you, and we will adjourn this panel and I will call the next 
panel to the Committee.
    All right. Our next panel is Mr. Dan DiMicco, President, 
Chief Executive Officer, and Vice Chairman of Nucor 
Corporation; Mr. Andrew Sharkey, President and Chief Executive 
Officer, American Iron and Steel Institute (AISI); Leo Gerard, 
International President, the United Steelworkers of America; 
Charles Connors, President, Chief Executive Officer, and 
Chairman of Magneco/Metrel, Addison, Illinois; and Peter 
Dooner, President, Wheatland Tube, Collingswood, New Jersey.
    Before you folks start your testimony, let me ask you to 
please try and keep your oral presentations to 5 minutes, and 
the little light in front of you will give you a high sign as 
to where you are. Any written testimony that you have will be 
made a part of the permanent record.
    With that, Mr. DiMicco, you proceed first.

 STATEMENT OF DAN DIMICCO, PRESIDENT, CHIEF EXECUTIVE OFFICER, 
AND VICE CHAIRMAN, NUCOR CORPORATION, CHARLOTTE, NORTH CAROLINA

    Mr. DIMICCO. Thank you, Mr. Chairman. Good morning. I am 
Dan DiMicco, President and Chief Executive Officer of Nucor 
Corporation, the largest steel producer in America, and the 
Nation's largest recycler. I appreciate this opportunity to 
testify.
    The President's remedy has had a beneficial impact on three 
classes of businesses: steel producers, companies supplying 
goods and services to the steel industry, and steel users who 
depend on a reliable source of domestic steel supply. There are 
literally thousands of these companies in all parts of the 
United States.
    The President is addressing the big picture: a crisis that 
threatened the steel industry and its supplier and customer 
base. The President's steel decision must be put in context. 
Our trading partners had repeatedly violated the anti-dumping 
and countervailing duty laws with respect to steel so 
pervasively that enforcement of our trade laws was virtually 
impossible. As a result of the blatant violation of 
international trade rules, the domestic steel industry was 
undergoing unprecedented hardships. Even companies like Nucor, 
which some analysts believe is the most efficient steel 
producer in the world, were finding it difficult to compete in 
our own home market. Clearly, something was dysfunctional with 
the world steel market.
    The President got it right with his three-part initiative. 
The first two parts address the root causes of the import 
surge: global excess capacity and government subsidies. The 
last part provides temporary, limited breathing room for the 
U.S. industry from imports. This breathing room is no free 
ride. It is conditional on the industry spending billions to 
reorganize, restructure, and make itself even more globally 
competitive. The industry accepted this 3-year contract and is 
carrying out its obligation. We are consolidating, 
restructuring, cutting costs, and improving productivity. We 
are bringing back capacity that is economically competitive on 
a global basis. Our suppliers are benefiting. Each of our 
plants supports dozens if not hundreds of small businesses 
throughout the United States.
    For example, the U.S. transportation infrastructure moves 2 
tons of raw material for every 1 ton of steel produced. Trucks, 
rail, barge, ports--we use them all. Yet this Subcommittee 
requested a section 332 study by the ITC without one mention of 
the beneficial impact of the President's remedy on suppliers 
and the transportation industry.
    I am surprised to see the Port of New Orleans here today 
opposing the President's program because the U.S. steel 
industry is one of their major customers. The U.S. industry 
brings substantially more raw materials through the port system 
in the State of Louisiana than do steel importers--fact. 
Moreover, steel imports into Louisiana are up 26 percent, not 
down, since the President's action. That is according to the 
port's own statistics. Their complaint of lost revenue is 
simply because they are losing business to more efficient up-
river ports.
    The entire decline in steel imports last year to the Port 
of Houston was caused by a sharp fall-off in oil country 
tubular goods, a steel product not even covered by the 
President's program. By the way, neither is wire rod that you 
heard about a few minutes ago.
    Steel users have also benefited. First, according to the 
Bureau of Labor Statistics data, the American consumer is 
paying less for a car and refrigerator since the President 
acted. As former Secretary O'Neill put it last year, steel 
prices were fictitiously low. Indeed, they were unsustainable. 
A huge share of the U.S. industry was on the brink of being 
shuttered permanently. This would have devastated domestic 
customers who rely on that supply. The President's program has 
brought back some needed shuttered capacity, but it is 
returning with a new, internationally competitive cost 
structure. This is good for steel consumers.
    Today steel consumers are paying lower prices for steel 
than they would have without the remedy. Prices are rising 
faster outside the United States. As a result, the 
international competitiveness of U.S. manufacturers who use 
steel has increased, not decreased, in the last several months.
    Just as our customers need a strong domestic steel 
industry, we need strong customers. There are many real 
problems facing American manufacturers. In particular, American 
industry is being devastated by currency manipulation by China 
and other governments. All U.S. manufacturers, and for that 
matter our entire economic recovery, is being severely damaged 
by these currency manipulations. In 1985, President Reagan 
dispatched U.S. Treasury Secretary Baker to effect an end to 
the grossly overvalued dollar through negotiations with the G-7 
nations. The result became known as the Plaza Accord. It was 
this action, together with the Reagan tax cuts, that laid the 
foundation for economic recovery.
    A $41 to $45 billion monthly trade deficit is not only 
extreme, it is obscene. The currency manipulations are hurting 
everyone appearing before you today. This is the real culprit, 
not steel pricing, which is at historic lows at this time.
    Finally, I would like to address one critical point, and 
that is the systematic action by foreign diplomats who run the 
WTO to strike down virtually every single American law that is 
challenged, whether it is the Foreign Sales Corporation or 
trade law enforcement actions. Unless Congress addresses the 
WTO abuse of power and infringement on U.S. sovereignty, our 
international rules-based trading system will disintegrate.
    The President did the right thing in enforcing the 
safeguard law. The program is working. The President made a 3-
year commitment to the industry, and the industry is carrying 
out its obligation. The President deserves all of our support. 
Thank you.
    [The prepared statement of Mr. DiMicco follows:]
Statement of Dan DiMicco, President, Chief Executive Officer, and Vice-
         Chairman, Nucor Corporation, Charlotte, North Carolina
Introduction
    Mr. Chairman and Members of the Committee, my name is Dan DiMicco. 
I am the President, CEO, and Vice Chairman of Nucor Corporation. I am 
here today to state my unequivocal support for the President's steel 
program. The program has been good for the U.S. steel industry, U.S. 
steel consumers, and the U.S. economy.
The Origins of the President's Program
    Nucor is the best example of why President Bush implemented his 
steel program. With facilities in fourteen States, Nucor is the largest 
producer of steel in the United States, and the largest recycler. We 
are viewed by some industry analysts as the most efficient producer of 
steel in the world.
    Yet, as efficient as we are, by 2001 Nucor was unable to earn its 
cost of capital. The reason was that a flood of illegally traded 
imports had driven steel prices in the United States to twenty-year 
lows. The Department of Commerce found in literally hundreds of cases 
that foreign steel had been dumped or subsidized. The International 
Trade Commission found in many of these cases that dumped or subsidized 
imports had injured the U.S. steel industry. Yet as soon as one source 
of steel became subject to an anti-dumping or countervailing duty 
order, importers found another low-priced source of supply.
    As a consequence of this flood of illegally traded imports, steel 
prices hit rock bottom. When prices are so low that the best company in 
an industry cannot justify spending money on its core business, 
something is wrong. President Bush correctly realized that there was a 
fundamental problem, and that a forceful response under the trade laws 
was necessary.
The Multilateral Steel Initiative
    That response was President Bush's Multilateral Steel Initiative. 
It is important to remember that the Section 201 remedy was only one of 
the three components of the President's program. The other two were 
international negotiations to close permanently inefficient and 
unnecessary steel making capacity around the world, and international 
agreement to end government subsidies and anti-competitive practices in 
the steel industry.
    Negotiations among the steel making countries are yielding real 
progress towards these vital goals. Were it not for the President's 
decision to impose some temporary duties, this progress would not have 
occurred. Any assessment of the effect of the President's Multilateral 
Steel Initiative must include the impact it has had on the global 
situation.
The Initiative and the U.S. Steel Industry
    When President Bush announced his decision to provide temporary 
import relief under Section 201, he made it clear that his decision was 
not simply a gift to the domestic steel industry. The President 
emphasized that ``[t]he U.S. steel industry must use the temporary help 
today's action provides to restructure and ensure its long-term 
competitiveness.'' The President's decision reflected an implicit 
contract between the Administration and the industry. In return for a 
``breathing space'' from import competition, the domestic steel 
industry promised to undertake real consolidation and restructuring.
    In doing so, the U.S. steel industry is incurring massive costs and 
accepting substantial risks. Consolidation and restructuring require 
investment. Nucor, for example, has taken on some $600 million in debt 
in connection with its acquisition of the assets of Trico Steel and 
Birmingham Steel. For a company that has always funded new investments 
primarily from retained earnings, a decision to borrow like this 
represents a real departure. Yet we decided that the opportunities the 
President's program has created justify the risk.
    Major changes are occurring within the domestic steel industry, as 
producers consolidate and as inefficient capacity goes out of 
production. The industry has billions of dollars at risk. Buying the 
assets of another company isn't the difficult part; the difficulty 
comes with integrating its operations into yours. That takes time.
    President Bush promised three years of import relief. That was part 
of the contract. If those who have benefited from dumped and subsidized 
steel succeed in terminating the President's program early, the 
opportunity we have to restructure the U.S. steel industry will be 
lost. There would be devastating effects not just on the U.S. industry, 
but on the thousands of businesses that supply the industry with 
inputs, the thousands of small transportation companies that move two 
tons of raw materials for every one ton of steel produced in the United 
States--and the thousands of customers that depend on us for steel.
The President's Steel Program and the U.S. Economy
    The President's program is only one component of a larger policy to 
preserve and expand the manufacturing base of the United States. Many 
manufacturing industries in the United States use steel as a vital 
input into their products. It is impossible to have a healthy 
manufacturing sector without a strong steel industry.
    The President's program has created thousands of jobs in the steel 
industry itself. A perfect example of how the President's program has 
worked is that of the former Trico Steel mill in Decatur, Alabama. 
Although Trico was one of the most modern mills in the world, it had 
been unable to compete with the wave of dumped and subsidized imports 
of hot-rolled steel that flooded the U.S. market. The company declared 
bankruptcy, and stopped production in March 2000.
    Nucor purchased the assets of Trico Steel in July 2002. Nucor 
restarted production there in September 2002, months ahead of schedule. 
This investment and reopening of efficient, low-cost U.S. capacity is a 
direct result of the President's steel program. We have brought several 
hundred high-paying jobs to an economically depressed area. And, Mr. 
Chairman, because Nucor reopened this plant, customers throughout the 
South are now able to get the hot-rolled coils they need for their 
businesses. Indeed, in January we decided to add another crew. Over 
7,000 people applied for 60 positions. In his State of the Union 
address, President Bush spoke of the need for ``more employers to put 
up the sign that says `Help Wanted.' '' We did--and 7,000 Alabamans 
came knocking on our door, eager to work.
    The President's program has also affected an important segment of 
the economy--companies supplying the steel industry. You will hear 
today from Mr. Chuck Connors about the very positive impact of the 
President's steel program on his business. Nucor buys from literally 
hundreds of small businesses. When we produce more steel, as we did in 
2002, we buy more from our suppliers. University researchers using 
Department of Commerce methodology have calculated that every new job 
in one of our mills creates eight jobs in other industries. This means 
that, when we added 60 workers at Decatur, nearly 500 more jobs were 
created up- and down-stream.
    Another example of the positive impact of the President's program 
on suppliers is the Port of New Orleans. In 2002, imports of steel 
through New Orleans were about 4 million tons. But that same year, the 
U.S. steel industry imported 6 million tons of raw materials through 
the Port of New Orleans--such as steel scrap, pig iron, and 
ferroalloys--an increase of over 7% from 2001. This increase is 
directly attributable to the increased domestic production made 
possible by the President's steel program. Ironically, however, the 
Port of New Orleans has been a vocal critic of the President's program.
    The benefits of these raw material imports did not stop at New 
Orleans. Most of these materials moved up the Mississippi River, to 
Nucor mills in fact. In this way, they created jobs and produced income 
for workers throughout the Mississippi transportation system. When the 
U.S. steel industry is healthy and thriving, America moves.
The President's Program and Steel Consumers
    Perhaps the biggest beneficiaries of the President's steel program 
have been steel consumers. The President's program averted a crisis for 
steel consuming industries in 2002 and 2003, a crisis that could have 
driven hundreds of companies out of business and cost thousands of 
workers their jobs. Because it is enabling the domestic steel industry 
to reduce costs, the President's program will continue to benefit steel 
consumers far into the future.
    Let me explain. By 2001, steel prices had hit 20-year lows. Over 30 
steel producers had declared bankruptcy, and many of them had stopped 
production. In December 2001, LTV, once the third-largest producer of 
steel in the United States, suddenly announced that it was ceasing 
operations. Almost overnight, over six million tons of steel making 
capacity went out of production.
    The impact of LTV's closure was immediate. Customers that had 
depended upon LTV suddenly found themselves scrambling to find 
alternative sources of supply. Prices for flat-rolled products like 
hot-rolled and cold-rolled sheet began to rise rapidly, and occasional 
shortages appeared. Steel consumers were in a state of shock.
    On March 5, 2002, the President announced his decision regarding 
import relief. Since then, the U.S. steel industry has undergone a 
tremendous amount of consolidation and restructuring, a process that 
has really only just begun. Production reopened at LTV, Trico, and 
other mills. As domestic supply increased, and imports from non-covered 
developing countries increased, prices stabilized and then began to 
move back down. Because of the President's program, the shortages and 
price spikes that came in early 2002 are a thing of the past.
    Consolidation and restructuring are not ends in themselves. The key 
question is whether the domestic steel industry will be able to lower 
its costs and increase productivity. The evidence so far is that it is 
doing so. One analyst has stated that, a year ago, about 12% of flat 
products such as hot-rolled and cold-rolled sheet were being produced 
in ``low cost'' facilities. After only one year, that percentage is 
rising to 45%. Studies by World Steel Dynamics, perhaps the leading 
authority on productivity in the industry, show that U.S. mills are now 
among the most productive in the world. The greatest beneficiaries of 
this change will be steel consuming industries in the United States.
    This improvement was possible because of the President's steel 
program. Without the program, investors would not have been willing to 
take on the debt and accept the risks that consolidation and 
restructuring require. LTV, Acme and Trico would have remained closed, 
and their eight million tons of capacity idle. Both Bethlehem and 
National, both of which are currently in bankruptcy, would probably 
have cut back production, and might well have stopped operations 
completely. The same is true of Birmingham. Instead of eight million 
tons of capacity closing temporarily, the domestic industry could have 
seen over twenty-five million tons of capacity--over 20% of the U.S. 
total--go out of production.
    The impact on steel consumers would have been devastating. Prices 
would have skyrocketed, and some steel-using industries would have 
found that they could not obtain the steel they needed at any price. 
The President's program kept prices from climbing higher than they 
would have in the absence of relief.
The True Impact of the President's Program
    Critics of the President's program have recited a litany of ill 
effects for which they blame the President's 201 decision. The 
shortages and price increases they cite are old news. These situations 
have long since been rectified by the President's steel program.
    Some users claim that they have been unable to get the steel they 
need because of the 201 duties. Yet, the 201 duties do not keep any 
steel from entering the United States. Duties can only affect price, 
not availability.
    Changes in steel prices mimic a pendulum, swinging from extreme to 
extreme. By the end of 2001, prices were at the far end of the swing, 
as they reached their lowest levels in twenty years. Much of the 
testimony you may hear today is nothing more than complaints that 
prices did not stay there. Just as a pendulum cannot arrest its motion 
at the end of its swing, this was an economic impossibility. Precisely 
because prices had fallen so far, many producers were forced to cease 
production. The critics of the President's policy would seek to repeal 
that most basic law of economics--that if supply falls, and demand 
remains steady, prices must rise. Any company that was depending upon 
the continuation of prices at record lows for an indefinite period was 
trusting a fatally flawed business model.
    According to the Bureau of Labor Statistics, the price for primary 
steel products rose by only 10.8% from January 2002 to January 2003. 
The big automotive producers agreed to a price increase averaging 7% 
for their steel purchases, spread over a three-year period. Even after 
this partial price restoration, prices in January 2003 were at or near 
their 20-year averages. Transaction prices on flat rolled and other 
products were well below those averages. The President's steel program 
essentially put a minimal floor on prices. By encouraging the reopening 
of shuttered production that could be operated efficiently, it also 
effectively put a ceiling on them.
    In terms of international competitiveness for manufacturers who use 
steel, what matters most is not absolute price levels, but relative 
price levels. Steel prices have been rising faster outside the United 
States than in it. Prices are so attractive outside the United States 
that U.S. steel producers have begun to export significant quantities 
of steel. The United States now has some of the lowest steel prices in 
the world, especially for hot-rolled sheet, probably the single most 
widely used steel product. The international competitiveness of U.S. 
manufacturers who use steel has increased over the last year.
    The President's program did not stop steel imports. To the 
contrary, steel imports were 8.4% higher in 2002 than in 2001. Imports 
of hot-rolled sheet increased by 56% from 2001 to 2002, while imports 
of coated sheet rose by 34%. This increase should not be surprising; 
most countries were exempted from the 201 duties, as were many major 
products. Over 700 individual products were excluded in response to 
requests by steel users. By our latest estimates, the 201 duties apply 
to only about 20% of all steel imports.
    These import figures rebut one particular criticism of the 
President's program--that it has hurt America's ports. One frequently 
cited example is the Port of New Orleans. According to the Port itself, 
imports of steel products through New Orleans were 25.7% greater in 
2002 than in 2001 and represented its number one cargo. The increase 
was not limited to semi-finished products, as imports of finished 
products were nearly 13% greater in 2002 than in 2001. Much of this 
increase was from developing countries excluded from the 201 relief. 
And the Port of New Orleans recently stated that it expects continued 
growth.
    Critics of the President's steel program have used bogus economic 
studies to claim that the program has cost hundreds of thousands of 
jobs in steel consuming industries. But in fact, the Bureau of Labor 
Statistics shows that employment in these industries increased after 
the President's decision in March 2002, by over 52,000 jobs. Had the 
President not acted, many, if not most, of the jobs in steel consuming 
industries would have moved offshore with steel production.
Other Factors Affecting Steel-Using Industries
    A number of factors have had a much greater impact on steel 
consumers than the President's program. These were largely factors that 
affected all manufacturing industries. This emphasizes the need for a 
common agenda by manufacturers to address these problems.
    The most obvious factor affecting steel users in 2002 was the 
recession. The recession was not especially deep, but it did affect 
many companies significantly. The recovery has so far been rather weak, 
so that some companies are still hurting.
    A second important factor, one about which I have spoken 
frequently, is the strong dollar. A dollar that is too strong hurts 
U.S. manufacturers by making their exports expensive and imports cheap. 
Some foreign countries, especially China, are purposefully manipulating 
their currencies to overvalue the dollar. The National Association of 
Manufacturers calculates that this has cost the U.S. economy two 
million jobs. If manufacturing companies are looking for a cause of 
their problems, the excessive strength of the dollar, not the 
President's steel program, is the real culprit. All manufacturers need 
to work together in urging our leaders to address this problem.
    Finally, some steel consumers in 2002 suffered the consequences of 
their own buying decisions. Companies that use substantial amounts of 
steel have two choices: they can purchase steel under long-term 
contracts, or they can speculate on the spot market. Some steel users 
made conscious decisions to gamble on the spot market as their primary 
source of steel, so that they could take advantage of the 
extraordinarily low prices that were prevalent in 2001, due to 
widespread violations of our trade laws. Of course, when prices on the 
spot market began to rise, they had to pay more for their steel. 
Nucor's contract customers, on the other hand, were protected from 
price increases; Nucor did not break any customer contracts in 2002, 
even though we were selling much of our steel under contracts at prices 
far below what we could have received on the spot market.
Conclusion
    The U.S. steel industries has made tremendous progress in 
consolidation and restructuring in the year since President Bush 
announced his decision. We have kept our side of the bargain. Our work 
is not finished, though. The industry must resume investment in new 
technology and equipment. By one estimate, the domestic steel industry 
will need to invest up to nine billion dollars over the next three 
years just to maintain its current level of competitiveness. Investors 
will be unwilling to make these investments if they believe that prices 
will return to the unsustainable levels of 2001, or that the U.S. steel 
market will be exposed to new tidal waves of dumped and subsidized 
imports.
    The best way to facilitate consolidation, restructuring and 
investment is to ensure that the President's program remains in place 
for its full three-year period. The U.S. steel industry will suffer if 
this process does not continue. The companies in the United States that 
depend upon steel to make their products will also suffer. The health 
of the manufacturing sector depends upon the existence of a healthy 
domestic steel industry. The President's steel initiative has done a 
remarkable job of helping our industry regain its health. The 
President's plan is working for steel producers, their suppliers and 
their customers. It deserves your support.

                                 

    Chairman CRANE. Thank you. Our next witness is Mr. Sharkey.

  STATEMENT OF ANDREW SHARKEY, PRESIDENT AND CHIEF EXECUTIVE 
           OFFICER, AMERICAN IRON AND STEEL INSTITUTE

    Mr. SHARKEY. Thank you, Mr. Chairman.
    When President Bush announced his three-part steel program 
in June 2001--first, to initiate a Section 201 investigation; 
second, to pursue international discussions to reduce world 
steel overcapacity; and, third, to engage in international 
negotiations to eliminate market-distorting practices in the 
steel sector--it constituted recognition at the highest level 
of our government that the steel crisis conditions in 2001 in 
the United States and worldwide were not sustainable, not for 
steel producers and, over the long term, not for our customers 
who want and need steel to make their products.
    It was not just that the U.S. steel market had become the 
world's steel dumping ground. Because of massive global 
overcapacity in steel and a whole host of resulting trade and 
market-distorting practices, there was no free trade in steel 
anywhere. Normal market forces were not working in the case of 
steel anywhere.
    So, when 40 governments met at the Subcabinet level at the 
Organization of Economic Cooperation and Development (OECD) in 
September 2001 to discuss the world steel crisis, all agreed 
that a key characteristic of the steel crisis was artificial, 
non-sustainable price depression. Simply put, the prices for 
most steel products by late 2001 were at 20-year lows and well 
below the cost of production for any steel producer, whether 
here or abroad, regardless of how efficient they were.
    Viewed against this background, the President's 
international steel initiative is a pro-free trade policy 
because it is designed to restore market forces to the global 
steel sector. In much the same way, the President's Section 201 
remedy represents a pro-competitive policy. It is designed to 
provide our steel industry with a temporary breathing space 
from injurious import surges so that we can again attract the 
investment capital we need to consolidate, restructure, and 
improve our competitiveness.
    Our written statement describes why the President's Section 
201 remedy was a last resort and why the President was right. 
It explains, factually, how the President's remedy is working 
precisely as intended and why it is serving the national 
interest, not just by strengthening steel, but also by creating 
long-term benefits for our suppliers, our customers, our 
economy, and our national security.
    In the short time remaining, I will focus on three key 
points.
    First, the President's Section 201 tariff remedy has 
allowed a competitive, but fragmented, American steel industry 
to restructure and consolidate--a goal virtually everyone 
agreed was needed. At the 1-year anniversary point of the 
remedy a couple of weeks ago, it is fair to say that this is 
the most significant restructuring in decades for America's 
steel industry, and the President's tariffs have played a key 
role in facilitating this monumental change. Grant Aldonas, 
Under Secretary for International Trade at the U.S. Department 
of Commerce, was recently quoted as saying that he is 
``absolutely'' convinced the President's tariffs have helped 
the U.S. steel industry to restructure. According to Under 
Secretary Aldonas, the President's Section 201 remedy has set 
the stage for the steel industry ``to come back with a roar in 
the United States'' instead of continuing the ``death spiral'' 
it was in before the President imposed his tariffs.
    Second, while our government negotiators still have a long 
way to go, the President's Section 201 tariff remedy has 
encouraged real progress in the international talks to address 
the root causes of the U.S. and global steel crisis.
    Third, and in conclusion, the U.S. steel industry, the 
financial community, and the President himself (and his trade 
negotiators) all need the Section 201 tariffs to continue for 
the intended, full 3-year duration.
    U.S. steel companies who have incurred increased financial 
risk relative to planned or recent mergers, acquisitions, and 
investments need the tariffs to continue so they can complete 
the job of restructuring and consolidating.
    The financial community needs to know that this period of 
relative steel import stability will continue so they can have 
at least some assurance that we will have the breathing space 
and time we need to put their money to effective use.
    Our government negotiators need the Section 201 tariffs as 
a continued ``stick'' to keep our trading partners at the 
negotiating table so they can achieve as much progress as 
possible in the ongoing multilateral talks.
    The AISI very much appreciates this opportunity to testify 
on the positive impact of the President's steel tariffs and the 
need for them to continue in the national interest. I thank 
you, Mr. Chairman.
    [The prepared statement of Mr. Sharkey follows:]
  Statement of Andrew Sharkey, President and Chief Executive Officer, 
                   American Iron and Steel Institute
    The American Iron and Steel Institute (AISI), on behalf of its U.S. 
members who together account for approximately two-thirds of the raw 
steel produced annually in the United States, welcomes this opportunity 
to provide written comments for the record to the Subcommittee on Trade 
of the House Committee on Ways and Means in connection with the 
Subcommittee's March 26, 2003 hearing regarding the impact of the 
Section 201 safeguard action on certain steel products. Our comments 
will focus on:

    1. LThe positive, intended effects--on domestic steel producers, 
steel industry suppliers, steel-consuming industries, the U.S. economy 
and America's national security--of the President's 201 tariffs; and
    2. LThe very significant adjustment efforts taking place within 
America's steel industry, and the key role of the President's tariffs 
in facilitating this adjustment.
The Darkest Days
    Before we address the impact of the steel Section 201 remedy to 
date, it is useful to recall why this was the first Presidentially-
initiated 201 investigation in 16 years. President Bush initiated this 
action as a last resort. It followed (1) more than 200 separate 
government determinations, over a period of several years, that foreign 
steel had been traded illegally in the U.S. market at prices that 
violate international rules and U.S. laws and (2) immediately pertinent 
to the President's decision, the single greatest surge of dumped, 
subsidized and disruptive steel imports in U.S. history.
    In many respects, 2001 and the immediate months leading up to the 
Section 201 announcement on March 5, 2002 were the darkest days in the 
long and proud history of the steel industry in the United States.

     LPrices for most steel products were at artificial, non-
sustainable 20-year lows, well below anyone's cost of production--
globally.
     LEven some of the most efficient U.S. steel companies were 
hemorrhaging cash.
     L35 domestic steel companies had declared bankruptcy in 
less than five years.
     LThis rash of bankruptcies affected 53 million tons of 
U.S. steelmaking, or roughly 45 percent of total U.S. capacity.
     LNational Steel filed for bankruptcy just a day before the 
President's announcement.
     LNearly 19 million tons of U.S. steel capacity was idled, 
and domestic crude steel production dropped 18 percent between December 
2000 and December 2001.
     LWe were well on our way to over 50,000 unemployed steel 
industry workers.
     LThere was a huge negative ripple effect of financial 
losses and lost jobs, affecting hundreds of suppliers of raw materials 
and related services, including numerous small businesses and steel-
centric communities, in many parts of the country.
     LTens of thousands of U.S. steel industry employees and 
retirees were losing their pensions and medical benefits due to 
bankruptcies.
     LThis highly capital-intensive industry was essentially 
shut out of the capital markets (debt or equity), with bankrupt 
companies struggling even to secure debtor-in-possession (DIP) 
financing.
     LEven the lowest cost, best-managed U.S. steel companies 
were drowning under the impact of a tidal wave of dumped and subsidized 
imports.
     LNotwithstanding all of this--and even after an 
exhaustive, independent 8-month investigation by the International 
Trade Commission (ITC) and its unanimous rulings of serious import 
injury--it was far from certain that the President would impose 
effective Section 201 trade relief and, if so, in time to prevent a 
wholesale collapse of America's steel industry.
The President's Steel Program: Its Objectives, Critics and Results
    The President's Steel Program, first announced in June of 2001, had 
three inter-related parts: (1) a self-initiated Section 201 
investigation to examine the role played by increased imports in the 
U.S. steel crisis; (2) international discussions to reduce excess and 
inefficient global steel capacity; and (3) international negotiations 
to eliminate government subsidies and other market-distorting practices 
in the global steel sector. This bold Presidential initiative was put 
forth to address the root causes of the U.S. and global steel crisis 
and--if warranted by the 201 investigation--to grant the seriously 
injured domestic industry an opportunity to catch its breath, make 
necessary adjustments and otherwise enhance its ability to compete in 
the post-safeguard world.
The Objectives
    As the President correctly recognized, market forces were not 
working in the case of steel. Instead of free trade in steel, there was 
a 50-year history of foreign government intervention in the steel 
sector. There was a dysfunctional world steel market characterized by 
massive foreign government subsidies to steel, pervasive private 
anticompetitive practices among foreign steel mills, tightly restricted 
foreign steel markets--and over 200 million tons of global excess steel 
capacity in search of markets at virtually any price.
    It was against this background that:

     LIn September 2001, 40 governments met at the OECD to 
declare that, with world steel prices at unsustainable, below-cost 
levels, there was a world steel crisis; and
     LOn March 5, 2002, President Bush announced his 201 remedy 
decision to impose temporary and declining tariffs, for 3 years and a 
day, on some steel imports from some foreign countries for the dual 
purpose of (1) providing a period of time for the U.S. steel industry 
to recover and restructure and (2) encouraging our trading partners to 
engage in serious international discussions on the structural problems 
that continue to exist in the steel sector outside U.S. borders.

    The President's Section 201 decision was not everything the U.S. 
steel industry had hoped for. Among other things, the 201 remedy 
exempted, at the start, some 100 developing countries, and it included 
a complex product exclusion process, which has so far resulted in more 
than 1,000 product exclusions. Still, this was a courageous initiative 
on the part of the President.

     LInternationally, it was a pro-free trade policy, designed 
to restore market forces to the global steel sector.
     LDomestically, it was pro-competitive policy, designed to 
provide our steel industry with a temporary breathing space from 
injurious import surges, so that we could again attract the investment 
capital needed to consolidate, restructure and improve our 
competitiveness--to the long-term benefit of U.S. steel consuming 
industries, the U.S. economy and U.S. national security.
The Critics
    The President's 201 remedy was a reasonable, necessary and modest 
response to a crisis of unprecedented proportions facing one of our 
Nation's most critical industries. The President based his 201 decision 
on fact, common sense and unanimous ITC rulings. If there ever was a 
situation crying out for a safeguard, this was it, and the President 
enforced the law. Nevertheless, almost immediately, the President's 
action sparked a firestorm of outrage from expected quarters--from many 
of our trading partners, foreign steel producers, steel importers, 
steel trading companies, trade law opponents and some steel-consuming 
industries. The 201 opponents have three main goals:

     Lto secure, in the short-term, exemptions from the tariffs 
(by country or product);
     Lto use the Midterm Review (section 204) process to 
pressure the Administration into early termination of the 201 remedy 
after 18 months; and
     Lto use the steel 201 issue as part of a larger campaign 
to weaken U.S. trade laws.

    As defined by the steel 201 critics, the major (false) themes of 
what has become a well-organized, well-funded campaign are these:

     LAmerica's major trading partners (e.g., the EU) will 
retaliate against U.S. exports.
     LSteel-consuming industries in the U.S. will be faced with 
acute steel shortages, spiraling steel prices, an inability to pass 
these increases through to their customers and a growing competitive 
disadvantage vis-a-vis their offshore competition--who will continue to 
have access to cheap steel in their home markets.
     LThe cost of the 201 remedy to U.S. steel-consuming 
industries, the U.S. consumer and the overall U.S. economy will far 
exceed any benefit to domestic steel producers.
     LNothing will happen on steel restructuring during the so-
called breathing period, and the industry will be back at the trough 
again just as soon as the program ends.
The Results
    As it turns out, at the one-year anniversary of the President's 
steel tariffs, the results resemble the President's forward-looking 
vision far more than the doomsday scenario painted by his critics.

No Foreign Government Retaliation

    While it is highly questionable whether the foreign government 
threats were ever actionable or relevant in the first place, the 
generous product exclusions granted by the Administration blunted the 
threatened retaliatory moves by U.S trading partners.

Imports Flowing Freely

    Given the extensive country and product exclusions, steel products 
covered by the 201 tariffs represent less than 20 percent of total 
steel imports, and less than 5 percent of the U.S. steel market. Not 
only have imports not been shut out of the U.S. market, but also total 
2002 steel imports, at 32.5 million tons, were up 9 percent from 2001 
in spite of the President's tariffs--and this in the face of a very 
soft metalworking economy. Imports of many finished steel products, 
including those with a then-30 percent tariff, were also up 
substantially in 2002 (after the tariffs were put in place) compared to 
the year before.

Competitive Gains for U.S. Steel-Using Industries

    The temporary market tightening experienced in the first half of 
2002 was due to many factors--including in particular, to the sudden 
removal of 6-8 million tons of domestic steel capacity in late-2001. 
Had the President not acted, still more domestic capacity would have 
shut down, causing higher prices. What has happened is that U.S. flat-
rolled steel prices, after a brief spike in the ``spot'' market in the 
first 7-8 months of 2002 (where they were restored to roughly their 20-
year averages), have since fallen substantially from their peaks of 
last July-August. It is important to note that the only supply-related 
steel price spike occurred where significant U.S. capacity was idled--
and only while it was idled. This significant downturn in U.S. spot 
prices since the summer has occurred precisely as idled U.S. capacity 
has been reorganized at a lower cost and come back on stream, thanks in 
large part to the President's 201 remedy. Meanwhile, steel prices have 
continued to increase offshore--and steel prices have increased much 
more abroad than they have here during the 201 period. Thus, U.S. steel 
users have actually gained competitive advantage since the President 
imposed his 201 remedy. Today, the prices for most flat rolled steel 
products are higher in Europe, Asia and other major steel-consuming 
regions than they are in the United States.

Marginal Effect on U.S. Consumers

    Steel represents less than 0.2 percent of the U.S. economy, so the 
201 tariffs could not have a major effect on the economy or result in a 
significant loss of U.S. jobs. Claims that U.S. consumers would pay 
significantly higher prices for new vehicles or appliances because of 
steel prices are also false. Steel represents a tiny percentage of the 
total cost of most end-use products, and BLS/PPI data indicate that 
steel price fluctuations in 2002 had little effect on most final 
consumers of steel-intensive products. In fact, the wholesale price of 
new vehicles, auto parts and household appliances actually fell 2.2, 
0.7 and 1.0 percent, respectively, last year.

Most Significant U.S. Steel Industry Restructuring in Decades

    Consolidation and restructuring of U.S. steel facilities are well 
underway in both the electric arc furnace (or ``mini mill'') and 
integrated sectors. The American steel industry is strengthening 
itself, and addressing its structural problems. It is investing in 
state-of-the-art technologies, and is beginning to access the capital 
markets again to do just that. It is rationalizing and--consistent with 
the primary objective of the President's 201 remedy--it is becoming 
even more internationally competitive. The U.S. integrated steel 
sector, which many had given up for dead, is improving dramatically its 
cost structure through the infusion of new capital, lower capital costs 
per ton of capacity, painful restructuring of legacy costs through 
asset-only sales and the negotiation of new labor contracts that 
promise significant improvements in flexibility and productivity. With 
some industry observers now talking about a ``radical change in the 
industry's cost curve,'' users of steel will ultimately benefit from 
this improved steel industry cost structure and increased investment--
in the form of lower priced, higher quality steel.

Ongoing Progress to Attack Root Causes of U.S. and World Steel Crisis

    Our trading partners have come to the table. International 
discussions at the OECD on steel overcapacity are proceeding and have 
been useful, and governments have initiated serious negotiations on an 
agreement to eliminate steel subsidies worldwide.

Enhanced U.S. National Security

    It is useful to note, with regard to ``Operation Iraqi Freedom,'' 
that the list of steel-supplying nations in the ``Coalition of the 
Willing'' is substantially shorter than the one contemplated by those 
who have said--in error--that the U.S. can get all the war-time steel 
it needs, on a priority basis, from its ``allies.'' As America's 
``Steel Wave'' proceeds toward Baghdad, we are reminded once again of 
what President Bush stated on August 26, 2001: ``If you're worried 
about the security of the country and you become over-reliant upon 
foreign sources of steel, it can easily affect the capacity of our 
military to be well supplied. Steel is an important job issue. It's 
also an important national security issue. And that is why we took the 
actions in this Administration.'' The President's steel tariffs, by 
supporting the long-term development of a stronger, more viable 
domestic steel industry, are improving the national security of the 
United States.

Serving the National Interest

    The President's Steel Program, including the 201 tariff remedy, is 
serving the national interest. As the President stated when he imposed 
his steel tariffs, this remedy is in the national interest of the 
United States, because it will ``facilitate [steel] industry 
restructuring without unduly burdening U.S. steel consumers or the 
country as whole.''

Having Intended Consequences

    The reality is the President's steel tariffs are working as 
intended and their effects on steel consumers have been modest. To 
summarize:

     LU.S. steel prices have recovered from the unsustainable 
historic lows seen in late-2001. However, since the summer, there has 
been a ``Buyer's Market'' for steel according to Purchasing Magazine, 
and U.S. steel prices have fallen substantially.
     LU.S. steel prices today are at the low end worldwide, and 
U.S. steel users have improved their position against foreign 
competitors since the imposition of the 201.
     LThere is no shortage of steel in the U.S. market today, 
and both domestic and imported steel products continue to be readily 
available.

    Healthy suppliers need healthy customers, and healthy customers 
need healthy suppliers. We know this better than most. AISI and its 
U.S. members have been world leaders for decades in forging close, day-
to-day working partnerships between steel producers, engineers and 
customers. Unfortunately, our market development efforts and our 
critical steel-customer partnerships also suffered damage as a result 
of the U.S. steel crisis. The steel 201 is not a ``steel wins, 
customers lose,'' zero-sum game. Steel is a very capital-intensive 
business, and it is only through ongoing investment in new plant, 
equipment and technology that steel companies can increase 
productivity, lower costs and improve quality, to the long-term benefit 
of their customers.
A Promising Start, But Unfinished Business
    A key purpose of the steel 201 tariffs is to create a sustained 
period of import stability, so that we can get back to planning for the 
future. This is happening, and it is working. However, these things 
take time. No one envisioned this to be a 12 or 18-month process. After 
a 50-year legacy of foreign government intervention in steel, the 
President's Steel Program granted a 3-year period of declining U.S. 
tariffs. The President' Program has made a promising start, but it 
needs to continue for the full 3 years intended so that (1) U.S. steel 
companies can complete their current restructuring plans and (2) U.S. 
negotiators can address, as much as possible, the root causes of the 
U.S. and global steel crisis. The bottom line is simply this: the 
financial community, the U.S. steel industry and the President himself 
(in terms of the success of his international steel initiative) all 
need the tariffs to continue for the full 3 years intended.

Domestically

    Prior to the 201, virtually all agreed that the U.S. steel industry 
needed to consolidate and restructure. This process has begun in 
earnest. While this restructuring is a work-in-progress, America's 
steel producers are doing what it takes to keep their promise to the 
Congress and the Administration. They are using the 3-year period of 
relief to rationalize, reduce their cost structure, improve their 
competitiveness and become even stronger suppliers to customers. 
Industry observers agree: this unprecedented restructuring would not 
have occurred without the President's steel tariff remedy in place. 
Domestic steel companies, however, are incurring increased financial 
risk relative to recent or planned mergers, acquisitions and 
investments--and this is occurring at a time when U.S. steel prices 
remain below historic 20-year averages, and there are significant 
increases in the cost of steelmaking inputs. While our steel industry 
has enhanced its global competitiveness over the past year, it has made 
itself more vulnerable in the absence of the 201 remedy continuing for 
the full 3 years. The Administration cannot turn its back on the 
monumental change it has facilitated in the U.S. steel sector. These 
things take time, and our industry's sources of capital also need some 
assurance that we will have the time we need to put their money to 
effective use.

Internationally

    Thanks to the 201 and the Administration's determination not to 
allow the United States to remain the World's Steel Dumping Ground, the 
international talks to address the root causes of the U.S. and global 
steel crisis are showing real signs of progress. There is, however, a 
long way to go. We need the 201 tariffs to continue for the full 3 
years intended so that our government negotiators can achieve further 
progress in the ongoing multilateral efforts to reduce inefficient and 
excess global steel capacity and eliminate steel market-distorting 
practices worldwide.
The Distortions of the 201 Critics
    Unfortunately, at a time when this remedy is just beginning to 
work, it is under strong and constant attack by interests long opposed 
to the 201. These interests have not hesitated to use false and 
misleading information to describe conditions in the U.S. steel market 
in the aftermath of the President's decision to impose 201 relief. Much 
of the misleading information suggests that the 201 is having severe 
and negative effects on U.S. steel-using industries and consumers. A 
key purveyor of this false claim about the President's steel tariffs is 
the Consuming Industries Trade Action Coalition (CITAC).
    As but one example, CITAC recently released a study showing an 
alleged loss of 200,000 steel-consuming jobs as a result of the 
President's Steel Program. Almost as soon as this CITAC study was 
released, an article in the Financial Times (``The Devil's in the 
Details,'' 2/10/03) concluded that, with this study, CITAC ``hit a new 
low'' in the tradition of misused statistics in the world of Washington 
lobbying. The article noted that, two days after the study's release, 
the authors altered their report to adjust the total number of steel-
consuming jobs lost over the last year--saying that actually referenced 
lost jobs occurred over the last two years, a time period that included 
the full year before Section 201 duties were put in place. The article 
went on:

    L  What the study also failed to mention was that all the jobs lost 
in 2002 actually occurred in January 2002, two months before the 
tariffs were imposed and when steel prices were near historic lows. 
Between January and December 2002, total employment in industries that 
buy steel grew by about 228,000 jobs, despite higher steel prices. 
(emphasis added).

    What the House Ways and Means Trade Subcommittee needs to know is 
that the CITAC study's own numbers show that U.S. steel-consuming jobs 
went up, not down, after the 201 was put in place--and that job losses 
in consuming industries correlated with low steel prices, not high 
steel prices. This is why even an economist who opposes the steel 
tariffs told the Financial Times that CITAC's claim is ``way out of 
bounds.''
    These are just a few of the problems with this latest CITAC study. 
There are many other ways in which CITAC's most recent claims are 
rebutted by the facts. This, however, is not the first time that CITAC 
has been caught issuing deceptive information. CITAC's studies have 
been flawed from the beginning. Its short-term goal is to dismantle the 
President's steel tariffs. Its long-term goal is to weaken the trade 
laws passed by Congress--and used by all domestic manufacturers. Its 
ultimate aim is to provide increased, if not unfettered, access in the 
U.S. market to dumped, subsidized and illegally traded imports. Since 
CITAC knows that the Congress supports effective trade laws, it is 
forced to use misinformation about the President's steel tariffs.
    Unfortunately, this constant repetition of incorrect information by 
CITAC and the other 201 opponents could leave some Members of Congress, 
as well as the general public, with the impression that the President's 
steel tariffs are not working as intended--when they are. It is 
important that the Subcommittee understand what is going on here.
    The steel consumers who benefited from the unsustainable and 
artificially low steel prices that existed in the 1998-2001 period 
would like to turn the clock back. This is understandable. However, had 
U.S. steel prices continued at the unrealistic and severely depressed 
levels of late-2001, we would no longer have a steel industry in the 
United States. Prices had to go up. This was not a sustainable 
situation for steel--and it was also not in the long-term interest of 
any U.S. manufacturer that relies on steel and wants to keep steel-
containing products as a key part of its product mix in the future. 
Illegal trade is not an acceptable practice or answer to 
competitiveness challenges, and it is not appropriate for one sector to 
gain from illegal trade at the expense of another.
    CITAC and the other 201 critics remain fixated on a past period of 
rising spot steel prices during a time (December 2001-August 2002) when 
a lot of U.S. steel capacity was shuttered due to the import crisis. 
Many CITAC members assume a false, one-to-one relationship between 
higher steel costs (since late-2001) and the President's steel tariffs. 
During the 201 period, U.S. steel prices have gone up, gone down or 
hardly moved at all (depending on the product).
    CITAC and the other 201 critics would like you to believe that the 
President's steel tariffs are causing significant financial and job 
losses in U.S. steel-using industries, increased imports and decreased 
exports of steel-containing products and, worst of all, decisions to 
relocate facilities to China and other countries where steel is 
supposedly cheaper. The fact is: the President's steel tariffs and U.S. 
steel prices cannot be causing U.S. job losses, because (1) steel 
prices are higher outside the United States than they are here and (2) 
steel prices abroad have risen much faster than they have in the U.S. 
since the President imposed his tariffs. Jobs may be moving to China 
because of lower wages or managed exchange rates, but not because of 
steel prices. No one would move facilities to China because of steel 
prices. Today, U.S. steel producers are exporting large amounts of 
steel to China where, until recently, steel prices were at a 10-year 
high.
    One of the most frequently cited ``unintended consequences'' of the 
President's steel tariffs, according to CITAC and the other 201 
critics, is the alleged damage done to the Port of New Orleans and to 
other U.S. ports from lower steel imports. As it turns out, when we 
examine the facts, it is difficult to see that there has been any 
damage. First, U.S. steelmaking inputs in the Port of New Orleans (such 
as pig iron, ferroalloys and scrap) are even greater, on a tonnage 
basis, than steel imports. Second, steel imports in the Port of New 
Orleans actually increased by 27 percent in 2002; they were the number 
one cargo in the Port last year; and the Port Authority expects to see 
continued growth in steel imports according to its own recent press 
release.
    The facts do not seem to matter to CITAC and many of the 201 
critics. They use incorrect figures to urge business groups to oppose 
the President's tariffs--and they use anecdotes, distortions and 
generalized allegations of undocumented harm to consumers to urge 
Congressmen to support H. Con. Res. 23, the ``Knollenberg Resolution.'' 
It would promote an inappropriate, unnecessary change in the 
congressionally mandated procedures relating to the ITC Midterm Review 
of the President's steel 201 remedy.
The Real Problems in Manufacturing
    Perhaps the worst part of the Big Lie perpetrated by the steel 201 
critics is that, instead of stressing the need to work together to 
address the real problems of U.S. manufacturing, the critics have 
chosen to divert the focus and ignore the facts, make the President's 
steel tariffs a scapegoat and pit one segment of U.S. manufacturing 
against another. AISI and its U.S. members reject this way of thinking.
    Manufacturing is at a crossroads in this country, and it has 
nothing to do with steel prices or the President's steel tariffs. 
Manufacturing lags the rest of the U.S. economy. Its recovery from the 
recent recession has been slow. More than 2 million U.S. manufacturing 
jobs have been lost since the beginning of 2000. There are many factors 
responsible for our manufacturing recession, from the value of the 
dollar, to slow demand to high health care costs. American 
manufacturing continues at a distinct disadvantage in global 
competition--due to:

     Lthe lack of a pro-investment, pro-competitive tax system;
     Lrising costs associated with U.S. Government regulations, 
runaway litigation and employee health insurance;
     Linadequate capital and workforce skill deficiencies, 
which make it difficult to achieve sustained, high productivity growth; 
and
     Lmarket-distorting foreign trade practices--including 
closed markets, dumping, subsidies, private anticompetitive behavior 
and managed currencies, e.g., in China, whose currency is estimated to 
be undervalued by as much as 40 percent.

    We therefore urgently need a pro-manufacturing policy agenda in our 
country, and much of it involves reform of key laws (e.g., on tax, 
trade and benefits) that fall within the jurisdiction of the House Ways 
and Means Committee. Accordingly, AISI would welcome an opportunity to 
participate in another hearing on how current law renders American 
manufacturing substantially less competitive than it might otherwise 
be.
    AISI greatly appreciates this opportunity to testify before the 
House Ways and Means Trade Subcommittee on the positive impact of the 
President's steel tariffs. It is an opportunity that was denied to us 
at extremely one-sided hearings held last year by the House Small 
Business Committee.
    To help ensure a full and balanced understanding of the steel 201 
issue in connection with the March 26, 2003 Trade Subcommittee hearing, 
AISI is providing a packet of additional information under separate 
cover to all Members of the Subcommittee.

                                 ______
                                 
Metaldyne and the Steel 201 Tariffs: What One Steel 201 Opponent Isn't 
                              Telling You
    The Consuming Industries Trade Action Coalition (CITAC), the Motor 
Equipment Manufacturers Association (MEMA) and other groups opposed to 
the steel 201 have claimed that President Bush's decision to impose 
temporary import duties on imports of some steel products from some 
countries has severe economic impact. These claims are false. One of 
the most vigorous steel 201 opponents has been the Metaldyne 
Corporation. It turns out that, when we look at Metaldyne's own filings 
with the Securities and Exchange Commission, official import statistics 
and basic economic texts, we find a very different story. Here is what 
one steel 201 opponent isn't telling you.
    The 201 relief did not cause a shortage of domestic special bar 
quality (``SBQ'') steel. Metaldyne explained in its 2002 10-K that 
``[u]nder supply contracts for special bar quality steel, we had 
established prices at which we purchased most of our steel requirements 
through 2002.'' \1\ These contracts guarantee Metaldyne's supply of SBQ 
steel. Significantly, Metaldyne's 2002 10-K does not make any mention 
of steel shortages in 2002.
---------------------------------------------------------------------------
    \1\ Metaldyne 2002 10-K at 26.
---------------------------------------------------------------------------
    Metaldyne's claims of shortages are also contradicted by an 
official filing made by the ``SBQ Coalition,'' of which it is a member, 
with the U.S. Government. In that filing, the Coalition stated that its 
members ``do not have an identifiable shortfall'' of supply in 2003.\2\ 
Metaldyne's 2002 10-K does not indicate that Metaldyne has any concerns 
about the availability of SBQ steel in 2003.
---------------------------------------------------------------------------
    \2\ Letter from SBQ Coalition to Mr. Richard Weible and Mr. Andrew 
Stephens, dated March 7, 2003, at 1.
---------------------------------------------------------------------------
    Metaldyne has not been hammered by rising steel prices. In its 2002 
10-K, Metaldyne stated that its steel purchases in 2002 were covered by 
long-term contracts. These contracts protected Metaldyne against the 
modest price increases for SBQ steel that occurred in 2002. Indeed, Mr. 
Timothy Leuliette, the President and CEO of Metaldyne, stated in 
testimony to Congress that, since the inception of the 201 tariffs, 
``we have experienced 5-10% increases in our SBQ material cost in 
aggregate. . . .'' \3\
---------------------------------------------------------------------------
    \3\ Statement of Timothy D. Leuliette, House Committee on Ways and 
Means, dated March 26, 2003, at 1.
---------------------------------------------------------------------------
    The SBQ steel price increases of which Metaldyne has so vigorously 
complained certainly do not appear to have had much of an effect on its 
profitability. In 2002, Metaldyne earned a gross profit of $299.1 
million on sales of $1,793.35 million, a profit rate of 25.3%. It 
earned an operating profit of $114.09 million, or 9.7%.\4\ In fact, 
Metaldyne's operating profits in 2002 were 62% higher than in 2001. In 
contrast, General Motors, one of Metaldyne's largest customers, earned 
an operating profit in 2002 of only 2.78%. Another major customer, 
DaimlerChrysler, had an operating margin of only 1.51%. Despite 
Metaldyne's complaints about the pricing pressures its customers place 
upon it, Metaldyne is earning much better operating profits than its 
customers.
---------------------------------------------------------------------------
    \4\ Metaldyne 2002 10-K at 35.
---------------------------------------------------------------------------
    According to Metaldyne, higher prices for SBQ steel will have only 
a minor impact on its financial performance in 2003. Metaldyne stated 
in its 2002 10-K that ``we expect the effect of the steel price 
increases to have an approximate $5 million negative impact on our 2003 
profitability.'' \5\ In 2002, Metaldyne's total cost of sales was 
$1.494 billion.\6\ An increase in costs of $5 million because of higher 
steel prices would represent an increase of only 0.3% in Metaldyne's 
costs.
---------------------------------------------------------------------------
    \5\ Metaldyne 2002 10-K at 6.
    \6\ Metaldyne 2002 10-K at 35.
---------------------------------------------------------------------------
    One thing Metaldyne has not admitted is that prices at the end of 
2001 and the beginning of 2002 were the lowest they had been since 
1987. The price increases that Metaldyne is seeing in 2003 are the 
first price increases some of Metaldyne's steel suppliers have received 
since 1993! Indeed, SBQ steel prices now are basically what they were 
in 1993.
    Metaldyne is not moving production offshore because of higher steel 
prices in the United States. Relocating production to another country 
is expensive. It is not something that companies do because the price 
of one of their raw materials has increased by 5-10% per ton, allegedly 
because of the impact of temporary import duties. This is especially 
true for a product like SBQ steel, whose price can fluctuate by 5% or 
more from month to month.
    Metaldyne has in fact explained why it is investing overseas, and 
it has nothing to do with steel prices:

    L  Global expansion is an important component of our growth 
strategy since a significant portion of the global market for 
engineered metal parts is outside of North America. Furthermore, as 
OEMs continue to consolidate their supply base, they are seeking global 
suppliers that can provide seamless product delivery across geographic 
product regions.\7\
---------------------------------------------------------------------------
    \7\ Metaldyne 2002 10-K at 4.

    Metaldyne is moving workers and production to Asia because Asian 
automotive producers are substantial customers of Metaldyne's, and 
Metaldyne prefers to serve them from facilities located in the region. 
``About one-third of Metaldyne's current growth, aside from 
acquisitions, is with Asian carmakers.'' \8\ Indeed, the demands of 
automotive producers for just-in-time delivery practically require that 
parts suppliers be located relatively close to their customers. 
Metaldyne is investing offshore, not because it can buy steel more 
cheaply outside the United States, but because that is where its 
customers are.
---------------------------------------------------------------------------
    \8\ James Treece, Metaldyne Looks to Asia-Pacific for Growth, 
Automotive News (October 7, 2002).

---------------------------------------------------------------------------
                                 

    Chairman CRANE. Thank you, Mr. Sharkey. Mr. Gerard?

  STATEMENT OF LEO W. GERARD, INTERNATIONAL PRESIDENT, UNITED 
                    STEELWORKERS OF AMERICA

    Mr. GERARD. Mr. Chairman, let me just say that, counter to 
the last panel, I am here representing people as well as the 
industry. This is not just some theoretical of what might 
happen. In fact, in the back of the room, we have a few dozen 
steelworkers who are here on their own time, at their own 
expense, so that this Committee will know that this is really 
about people as much as it is about the industry, and I would 
like them to stand.
    This is a representative body of steelworkers from steel 
facilities that are what I call within driving distance. They 
represent some of the 54,000 people who have already lost their 
job in the steel industry, some of the additional 85,000 people 
who have lost their job in that supplies the steel industry, 
and more than anything, they are representing the quarter of a 
million American citizens who, because of the 37 bankruptcies 
in the steel industry from 2000 until now have lost their 
health care, some of which are 80, 90, 70 years old, some of 
which worked 30 or 40 years in those plants, the men and women 
who fought America's wars, the men and women that made the 
steel that built the World Trade Center, built the Golden Gate 
Bridge, and built America's icons.
    This is not some theoretical event. The reality, when you 
come to steel prices, counter to the whining of the last 
panel--and I am more than happy to defend that statement in the 
question period--steel prices fell to under $210 a ton, brought 
about by a systematic 30-year assault on America's steel 
industry in a report commissioned by the Department of 
Commerce, supported by the previous Administration and this 
administration, that said that steel and trade has been 
subjected to 30 years of market-distorting subsidies.
    In the 3 years prior to the implementation of the Section 
201, the industry and the union jointly filed 130-plus 
violations of American trade law and were successful in one 
degree or another in those cases. Companies who believe that 
their business plan has to include steel prices that are 
subsidized by illegal activity are, in fact, supporting at 
least civil illegal activity, if not criminal. If you talk to 
the 250,000 people who are losing their health care, I am sure 
they would say that is at least morally criminal if not civilly 
criminal.
    I want to just briefly say a few words about some of the 
stuff that was said about job losses. With all due respect to 
the Chief Executive Officers that were here, anybody who says 
that since the Section 201 was initiated they went to China, 
did an investigation, did a due diligence, bought the 
equipment, set up the equipment, bought the land, and moved 
their plant to China in that year I suspect ought to be called 
before their shareholders because they didn't do the right kind 
of due diligence. If they went to China in the last few months, 
they were planning it prior to this Section 201, and we ought 
not to be fooled by that, and you might not want to be fooled 
by that either.
    Let me just say I was heartened to hear from the initial 
panel of congressional leaders as well as some of the earlier 
panel talk about the absolute devastation of America's 
manufacturing base. We have lost in the last 2 years closer to 
3 million direct manufacturing jobs, and for anyone who sits 
before this Committee or any other Committee to try and 
attribute that to a declining tariff of 3 years' duration that 
is already now moving into its second phase of decline is 
perpetrating an illusion.
    Let me recommend strongly to this Committee, the steel 
industry is not the problem in the manufacturing base of this 
country. I would highly recommend that this Committee hold 
hearings on escalating health care cost that is driving 
millions of Americans and millions of retirees out of the 
health care system, that you hold hearings on the overvalued 
dollar and the manipulation of currency by our trading 
partners, that you hold hearings on price gouging in the energy 
sector, that you hold hearings on child labor, that you hold 
hearings on the lack of legal environmental integrity amongst 
our trading partners. I am prepared to pay as a citizen to have 
clean air and clean water, but I don't think they should get a 
break because they don't.
    Let me last sum up by saying--and I commend a number of you 
that asked these questions in your question period. Today 
America's steel industry has one armor plate manufacturer left. 
That armor plate built the USS Enterprise and the carriers that 
are in the Gulf. Today America's steel industry doesn't make 
the structural steel to rebuild the World Trade Center. Today, 
if we wanted to have a high-speed rail system, we can't produce 
the high-quality high-speed rail. We would have to build new 
mills. Today, if we wanted to have an energy policy that could 
produce large-diameter thick pipe, we couldn't produce that 
unless we built new mills. Those mills have been destroyed by 
30 years of systematic illegal activity documented in a 
commission report supported by both Administrations.
    This is not the time to be inflicting further damage on the 
steel industry and creating more of those workers who gave 
their lives to this industry and this country that lose their 
jobs, lose their health care, and, yes, some of them are going 
to lose their homes. They are going to have to choose between 
their home and their health care. In the richest, freest 
country on Earth, that should not be happening. Thank you.
    [The prepared statement of Mr. Gerard follows:]
      Statement of Leo W. Gerard, International President, United 
                        Steelworkers of America
    Mr. Chairman, Ranking Member Rangel, and distinguished Members of 
the Ways and Means Committee, thank you for your invitation to appear 
before you today to testify concerning the necessity of continuing the 
Section 201 relief for America's steel industry that was put into place 
last year by President Bush.
    There are some who now call upon the President and Congress to 
relax or retreat from the 201 tariffs that were imposed in March 2002. 
They claim that the impact of the 201 tariffs upon steel users and 
consumers has been devastating to them. But a closer look at the facts 
reveals that their claims are as unsubstantiated as is their call for 
us to abandon the 201 remedy.
    Let us remember how we have come to this crossroads.
    From 1997 to 2002, America's domestic steel industry was literally 
under attack from foreign producers, aided and abetted by foreign 
governments through subsidies and other market manipulations. Their 
weapon was millions of tons of foreign steel, much of it illegally 
dumped into our domestic market. At a time of growing global steel 
capacity, many of these same countries were actually adding additional 
capacity--not for domestic consumption in their own countries, but for 
export into the United States. While many foreign governments continued 
to support their steel industries, our government sat by and watched as 
the American steel industry endured the most vicious assault in our 
history.
    The consequences of this assault have been disastrous for our 
steelworkers and for the American steel industry. Thirty-seven 
companies have been forced into bankruptcy and 54,000 steelworkers have 
lost their jobs. Thousands of steelworkers have seen their work hours 
reduced. Since 1998, The PBGC has announced its intent to initiate 
distress terminations of the defined benefit pension plans of 14 steel 
companies, involving nearly 240,000 participants and nearly seven 
billion dollars in unfunded guaranteed pension benefits. And now, in 
the cruelest blow of all, nearly 200,000 steelworker retirees, widows 
and their dependants have lost health care benefits.
    In June 2001, at the request of the President, the U.S. 
International Trade Commission (USITC) undertook one of the most 
exhaustive Section 201 investigations in the agency's history. After 
hearing and reviewing the testimony of literally hundreds of witnesses 
(both for and against the 201 remedy), after reviewing reams of 
economic data on imports, exports, and prices for dozens of individual 
steel products, the USITC made a unanimous determination that our steel 
industry had suffered serious injury as a result of the surge of 
imports and voted unanimously to recommend a remedy.
    In March, 2002, President Bush imposed three years of declining 
tariffs ranging from 8 to 30 percent on imports of 13 finished steel 
products, and a three-year increasing tariff rate quota on imports of 
slab, an important type of semi-finished steel product.
    The President's safeguard tariff remedy excluded many products and 
nations from coverage. The President granted 727 exclusions of nearly 
1,300 requested by steel consumers and importers, after extensive 
investigation by the Department of Commerce and the Office of the 
United States Trade Representative. The President's 201 remedy excluded 
steel imports from four partners in free trade agreements with the U.S. 
(Canada, Mexico, Israel, and Jordan) and 99 developing nations.
    The Union and the industry estimate that these exclusions amounted 
to 15 million net tons in 2002. As a result, only about 7% of total 
apparent domestic steel consumption was covered by the tariffs in 2002.
    The Department of Commerce and the Office of the United States 
Trade Representative announced the exclusion of an additional 295 steel 
products from the steel safeguard remedy. Industry sources estimate 
that these additional exclusions will affect another 400,000 tons of 
steel products.
    It is important to note that imports of steel in the product 
categories covered by the tariffs actually increased by 11% in 2002, 
from 22.6 million net tons in 2001 to 25.1 million net tons in 2002. 
Let me say that again. Steel imports in categories subject to the 
safeguard tariffs actually increased in 2002. Thus, steel consumers and 
importers can make no credible argument that the safeguard tariffs 
injured consumers or prevented manufacturers from obtaining necessary 
raw materials.
    What has happened since the President's 201 decision?
    The American steel industry is in the midst of the biggest 
consolidation in the history of the industry. Since the President's 201 
decision was announced only a year ago, numerous companies have been 
moving to merge or have been put up for sale. Steel prices, which had 
plummeted to historic lows, have begun to stabilize. Layoffs have 
ceased and the number of companies entering bankruptcy has now slowed.

     LBethlehem Steel has been sold to International Steel 
Group (ISG) in a deal that could bring Bethlehem out of bankruptcy and 
creates the Nation's largest steelmaker.
     LEarlier this year, ISG acquired LTV Steel and Acme Steel 
(which had ceased operations). Wilbur Ross, Chairman of W.L. Ross, 
which purchased LTV, identified ``strong relief under Section 201'' as 
one of the reasons he believes ISG will be successful.
     LU.S. Steel and AK Steel are both vying to acquire 
National Steel.
     LIn May 2002, Nucor moved to acquire Birmingham Steel's 
assets for $615 million. The deal was completed in December 2002.
     LIn July 2002, Nucor also purchased the assets of Trico 
Steel in Decatur, Alabama.

    But this consolidation has led to further heartache for tens of 
thousands of steelworkers and their families. Some of the distressed 
companies, such as Bethlehem Steel and others, have moved to terminate 
health care benefits for their retirees. For a 75-year-old retired 
steelworker who has numerous prescription medications, or has been 
hospitalized, the loss of their health care benefits is quite literally 
a life-threatening event. For a retired steelworker who faces cancer 
and is wondering how he will pay for doctors and chemotherapy 
treatments, the loss of health insurance is a life-threatening event.
    The USWA is conducting an outreach effort to the 95,000 retirees 
and dependants from Bethlehem Steel, including many salaried retirees, 
who will lose their health care benefits on March 31, 2003. We have 
received enormous cooperation from the various State Departments of 
Aging, Veterans' Administration and Centers for Medicare and Medicaid 
Services. However, the reality is that there are no attractive options 
available for most of these retirees. I would invite the critics of the 
safeguard tariffs to visit Johnstown, PA or Lackawanna, NY to tell 
these retirees that no further assistance to the steel industry is 
needed.
    The USWA is working hard to ensure that the Health Insurance Tax 
Credit (HITC) provision in the Trade Adjustment Assistance Act is made 
available to the greatest number of steelworkers who lose their health 
insurance coverage. However, in order to make the program meaningful, 
we will need the cooperation of the Bush Administration and the State 
governors. In Pennsylvania, Governor Rendell has put the full weight of 
his administration behind the effort to develop a State-based health 
care plan that will qualify for the HITC. Unfortunately, no other 
States are as far along.
    We realize that the crisis facing steelworkers and our retirees who 
are losing their health care is only a small piece of a much bigger 
problem. Some 41 million Americans have no health insurance at all. 
More are losing their insurance every day. Many of our seniors who need 
prescription drugs to stay alive are being forced to choose between 
buying their medication and eating. In a country as wealthy as America, 
this is a choice no one should have to make. The Congress has a 
responsibility to respond forcefully to this crisis. We call upon you 
to pass H.R. 1199, the Dingell-Rangel Medicare Prescription Drug bill. 
This measure provides a meaningful prescription drug benefit for 
seniors through the existing Medicare program. It does not push seniors 
into HMOs to get their prescription drugs. It does not give them 
discount cards whose value is wiped out by the 15 to 18 percent annual 
increases in the cost of prescription drugs. For only $25 a month, 
seniors would have 80 percent of their drug costs picked up by the 
government with seniors picking up the remaining 20 percent. No 
gimmicks, no gaps, no excuses.
    We also call again upon the Congress as we have for many years now, 
to pass national goal that no American should go without the health 
care they need.
    Other companies are moving to terminate or renegotiate their 
defined-benefit pension plans with profound financial consequences for 
thousands of steelworkers and retirees. In some instances, the Pension 
Benefit Guaranty Corporation (PBGC) has moved on its own to terminate 
certain pension plans, resulting in the denial of early retirement 
benefits to many steelworker retirees.
    As a condition of granting the 201 relief to the steel industry, 
the Administration insisted upon consolidation. It is now happening, 
but at a tremendous cost to our steelworkers and retirees. They have 
borne and continue to bear more burdens than anyone can imagine for the 
failure of our own government over many years to effectively enforce 
our trade laws.
    I want to close by adding that it is simply inconceivable to me 
that anyone could now suggest, just a year after they were imposed, 
that the Section 201 remedy granted by the President should now be 
curtailed or eliminated. In this regard, it has not gone unnoticed that 
many of those who argue for the elimination of the 201 remedy have 
employed shockingly phony arguments.
    For example, a recently released study by the Consuming Industries 
Trade Action Coalition (``CITAC'') purported to show job losses in 
steel-consuming industries as a result of higher steel prices. But upon 
review, CITAC's arguments fell apart. The Financial Times concluded 
that CITAC ``hit a new low'' with the release of the study, referencing 
multiple factual inaccuracies, surreptitious revision of data, and 
misleading conclusions. Gary Hufbauer, an economist with the Institute 
for International Economics, which opposes Section 201 relief, called 
CITAC's claim of 200,000 lost jobs ``way out of bounds.''
    The CITAC study claimed ``200,000 Americans lost their jobs to 
higher steel prices during 2002.'' As the Financial Times noted, 
however, CITAC's own figures show that employment in steel consuming 
industries actually increased by 229,000 from March 2002--when relief 
was implemented--to the end of the year.
    Some steel users opposed to continuing the 201 relief say that they 
are now paying more for steel products than they did in 1998 or 1999. 
The fact is that domestic steel prices are still below their 20-year 
average. Indeed, while there was a temporary price increase that 
occurred at the outset of the tariff program--chiefly due to the loss 
of 20 million tons of domestic capacity in late 2001--steel prices in 
the U.S. have significantly declined since August of 2002. And to the 
extent steel prices have risen in the U.S. from the untenably low 
prices of 1998 and 1999, they have risen less and risen more slowly 
than steel prices around the world during this period. U.S. steel 
consumers do not suffer a competitive disadvantage compared to their 
steel-consuming competitors around the world. U.S. steel consumers 
continue to have ready access to steel that is priced low, both 
historically and in relation to what consumers are paying around the 
world.
    In any event, the truth is that for most manufacturers of steel-
containing products, steel represents only a small portion of their 
total costs. For automobile and appliance manufacturers, there is no 
evidence of added cost to the end consumers attributable to the 201 
remedy. In fact, many automobile manufactures are offering zero-percent 
financing on new cars as an incentive to get customers into their 
showrooms.
    A recent study by Dr. Peter Morici from the University of Maryland, 
titled, ``An Assessment of Steel Import Relief Under Section 201 After 
One Year,'' finds that ``steel users have not been harmed by the 
President's (201 remedy), nor have consumers seen rising prices because 
of it. The program does not appear to have had a significant effect on 
producer prices.'' Furthermore, Dr. Morici states that ``continuation 
of the temporary 201 tariffs through 2005, and application of the 
provisions of the President's program that protect against surges of 
imports from uncovered countries, will be necessary to ensure the U.S. 
industry has a `breathing space' long enough to allow it to complete 
the process of consolidation, rationalization, and modernization that 
it has begun.''
    Critics of the tariffs ignore the real problem in steel facing this 
country. The problem is not too little steel available at too high a 
price. To the contrary, the real problem is that worldwide, there is 
too much steel being produced, and this has led to years of dumping of 
steel by foreign producers in violation of U.S. laws and international 
agreements. The steel tariffs imposed last year have broken this cycle 
of dumping and price suppression. With prices stabilized the domestic 
industry has begun the difficult but necessary job of consolidation and 
restructuring. This is critical if the domestic steel industry is to 
achieve long-term health and competitiveness. And at the end of the 
day, U.S. steel consumers will benefit from having a strong, viable, 
domestic steel industry to supply them with their needs. U.S. steel 
consumers should be rooting for the U.S. steel industry, not seeking 
repeal of the 201 relief that is so critical to the survival of the 
industry.
    In my opinion, it would be a tragic mistake if the 201 remedy were 
to be curtailed or revoked prematurely. Please do not let that happen. 
Too many steelworkers and too many of our retirees have already paid 
too high a price to solve a steel crisis created abroad and ignored for 
too long by our own government. Stand firmly behind the President's 201 
remedy for the full term. Thank you.

                                 

    Chairman CRANE. Thank you. Mr. Connors?

   STATEMENT OF CHARLES W. CONNORS, CHIEF EXECUTIVE OFFICER, 
               MAGNECO/METREL, ADDISON, ILLINOIS

    Mr. CONNORS. Thank you, Mr. Chairman. My name is Chuck 
Connors. My company is Magneco/Metrel, located in Addison, 
Illinois, with manufacturing facilities in Gary, Indiana, and 
Columbiana County, Ohio. We are a producer of refractories and 
a supplier to the steel industry, and I appreciate that the 
word ``supplier'' has come up a couple times here. Sometimes 
this argument seems to be one where the consumers, who usually 
get the last word in any business, like to act like it is only 
between the steel company and the person who buys steel. There 
is a chain of supply that goes back to mines and railroads and 
things that have been mentioned here that is at least as big as 
the chain of supply that goes on after the steel is 
manufactured.
    Refractories are high-temperature ceramics that are 
necessary in just about everything that you encounter in your 
life if it has been made in a plant that made steam or treated 
anything above a thousand degrees or handled acid. About 80 to 
85 percent of all the refractories made are consumed by the 
steel industry. The steel industry is the driver.
    Magneco/Metrel has 143 employees and about 330 people who 
are dependents of employees who receive our health care. 
Approximately 80 percent of our sales go to the iron and steel 
industry.
    Our company lost about $2.5 million--well, greater than 
$2.5 million in the last 2 to 3 years due to bankruptcies, both 
Chapter 7 and Chapter 11, which we feel will never be recouped, 
on product that we sold to the steel industry companies that 
went bankrupt. They went bankrupt because they were selling 
their products at below cost, and the windfall that was 
appreciated by the people who bought those products was made up 
by Magneco/Metrel by not getting paid.
    We have about 300 suppliers for our company. Given those 
numbers for just one medium-sized downstream company in the 
steel industry, you can see there is a network of thousands and 
thousands of small businesses whose ability to thrive depends 
on the continued strength of the domestic steel industry.
    In terms of using transportation and import systems, the 
Port of New Orleans was referred to. Our company brings in 
about 30,000 tons of raw materials through the Port of New 
Orleans, and we export about 10,000 of those tons in the form 
of finished product to Europe and Latin America. We can only 
continue if the tariffs remain in effect for the full 3 years. 
Having lost the money that we lost, we are under tight scrutiny 
from our bank, and we can't continue--we could not absorb 
another bankruptcy. There has not been a bankruptcy affecting 
us since the tariffs went into effect.
    Prior to the President's program announcement, to give you 
an example with the write-offs, in 1 year, in 2001, our small 
company had a loss of $2 million on about $32 million in sales. 
In January and February 2002, we lost $300,000. After the 
tariffs went into effect, in the remaining 10 months of the 
year we made $1.2 million. Our employees went from 135 
employees to 143 employees.
    When the President initiated the steel program, he did so 
recognizing that our domestic steel industry was in crisis and 
the roots of the crisis laid outside of the United States. His 
three-part program was designed to address the underlying 
causes: global excess capacity, closed markets, subsidies, 
cartels, and other private anti-competitive behavior that would 
not be tolerated in this country if it was done by one domestic 
corporation against another.
    After 1 year, the program is working. It is critical to my 
company and to thousands of small businesses throughout the 
country whose viability depends on having a healthy, 
independent, and strong American steel industry, that the 
President's remedy not be undermined, and that it remain in 
effect for the full 3-year term as the President intended. 
Thank you.
    [The prepared statement of Mr. Connors follows:]
 Statement of Charles W. Connors, President, Chief Executive Officer, 
                   Magneco/Metrel, Addison, Illinois
    Thank you, Mr. Chairman. I appreciate the opportunity to testify 
today, as a representative of small business, regarding the impact of 
steel Section 201 relief on U.S. manufacturing. This is a critical 
issue to my company and to thousands of small businesses throughout the 
country whose viability depends on having a healthy, independent and 
strong American steel industry.
    Magneco/Metrel is located in Addison, Illinois with manufacturing 
facilities in Northern Indiana and Eastern Ohio. As a producer of 
refractories that are used in steelmaking furnaces, we are both a steel 
industry supplier and a customer. My company has 143 employees and we 
also provide health care and other benefits to a total of 330 people, 
including employee dependents.
    We purchase approximately $300,000 of steel molds annually, with 
more than half of the total value coming from Lake County, Indiana. 
Over the past 12 years, we have spent approximately $6,000,000 (or 
$500,000 per year) on equipment for use with our products. The 
equipment includes mixers, pumps, gunning machines, backhoes and fork 
trucks. We maintain a fleet of 30 cars, small trucks and medium size 
trucks, as well as four semi trucks with trailers. All of this 
equipment is manufactured in the United States. In total, Magneco/
Metrel has approximately 300 suppliers, the vast majority of which are 
small businesses. Given those numbers for just one downstream company 
in the steel industry, you can see that there is a network of thousands 
and thousands of small businesses whose ability to thrive depends on 
the continued strength of the domestic steel industry. That will only 
happen if the President's steel remedy is maintained for the full three 
years intended and thus allows the industry to continue to strengthen 
itself from within and complete the restructuring and consolidation 
that is already underway as a result of the 201 safeguard.
    In the case of Magneco/Metrel, we had 2002 sales of $39.5 million. 
That was an increase of 16.3 percent over 2001. Our annual purchases 
from the steel industry are about $300,000, mostly lightweight plate, 
which is 100 percent domestically produced. Our sales breakdown was 
about 85 percent to the iron and steel industry in 2001 and 80 percent 
to the iron and steel industry in 2002. In addition, about 30 percent 
of our 2002 sales were exported, divided equally between Europe and 
Latin America, with our biggest customer being Mexico. These sales are 
all of unique and proprietary products, which have been developed and 
proven in world class iron and steel plants in the United States. 
Without healthy and competitive American iron and steel plants, we 
would have no export sales.
    During the height of the steel crisis, severe human and economic 
devastation was done to steel-related small businesses from one end of 
our country to the other by repeated surges of illegally traded and 
injurious steel imports. As the toll of steel company bankruptcies 
mounted, hundreds of small business suppliers to the steel industry 
were left reeling. For those suppliers who had all or most of their 
business with a Chapter 7 steel company, the end result was usually the 
bankruptcy of that small business supplier.
    Prior to the President's program announcement one year ago, 
Magneco/Metrel had a net loss of approximately $300,000 for January and 
February of 2002. Following a loss in 2001 of $2 million, one more 
month with that rate of loss would have put us out of business. After 
the President's timely announcement, the situation reversed and the 
year ended with a net income of approximately $1.2 million. From 135 
employees a year ago today, we have 143 employees today. There have 
been no substantial bankruptcy filings that affected Magneco/Metrel 
since the President's program announcement.
    When the President initiated his steel program, he did so 
recognizing that our domestic steel industry--including steel 
producers, suppliers and customers--was in crisis, and that the roots 
of the crisis lie outside of the United States. His three-part program 
was designed to address these underlying causes--global excess 
capacity, closed markets, subsidies, cartels and other private anti-
competitive behavior that could not be tolerated in this country.
    After one year, the President's program is working. The steel 
industry is starting to turn the corner and for the first time in many 
years, we feel a sense of hope for the future of our industry. The 
previous situation before the President launched his steel program was, 
in terms of steel pricing, not sustainable for the steel industry. It 
was also not in the long-term interest of any U.S. manufacturer who 
relies on steel and wants to keep steel-containing products as a key 
part of its product mix in the future.
    It is interesting to note that the price spike that occurred early 
in 2002 was due not to the initiation of the steel tariffs, but rather, 
it was the result of the steel crisis itself. After LTV Steel in Ohio 
closed its doors, along with a number of other smaller steel producers 
who ceased operations, there was a sudden but brief period when 18 to 
20 million tons of capacity was removed from the market. However, as 
consolidation intensified, mills were re-started and capacity came back 
online. The price stabilized and has, in fact, declined to where the 
price of steel in the United States now is generally below what it is 
in most markets around the world. There is adequate supply readily 
available without lags in delivery. It is my belief that without the 
President's program, the crisis would have worsened, more capacity 
would have been shut down and prices would be at a much higher level 
than is the case today.
    The President's program is working. Since it was initiated, we have 
seen the most dramatic consolidation and restructuring to occur in this 
industry in decades. This will not be completed overnight. Much of the 
progress and investment underway will require the President's program 
to remain in place for its full intended duration for the deep roots of 
this, the worst crisis in the history of America's steel industry, to 
be fully addressed and remedied. It is of serious concern to my 
company, and to many other small businesses that depend on a domestic 
steel industry, that the President's remedy not be undermined and that 
it remains in effect for the full three-year term as the President 
intended. Thank you.

                                 

    Chairman CRANE. Thank you. Mr. Dooner?

 STATEMENT OF PETER DOONER, PRESIDENT, WHEATLAND TUBE COMPANY, 
 COLLINGSWOOD, NEW JERSEY, ON BEHALF OF THE COMMITTEE ON PIPE 
                 AND TUBE IMPORTS 201 COALITION

    Mr. DOONER. Thank you, Chairman Crane, Congressman English, 
and the Subcommittee. I am here as the President of Wheatland 
Tube Company. Wheatland has been a leader in the consolidation 
of the welded pipe and tube industry in the United States. 
Wheatland is a 126-year-old private, family owned company. Last 
year, we acquired Sawhill Tubular, formerly a division of A.K. 
Steel. Today we have two major pipe mills in western 
Pennsylvania in the town of Wheatland and Sharon. We also have 
another major pipe mill in nearby Warren, Ohio, along with 
mills in Little Rock, Arkansas, and Chicago, Illinois. We have 
nipple plants in Texas and Ohio which go by the name of 
Seminole Tubular Products; overall, 2,000 workers, of which 
approximately 1,000 work in western Pennsylvania in Congressman 
English's district.
    Unfortunately, we recently announced the closure of the old 
Sawhill Tubular cold drawn mill, which is also located in 
Wheatland. This will result in the loss of 125 jobs.
    I am not only here today on behalf of Wheatland Tube 
Company. I also represent the Committee on Pipe and Tube 
Imports (CPTI) 201 Coalition, a coalition formed by the CPTI, a 
trade association. The CPTI is comprised of 33 welded pipe and 
tube producers, collectively with 20,000 workers and consumes 8 
million tons of flat-rolled steel annually.
    Today, I wish to make three important points on the impact 
of the Section 201 relief on the welded pipe and tube group.
    Number one, the Section 201 relief provided for first year 
tariffs of 30 percent on flat-rolled products, but only 15 
percent tariffs on pipe and tube. This has put my industry and 
my company in a cost-price squeeze. Manufacturers of welded 
pipe and tube have approximately 65 percent of their total cost 
derived from steel. So, you have heard some of the other 
panelists say 30 and 50 percent. We are probably the highest. 
This has hurt our efforts to consolidate. As many of you know, 
we are now in the second year. We are now being protected by 12 
percent tariffs for certain countries.
    My second point, many foreign pipe and tube producers have 
simply been able to absorb the 15-percent tariffs, and their 
shipments to the United States have increased. Korea and 
Thailand would be two examples, along with a massive surge in 
pipe nipples from China.
    In addition, uncovered, developing, and excluded countries 
such as Turkey have increased their share of our market of 
welded pipe and tube. The results of these increased shipments 
in the face of weak demand have resulted in layoffs at both the 
hourly and salaried level at Wheatland and at my CPTI 
counterparts.
    Finally, my third point, Wheatland Tube and all of the CPTI 
producers who are welded pipe and tube producers, will benefit 
in the long run from the breathing space which was given to the 
flat-rolled industry by the Section 201 relief. In a short span 
of 6 months in late 2001 and early 2002, four flat-rolled 
producers shut down. Three of these have since been reopened. 
Nucor and ISG have consolidated three of these four. We believe 
that without the Section 201 action we could have possibly lost 
these producers and several other very important regional flat-
rolled producers, such as Weirton, Wheeling-Pittsburgh, and 
Warren Consolidated.
    We believe that by the end of the Section 201 relief, we 
will have a higher quality, more competitive industry to supply 
the welded pipe and tube group. That ends my testimony. Thank 
you.
    [The prepared statement of Mr. Dooner follows:]
     Statement of Peter Dooner, President, Wheatland Tube Company, 
 Collingswood, New Jersey, on behalf of the Commitee on Pipe and Tube 
                         Imports 201 Coalition
    These written comments are submitted by the CPTI 201 Coalition for 
the official Committee record with regard to the Section 201 Steel 
Safeguard hearing. To supplement the Coalition's testimony provided on 
March 26, 2003 the written testimony elaborates on three main points 
made to the Committee about the impact of the 201 relief on the welded 
pipe and tube industry. The differential relief of 30% tariffs on flat 
rolled products and 15% tariffs on welded pipe and tube products has 
caused a cost price squeeze on the domestic industry which is 
particularly evident in the latter part of 2002 and early 2003. Unlike 
the flat rolled industry in which three of the four flat-rolled mills 
shut down during the time period between President Bush's June 2001 
Section 201 request and the beginning of 201 relief in March 2002, none 
of the pipe and tube mills shut down since November 2001 have been 
reopened by new buyers.
    In November 2001, Laclede Steel shut down its operations including 
continuous weld pipe mills located in East Alton, IL and Fairless, 
Pennsylvania. These mills had a combined capacity of 450,000 tons 
annually of welded pipe and tube. While there has been a recent 
announcement of a purchase and plant reopening of the Laclede melt shop 
in East Alton, Illinois to produce special bar quality products, this 
new owner has no plans to reopen the pipe mills. In addition, Geneva 
Steel shut down a 150,000 ton pipe mill producing welded pipe up to 16 
inches in outside diameter. Maverick Tube announced the closure of the 
former LTV tubular mill in Youngstown, Ohio with 170,000 tons of 
capacity to produce welded pipe and tube up to 16 inches outside 
diameter. This plant is being shut down at the present time. In 
addition, Excalibur Tube Company went into Chapter 7 liquidation in 
early 2002. Their mills had an estimated total capacity of 150,000 
tons. Olympic Steel Tube shut down its operations in mid 2002 and had 
an estimated 100,000 tons of capacity. Thus, over a million tons of 
capacity has been removed from the U.S. pipe and tube market in the 
past 18 months. (See attached chart.)
    The industry has also seen two major consolidation and 
restructuring efforts. First, in April 2002 Wheatland Tube acquired the 
Sawhill Tubular division of AK Steel. In December 2002 Maverick Tube 
acquired the LTV Tubular division from the bankruptcy court and LTV.
    Overall, imports of welded tubular products other then OCTG which 
is the pipe and tube product category that received 201 relief, 
declined by approximately 10% in 2002 compared to 2001. However, we 
believe that due to the significant downturn in non-residential 
construction which is the primary driver of demand for welded tubular 
products other than OCTG, that import market share of these products 
actually increased after the imposition of 201 relief. The reason for 
this increase in import market share even after 201 relief is that 
imports of pipe and tube subject to 201 duties from certain countries 
did not decline after the imposition of relief and that imports of pipe 
and tube from some excluded developing countries have surged.
    For example, as seen on the attached charts, imports of welded pipe 
and tube from Thailand increased in 2002 after the imposition of the 
15% tariffs. The reason for this is that the Thai producers limited the 
amount of 201 duties they had to pay by reducing the customs value of 
their exports to the United States. This is truly incredible given the 
sharp rise in steel costs in Asia that occurred in 2002. We believe 
there is no rational commercial reason that would allow producers in 
Thailand to reduce reported customs values by $50 per ton in order to 
reduce 201 duties paid during a period of higher steel prices and pipe 
and tube prices in Asia, and for that matter higher steel prices and 
pipe and tube prices in the U.S. market during 2002.
    The same is true of pipe nipples from China, a product produced by 
Wheatland's Seminole Tubular Division, and other members of the CPTI. 
Pipe nipples obtained 201 relief in the pipe fittings category of an 
additional 12% tariff. However, as seen in the attached chart, after 
the imposition of 201 relief, pipe nipple imports from China actually 
increased by more than 50% despite the imposition of the 12% Section 
201 tariffs. Thus, the nipple industry has continued to experience a 
serious injury even after receiving 201 relief.
    The biggest problem for the pipe and tube industry has been the 
tremendous import surge in imports from excluded countries since the 
period of 201 relief was granted. In particular, imports of welded pipe 
and tube other than OCTG from India and Turkey have surged incredibly. 
As demonstrated on the attached chart, imports form India and Turkey, 
which each accounted for below 3% of total imports of welded pipe and 
tube in 1996 and 1997 each accounted for more than 4% of imports in 
2002. On a monthly basis, imports from India and Turkey increased from 
2-3,000 tons a month in 2000 to almost 10,000 tons a month from each 
country in the 9 months of 2002 after 201 relief was granted. 
Incredibly, there were 28,000 tons of welded pipe and tube other than 
Oil Country Tubular Goods (OCTG) imports from India in January 2003 and 
17,000 tons of imports from Turkey in January 2003. Imports from just 
these two excluded countries accounted for 22% of total welded pipe and 
tube imports subject to the 201 remedy in January. The welded pipe and 
tube industry has seen relief under the 201 program seriously 
undermined by these rapid import surges. The CPTI 201 coalition filed a 
petition in September 2002 with Secretary Evans and Ambassador Zoellick 
requesting action against these import surges from Turkey and India. No 
action to impose 201 duties against imports from these countries has 
been taken.
    As a consumer of 800,000 tons of flat rolled steel annually, and as 
a part of a trade association whose members consume approximately 8 
million tons of flat-rolled steel annually, Wheatland and the CPTI 201 
Coalition support Administration efforts to preserve and revitalize an 
efficient flat rolled steel industry in the United States. Prior to the 
imposition of 201 relief, the U.S. had witnessed the permanent closure 
of Gulf States Steel of Gadsden, Alabama, and the closure of all of the 
LTV steel mills, Trico, Geneva Steel and Acme Steel. Since the 
imposition of 201 relief all of these mills except Geneva have 
reopened. In addition, significant suppliers of steel to Wheatland and 
other CPTI members such as Wheeling Pittsburgh, Bethlehem Steel and 
National Steel were in Chapter 11 bankruptcy and in peril of being 
closed down and liquidated. Many other flat rolled steel producers 
including Weirton Steel, Rouge Steel and WCI Steel were facing serious 
financial pressures and were in danger of bankruptcy. The steel 201 
program has now produced significant consolidation, restructuring and 
reinvestment in the flat-rolled steel industry. Wheatland Tube and 
other CPTI members believe that the long term health of the pipe and 
tube industry will require healthy, efficient, and world class cost 
competitive flat-rolled steel producers in the United States. Wheatland 
and the CPTI do not wish to be dependent upon foreign steel in the 
future to supply steel to pipe and tube mills. But for the imposition 
of 201 relief, it is quite likely that after the closure of domestic 
mills there would have been surges of imported flat-rolled steel to 
furnish the U.S. market instead of the reopening of domestic supply. We 
are pleased that domestic steel mills have been reopened and are 
hopeful that new management and new labor agreements with the USW will 
result in the reinvigoration of the domestic steel industry.


                               Welded Tubular Products Other Than OCTG, 1998-2002
                                             Quantity in short tons
----------------------------------------------------------------------------------------------------------------
                       Country                           1998        1999        2000        2001        2002
----------------------------------------------------------------------------------------------------------------
Subtotal of subject countries                         1,173,186   1,005,130   1,191,156   1,492,826   1,002,153
----------------------------------------------------------------------------------------------------------------
Subtotal of non-subject countries                     1,088,310   1,110,727   1,436,078   1,345,919   1,530,672
----------------------------------------------------------------------------------------------------------------
Total of all countries                                2,261,495   2,115,857   2,627,235   2,838,746   2,532,825
----------------------------------------------------------------------------------------------------------------



                               Welded Tubular Products Other Than OCTG, 1998-2002
                                                Import Share (%)
----------------------------------------------------------------------------------------------------------------
                         Country                              1998       1999       2000       2001       2002
----------------------------------------------------------------------------------------------------------------
Subtotal of subject countries                                51.88%     47.50%     45.34%     52.59%     39.57%
----------------------------------------------------------------------------------------------------------------
Subtotal of non-subject countries                            48.12%     52.50%     54.66%     47.41%     60.43%
----------------------------------------------------------------------------------------------------------------
Total of all countries                                      100.00%    100.00%    100.00%    100.00%    100.00%
----------------------------------------------------------------------------------------------------------------



                                     Welded Tubular Products Other Than OCTG
                                             Post 201 Import Surges
----------------------------------------------------------------------------------------------------------------
                                        2001                      2002                     01 2003     01 2003
               Country                 (Short    2001 Import     (Short    2002 Import     (Short       Import
                                       Tons)      Share (%)      Tons)      Share (%)      Tons)      Share (%)
----------------------------------------------------------------------------------------------------------------
India                                   38,321        1.35%      106,790        4.22%       28,428       13.96%
----------------------------------------------------------------------------------------------------------------
Turkey                                  41,937        1.48%      102,828        4.06%       17,219        8.46%
----------------------------------------------------------------------------------------------------------------



                 Welded Tubular Products Other Than OCTG
                         Post 201 Import Surges
------------------------------------------------------------------------
                                2001-2002 Volume       2001-2002 Value
           Country                 Change (%)            Change (%)
------------------------------------------------------------------------
India                                     178.67%               165.74%
------------------------------------------------------------------------
Turkey                                    145.20%               129.87%
------------------------------------------------------------------------



           Welded Tubular Products Other Than OCTG, 2001-2002
                         Quantity in short tons
------------------------------------------------------------------------
           Country                    2001                  2002
------------------------------------------------------------------------
Thailand                                   62,487                89,171
------------------------------------------------------------------------



           Welded Tubular Products Other Than OCTG, 2001-2002
                         Quantity in short tons
------------------------------------------------------------------------
           Country                    2001                  2002
------------------------------------------------------------------------
Thailand                                   62,487                89,171
------------------------------------------------------------------------



                                          Steel Pipe Nipples, 1996-2002
                                             Quantity in short tons
----------------------------------------------------------------------------------------------------------------
              Country                   1996       1997       1998       1999       2000       2001       2002
----------------------------------------------------------------------------------------------------------------
China                                     294        316      1,161      1,532      2,249      4,256      7,681
----------------------------------------------------------------------------------------------------------------



      Consolidation and Capacity Shutdowns in Welded Pipe and Tube
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                              Consolidation
 
            Wheatland--Sawhill                               April 2002
            Maverick--LTV Tubular                         December 2002
 
             Capacity Reductions (tons)--since November 2001
 
            Laclede                                             450,000
            Geneva                                              150,000
            LTV Youngstown                                      170,000
            Excalibur                                           150,000
            Olympic Steel Tube                                  100,000
              Total:                                          1,020,000
------------------------------------------------------------------------


                                 

    Chairman CRANE. Thank you, and I would like to address my 
first question to Mr. DiMicco.
    Mr. DiMicco, it is my understanding that Nucor has received 
certain State and local incentives to build modern steel-making 
facilities. Part of the President's steel initiative involves 
multilateral negotiations to eliminate market-distorting 
subsidies. Do you believe State and local subsidies should be 
included in the OECD discipline on subsidies to the steel 
sector? Some would say that if a plan can't be built without 
subsidies, it shouldn't be built. How would you respond?
    Mr. DIMICCO. First off, the State tax issues referred to 
that Nucor has taken advantage of have not been subsidies. They 
only do anything if you actually make a profit.
    Second, we are against all subsidies, and we would be very 
happy to not be in a position to take advantage of those quite 
legal incentives that exist in States until the rest of the 
world gets its act together with respect to doing away with 
subsidies everywhere.
    [Additional information follows:]

    As I stated at the hearing, we do not believe that Nucor receives 
any subsidies within the meaning of the WTO Agreement on Subsidies and 
Countervailing Measures. Any economic development incentives Nucor 
receives from State and local governments are nonspecific and generally 
available to any company in the United States.
    Unfortunately, the foreign steel lobby has perpetuated the myth 
that a small amount of generally available incentives somehow equate to 
the massive government intervention provided to the non-U.S. steel 
industry by foreign governments. There is no comparison.

                                 

    Chairman CRANE. This is to all of you out there. I don't 
know whether you heard the New York Times quote earlier about 
the WTO ruling against our steep steel tariffs, and it has been 
suggested that the threat of European Union (EU) retaliation is 
not real. While retaliation prior to an adverse WTO ruling was 
avoided through exclusions, the EU has already published a 
retaliation list of $557 million worth of tariffs ranging from 
8 to 30 percent that would automatically go into effect 5 days 
after an adverse WTO ruling.
    Do you think that retaliation is something that Congress 
and the Administration should consider when deciding the best 
course of action following the mid-term review? I put that to 
all of you.
    Mr. Gerard.
    Mr. GERARD. Let me be the first to respond. I am sure that 
it is well-documented in this room and other rooms that are in 
these buildings, the steelworker position on the WTO. It is 
interesting that America is losing almost every case that goes 
before it, and it is undermining our very ability to set laws 
for America.
    I would hope that the House and the Senate, as well as the 
Administration, would fight as hard for the American steel 
industry as it did for bananas. We grow no bananas in America, 
and we went to the wall to defend whoever sells them. The steel 
industry is a vital, integral part of America's manufacturing 
base, and dare I say, today, a strong, viable steel industry is 
a national security issue.
    When I talk about national security, I am not just talking 
about ships, and tanks and guns. I am talking about roads, and 
bridges, and computers, and all of the infrastructure that you 
need to have a modern economy that can keep itself safe and 
secure.
    We, from the beginning, were convinced that the European-
based secret bureaucracy of the WTO would rule against us. We 
have opposed the WTO from the beginning, and we will continue 
to oppose it, but we will not stop defending the steel industry 
and our members' jobs.
    Mr. DIMICCO. Mr. Chairman, Dan DiMicco.
    First of all, I never respond very well to blackmail and 
threats from people for enforcing our laws. The Europeans have 
these laws on the books. They file trade cases every bit as 
much as we do. They file them against the Russians, they file 
them against the Ukrainians, the Turks, the Indians, you name 
it. This is a practice that is globally there to ensure that 
trading takes place in a free, fair, and responsible manner. 
For any entity--European or otherwise--to come out and threaten 
that because we enforce our trade laws through a due process 
system, not by just a knee-jerk reaction, they are going to 
retaliate? I find that a bunch of hot air.
    Number two, I would be very concerned if I were them 
because last time I checked, we had a $45-billion-a-month trade 
deficit. That means we are buying $45 billion a month more 
goods from overseas than they are buying from us. It seems to 
me, talking about killing the goose that lays the golden egg, I 
see it as an idle threat, and I don't think our President 
should pay any attention to it.
    Chairman CRANE. Much has been said about global 
overcapacity in the world steel market. At the same time, I 
understand that U.S. firms have increased steel production 
capacity since the Section 201 safeguard went into effect last 
year.
    Couldn't it be argued that the current problems in the 
steel industry are caused, in part, by the addition of new 
production capacity in the United States?
    Mr. SHARKEY. I will take a crack at that.
    I think, to place this question in perspective, the United 
States is the only major steel-producing country in the world 
that does not produce enough steel to meet its needs, and so it 
is not a case of adding capacity to export, which is the 
pattern around the world. It is capacity that is not built for 
their home market, it is capacity that is built for export, and 
it gets exported into the biggest, most open market in the 
world, which is here. I think that is the critical point with 
this particular question.
    Second, the capacity that is being brought back on stream 
is very low-cost capacity. Fundamental restructuring has taken 
place. Steelworkers have been an important part of that. It has 
gone on in the electric arc furnace sector as well. This is 
low-cost capacity that is coming back. This is not surplus, 
inefficient capacity.
    Mr. GERARD. I would just add or support what Andy said, 
that in a number of product lines, America has been driven out 
of those product lines by the 30 years of market-distorting 
practices, and I refer to some of them. Of major industrial 
democracies, America is the only major industrial democracy 
that does not produce enough steel to meet its domestic demand.
    During the Section 201 hearings, we created a chart that 
was based on steel consumption by a major country, producing 
country and steel demand--excuse me--steel demand by producing 
country and steel production. In almost every one of those 
countries, they produced somewhere between 117 up to 210 
percent of what their own domestic demand was, and I would be 
more than happy, if you are interested, to make that available 
to the Committee.
    [The chart follows:]

    [GRAPHIC] [TIFF OMITTED] 89863A.000
    

                                 

    Chairman CRANE. Please do.
    Mr. CONNORS. Could I add a little something to that? If we 
are looking at it as a consumer-driven reason to have a steel 
industry, why do all of these other countries make the numbers 
that we just heard here way more than they consume? They make 
more than they can consume as a national policy because they 
recognize the economic impact on not just the steel companies 
in their country, but on the entire supply infrastructure 
pyramid that supports those companies. They get a supply 
infrastructure that supports, in some cases, 210 percent of 
their needs and export 110 percent of it, but keep all that 
supply impact at home.
    Mr. DIMICCO. Mr. Chairman, one final point. The capacity 
that is coming back is actually going to be a benefit to 
consumers in this country because it is coming back at globally 
competitive cost structures, and that is a good thing.
    The second thing I would like to say is the overcapacity 
issue is not a U.S. issue. The overcapacity issue is a global 
issue, and it really has its roots back to the collapse of the 
Soviet Union, where they had several hundred million tons of 
steelmaking capacity and after the collapse, they only had 
about 30 million tons of consumption, and that is where this 
whole thing started, and it just kept building through the 
nineties, and it culminated in the late nineties with the 
collapse in Asia of the Asian economies.
    This has got a long history, but the problem is not rooted 
here in the United States. We cannot supply our own needs. How 
in the heck could we have an overcapacity issue here? That is 
not the problem.
    Chairman CRANE. Thank you. Mr. Levin?
    Mr. LEVIN. Thank you. There has been reference to the WTO 
decision. We are now just getting some of the details that are 
supposed to be confidential. It is a preliminary report, and I 
would hope that another look would be taken at it.
    I supported a WTO dispute settlement system with finality, 
and I still do, but what is happening with the WTO is I think 
they are undermining their credibility surely as to safeguard 
measures. We negotiated safeguard measures into the WTO. In the 
12 cases involving safeguards, the panels have overthrown use 
of the safeguard mechanism in every single case.
    So, I think it isn't our use of safeguard mechanisms that 
is on trial, it is mainly the WTO implementation, and I think 
that is what is more on trial.
    Let me also say, in terms of excess capacity, there has to 
be a much more vigorous effort by this administration and 
everybody else to deal with global overcapacity. If we simply 
put our house in order here, and the international house is not 
put in order, it isn't going to work.
    Let me then ask about putting our house in order because I 
don't think it is understood very well what steps have been 
taken these last 18 months, say, to restructure, and all of you 
have been involved in it in one way or another.
    So, somebody graphically describe, in a minute or two, that 
is all we have, what has been going on here, the restructuring? 
It has been considerable. What has it meant? Don't divulge your 
negotiating strategy, but just describe for everybody what has 
been happening. Who wants to address that?
    Mr. DIMICCO. Dan DiMicco from Nucor.
    Before you can have any major restructuring, 
rationalization and major competitiveness issue effected, you 
have to go through a process of consolidation first. It is the 
natural course of events in a market economy, and that takes 
time, and people are not going to consolidate; i.e., go and buy 
other companies if there is not a payoff down the road.
    The Section 201 lent hope, a ray of hope, that there would 
be a payoff, and a number of companies and organizations, 
including Leo's organization, have taken some bold moves to----
    Mr. LEVIN. Like what? Just describe the adjective.
    Mr. DIMICCO. Well, first off, I would like Leo, in a 
second, to comment about what has been going on, on the 
integrated side because he is more familiar with that.
    Even on the mini-mill side, of which Nucor has been a part 
for 35 years, where it is considered to have a very efficient 
type of steelmaking process and culture, we still have a lot of 
inefficiencies that we need to take out of our operations and 
out of our mini-mill sector. So, ourselves and Gerdau 
Ameristeel have been consolidating the industry on the long-
product side. Nucor has acquired Birmingham Steel, Auburn 
Steel, just this past week Kingman from North Star Steel, we 
have acquired TRICO, which was a flat-rolled plant. The other 
ones were all long-product plants.
    By doing this, we were able to improve our cost structures 
from an operating standpoint, a geographical coverage 
standpoint in servicing the customers, and also from a 
purchasing standpoint in pooling our purchasing.
    Mr. LEVIN. Mr. Gerard, let me just interject, you mentioned 
Mr. Gerard. So, what has been going on? Describe it.
    Mr. GERARD. I guess I want to do this very cautiously 
because I think----
    Mr. LEVIN. I understand that, but just give----
    Mr. GERARD. We have to be very careful that we are not 
demanding a restructuring, and a reorganization and a 
consolidation that happens on the backs of workers.
    Mr. LEVIN. Right.
    Mr. GERARD. Right now what has happened is--I made a point 
of introducing some folks--a quarter of a million Americans 
have lost their health care in the steel industry. What has 
happened is that we have managed to find an investor ISG. We 
have brought LTV Steel back on stream. We have reorganized the 
workplace. We have taken out all kinds of layers of management. 
We have completely organized the lines of progression. We have 
put all new work practices in place. We did all of the new 
rules. We negotiated a new pension plan after it was terminated 
by the Pension Benefit Guaranty Corporation (PBGC). We have 
negotiated new health care benefits after they were terminated 
by the bankruptcy court.
    The ISG has purchased Bethlehem, just closed a few weeks 
ago, a week ago. We are in bargaining, as we speak, with that. 
U.S. Steel is attempting to buy National Steel, as A.K. is. 
They are in a bit of a competitive environment to try and get a 
collective agreement, and someone is going to try to save 
National Steel. Acme Steel has been brought back by ISG under 
new rules, new consolidation.
    The problem, up until now, with all due respect to 
everybody in the room, is that consolidation has been done on 
the backs of our retirees and our folks who have lost their 
pensions and their health care benefits.
    If you really wanted to help the consolidation, the PBGC 
would not have preemptively terminated the pension plans 
because by preemptively terminating the pension plans, the PBGC 
has made it doubly hard to consolidate. The cost of delayering 
the work force now falls on the purchaser, and the rules of the 
game have been changed in midstream.
    Let me just say that in the consolidation process, to even 
have the review that you are asking for of the Section 201 
makes the ability to consolidate the industry in the integrated 
industry that much harder because you have got to go get the 
money out of the marketplace. The ISG is going to do an initial 
public offering.
    If there was a pulling of the Section 201, the market would 
respond. U.S. Steel and A.K. are going to have to find a way to 
absorb National, whoever wins it. The market is going to 
respond, and if you pull the Section 201, just the fact that 
you are doing this hearing is affecting that marketplace.
    Mr. LEVIN. Thank you.
    Chairman CRANE. Mr. English?
    Mr. ENGLISH. Thank you, Mr. Chairman, and let me just say I 
am very appreciative of the way you have handled this hearing. 
Let me say I am just becoming aware of the WTO decision that 
has been handed down, and I am absolutely outraged. The WTO is 
apparently not content merely to micro-manage our tax system. 
They are also trying to dismantle America's trade laws and 
change the rules in mid-stream. This is an essay in Yankee 
bashing, and I am sick of it, and I can tell you we, in the 
Steel Caucus, are sick of it, and we are not going to put up 
with any more of it.
    Now, Mr. DiMicco, I was motivated by something that was 
said by the prior panel. Mr. Smith testified that your industry 
is the most highly subsidized in America, the most highly 
subsidized, I presume, more so than sugar, cotton, peanuts, 
ethanol or wheat. Aside from local economic development 
assistance, which I presume every one of that previous panel 
had access to, what subsidies do you get, Mr. DiMicco?
    Mr. DIMICCO. Zero.
    Mr. ENGLISH. Zero? Donut?
    Mr. DIMICCO. Zero, donut, nada.
    Mr. ENGLISH. Mr. Dooner, you are a great employer in 
western Pennsylvania, and I am sorry one of your plants is no 
longer in my district, but certainly your employees still are. 
You have been lean, you have been hungry, you received far less 
benefit from the President's trade policy as a pipe and tube 
company than other producers have. May I ask you what subsidies 
do you get?
    Mr. DOONER. Zero.
    Mr. ENGLISH. Donut?
    Mr. DOONER. Yes, sir.
    Mr. ENGLISH. Your competitors, do they get subsidies?
    Mr. DOONER. I don't know of any.
    Mr. ENGLISH. Very good. Let me move on to a couple of other 
questions. Mr. DiMicco, how much have you increased your prices 
during the first year of the President's remedy and what are 
the current pricing trends?
    Mr. DIMICCO. You have to look at different product lines. 
We will talk about flat rolled, being the one that has been 
most impacted by the marketplace and potentially by the Section 
201.
    Just prior to January 1, 2002, LTV Steel announced that 
they were shutting down in their previous quarter. That 
shutdown created a shortage of steel and a change in the 
pricing dynamics of the marketplace. Prices started going up 
effective January 1, 2002, not based upon a Section 201 tariff, 
which had not even been put in place or ruled on yet. It wasn't 
going to go into place until March, a couple months later.
    The major pricing dynamics that took place in flat rolled 
had to do with a change in the balance of supply and demand 
brought about by the LTV Steel closing. At that point in time, 
a pricing dynamic materialized, where pricing, over the period 
of the next 6 to 9 months, went up and peaked, in terms of 
actual transactions for hot band, from $200 a ton to maybe $350 
a ton.
    Since LTV Steel has brought back on their additional 
capacity, that pricing has now softened back to $300 a ton or 
in that neighborhood. So, we have gone through that type of 
move. The only reason why it has not gone back to $200 a ton is 
because the Section 201 has effectively stopped the illegal 
trading activity that was going on, except in a very few cases 
where there were some surges coming from developing countries 
that we are asking the USTR to address today.
    Mr. ENGLISH. So, your products haven't experienced the 
price surge that you heard described during the last two 
panels.
    Mr. DIMICCO. There was a price surge initially, but not due 
to the Section 201, and it has since moderated and come back 
down because of the balance of supply and demand, and it is----
    Mr. ENGLISH. You have not heard of in your product lines, 
30- to 50-percent price increases?
    Mr. DIMICCO. Well, first of all, the price went down by 50 
percent, from $400 a ton to $200 a ton, and so what we have 
achieved is a partial restoration of already historically low 
pricing. I would like to know what people did with the money 
they made when the price of steel went from $400 to $200 while 
they were still experiencing their higher contract prices with 
their customers.
    Mr. ENGLISH. So would I. Mr. Sharkey, what would be the 
consequences of terminating the remedy before the full 3 years?
    Mr. SHARKEY. Can I make just one quick comment on Dan's?
    Mr. ENGLISH. Yes.
    Mr. SHARKEY. One other thing we need to keep in perspective 
here is that a substantial amount of steel that is bought in 
this country is bought on contract. It is not necessarily 
bought on the spot market, and so a lot of the customers, last 
year in 2002, who had negotiated annual contracts, negotiated 
those contracts late in 2001, and Nucor and other steel 
producers, with very, very few exceptions, honored those 
contracts throughout 2002.
    So, the increases that you are hearing about were primarily 
from buyers buying from a service center market, buying on the 
spot market, who tend to have much more volatility in their 
pricing.
    Mr. ENGLISH. Before my time is up, early termination of the 
policy, your anticipation of the consequences?
    Mr. SHARKEY. Early termination, I would simply support what 
Leo Gerard said. It will have a significant impact on the 
capital markets. That is critical to the restructuring of the 
industry. This industry is fragile right now. There has been 
some improvement, but early termination would basically send 
the signal that it is going to go back to the way it was 
before.
    Mr. ENGLISH. Thank you all, and thank you, Mr. Chairman.
    Chairman CRANE. Mr. Cardin?
    Mr. CARDIN. Thank you very much, Mr. Chairman.
    Mr. Gerard, I was struck by your comment about the 
relocation of companies by the last panel, which I think you 
are stating the obvious. You don't make those decisions in a 
few months, so I think that point is very well-taken, and I 
would like to get a response from the last panel, and maybe we 
will have a chance to do that by inviting a written response.
    I also share your concerns that we have restructured on the 
backs of our steel retirees. Again, I would invite Members of 
this Committee to join me at some of the meetings that we are 
having with Bethlehem Steel retirees and listen to their 
stories because I do think it is a broken commitment by our 
Nation to the steelworkers, and it goes back many, many years, 
when we talked about working to reduce capacity in this country 
and gave at least an implicit assurance to our workers that 
they would be protected and, in fact, they are not.
    I would just like to get your response on the language we 
use here about restructuring. I understand the politics of 
restructuring. We have to show the world that we are doing 
things differently here, but we are doing things differently 
here, and we have for the last several decades. Whereas, the 
rest of the world has not, the steel producers have not.
    You have mentioned several times that we don't produce 
enough steel for our own needs, that we have reduced capacity. 
You haven't, I think, emphasized enough the type of investments 
that we have made in steel in modernization over the last 
couple decades to become a very cost-effective, efficient 
operation.
    So, I understand the politics of talking about 
restructuring, and we have to do that as part of our 
international discussions, but I wish you all would talk a 
little bit more about what we have already done, not in the 
last 18 months, but we have done in the last 15 to 20 years, 
because there has been dramatic changes in the steel industry 
in the United States, which has not been matched by our 
partners, and I would invite your comments.
    Mr. GERARD. Not to give another history lesson, but we have 
been driven out of a lot of product lines in this country over 
the last 30 years by what the U.S. Department of Commerce 
reports as 30 years of systemic, market-distorting practices by 
``our trading partners,'' and I went through a small list of 
what we can't produce any more, but that list is much, much 
greater.
    During the 15 years prior to the imposition of the Section 
201, the domestic steel industry invested $60 billion--with a 
``B''--in ongoing modernization. One of the first mills to 
close in this last round of steel crisis, brought about, as Mr. 
DiMicco said, by those collapses of those other global 
economies.
    One of the first mills to close was Gulf State Steel in 
Alabama. Gulf State Steel was able to produce steel at a rate 
of man-hours per ton lower than 300 million tons of the global 
overcapacity that existed outside of the United States. For 
example, Russian mills were producing 2 million tons, with 
22,000 workers, 16 man-hours per ton. Yet they were selling 
steel in this country at $100 a ton lower than we could.
    We can't compete. It is immoral to ask us to compete with 
that. So, that the steel industry has been continuously 
investing in a modernization program, and we understand that 
that investment in the modernization can mean only one of two 
things: You are either going to produce the same amount of 
steel with less people or you are going to produce more steel 
with the same amount of people.
    We have not been able to produce more steel with the same 
amount of people because we have been systematically targeted, 
product line by product line, and once we have been driven out 
of that market, they move to another one. That is why we filed 
130 dumping complaints, and we won them all, but that is why 
nothing changed and why we went to a Section 201.
    Now, the end result is I think it would be tremendously 
appropriate for this Committee to hold a hearing on what is 
happening to the quarter of a million citizens who have lost 
their health care as a result of illegal trade activity. I 
think it would be totally appropriate for this Committee to 
hold a hearing on what the overvalued dollar is doing to not 
only the steel industry, but the manufacturing industry's 
ability to compete in the world.
    At some point, we have got to quit being the world's 
``patsies'' for some kind of ideological stuff that does not 
exist. Free trade does not exist unless it is fair trade, and 
no one can demonstrate any of our trading partners that are 
abusing us that are trading fairly with us.
    Mr. CARDIN. Let me thank all of you for your testimony. 
Thank you, Mr. Chairman.
    Chairman CRANE. Thank you. Mr. Becerra? Oh, I am sorry. I 
missed someone.
    Mr. BECERRA. Mr. Chairman, I will yield to Mr. Houghton 
from New York if he is next.
    Mr. HOUGHTON. No, no, go ahead.
    Mr. BECERRA. No, go right ahead, Mr. Houghton.
    Mr. HOUGHTON. Age takes its place.
    [Laughter.]
    Mr. BECERRA. I was going to say beauty, but either one.
    Mr. HOUGHTON. Age before beauty, is that it?
    Well, first of all, thank you very much for being here. You 
give really a balanced position and, again, I am sorry that 
there was not a little dialog or debate between the users and 
the producers.
    Mr. DiMicco, nice to see you. You have a plant in our 
district. I have got just a couple of questions, and then I 
would like to ask a broader question. First of all, you have 
never been involved in a trade dispute discussion like this--
why now? Then, second, wouldn't you be doing what you are doing 
even without the Section 201 tariffs?
    Mr. DIMICCO. To answer your first question, for over 35 
years, Nucor was not a company that would get involved in trade 
issues. Typically, our rationale behind that had more to do 
with the way our operations continued to grow through new 
technologies. We have become known as an innovator in the steel 
industry, not just in the United States, but globally. We have 
reduced the cost to produce steel by 50 percent over the last 
35 years.
    However, things got so bad with the illegal trading 
activities that were taking place, the fact that our laws were 
being blatantly ignored that even Nucor couldn't sit on the 
sidelines any more. Companies as efficient, worldwide 
recognized as efficient as Nucor, could no longer earn their 
cost of capital.
    Companies like Nucor, who reinvested in new technologies 
like thin slab casting, and today in cast strip, casting sheet 
steel directly from liquid, could no longer earn their cost of 
capital and reinvest in those technologies because of the 
blatant disregard for our trade laws.
    When people start ignoring our laws and breaking the law, 
it is our right, as citizens and businesspeople, in this 
economy of ours, to stand up and ask our government to enforce 
those laws, and that is all we did. That is all we were asking 
for, and it was so bad that even Nucor could not ignore it any 
more.
    As far as what we would be doing today in the way of 
consolidation, Nucor has taken a very active role in 
restructuring and consolidating the industry on the long 
product side, on the mini-mill side, we would not be doing it 
today without the Section 201. You cannot invest a dollar into 
something you can't get your cost of capital out of, and it 
would not be happening, and it certainly would not be happening 
on the integrated side either. Thank you.
    [The information follows:]

    Congress should also correct the flaws in our trade laws that 
actually lead to import surges and repetitive dumping. Today, we can 
spend a year or more prosecuting a dumping case only to see imports 
increase from new, non-covered sources. This ``country/product 
switching'' scheme is repeated over and over again. As noted above, we 
also need to close a loophole that allows ``duty absorption,'' in which 
the target of a successful trade case simply absorbs the duties and 
continues dumping. And we need an effective import licensing program to 
provide early warning of import surges. These flaws and others in the 
trade laws are addressed in legislation introduced in the 107th 
Congress by Rep. English, Levin, Houghton, and Cardin, H.R. 1988, and 
by Rep. Berry, H.R. 3571. They should be supported by this 
Subcommittee.
    Further, as I indicated in my testimony, this Administration should 
pursue a sounder dollar. At the least, the United States should send 
the message that we expect our trading partners in the Far East to stop 
the widespread and deliberate currency manipulations. Every sector of 
our economy, from agriculture to manufacturing to services, is hurt by 
currency manipulation by China and other governments. For example, 
China has pegged its currency against the dollar at a rate that is 
estimated to be 40 percent lower than its actual value. This is a 
massive subsidy that is causing a huge trade deficit with China. Every 
day, U.S. jobs are going to China because of this advantage. While the 
Chinese economy grew at 17% last quarter, our economy is sputtering. 
Our economic recovery is being thwarted by the currency management 
policies of China and others. This situation demands our government's 
action.

                                 

    Mr. HOUGHTON. Thank you. Well, I can't speak for anybody 
else, but I think a lot of us will try to keep the Section 201 
as it is and not shorten it, and also we will try to put some 
rules, and some understanding, and some manners in the WTO 
decision, which is wrong, but I want to look over the next 
hill.
    As Bill Kleinfetter knows so well, I have said many times, 
if we are not careful, we are going to become a country and a 
warehouse for goods we can't afford to buy. So, the question 
is, after Section 201, what happens? Where do we go? How do we 
protect ourselves? How do we protect this market of ours? This 
is a temporary deal, as you know, and we will get over this WTO 
ruling in some way, but long term we are constantly going to be 
barraged by people who use their own economic system to 
undercut ours, and therefore get a share of the market, which 
ultimately we won't be able to afford. Tell us what we should 
do.
    Mr. GERARD. I guess it may lead us into an ideological 
discussion because----
    Mr. HOUGHTON. Well, we don't have time for that.
    [Laughter.]
    Mr. GERARD. My comment would be to reiterate the comment I 
made at the end of my last comment, and that is that America 
can't throw open its markets without having a series of rules 
that demand unfair trade. Make the point one more time. America 
is the only industrial democracy in the world where the ability 
of a retiree to have health care is directly related to the 
ability of his employer to stay in business.
    Mr. HOUGHTON. Can I just interrupt a minute? So, what you 
are saying is that we are going to have a series of Section 201 
or 301, super 301 cases; that is the inevitable course of our 
trade?
    Mr. GERARD. I think what will happen in steel, and God only 
hope I am wrong, is that no matter how low we can drive the 
price of steel domestically by the efficiencies we are putting 
in place, unless we have a series of rules, pick the Russian 
mill that I just talked about, they are not trading in steel 
here for competitive reasons; they are trading in steel here to 
bring dollars home, and they are using their steel industry as 
an employment industry.
    Mr. HOUGHTON. I am not worried about Russia. I am worried 
about us.
    Mr. GERARD. My argument about that is that unless we have a 
series of defensible rules, they will continue to dump into 
this market.
    Mr. HOUGHTON. The 301 or Section 201 are not sufficient; is 
that right?
    Mr. GERARD. I don't think they will be sufficient in 5 
years because the next downturn in their economy, they are 
going to dump into ours.
    Mr. HOUGHTON. Could I just ask one thing, Mr. Chairman? 
Maybe you could tell us what you think the rule structure ought 
to be. Thank you.
    Mr. GERARD. I will be glad to send you some written stuff.
    [The information follows:]

1. A Strong Rules-Based Trading System is Essential
    First and foremost, defensible trade rules require the maintenance 
of the system of rules-based international trade established by the 
GATT and WTO agreements on anti-dumping, subsidies and countervailing 
measures, and safeguards, in particular. This rules-based system must 
be strengthened, not weakened.
    Over the course of many multilateral negotiating rounds since the 
beginning of the GATT in 1947, tariffs on goods have been reduced 
substantially. The lowering of tariffs, however, intensifies the need 
for effective trade rules that can address unfair trade practices.
    The promise of trade liberalization can only be achieved through a 
rules-based system that promotes fair trade. Indeed, a healthy and 
vigorous rules-based system will promote increased trade because it 
will create a trading environment that establishes the ``rules of the 
road'' for all players and maximizes benefits for all. However, without 
the availability of trade remedy mechanisms, such as anti-dumping, 
antisubsidy, and safeguard laws, to address market distortions, trade 
liberalization will fail. As Ambassador Zoellick has noted, ``(g)iven 
America's relative openness, strong, effective trade laws against 
unfair practices are crucial toward maintaining domestic support for 
trade.'' USTR, President's 2002 Trade Policy Agenda, April 2002, at 7.
2. Proposals for Reform/Improvement of International Trade Rules
    The Committee to Support U.S. Trade Laws (CSUSTL), of which the 
USWA is a member, is an organization comprised of American companies, 
trade associations, agricultural producers, labor organizations, and 
law firms. CSUSTL supports the efforts of the U.S. Government to 
strengthen international disciplines and U.S. laws against unfair trade 
and to counter efforts to weaken U.S. trade laws. CSUSTL believes that 
strong and effective laws against unfair trade are critical to the 
survival of competitive U.S. industries and actively promotes reform of 
U.S. trade laws to make them more effective. To this end, CSUSTL has 
formulated proposals for the improvement and reform of the rules-based 
system. In particular, CSUSTL has identified numerous examples of trade 
distorting practices of foreign governments that need to be addressed 
to assure that the usefulness and effectiveness of the rules-based 
trading system is not undermined. Such trade distorting practices 
include

    1. Lemployment-based industrial policies that result in maintenance 
of vast overcapacity in steel, agriculture, textiles, and other 
industries,
    2. Lthe buildup of strategic industries by foreign governments 
(e.g., steel, semiconductors, agriculture, aerospace and technology),
    3. Lclosed home markets, and
    4. Lexport targeting that results in excess capacity and export 
flooding to maintain an employment base.

    In an effort to improve the rules-based system, CSUSTL has compiled 
a Priority Issues list that identifies twenty-two issues of prime 
importance to ensuring that the American business and agricultural 
communities and their workers are beneficiaries of trade rules, instead 
of victims of trade distortions. CSUSTL also proposes corrective 
actions with respect to each issue. The 22 Priority Issues are:

     LWTO dispute settlement in trade relief actions;
     Lprohibited subsidies;
     Lalternative causes of injury;
     LContinued Dumping and Subsidy Offset Act (CDSOA);
     Lprivatization;
     Lelimination of injury test;
     Leffective action against fill-in countries;
     Lpresumption of injury for repeat offenders;
     Lsunset reviews;
     Lcircumvention based on upstream dumping;
     Lcircumvention based on input products;
     Lde minimis thresholds;
     Lnew shipper reviews;
     Lindirect subsidies;
     Laccess to trade remedies by farmers and ranchers 
producing perishable, seasonal and cyclical products;
     Lzeroing;
     Lcalculation of all other rates;
     Lnegligibility thresholds;
     Lstanding;
     Lverification;
     Lfacts available;
     Ladjustments.

    The full text of CSUSTL's proposals for reform and improvement of 
international trade rules may be found at: www.rulesbasedtrade.org/cms/
fileadmin/user_upload/Proposals_for_Reform_CSUST L_01.pdf. For further 
information, the Subcommittee may consult CSUSTL's website: 
www.rulesbasedtrade.org.
3. The Problem of Structural Excess Capacity in the Context of 
        International Trade Rules
    In Mr. Gerard's testimony, his reference to the ``Russian mill'' 
example was a reference to the problem of global excess capacity in 
steel, and how in many countries (e.g., Russia) market signals do not 
operate properly, but rather, governments interfere in the market and 
maintain steel excess production, among other reasons, as a means of 
providing employment for their citizens. The result, of course, is that 
too much steel is produced worldwide, and that steel, needing to find a 
market, is likely to be dumped in the most open market available, the 
United States. Structural excess capacity and production has been a 
persistent problem, not just in the steel sector, but in other sectors 
as well. Because excess capacity is the result of governments and 
companies ignoring market signals, the trade rules in place at present, 
such as the anti-dumping laws, antisubsidy laws, and safeguard laws, 
are not completely effective in dealing with this trade distortion. 
This is the case because, while the existing WTO trade rules address 
individual member rights and obligations, they are not fully capable of 
addressing multilateral problems needing multilateral solutions.
    Also, because the problem of structural excess capacity is global, 
without multilateral rules individual nations cannot adequately address 
the problem through the use of trade remedies alone, although many have 
tried. Almost every steel producing nation with trade remedy laws has 
conducted anti-dumping, antisubsidy, and/or safeguard investigations 
concerning steel products, with some countries conducting dozens or 
even hundreds of investigations. The sheer number of these 
investigations, however, demonstrates that the underlying root causes 
of global excess capacity have not been corrected. It is time to 
reconsider the problem of structural excess capacity and to formulate 
new multilateral rules and disciplines to correct this chronic problem.
    Indeed, with respect to steel, one of the goals of the President's 
3-part steel program has been to finally address and fix the root 
causes of global excess capacity in the steel sector. As Undersecretary 
of Commerce for International Trade Grant Aldonas has said: ``The time 
has come to find a lasting solution--one that restores market 
conditions to the steel trade globally. We must find a way to get rid 
of the government interference and underlying distortions in the market 
that have produced the global glut in the first place.'' Testimony 
before the Senate Finance Committee, February 13, 2002. Thus, one part 
of the President's steel program (another part being the President's 
request for the Section 201 investigation) is focused on working to 
address the problem of global excess capacity through multilateral 
negotiations with other steel-producing countries. In addition, the 
President, in the third prong of the steel program, is trying, through 
the OECD, to correct market distorting practices through enhancing 
disciplines on steel subsidies and other distorting practices. 
Undersecretary Aldonas has noted that ``the problem of overcapacity 
will likely recur without effective market disciplines.'' Id.
    In sum, given the persistent problem of global excess capacity in 
the steel sector as well as others, it is apparent that, in addition to 
the existing trade remedy measures, multilaterally agreed rules are 
called for in order to efficiently address the distortions in trade 
flows that result when actions of governments distort market signals. 
The current efforts of the OECD steel negotiations are a start, and, 
from that basis, countries should work to achieve a multilateral 
agreement that adds effective rules aimed at eliminating inefficient 
excess capacity.
    With respect to the problem of, and ways to address, structural 
excess capacity in the context of a rules-based trading system, I note 
for your consideration two publications authored by Terence P. Stewart, 
of the Law Office of Stewart and Stewart in Washington DC (Mr. Stewart 
has acted as the USWA's special counsel in a number of international 
trade matters, including the Section 201 investigation on steel). Both 
of the following publications address the problem of structural excess 
capacity, using the steel sector as an example.

     LRules in a Rules-Based WTO: Key to Growth; The Challenges 
Ahead (Transnational Publishers 2002).
     LOpportunities in the WTO for Increased Liberalization of 
Goods: Making Sure the Rules Work For All and That Special Needs Are 
Addressed, 24 Fordham International Law Journal 652 (Nov.-Dec. 2000).

    (Electronic versions of these publications are attached).

    With respect to Russia, I would note that, one condition that 
contributes to excess production of steel and other products is the 
artificially low prices of natural resource inputs in Russia. Even 
despite continuing concerns about Russia's regulation of ``natural 
monopoly'' prices (e.g., natural gas, oil, electricity, transport 
services, and so forth.), both the EU and the U.S. have now recognized 
Russia as a market economy. In the case of the EU, the EU apparently 
insisted that Russia agree to raise natural gas prices closer to world 
levels before the EU would agree to give Russia market economy status. 
And, in their revised anti-dumping law, the EU added a provision that 
addresses unrepresentative costs of production. It states that if costs 
associated with production and sale of the product under investigation 
are not reasonably reflected in the records of the party concerned, 
then the costs shall be adjusted based on costs of other producers or 
exporters or on an other reasonable basis including information from 
other representative markets. Council Regulation (EC) No. 1972/2002 of 
5 November 2002, OJ L 305/1, 7.11.2002, p.2 (http://europa.eu.int/eur-
lex/pri/en/oj/dat/2002/l_305/l_30520021107en000100 03.pdf).
    The U.S. decision to recognize Russia as a market economy notes 
that ``despite repeated double-digit annual percentage increases, most 
regulated prices, particularly those for gas and electricity (43 
percent of the generation of which is gas-based), remain well below 
world-market levels and may not even cover the cost of production. 
Thus, . . . regulated energy prices in Russia remain a significant 
distortion in the economy, as they encourage the wasteful use (mis-
allocation) of Russia's energy resources and slow the adoption of more 
efficient production methods.'' Department of Commerce, Decision 
Memorandum re Inquiry into the Status of the Russian Federation as a 
Non-Market Economy Country Under the U.S. Antidumping Law, June 6, 2002 
(emphasis added) (available at http://ia.ita.doc.gov/download/russia-
nme-status/russia-nme-decision-final.htm). The Decision Memorandum, 
however, does not indicate how, in the context of future antidumping 
proceedings involving imported products from Russia, the Department of 
Commerce intends to account for the ``significant distortion'' of 
regulated prices that are below the cost of production. This will be a 
persistent problem as long as Russia continues to regulate the prices 
of natural gas, electricity, oil and other resources and keeps them 
below world market levels.
4. The Problem of Misaligned Currencies
    Another persistent problem that creates trade distortions in 
international trade is misaligned currencies. Currency misalignment can 
be characterized by under-valuation or over-valuation, either of which 
can significantly affect the rules-based trading system, because 
misalignment results in misallocation of economic resources and 
undermines stability. Undervalued currencies, in particular, can 
produce false market signals--making it appear that industries in the 
country with an undervalued currency are more competitive than they 
actually are, leading to overexpansion of production and export 
flooding by particular products.
    Moreover, the existing trade rules are not adequate to address the 
problems caused by misaligned currencies. Indeed, where countries do 
resort to using WTO trade rules to address floods of injurious imports, 
currency misalignment can affect dumping margin calculations by 
producing distorted or inaccurate margins.
    Of late, China has been singled out as a country with an 
undervalued currency that has had substantial negative effects on 
trade. Economists have observed that China manipulates its currency 
through large and persistent central bank purchases of dollars and 
other foreign currencies, resulting in the RMB being undervalued by 
about 40 percent. The effect of this undervaluation is that the U.S. 
trade deficit is about $100 billion larger than it would otherwise be, 
which translates into one million fewer U.S. jobs in manufacturing. See 
Chinese Currency Manipulation and the U.S. Trade Deficit, Statement 
Before the U.S.-China Economic and Security Review Commission by Ernest 
H. Preeg, Senior Fellow in Trade and Productivity, Manufacturers 
Alliance/MAPI, September 25, 2003, (available at http://www.mapi.net/
filepost/PreegTestimonySep2503.pdf). The current concern about China's 
undervalued currency and its effects on U.S. manufacturing and 
increased imports has led to a number of proposals presently introduced 
in Congress to address this problem. One example is the recent bill (S. 
1586) introduced by Senator Schumer (see http://
frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=108_cong_bills&doc 
id=f:s1586is.txt.pdf).
    S. 1586 notes that:

    1. LChina's currency is artificially pegged below its market value 
by 15-40 percent, or an average of 27.5 percent;
    2. Lthe undervaluation of the yuan makes exports from China less 
expensive for foreign consumers and foreign products more expensive for 
Chinese consumers, which effectively result is a subsidy to China's 
exports and a virtual tariff on foreign imports;
    3. LChina's undervalued currency and the U.S. trade deficit with 
China is contributing to significant U.S. job losses and harming U.S. 
businesses;
    4. LChina has intervened in the foreign exchange markets to hold 
the value of the yuan within an artificial trading range; and
    5. LChina's undervalued currency and intervention in the value of 
its currency violates the spirit and letter of the world trading 
system.

    To address this problem, S. 1586 would ``impose a rate of duty of 
27.5 percent ad valorem on any article that is the growth, product, or 
manufacture of the People's Republic of China, imported directly or 
indirectly into the United States'' unless the President certifies to 
Congress that China is no longer manipulating its exchange rate and 
that its currency is valued in accordance with accepted market-based 
trading policies.
    The example of S. 1586 shows that the existing WTO Agreements on 
antidumping, subsidies and countervailing measures, and safeguards, 
while designed to address injurious or increased imports, are not 
designed to correct the effects of currency misalignments, even though 
that problem may cause or exacerbate injurious or increased imports. 
The problem of currency misalignment, like that of global excess 
capacity, should be addressed on a multilateral level with the aim of 
adding effective rules to the rules-based system that will prevent and 
eliminate the injurious trade distortions caused by currency 
misalignment.
    For further review of this issue, I would direct your attention to 
the Stewart publications noted above, as they also address the problem 
of currency misalignment.
    [The attachments are being retained in the Committee files:]

                                 

    Mr. HOUGHTON. Thank you.
    Chairman CRANE. Mr. Becerra?
    Mr. BECERRA. Thank you, Mr. Chairman. I am wondering if 
anyone on the panel would like to venture to give us an 
estimate of what this means to the average American, the 
average family out there, in terms of cost to him or her or to 
a family. So, Section 201 is a tariff, it is a cost. It means 
that we can't have a steel product brought into this country at 
a cheaper price, and some would say that we should always let 
in whatever is cheapest come in so that we could have it at the 
best price so American consumers can save as much as possible 
so their pocketbook isn't hit.
    I am wondering if you can give me a sense of how much 
Americans are having to pay in extra cost as a result of 
Section 201 so we can see if it is really something Americans 
would be willing to absorb, given that you otherwise lose, and 
Mr. Gerard said 275,000 people with their health care. I think 
if Americans had a chance to see what the consequences are of 
letting an industry die in America, that they might be willing 
to absorb the additional cost that they may have to pay for the 
automobile or for the dishwasher because it has steel in it.
    How much are we talking about the American family having to 
pay in extra cost to preserve an industry that is facing 
dramatic increases in imports that are, for the most part, 
being produced because of major subsidies by those foreign 
countries where those imports are produced?
    Mr. SHARKEY. Sir, I can't give you a macro number, but 
maybe I can give you a specific example that might be helpful. 
In a typical four-passenger sedan that, on average, costs 
$25,000 to $26,000 a year, there is $700 worth of steel.
    Mr. BECERRA. That is it.
    Mr. SHARKEY. Seven hundred dollars worth of steel. There is 
more health care in the car than there is steel.
    Mr. BECERRA. A Section 201 action over the last few years--
--
    Mr. SHARKEY. A Section 201 action, even if you assumed that 
it raised the price of that automobile $100, which we think is 
high----
    Mr. BECERRA. That would be one-seventh, or it would be 
about 14 percent.
    Mr. SHARKEY. Correct.
    Mr. BECERRA. That would seem very high that the Section 201 
action would have increased the price of that steel for that 
auto manufacturer that much.
    Mr. SHARKEY. What we know is that, basically, the price of 
automobiles fell last year, and so if you look at the producer 
price index for most steel-containing products, they actually 
declined. My point is it is really pretty minimal.
    Mr. BECERRA. You don't buy a new car every year.
    Mr. SHARKEY. No, I don't anyway.
    Mr. DIMICCO. Dan DiMicco. A new car, if I could?
    Mr. BECERRA. Go ahead.
    Mr. DIMICCO. The real cost to the American consumer will be 
the continuing loss of manufacturing jobs in this country, 
high-paying jobs.
    Mr. BECERRA. Mr. DiMicco, I know that. I am trying to, 
because most Americans aren't going to be told, as much as they 
might be concerned about their fellow Americans losing a job, 
at the end of the day they are going to be told, ``Do you want 
to pay X amount more for that car, for that dishwasher, for 
that whatever it might be?''
    I am trying to get a sense, if Americans knew what the 
additional cost would be to help fellow Americans retain a job 
and help fellow Americans retain an industry that has been part 
of America for time and memorial, I am wondering, if we could 
give them a sense, they might be willing to say, ``Okay, wait a 
minute. Let us have the Section 201. We are willing to do this 
because we understand that if we don't we have that loss for 
Americans of those jobs.''
    If you could give me a sense, I am trying to quantify, as 
difficult as that might be, and Mr. Sharkey tried to do that.
    Mr. CONNORS. Could I jump in and show off my math skills?
    Mr. BECERRA. Let me see if Mr. DiMicco wanted to answer, 
and I know Mr. Gerard wanted to say something, and then, of 
course, Mr. Connors, you can chime in as well.
    Mr. DIMICCO. My point to you would be this: The average 
American consumer doesn't give a hill of beans about the 
Section 201.
    Mr. BECERRA. Right, they don't know about it.
    Mr. DIMICCO. They don't know about it because it is not 
impacting their pocketbook, it is not impacting their bottom 
line.
    Mr. BECERRA. The argument is made----
    Mr. DIMICCO. There are other macros things that are, and I 
know you don't want to talk about them right now, but that is 
something we need to talk about.
    Mr. BECERRA. It is not that I don't want to, it is just 
that what I am trying to get a sense is, is that the argument 
is being made to the American public we have to have the most 
competitive products come to America, and right now people will 
say that the most competitive markets we can get in America on 
steel come from abroad. What I am trying to say is can we 
explain to the American public what they are sacrificing to get 
those cheaper products?
    Mr. DIMICCO. As more and more people lose their jobs while 
you follow that logic, more and more Americans are going to be 
concerned about just getting the cheapest thing instead of 
getting something that is balanced.
    Mr. BECERRA. They won't have the jobs to pay for them 
afterward, either. Mr. Gerard and Mr. Connors?
    Mr. GERARD. I will be really brief. I was holding this up, 
and you can probably see the red lines. There is the bottom of 
the crisis in steel. That was the price. This line is the 20-
year average price of steel, and there is the price of steel 
today. So, when I say there is a lot of whining going on, on 
the last panel, this is a fact. This isn't just me.
    [The chart follows:]

    [GRAPHIC] [TIFF OMITTED] 89863A.001
    

                                 

    Mr. BECERRA. So, prices are still lower than they were or 
the average----
    Mr. GERARD. Prices are lower than the 20-year average. To 
quote Dan, I want to know what they did with all of the money 
when the prices went down.
    Last, the average increased cost of a refrigerator, to give 
you a specific, if the full implementation of the tariff was 
passed on, and it is never all fully passed on, is $4.
    Mr. BECERRA. Mr. Chairman, I know my time has run out, but 
Mr. Connors did want to answer.
    Mr. CONNORS. Well, 260 million people in the United States, 
130 million tons of steel. That is one-half a ton per person. A 
$100 increase in the price of a ton of steel is a dollar a 
week.
    Mr. BECERRA. Thank you.
    Chairman CRANE. Mr. Jefferson.
    Mr. JEFFERSON. I want to ask about what is going on with 
restructuring in the industry. The whole point of the Section 
201 action was to I suppose achieve some efficiencies in the 
industry through restructuring, which is one way. There may be 
other ways, but what has happened with respect to that?
    I have seen varying reports on it, but is there any 
progress being made? If so, specifically what is it in, and is 
it all going to be done, and how long is it going to take to 
get this done? On the mini-mill side and the big companies.
    Mr. DIMICCO. The restructuring that is going on is of an 
order of magnitude never seen before in the United States and 
very seldom seen anywhere in the world. There are massive 
reorganizations taking place, both on the integrated and 
minimal side. The fragmented industry is becoming significantly 
less fragmented. Costs are going down by not 2 or 3 percent, by 
20 or 30 percent, and this process has to continue--it just 
takes time to get through to its completion.
    The first thing you do is you go through a process of 
consolidating. The ISG buys Bethlehem. It takes a year to get 
that done. Then you have to go in, and you have to organize, 
you have to get your systems working together. You look at what 
operations should be kept going or shut down, if any. You look 
at what kind of money you have to reinvest to take advantage of 
that consolidation to its fullest.
    That is why this is not something that can be dealt with in 
a 6-month period, a 1-year period or a 2-year period, and 3 
years may not be enough to get us all the way there, but 
shortening it certainly makes it even more difficult, if not 
impossible. That is why the full 3 years is needed.
    The second thing I want to emphasize here is that these 
people were breaking the laws, and this Section 201 that has 
been put in place is to deal with the fact they were breaking 
the laws repeatedly. Even though it is not required by the 
Section 201 to prove that they were breaking the law, they were 
so good at breaking it and getting around our trade laws that 
the safeguard measure was put in place. The WTO maintenance 
safeguard measure, a rule of law in the WTO for that very 
purpose, and we put it in place to stop the illegal activity 
that was going on because that was the only way we could do it.
    I will let Leo talk some more about the consolidation on 
his side.
    Mr. GERARD. The consolidation in the integrated side is 
more profound than it has been since the birth of the industry, 
I guess. My concern, quite frankly, is that the consolidation 
is going on, on the backs of our retirees, both through the 
termination of the pensions, as a result of the preemptive 
action by the PBGC, and the fact that the bankruptcy courts, as 
was reported earlier, the bankruptcy courts just yesterday 
terminated the health care provisions of 90,000 Bethlehem 
retirees.
    I think that the Committee on Ways and Means could do the 
country a real service by holding hearings on the termination 
of pensions and on the loss of health care by a quarter-million 
Americans and judging what that has done to America's 
competitiveness.
    Mr. JEFFERSON. Is a major part of the issue here that 
impedes restructuring or whatever, is it the issue of this 
legacy cost?
    Mr. GERARD. This is a catch-22 for the industry and for our 
members.
    Mr. JEFFERSON. If that is true, does Section 201 really 
have enough coverage to address that issue?
    Mr. GERARD. No, and let me come at it another way. When I 
talked about the $60 billion that had been invested in 
modernization in the last 15 years, and if you do the series of 
steel crises, the industry went through a series of 
modernizations, and rationalizations and closing any fishing 
facilities to get productivity up, and that resulted in a lot 
of plant closures resulted in a lot of retirees. It resulted in 
a lot of cost to the employer.
    The Section 201 provided a breathing space, but it didn't 
take anybody out of bankruptcy. No company that went into 
Chapter 11 bankruptcy, as of yet, has come out on its own.
    Mr. JEFFERSON. Let me switch gears here because Mr. DiMicco 
said some things about the Port of New Orleans coming in. When 
I first heard him start speaking, and of course that is my port 
and my city, and they, of course, are complaining to me about 
the loss of jobs, the loss of business at the port, and your 
report is quite different from their report.
    The panel before talked about the prices, but they talked 
about prices spiking up considerably. I saw the 20-year average 
that you had there, but there has been a spike-up in it, and 
they complain of something they call it as egregious as price 
gouging. Of course, you deny that on your end of it.
    I read this report that somebody did about the Port of New 
Orleans, but it contradicts what our folks are saying. I will 
have some questions about that when our people get up there, 
but how can we have such contradictory reports about what is 
happening in the Port of New Orleans without our folks haven't 
been talked to. They tell me that no one has talked to them. 
They make their reports to me about what is going on, and yet 
you make a different representation.
    Mr. DIMICCO. Well, some people misrepresent the facts, some 
people don't.
    Mr. JEFFERSON. Are you claiming the Port of New Orleans is 
misrepresenting the facts?
    Mr. DIMICCO. I am saying that you can make numbers say 
anything you want, and I know that the numbers that we put in 
there are from the Port of New Orleans' own numbers, and the 
State of Louisiana's own numbers and not something we made up.
    The other thing I would like to say is there is a big 
difference between price gouging and price restoration. 
Remember, the price dropped 50 percent before prices went back 
up again. They never went back up to the original levels prior 
to the illegal trading. This is not an issue of price gouging, 
as some people earlier proclaimed. It is an issue of a price 
restoration from illegally traded goods that destroyed the 
pricing structure.
    Mr. JEFFERSON. We will try to get the records straight when 
the Port of New Orleans shows up in a few minutes.
    Chairman CRANE. Mr. Neal?
    Mr. NEAL. Thank you very much, Mr. Chairman. I want to 
thank the panelists as well.
    Mr. Gerard, that testimony you delivered, with such great 
passion and emotion, that could have been a speech delivered at 
the Democratic Caucus 2 days before a trade vote. The issues 
you raised have bedeviled most of us on this side of the aisle 
largely because in the seats where you are sitting we often 
hear from professors, economists, business executives, and even 
editorial writers. Do you know what happens when these trade 
agreements go into effect? Not one of them ever loses their 
job. Not one of them loses their pension benefits. None of them 
ever lose their health care, and they walk out of here holding 
the same job that they held when they walked in.
    I have had this argument with the previous Administration, 
and I have had this argument with the current Administration, 
and like many on our side have been schizophrenic with free 
trade, voted for some of the agreements; opposed others.
    How do you, as panelists, respond to the often esoteric 
argument offered here that these relocations and these 
adjustments are nothing more than the free market at work?
    Mr. GERARD. I will be very blunt. These are not agreements 
that are managed. In fact, if you tell me that workers in 
America need to compete with China based on China's rules not 
our rules, I am going to tell you we are out of business. That 
is not a free market in China. It is a totalitarian regime that 
uses child labor, slave labor, has no environmental rights, 
manipulates currencies. I love that Russia's trying to move to 
a democratic free-market system, but don't tell me that making 
2 million tons of steel with 22,000 workers and selling that 
steel in America at any price that you can has anything to do 
with the free market. Pick the country in the world. The fact 
of the matter is that we are for fair trade. Given a fair set 
of rules, our Members can compete with anybody in the world. 
American manufacturing workers can compete with anybody in the 
world, given a fair set of rules.
    Right now the playing field isn't level. That is why we are 
losing--that is why we are losing more than 2.5 million 
manufacturing jobs to date. That is why we have got a trade 
deficit that is $45 billion a month. That is unsustainable. I 
am told--I'm not an economist, but I am told that that trade 
deficit is going to grow. You heard these people sitting here 
who have told you and you and you that the jobs they moved to 
China they aren't bringing back.
    When they start moving the tube mills to China, what are we 
going to do when we need tubes and pipe to make gas lines? When 
they move all the auto parts to China, what are we going to do 
when we want to build the cars and they decide they aren't 
going to ship?
    Mr. NEAL. Mr. DiMicco, as shy as you have been, do you want 
to say something?
    Mr. SHARKEY. I would like to make just a quick comment, if 
I could. I think this line of questioning, and I go back to 
Congressman Houghton as well, this really focuses on the real 
issue that is at stake here. The Section 201 will come and go. 
What unites this panel and the panel before is that we all are 
part of this broader manufacturing crisis. I don't know of a 
single metalworking industry that doesn't have the same issues 
with China, as we participate in those discussions.
    What we really need to be about here is figuring out how we 
are going to continue to make things in this country. We need a 
strong manufacturing policy. We need public policies that 
support it from a tax and regulatory standpoint. That is what 
unites us all here. We are fighting over this issue today, but 
we have a lot more in common than we have in conflict. That is 
where our focus really needs to be in the long term.
    The National Association of Manufacturers (NAM) is trying 
to work on this issue. We are all Members of NAM. I think that 
is where our energy really needs to be invested. That is the 
longer term issue.
    Mr. DIMICCO. I would like to first apologize for my 
shyness. I would suggest to you, on a big-picture issue, our 
world-trading system is broke. It doesn't work. The fact there 
was a Section 201 needed at all or even looked at is evidence 
of that. The fact that no safeguard measures have been upheld 
by the WTO is proof of that. The fundamental distortion is 
this. There is no freedom in this world that we believe in, 
particularly in this country, that doesn't come with a set of 
rules, that doesn't come with a set of responsibilities, and 
doesn't imply fairness and legal behavior.
    The world has distorted the concept of free trade. I am 
afraid some of the Members of Congress have also distorted the 
concept of free trade. Free trade means responsibility, 
responsible trade, rules-based trade that people adhere to. Our 
system is broke, folks. If we don't fix it, we are going to 
have some serious global consequences.
    Mr. NEAL. Thank you all. Thank you, Mr. Chairman.
    Chairman CRANE. Thank you. Before we wrap up here, just one 
final question. Mr. DiMicco, you mentioned you haven't received 
any subsidies other than local development incentives. I was 
curious what types of local incentives have you received and 
how much?
    Mr. DIMICCO. I don't have those numbers on the tip of my 
tongue, but I can get those to you. They are basically 
incentives that have to do with hiring employees in the area, 
you might have training incentives, you might have some State 
and use tax incentives, sales tax incentives, and some income 
tax forgiveness based upon bringing high-paying jobs into the 
area. I would add that's available to any company in the United 
States, not just Nucor or any steel company. I would also 
mention to you that globally those things are also available at 
the local levels around the world, and are not the subject of 
the global anti-subsidy negotiations that we're talking about, 
where governments give wholesale forgiveness of billions of 
dollars in debt and give away facilities for nothing to people 
just so they can keep other people employed.
    Chairman CRANE. Have you received any money from the Byrd 
amendment disbursements?
    Mr. DIMICCO. I think we might have gotten $100,000. You can 
take that and put it someplace else, too if we could be assured 
of free trade.
    [Additional information follows:]

    Nucor received total distributions of $1,004.45 in 2001 and 
$291,366.89 in 2002 under the Continued Dumping and Subsidy Offset Act 
of 2000, also known as the ``Byrd amendment.'' As I stated at the 
hearing, we would gladly give up the Byrd moneys if the illegal trade 
activity stopped. Antidumping duties continue to be collected under 
dumping orders precisely because the antidumping and countervailing 
duty laws continue to be violated.
    One of the reasons that Byrd moneys exist is that U.S. trade law 
allows dumping duties to be absorbed by the foreign producer or 
exporter. Without duty absorption, foreign producers would either 
correct pricing in their home market, or they would have to sell at 
full prices in the U.S. During an administrative review, the 
antidumping margin would be reduced to zero. We would much rather that 
this be the situation than to collect Byrd money due to the 
perpetuation of the unfair trade practices. Many of our trading 
partners, including Europe, require that the dumping duty be passed on 
to the customer.
    There is no intellectually justifiable reason to continue the 
practice of tolerating duty absorption, which undermines the ability of 
dumping laws to correct distortions in markets. We support an amendment 
to the trade law contained in Rep. Berry's bill in the 107th Congress, 
H.R. 3571, which reflects European practice.

                                 

    Mr. GERARD. We will take it for health care.
    Chairman CRANE. Well, thank you all for your testimony. 
With that, this panel is adjourned.
    We will now call up our final panel. Charles Bradford, 
President, Bradford Research, New York; David Schulingkamp, 
Chairman, Board of Commissioners, Port of New Orleans; James 
Campbell, President, International Longshoreman's Association 
(ILA) Local No. 3000, New Orleans; Walter Niemand, Board 
Member, Texas Free Trade Coalition, Houston, Texas; Laurie 
Moncrief, President, Schmald Tool & Die, Burton, Michigan; and 
James Jones, Vice President, Dixie Industrial Finishing, 
Tucker, Georgia.
    If our next panel will please take seats. All right, we are 
ready to proceed. Mr. Bradford, you will be kicking off. Let me 
remind everyone to try and keep your oral testimony to 5 
minutes or less, and any additional testimony will be made a 
part of the permanent record. We will include it. With that, 
Mr. Bradford, you go first.

  STATEMENT OF CHARLES A. BRADFORD, PRESIDENT AND CHIEF FILE 
          CLERK, BRADFORD RESEARCH, NEW YORK, NEW YORK

    Mr. BRADFORD. Thank you, Mr. Chairman for the invitation to 
speak today. I am President and Chief File Clerk of Bradford 
Research. We are an independent investment research firm 
specializing on the metals. I have been a metals analyst for 38 
years. I thought today it might make some sense to try to hone 
in on what are the problems of the steel industry, which people 
have mentioned, and how do we go at it to try to solve the 
problems.
    Mr. Levin, I think, got it very right before when we said 
we have to have the correct information. First of all, our 
understanding and our view of the problem, which we have said 
for many years, has been the strong dollar. Unfortunately, the 
strong dollar is good for the economy but lousy for basic 
industry.
    Second, excess capacity. Everybody has talked about it but, 
in effect, no one has done much about it. There has been a 
consolidation in Europe, there has been a consolidation in 
Japan, and they have taken out capacity. The consolidations in 
this country have added capacity. In fact, capacity has been 
added during the Section 201. That is not solving the problem.
    There have been some other comments made that I think are 
interesting. Mr. Danicek in his prepared remarks--I don't think 
he was here to give them--talked about how the mini-mills have 
grown to where they are now 50 percent of the industry 
capacity, from 15 percent. Well, guess whose capacity that was 
aimed at? That was the integrateds that they took capacity away 
from.
    Mr. DiMicco just said that Nucor reduced their costs by 50 
percent over the last 35 years. That is pretty impressive, but 
guess again. That went to the customer and was a very serious 
problem for the integrated companies who also did a pretty good 
job at reducing costs. They deal with very large customers, and 
the customers took advantage of them.
    Last year, as an example, contract steel prices went down 
despite the Section 201. It was only spot prices which Nucor 
primarily benefited from, as did Steel Dynamics and other mini-
mills that got the benefits of the higher prices. DiMicco again 
got it right when he said it was the sudden closure of LTV 
Steel that panicked the customers, who double-ordered and ran 
up pricing. When they realized LTV Steel was coming back on 
again, prices retraced half of the gain. It was a 100-percent 
gain. It is now a 50-percent gain.
    High costs. We have some of the highest-cost steel mills in 
the world. We talk a lot about averages, and I am as guilty as 
anybody, but the fact of the matter is there are some very low-
cost mills, like Steel Dynamics and Nucor, and there are some 
very high-cost mills. I was shaken up I guess a couple of 
months ago when I realized that Wheeling-Pittsburgh had a blast 
furnace from 1905. That is the one they want to replace with an 
electric furnace. I know of a couple of rolling mills in this 
country, big, hot strip mills--the key to a plant--that date to 
the thirties. Yet there are other plants that are absolutely 
first-rate.
    I personally believe that foreign steel has been largely 
scapegoated. There isn't any 10-cent-an-hour wage rates in the 
major countries that supply steel to the United States. The 
biggest supplier is Canada. Next biggest has wage rates that 
are not too far from Canada. China with relatively small 
tonnage, less than 800,000 tons last year out of 30 million 
metric, does have low wages, but the big one is Canada. Japan 
is also relatively small in tons. Japanese wages, by the way, 
are $75,000 per man per year. Korea is $35,000 per man per 
year. Not 10 cents.
    I think we have to understand where the problem is. There 
are some very efficient steel companies in the United States, 
and there have been some very inefficient. We cannot have the 
inefficient running the industry. This is a situation where you 
have comparative advantage. If you were to start off with a 
piece of plain paper today, you would not build an integrated 
steel mill in the United States, but you would build mini-
mills. That is where the growth has been. I think they are as 
responsible as anybody for the problems of the integrated 
mills. They have gained 35 percent market share. The imports 
are 20 percent of the market.
    I think I am getting close to being out of time, but I 
think poor data is one of the big problems. The industry is 
smaller than they think they are, they double-count imports. If 
somebody imports a slab, it counts as a slab, then it counts 
again as hot roll. Or U.S. Steel imports hot roll for 
California; when they cold it, it becomes cold roll. Counted 
twice. I welcome your questions.
    [The prepared statement of Mr. Bradford follows:]
   Statement of Charles A. Bradford, President and Chief File Clerk, 
                 Bradford Research, New York, New York

The Steel Industry

What are the problems in the steel industry?
  a.  Excess world capacity
      i.  Subsidies to build new plants in U.S.
      ii.  High cost plants should be closed

  b.  Strong dollar over the last several years
      i.  Dollar has weakened recently and U.S. mills are now exporting

  c.  Rapid capacity expansions by flat rolled mini-mills during the 
1990's

  d.  Poor economic analysis--
      i.  Industry is actually a lot smaller than it believes
      ii.  LDouble counting of imports with the domestic steelmakers 
the largest buyer of foreign steel

  e.  Weak managements
      i.  Some with 17th and 18th century mercantilist ideas

  f.  Section 201 impact
      i.  Did it help the price of steel recover last year?
      ii.  Did it hurt domestic steel users?
      iii.  Any help in solving underlying industry problems?
          a.  LDomestic capacity increased more than 10% after the 
Section 201 put into place and steel prices fell sharply as plants 
reopened

  g.  Subsidies
      i.  Loan guarantee program
          a.  LThe one steelmaker that received a loan guarantee 
(Geneva) closed up 10 months later. Someone did a poor job of due 
diligence.
      ii.  States and local governments
          a.  LCapacity built in the 1990's by mini-mills all had State 
and local ``incentives.''

  h.  Value of the dollar
      i.  Strong dollar the real cause of the industry's problems
      ii.  Recent dollar weakness very helpful.

  i.  Steel and the national defense
      i.  LDepartment of Defense says 0.3% of domestic steel ends up 
being used by the DOD

  j.  Which plants should close to eliminate the excess capacity around 
the world?
      i.  Second Chapter 11s filing shouldn't be allowed
      ii.  High cost plants should be closed

  k.  LJust how many steelmakers actually filed for bankruptcy 
protection during the last few years? Thirty-five seems to be the 
number that we see in print the most.
      i.  LAlmost one-half of those on the USWA list of 35 never were 
steelmakers
      ii.  LAll the steelmakers on the list were either startups (3) 
that made poor equipment choices or USWA organized operations (at least 
partially)
  l.  The domestic steelmakers need foreign steelmaking equipment and 
technology
  m.  Consolidation
      i.  Didn't happen after 201 announced
      ii.  LDid occur once the USWA and ISG announced an agreement that 
recognized major cost savings
      iii.  Most legacy costs related to retirees eliminated

Key issues

    In the interest of time, the comments below will not cover all the 
items mentioned in the above outline since some are self explanatory.
    Nearly all observers of the steel industry believe that worldwide 
excess capacity is the largest problem that the industry faces. We 
differ as to how much excess capacity exists. Without a solution to 
this problem, any industry rebound is likely to be short lived, such as 
was the case last year. We know that the strength of the dollar caused 
serious harm to not just the domestic steelmakers, but also many of 
their customers. Recent weakness has been helpful, but we are unable to 
predict whether or not this will continue. We have never been very good 
at predicting the value of the dollar. A weaker dollar makes foreign 
goods more expensive. Thus the focus today, as we understand it, is to 
see whether or not the Section 201 program has made the domestic steel 
industry's situation better or not. In addition, the impact of the 
Section 201 on the steel user is being investigated.
    In some ways the downfall of the domestic steel industry began in 
1959 when a 116 day strike by the United Steelworkers of America led to 
the introduction of foreign steel into the U.S. Until that strike, 
foreign steel was regarded as inferior to the product of the domestic 
steelmakers, but was found to be actually superior in many ways, such 
as gauge control and flatness. Foreign steelmakers developed 
relationships with domestic steel users that continue to this day. 
Nearly all studies that we have seen from reputable analysts show the 
average domestic steelmaker to have much higher costs than many of 
their foreign competitors and much higher costs than their domestic 
mini-mill competitors. Some of this has been due to the strong dollar, 
some due to lower raw material costs elsewhere and a lot due to much 
newer and more efficient equipment outside the U.S. It should be 
pointed out that the domestic steelmakers have made major progress 
during the last decade to lower costs and to improve the quality of 
their product, but these gains have all either been offset by the 
strong dollar or have flowed to their major customers. The domestic 
steelmakers have not earned their cost of capital during the last few 
decades. They have thus been self liquidating.
    At the same time, newly developed German technology was accepted by 
U.S. mini-mills with one-fifth the capital cost per ton and much lower 
operating expenses than that of the old line integrated steelmakers. In 
addition, the new producers were non-union, thus no legacy obligations. 
These companies were able to benefit from various state and local 
government incentives and more than 20 million tons of new capacity was 
built. With limited market growth, steel prices fell sharply in line 
with the lower costs of the new producers. These mini-mills were also 
very aggressive in pricing their products, with Nucor, for example, 
apparently believing that their order book should be entirely filled 
before anyone else gets any business since they are the low cost 
producer.
    The domestic steel industry through the American Iron and Steel 
Institute has for years double counted imports of semi-finished steel, 
but recently began to correct its data for imported slabs. 
Unfortunately, some industry leaders still refuse to recognize that the 
mills themselves are the largest importer of foreign steel and when 
these slabs and hot-rolled coils are processed in the U.S., they are 
reported as a domestic shipment. Some industry leaders still double 
count, which leads to a mistaken impression that the industry is much 
larger than reality. The latest Department of Labor data covering steel 
employment shows only 187,600 total steel industry employment or 0.1% 
of total nonfarm payrolls. This compares to 511,900 steel industry 
employment in 1980 or 0.5% of total nonfarm payrolls. It is also 
interesting to us that the United Steelworkers of America union appears 
to represent 90% of the steel production employees, who account for 
about one-half of the domestic steel delivered. The decrease in 
employment is the result of improved productivity in the domestic 
industry and the new flat rolled mini-mills that use few people in 
their mills.
    In regard to steel usage by the Department of Defense, a 
particularly important issue at this time, the DOD has publicly stated 
that their usage of steel amounts to 0.3% of domestic steel deliveries 
and they do not generally buy imported steel. I personally think that 
it is incredible that certain steel leaders seem to believe that they 
know better than the Department of Defense and usually claim major 
steel usage by the DOD. Maybe the steel industry/union leaders believe 
that we are still building Liberty ships.
    But the real questions that you want to focus on today involve the 
Section 201 steel tariffs and industry consolidation. Have these two 
situations helped or harmed the steel industry and its customers? We 
believe that the Section 201 tariffs have led to increased steelmaking 
capacity of more than 10% from February 2002 (the month before Section 
201 was invoked) through February 2003. Thus the improved steel pricing 
during the first half of 2002 reversed and U.S. Steel recently forecast 
that it would report a loss for its first quarter of 2003. By the way, 
last year U.S. Steel's Slovakian subsidiary reported an operating 
profit of $110 million with an average steel price of $276 per ton 
while U.S. Steel domestic flat rolled steel operations had an operating 
loss of $31 million despite a much higher average selling price ($410/
ton). This is with U.S. Steel's accounting in Slovakia and no subsidies 
according to them.
    We believe that the real reason what flat rolled steel prices 
increased last year was the closure of steelmaking capacity in 2001. It 
is interesting to us that only some steel prices increased despite 
other products also ``benefiting'' from high tariffs. The product lines 
that did show much higher prices are also the products where capacity 
was sharply reduced. When much of this capacity was reopened, steel 
prices fell sharply. We thus believe that the Section 201 tariffs did 
not directly lead to higher steel prices during the first half of 2002.
    Another part of the President's program to aid the steel industry 
was a plea for consolidation. Here again, we doubt that the Section 201 
tariffs aided the consolidation of the industry, something that we 
applaud. Except for some mini-mill mergers, nothing happened among the 
large integrated steelmakers until the International Steel Group and 
the United Steelworkers union agreed to a labor contract that 
essentially eliminated most of the legacy liabilities for retiree 
health care and early pensions. Once that was announced a number of 
proposed steel mill acquisitions were proposed. We are concerned 
because in each of the cases announced so far, no capacity is to be 
closed, a major benefit we had hope would come of the industry 
consolidating. There have been statements about cost savings from some 
of the mergers, but as we analyze it, the savings come from an ISG like 
labor contract. There are also substantial risks from consolidations 
such as computer systems that can not communicate, corporate cultures 
that clash and management compensations that increases to whoever has 
the highest level of compensation. We like consolidation because we are 
hopeful that the price negotiations between the large steelmakers and 
their largest customers would be more balanced. For the last decade, 
the ``big'' three automakers have used their market clout to have their 
will with the nine major steelmakers. It seems to us that the contract 
negotiations would be more balanced with three buyers negotiating with 
three or four steelmakers.
    What about the steel users? Clearly some steel prices doubled and 
this couldn't have been good news for the steel users. Many steel users 
have to compete with foreign competitors who were able to buy their 
steel at very low prices until steel prices reversed last summer as the 
dollar weakened and China boomed. We believe that it is more 
interesting to look at steel prices over time and we have found that 
spot hot-rolled coil prices during the last decade averaged $347.61 in 
the U.S., but only $307.41 in Europe and $291.49 in Asia. Thus 
manufacturers using steel in areas outside the U.S. have a large 
advantage compared to their U.S. competitors, if steel is a large 
portion of their cost of production.
    Automobiles, often discussed since about one-half the weight of a 
car is steel, are an interesting subject. We understand that the steel 
cost in a car is only 5% of the total cost. These companies also did 
not pay the surging flat rolled steel prices last year because they buy 
under contracts, often multi-year, which had been signed before steel 
prices rose. However, there are a lot of suppliers to the automobile 
companies who we understand had to pay the higher spot prices, but whom 
had sold fixed priced products to the automakers. These companies were 
squeezed badly. We have read in the trade press that a number of these 
companies moved production overseas. The higher steel prices in the 
U.S. over time harmed the steel using customers of the steelmakers and 
thus steel demand grew slowly. This has been a trend over many years 
and partially explains why steel shipment growth has been very slow in 
the U.S. The situation of Corus (formers British Steel) is very similar 
to that of the U.S. steelmakers with the strong pound decimating steel 
consuming industries in Britain and making the U.K. plants of Corus 
noncompetitive compared to its Continental European plants.
    To us it is fascinating to hear some of the statements of the 
steelmakers/union leaders and how inconsistent they are. For example, 
ISG is now operating the LTV plants with one-third less people. How 
then could the company have been competitive as it had claimed? The 
USWA now seems to recognize that there are substantially too many 
steelworkers in many of the integrated plants. In some cases, 
electricians were called in on overtime to change a light bulb. 
Nonunion mini-mills don't operate this way. U.S. Steel now has the 
clear evidence that the low costs apparently achieved by Central 
European steelmakers are for real and not due to subsidies since they 
are achieving very low costs at USSK, their Slovakian mill. Another 
company's CEO in discussing a foreign joint venture stated that they 
were building the plant overseas because construction costs were much 
lower.
    Now the steelmakers are exporting steel because the weaker dollar 
made it feasible. When the dollar was strong, foreign steel exporters 
were benefiting from a weaker local currency and thus were exporting. 
However, the U.S. steelmakers claimed dumping. Many of these cases, 
however, were overturned on appeal, something that gets little press 
coverage. Some steelmakers claim that all they are seeking is the 
enforcement of U.S. trade laws, but whenever the WTO rules against 
them, they act as if the U.S. never signed the WTO treaty, making it 
the law of the land.
    One steelmaker, whose management has been particularly aggressive 
in demanding trade protection, now wants a government guaranteed loan 
to fund new steelmaking facilities to replace a blast furnace dating 
from 1905. Funny how the age of some of this company's facilities were 
never mentioned before when they were claiming to be viable ``if it 
just wasn't for those unfair foreign steel makers shipping low prices 
steel into the U.S.'' They also claimed how solvent they would be when 
they were reorganized after their first bankruptcy. Now, after their 
second bankruptcy they was a government guarantee so they can build an 
electric furnace not apparently understanding that EAFs alone do not 
make a mini-mill or a successful steelmaker. They even defaulted on a 
previous U.S. Government loan. In fact, a number of mini-mills filed 
for bankruptcy during the last couple of years. These were all USWA 
companies, which is a much more common thread dividing success from 
failure. In fact, two steelmakers are still using hot strip mills from 
the 1930's and claiming how competitive they are. Give me a break.
What did cause the industry problem in 2001?
    Domestic steel deliveries fell about 9.3% in 2001 compared to 2000. 
Imports fell 20.8%, but one large producer increased its market share 
by 25% and had average flat-rolled steel prices $150 per ton below that 
of U.S. Steel and $40 per ton below that of Steel Dynamics. These 
numbers alone say a lot about what/who was the problem. Of course, this 
company blamed imports.
What caused the excessive capacity and how can it be fixed?
    State and local ``incentives'' were obtained by each of the new 
mini-mills in the U.S., which we believe had the largest impact on the 
health of the old line integrated steelmakers. This is still continuing 
with Minnesota currently offering major sums to get a steel mini-mill 
built in that State. The situation at foreign mills is more difficult 
to generalize. Clearly some foreign mills benefited from governments 
building infrastructure, such as ports, and other benefits. Other 
situations that we have information about show the mills actually 
channeling money to politicians, in effect a reverse subsidy. We know 
of some situations where large amounts of debt were used to build new 
steel mills with nearly no equity. However, inflation accounting in 
some countries allowed equity to be generated as inflation raised the 
value of the steel mill, but not the debt. In other cases, mills have 
gone bankrupt and have been purchased at low prices. ISG is a major 
beneficiary of this.
    We suggest that the real elimination of subsidies would be a good 
first step, maybe even with some repayments as often required in 
Europe. No company should be allowed to file for Chapter 11 protection 
more than once. Clearly when they were reorganized they filed with the 
court a business plan that claimed that they would be solvent. 
Obviously their analysis was faulty otherwise they would not have 
bankrupt again. Why believe them the second time when their analysis 
was so faulty the first time? Maybe there should be some provision to 
cushion the plant closings by payments to the employees that lost their 
jobs, but only if the steel mill stayed closed, as was done in Europe.
    Clearly the high cost steel plants are the one that should be 
closed. Comments by some the steel mill managements that since we are 
importers of steel others should close capacity is nonsense, in our 
opinion. The fact that the U.S. imports steel should not be a factor 
unless oil imports are also to be controlled, etc. In fact, this type 
of analysis smacks of 17th century mercantilism. Modern economics 
suggest that the plants with a comparative advantage (lowest cost) 
should be allowed to prosper. Unfortunately, average steelmaking costs 
in the U.S. are quite high, although there are some very competitive 
plants in the U.S. Local subsidies, such as by West Virginia, Ohio and 
Pennsylvania may have ``saved'' local plants, but facilities in other 
nearby States were negatively impacted and eventually went bankrupt. 
There was no consideration of the macro impact before local authorities 
offered funds to save jobs. This is a zero sum game. None of these 
programs added to steel usage.
Consolidation
    Mergers and acquisitions without plant closures are not helpful to 
the industry. Some costs can be taken out and the companies thus get 
somewhat more competitive, but the industry as a whole is not helped 
since the excess capacity remains. Statistics about mergers and 
acquisitions also show that most do not achieve what is expected at the 
time of the combination.
    During the 38 years that I have been covering the steel industry, I 
have seen a lot of companies acquired by ``financial types'' and nearly 
all have failed. Mergers among the major steelmakers have also usually 
failed, with computer systems not able to communicate with each other 
and corporate cultures clashing.
Conclusion
    Don't stand in the way of plant closures. Eliminate incentives for 
companies to build new plants. If the business plan can't be financed 
conventionally, the plant shouldn't be built. No loan guarantees, no 
State and local subsidies. How can we complain about foreign subsidies 
when we are guilty ourselves?
    There needs to be serious consideration of the impact of programs 
to help the steel industry on their customers. There may be 40 
employees in customer plants for each steelworker job.
    Measures of industry injury should focus less on steel industry 
averages and more on the successful companies. If one or two companies 
have been able to compete, but a number of others have not, the fact 
that some are successful should be proof that maybe imports are not the 
problem. Maybe there are other factors since some companies were 
successful.

                                 

    Chairman CRANE. Thank you. Mr. Schulingkamp.

    STATEMENT OF DAVID P. SCHULINGKAMP, CHAIRMAN, BOARD OF 
   COMMISSIONERS, PORT OF NEW ORLEANS, NEW ORLEANS, LOUISIANA

    Mr. SCHULINGKAMP. Good afternoon, Chairman Crane. My name 
is David Schulingkamp and I am Chairman of the Board of 
Commissioners of the Port of New Orleans. I am pleased and 
honored to appear before you and the other Members of the 
Subcommittee.
    The Port of New Orleans is one of the busiest U.S. ports 
for steel product imports. For better or worse, over 40 percent 
of the port's revenue is derived from steel trade. As far as we 
are concerned, free trade is the engine that powers our growth, 
that powers our development, not only in the Port of New 
Orleans but in the ports throughout our region and throughout 
the country. It is in that light that we remain very concerned 
about the additional duties imposed under Section 201 on fairly 
traded steel products.
    Mr. Chairman, over a year ago you met with myself and other 
port and maritime and labor leaders in the effort to preserve 
the economic and employment opportunities provided by the 
import steel trade. You, Congressmen McCrery and Jefferson and 
others in the Congress realized that many U.S. companies and 
their employees, including those in the port and maritime 
industries, would pay the price for protected restrictions on 
fairly traded steel.
    The Port of New Orleans was indeed adversely affected by 
Section 201 tariffs on steel. Port estimates show that the 
imposition of tariffs and other restrictions on steel imports 
has resulted in a direct loss to the port of over $1.6 million 
in calendar year 2002 alone. Actual steel tonnage crossing the 
docks at the port decreased from 1.9 million tons in 2001 to 
1.36 million in 2002, a reduction of over 550,000 tons of steel 
handled at the port terminal facilities.
    This reduction in steel handled by facilities at the port 
is directly related to a commensurate and dramatic reduction in 
the number of hours worked by our longshoremen, our union labor 
who handle the unloading of steel cargo shipments. Our review 
and discussions with the local ILA officials indicate that the 
members have suffered a reduction over the past year of 
approximately 25 percent in the hours associated with the 
handling of general cargo, the majority of which involve steel 
shipments. Similarly, terminal operators, truckers, stevedores, 
customs house brokers, and so forth within the Port of New 
Orleans have been adversely affected by the protectionist 
tariffs under Section 201.
    In addition to the problems experienced by the Port of New 
Orleans, I know well from our work with other port customers 
that there has been an increase in the price of both domestic 
and imported steel products, and much of that is directly 
attributable to Section 201. Such price increases have caused 
significant loss of jobs in manufacturing sectors, as we heard 
from the second panel today, and transfer business activities 
to overseas.
    Mr. Chairman, the Administration just last week announced 
an additional 295 exclusions from Section 201 tariffs imposed 
on imported steel products of almost a year ago. This is a 
small step in the right direction. The Administration should be 
strongly encouraged to favorably consider future exclusions and 
requests to provide relief to the U.S. port and maritime 
industries and to domestic consumers of such products.
    Furthermore, I strongly support your efforts and those of 
Chairman Thomas of the Committee on Ways and Means requesting 
the ITC to closely examine the impact of the tariffs on steel-
consuming industries and on industries which rely on steel 
imports, including the American port industry.
    Thank you, Mr. Chairman, for standing up for free trade and 
listening to the travails of the port and maritime industry.
    [The prepared statement of Mr. Schulingkamp follows:]
 Statement of David P. Schulingkamp, Chairman, Board of Commissioners, 
              Port of New Orleans, New Orleans, Louisiana
    Good Morning, Chairman Crane and Members of the Subcommittee. My 
name is David P. Schulingkamp and I am Chairman of the Board of 
Commissioners of the Port of New Orleans. I am honored to appear before 
you today to discuss the difficulties encountered by the imposition of 
Section 201 tariffs on imported steel products.
    The Port of New Orleans is one of the busiest U.S. ports for steel 
product imports. Over 40 percent of the Port's revenue is derived from 
that steel trade alone. Free trade is the engine that powers the 
economy of our Nation, and the steel trade itself is of the utmost 
importance to the business health of the New Orleans region. It is in 
that light that I remain perplexed that protectionist measures were 
imposed under Section 201 on fairly-traded steel products.
    Mr. Chairman, over a year ago you met with me and other port, 
maritime industry and labor leaders in the effort to preserve the 
economic and employment opportunities provided by the import steel 
trade. You, Congressman Jefferson, and others in the Congress realized 
that many U.S. companies and their employees, including those in the 
port and maritime industries, would pay the price for protectionist 
restrictions on fairly-traded steel.
    The Port of New Orleans was indeed adversely affected by the 
Section 201 tariffs on the steel trade. Port estimates show that the 
imposition of tariffs and other restrictions on steel imports has 
resulted in a revenue loss to the Port of approximately $1,600,000 in 
calendar year 2002 alone. Actual steel tonnage crossing the docks at 
the Port decreased from 1,925,000 tons in 2001 to 1,361,000 in 2002, a 
reduction of over 564,000 tons of steel handled at Port terminal 
facilities.
    This reduction in steel handled by facilities at the Port of New 
Orleans is directly related to a commensurate and dramatic reduction in 
the number of hours worked by longshoremen who handle the unloading of 
steel cargo shipments. Our review shows that local International 
Longshoremen's Association members have suffered a reduction over the 
past year of approximately 25 percent in the hours associated with the 
handling of general cargo, the majority of which involves steel 
shipments. Similarly, terminal operators, truckers, stevedores, and 
customhouse brokers within the Port of New Orleans have been adversely 
affected by the protectionist tariffs under Section 201.
    In addition to the problems experienced by the Port of New Orleans, 
I also know from my work with Port customers that there has been a 
dramatic increase in the price of both domestic and imported steel 
products that is directly attributable to the Section 201 tariffs. Such 
price increases have caused a significant loss of jobs in manufacturing 
sectors, and in many cases, the transfer of business manufacturing 
activities to overseas companies.
    Mr. Chairman, the Administration just last week announced an 
additional 295 exclusions from the Section 201 tariffs imposed on 
imported steel products almost a year ago. This is a small step in the 
right direction to eliminate the Section 201 steel tariffs entirely. 
The Administration should be strongly encouraged to continue to 
favorably consider future exclusion requests to provide relief to the 
U.S. port and maritime industries and to domestic consumers of such 
products. Furthermore, I strongly support your efforts and those of 
Chairman Thomas of the Ways and Means Committee requesting that the 
U.S. International Trade Commission closely examine the impact of the 
tariffs on steel consuming industries and on industries which rely on 
steel imports, including the American port industry, in its mid-term 
review of the Section 201 safeguard measures.
    Thank you, Mr. Chairman, for standing up for free and open trade to 
the benefit of the port and maritime communities. I look forward to 
responding to any questions that you or other Subcommittee Members may 
have.

                                 

    Chairman CRANE. Thank you, Mr. Schulingkamp. Mr. Campbell.

   STATEMENT OF JAMES O. CAMPBELL, PRESIDENT, INTERNATIONAL 
    LONGSHOREMEN'S ASSOCIATION LOCAL NO. 3000, NEW ORLEANS, 
                           LOUISIANA

    Mr. CAMPBELL. Good afternoon.
    Chairman CRANE. You might pull that mike over a little more 
in front of you there.
    Mr. CAMPBELL. Good afternoon, Mr. Chairman, the Committee. 
First, may I ask you to bear with me. I have a sinus infection.
    My name is James Campbell, President of the ILA's Local 
3000 Union, New Orleans, Louisiana. I am honored to appear 
before you today to present our views of ILA Local 3000 
concerning the impact of Section 201 tariffs imposed over a 
year ago on steel products.
    I represent more than 800 working men and women who provide 
labor required to load and unload cargo vessels engaged in 
international trade that call at the Port of New Orleans. Our 
ILA members provide a skilled labor force at a competitive 
price by the companies in the port which depend on the 
longshore service. I am proud of our work force. I am proud of 
our workers, especially our steel gang. They are the most 
productive in the business.
    More than a year ago, I joined other port, maritime, and 
labor leaders from across the Nation and this country and met 
with this Committee in expressing our regard in response to the 
tariffs under Section 201 and the quotas that would restrict 
the imported steel trade. I stated then and I continue to 
believe today that the economic health of the Port of New 
Orleans and the related employment opportunities for the 
Members directly depends upon the preservation of fairly traded 
import steel through the New Orleans region.
    My concerns over a year ago were well-founded. The 
imposition of Section 201 tariffs on various imported steel 
products has had a negative impact on ILA Local No. 3000 
workers in the Port of New Orleans. Since the imposition of the 
Section 201 tariffs, our workers have experienced a decline in 
the volume of work in handling steel products at the docks. The 
numbers of hours worked for steel cargo by members has declined 
25 percent from 2001 to 2002.
    During the last year, Section 201 tariffs directly affected 
steel imported into the Port of New Orleans from countries that 
traditionally have been our largest trading partners, namely 
Japan, Korea, Brazil. Steel imports from Japan and Korea 
declined approximately 35 percent in the Port of New Orleans 
from 2001 to 2002. This represented a loss of 232,165 tons of 
steel. The steel from Brazil is 50 percent, a loss of 150,000 
tons. Overall, the Section 201 tariffs reduced the steel 
handled by ILA workers in the docks by approximately 564,000 
tons and their works hours have been reduced accordingly.
    The livelihood of our working men and women in the Port of 
New Orleans would greatly improve by the elimination of Section 
201 restrictions on imported steel products. The international 
trade in steel and other products is vital to the economy of 
the Port of New Orleans and its region. We strongly favor the 
immediate elimination of Section 201 tariffs in order to 
preserve the longshoremen of ILA Local No. 3000 jobs and 
opportunities and provide fairly traded steel products.
    Thank you for the opportunity.
    [The prepared statement of Mr. Campbell follows:]
Statement of James O. Campbell, President, International Longshoremen's 
           Association Local No. 3000, New Orleans, Louisiana
    Good morning Mr. Chairman and Members of this Trade Subcommittee. 
My name is James Campbell, and I am the President of the International 
Longshoremen's Association (ILA) Local No. 3000 in New Orleans, 
Louisiana. I am honored to appear before you today to present the views 
of ILA Local No. 3000 concerning the impacts of the Section 201 tariffs 
imposed over a year ago on steel products.
    I represent more than 800 working men and women who provide the 
labor required to load and unload cargo vessels engaged in 
international trade that call on the Port of New Orleans. Our ILA 
members provide a skilled labor force at a competitive price for the 
companies at the Port who depend upon our longshore services. I am 
proud of our workers, and especially our ``steel gangs,'' who are the 
most productive in the business.
    More than one year ago, I joined other port, maritime and labor 
leaders from across the nation to meet with the U.S. Trade 
Representative in Washington to express our concerns regarding proposed 
Section 201 tariffs and quotas that would restrict the import steel 
trade. I stated then, and continue to believe today, that the economic 
health of the Port of New Orleans and the related employment 
opportunities for our members are directly dependent upon the 
preservation of fairly-traded import steel products through the New 
Orleans region.
    My concerns over a year ago were well-founded. The imposition of 
the Section 201 tariffs on various imported steel products has had a 
negative impact on ILA Local No. 3000 workers in the Port of New 
Orleans. Since the imposition of those Section 201 tariffs, our workers 
have experienced a decline in the volume of work in handling steel 
products at the docks. The number of hours worked for steel cargo by 
our members has declined by 25 percent from 2001 to 2002.
    During the last year, the Section 201 tariffs directly affected 
steel imports into the Port of New Orleans from countries that 
traditionally have been our largest trading partners, namely Japan, 
Korea, and Brazil. Steel imports from Japan and Korea declined 
approximately 35 percent in the Port of New Orleans from 2001 to 2002. 
This represented a loss of 232,165 tons of steel. Steel from Brazil 
decreased 50 percent, a loss of 150,000 tons. Overall, the Section 201 
tariffs reduced the steel handled by ILA workers at Port docks by 
approximately 564,000 tons, and their workhours have been reduced 
accordingly.
    The livelihood of the working men and women in the Port of New 
Orleans would be greatly improved by the elimination of the Section 201 
restrictions on imported steel products. International trade in steel 
and other products is vital to the economy of the New Orleans region. 
We strongly favor the immediate elimination of the Section 201 tariffs 
in order to preserve for the longshoremen of ILA Local No. 3000 those 
job opportunities that are provided by fairly-traded steel products.
    Mr. Chairman, thank you for the opportunity to testify today, and I 
look forward to responding to any questions from you or Members of the 
Subcommittee.

                                 

    Chairman CRANE. Thank you, Mr. Campbell. Mr. Niemand.

 STATEMENT OF WALTER A. NIEMAND, PRESIDENT AND CHIEF EXECUTIVE 
  OFFICER, WEST GULF MARITIME ASSOCIATION, AND BOARD MEMBER, 
           TEXAS FREE TRADE COALITION, HOUSTON, TEXAS

    Mr. NIEMAND. Thank you, Chairman Crane. I know everyone has 
had a long day, and I have submitted some written comments into 
the record. I don't see any reason to go through them 
specifically.
    I have brought some additional material that was prepared 
by the Texas Free Trade Coalition, and I will leave copies here 
for the Chairman and also for Committee Members. Also, I am not 
going to take the time to go through all of that material 
today. If there are any questions, please feel free to ask and 
we will try to provide the answers.
    I am President and Chief Executive Officer of the West Gulf 
Maritime Association. It is a group of maritime employers, 
their carriers, terminal operators, stevedores, and agents, 
most of whom are small businesses to medium-size businesses. 
Section 201 has adversely affected all of our member companies. 
We have joined in an unusual coalition, if you will, with Texas 
Free Trade, joining with ports and also union and non-union 
employers, really, to try to address the adverse effects on the 
maritime industry itself in the State of Texas and more 
specifically in the Port of Houston.
    The companies that we represent employ approximately 10,000 
individuals per year throughout the State of Texas and Lake 
Charles, Louisiana. These are middle-class jobs where we have 
union employment that provide full benefits of retirement, 
medical both for active works and retirees. The member 
companies that we represent, several are minority-owned. They 
also create middle-class jobs not only for the unionized 
employees, but the people who work in their work force in 
offices and other related feeding services for our industry.
    The problem that we have seen is really reflected in this 
booklet, which we have called ``The Bible of Pain.'' What we 
have seen is major reductions from our members from anywhere to 
40 to 70 percent of their regular work force. In the longshore 
industry, many of the people employed are employed on a casual 
basis through union halls and hiring centers. In the Port of 
Houston alone, we lost 34,000 man-hours of highly skilled, 
highly paid work because of Section 201, or at least right 
after it was introduced. That equated to $1.29 million in lost 
pay to individuals that we employ, and that is only half the 
work force because half of the work force that handles these 
commodities is not represented by organized labor.
    Historically in our industry we have a 6-percent increase, 
$6 for every $1 spent on the waterfront. So, the actual loss to 
the Houston economy with the loss of steel tonnage in Houston 
alone was $7.8 million. The Port of Houston is the number one 
water-commerce port in the United States. Their own statistics 
show they lost 184 full-time positions within the organization, 
they lost $13.5 million in revenue, and they lost 430 tons of 
steel since the introduction of Section 201.
    I don't believe that the lost to the maritime industry is 
the end of the comments concerning this act, because it has 
adversely affected a lot of other industries in the State of 
Texas. A lot of the steel vessels that came in would deliver 
steel; they would have to go back empty. They, in turn, were 
very efficient ways of moving farm products and other goods, 
U.S. goods, to foreign markets. Since Section 201 has been 
enacted, there has not been sufficient capacity to carry a lot 
of the farm products at competitive prices from Texas and the 
United States to foreign markets.
    The problems that we've seen I think justify the section 
332 investigation. We believe that the number of jobs lost in 
the economy by Section 201 is going to far outweigh the number 
of jobs protected. We feel that the steel industry deserves 
protection. It is an important part of our economy. They have 
some basic problems, and they have to do with their costs, the 
number of people working, the number of people supported. We 
feel that some relief there would be far more meaningful, and 
basically it would leave us to have free trade, a level playing 
field in our minds, and we would encourage the Committee--we 
appreciate the Subcommittee's efforts concerning this matter. 
We would be glad to participate in the investigation and 
provide information.
    Thank you for the invitation and time.
    [The prepared statement of Mr. Niemand follows:]
Statement of Walter A. Niemand, President and Chief Executive Officer, 
  West Gulf Maritime Association, and Board Member, Texas Free Trade 
                       Coalition, Houston, Texas
    I would like to thank the Chairman and the Subcommittee on Trade 
for this opportunity to speak to you about this important issue. Most 
importantly, thank you for your willingness to consider the downstream 
effects that the Section 201 duties have had on the U.S. industry.
    The Texas Free Trade Coalition consists of over 30 members, who 
employ over 18,000 people, which was formed because of the loss of jobs 
and income to families due to a constant and recurring barrage of 
protectionist legislation. FREE TRADE IS AMERICAN JOBS! The impacts of 
Section 201 duties not only affected the steel consuming industries, 
but also the companies which service the international steel trade.
    The Section 201 duties on steel that were instituted one year ago 
galvanized a hugely diverse cross section of steel consumers, as well 
as groups like ours, that transport, handle, check and simply depend on 
a free and world competitive flow of steel into this country.
    An important function of our coalition is to educate all levels of 
decisionmakers, including local, State and Federal lawmakers. Please 
allow me to provide a summary of how our members have been negatively 
impacted as a result of the Section 201 duties.

     LThe Port of Houston, one of the top revenue generators in 
the entire State of Texas, much less the city of Houston, has been 
negatively impacted. As a direct result of the Section 201 tariffs on 
steel, the country's largest steel port has experienced the following:
      + L185 direct jobs lost.
      + L$13.5 million dollars loss of business revenue.
      + L430,000 tons of lost steel imports.
     LWest Gulf Maritime Association (WGMA) which, among many 
other responsibilities, serves as the payroll agent for the union 
employees of the ILA, tracked a reduction of 34,000 man hours, between 
Fiscal Year 2001 and 2002, specifically related to steel jobs. At an 
average wage of $38 (includes fringe benefits), the reduction of man 
hours equates to $1,290,000 dollars that workers were unable to take 
home to their families.
     LInbesa America, Inc., the largest non-union steel 
handling terminal in Texas, has experienced a 40% reduction in steel 
receipts. Consequently, the work force has been cut 40%. Furthermore, 
the reduction in steel imports has resulted in non-union employees 
taking home $1,440,000 dollars less.
     LCooper T. Smith Terminals, the largest union based steel 
receiver and top 10 receiver of all import cargos in the U.S. Gulf, has 
had to lay-off four highly experienced and long term crane operators 
(50% reduction), as well as two gear room personnel. The downsizing 
trend is an ongoing process.
     LShippers Stevedoring Company is the second largest 
stevedore and port terminal operating in Houston. It has invested over 
$20 million in receipt upgrades and expansion. As a result of the 
Section 201 duties it had to reduce work force by over 100 people (from 
160 down to 50). Also, there has been a 70% reduction in man hours 
worked since January 1, 2002, when the 201 ``waiting period'' started.
     LGulf Stream Marine Stevedores business relies 50% on the 
importation of steel. Since the inception of Section 201 duties, 15 
full time employees and 80 union longshoremen have been laid off.
     LCapt. I.S. Derrick Independent Ship and Cargo Surveyors, 
Inc. is a leading cargo surveyor in the U.S. Gulf. Capt. I.S. Derrick's 
business relies 85% on surveying imported steel. This company, prior to 
imposition of Section 201 duties, had never laid-off employees for 39 
years.
     LThe ILA Local 1351, which provides a hiring hall for port 
day labor jobs, had a loss of 25% man-hours that can be directly 
related to steel 201.
     LAll Trans Port Trucking, Inc. has experienced the worst 
year in the 10-year history of their company in terms of volume and 
income. All Tran is a minority owned company that has lost 50% of its 
volume base. All Trans had to release 10 of its 35 employees (30%) 
because of fewer steel vessels arriving at Port of Houston.
     LChaparral Stevedoring Company, Inc., a stevedoring 
company with over 36 years presence in the U.S. Gulf, has drastically 
reduced hours and wages for their longshoremen, truckers and 
warehousemen.
     LCoastal Cargo of Texas, which provides terminal and 
stevedoring services, experienced a 35% decline in their steel business 
since Section 201 went into effect.

    The company chronicles, listed above, are but a few of those 
compiled in our ``Bible of Pain,'' which has shown a direct correlation 
to job, revenue and tax losses within Harris and surrounding counties 
in the State of Texas.
    Mr. Chairman, in summary, the imposition of this ``subsidy to 
domestic steel producers'' has and will continue to cause loss of 
American jobs and is not an effective solution to the travails of the 
domestic steel manufacturers. Bottom line, President Bush well knows 
that ``There is no right way to do the wrong thing''--and Section 201 
duties is ``THE WRONG THING!''
    Thank you for allowing me to appear before you today.

                                 

    Chairman CRANE. Thank you, Mr. Niemand. Now, Ms. Moncrief, 
I think you testified while we were at lunch.
    Ms. MONCRIEF. Probably.
    Chairman CRANE. No, I am kidding you about the newspaper 
article. Did you see it yet?
    Ms. MONCRIEF. No.
    Chairman CRANE. Well, they quoted you and your testimony 
before the Committee. It was filed at 1:09 p.m., and we had 
just gotten back here after breaking for a little over an hour. 
We are interested, those of us on the panel here are interested 
in hearing your testimony.

 STATEMENT OF LAURIE MONCRIEF, BOARD MEMBER, COALITION FOR THE 
  ADVANCEMENT OF MICHIGAN TOOLING INDUSTRIES, AND PRESIDENT, 
              SCHMALD TOOL & DIE, FLINT, MICHIGAN

    Ms. MONCRIEF. Thank you. Mr. Chairman and Members of the 
Subcommittee, I appreciate the opportunity to testify before 
you today. I am sorry you had to read it in the paper first, 
though.
    I am testifying on behalf of my business and the employees 
specifically in the tooling sector generally. I am the 
President of Schmald Tool & Die, located just outside of Flint, 
Michigan. Founded in 1948, we are a third-generation family-
owned business. We design and build stamping dies, injection 
molds, and do special machining. Today we employ 31 workers, 
down from 45 just a year and a half ago.
    In addition to serving as President of Schmald Tool & Die, 
I am also co-founder and Board Member of the Coalition for the 
Advancement of Michigan Tooling Industries. It is heartening to 
be invited to testify today. I am somewhat surprised that as an 
owner of a small, 31-employee company, there is room for me at 
a congressional hearing which includes the likes of AISI 
President Andrew Sharkey, Nucor Chief Executive Officer Dan 
DiMicco, and United Steelworkers of America President Leo 
Gerard.
    I hope the Subcommittee will receive and treat my testimony 
with the same urgency and credibility accorded the steel 
representatives. In this regard, I am compelled to say to the 
steel guys, I am all for a healthy and vibrant steel industry. 
You are important to our national security and economic 
vitality. I buy domestic steel to make my dies and molds and 
most of my customers stamp domestic steel in their shops. My 
business probably cannot live without a domestic steel 
industry. However, right now, I can't live with it. The steel 
tariffs threaten the long-term viability of my company and 31 
families in Flint, Michigan. While the intent of the tariffs 
may be good, the impact is mostly wrong.
    Depending upon how the sector is defined, there are 
approximately 1,300 tooling shops providing 40,000-plus direct 
jobs in the State of Michigan. Michigan accounts for roughly 25 
percent of the tooling sector nationally. Other tooling-
intensive States include Pennsylvania, Illinois, Ohio, and 
Indiana. Our industry provides tools, dies, and industrial 
molds for a wide array of industries including automotive, 
defense, aerospace, medical, and residential consumer goods, to 
name a few. Anyone who truly knows the manufacturing supply 
chain will tell you that without tooling there really cannot be 
any manufacturing. Tool makers are the backbone in metal 
bending and forming.
    As a die maker, the impact of the tariffs has been 
indirect, but very real and dramatic. At an alarming rate, our 
customers are significantly reducing their stamping of sheet 
metal and are turning to importing semi-finished and finished 
products which are not subject to the tariff. Based on the 
statements of earlier witnesses, it is painfully obvious that 
this is an accelerating trend, one that bodes ill for a wide 
array of manufacturing sectors, including tool and die makers.
    With regard to the tooling sector, the impact of the tariff 
was not a surprise. Six months ago, upon a request from the 
Committee on Ways and Means, the ITC released a fact-finding 
study on the tool and die and industrial mold sector. I would 
encourage you to review this ITC study. The study identified 
many problems already plaguing the tooling sector, but 
important to note is that the ITC determined that the steel 
tariffs would be yet another additional burden.
    Please permit me to quote two brief excerpts. According to 
industrial officials, higher sheet prices have adversely 
affected the price of domestic stamped parts, causing companies 
to seek out foreign stamped-parts sources, thereby reducing 
demand for domestic tooling. Discussions with officials of U.S. 
firms involved in the production of stamped parts confirm that 
the effect that the program has had on sheet steel pricing and 
availability in the U.S. market has caused them to start 
investigating a relocation of stamping operations offshore.
    Later in the ITC report, they were more explicit and 
ominous. Delphi, the world's largest parts supplier, has 
announced it has already begun to place contracts for some new 
steel-intensive parts and products with overseas manufacturing 
as a result of cost increases related to rising steel prices. 
Although the additional duties are staged and will expire after 
3 years, it is unclear whether any stamping production that 
actually moves from the United States will return at the end of 
the program.
    Mr. Chairman, I know my time is about to expire. I wish to 
thank you again for inviting me to this hearing, as well as 
Chairman Thomas for requesting the ITC to study the impact of 
these tariffs, and Congressman Knollenberg for his leadership 
on the issue.
    I would like to leave this Subcommittee with one Orwellian 
thought. We in the manufacturing supply chain are all equal, 
except some seem to be more equal than others, at the expense 
of others. This needs to change. Thank you.
    [The prepared statement of Ms. Moncrief follows:]
     Statement of Laurie Moncrief, Board Member, Coalition for the 
Advancement of Michigan Tooling Industries, and President, Schmald Tool 
                         & Die, Flint, Michigan
    I am the President of Schmald Tool & Die, located just outside 
Flint, Michigan. Schmald Tool & Die is a third-generation; six decade-
old, family-owned and operated tool and die shop. We design and build 
stamping dies and injection molds for a wide array of industries, 
including: automotive; defense; aerospace; and residential consumer 
goods. Today, we employ approximately 31 workers, down from 45 just a 
year and a half ago. My company is one of approximately 1,100 tool and 
die companies providing 31,000 jobs in the State of Michigan. 
Nationwide our industry employs nearly 129,000 workers. These numbers 
are significantly reduced in the last couple of years.
    As a die maker, the impact of the tariffs has been indirect, but 
very real and dramatic. At an alarming rate, our customers are 
significantly reducing their stamping of sheet metal and are turning to 
importing semi-finished and finished products, which are not subject to 
the tariffs. We anticipate that this activity will only accelerate in 
the near future.
    Tool making companies such as Schmald truly are the backbone of 
manufacturing. Tooling is, in its simplest sense, the means of 
production. ``Special'' tooling, such as dies and molds, is custom 
designed and made to manufacture specific products, generally in 
quantity, and to the desired levels of uniformity, accuracy, 
interchangeability, and quality.
    Why is tooling and machining important to the United States? The 
broad industrial group known as tool and die includes mold making 
(molds produce plastic parts), die cast dies (die casting means forming 
aluminum parts), forging dies (used to form iron and other metal 
pieces), stamping and trim dies (tools that stamp parts out of metal 
sheets), tools and fixtures (used to hold pieces in place to perform 
additional manufacturing steps), precision machining (forming objects 
by cutting to specifications within .001") and many other manufacturing 
specialties. These industries build the tools that are used as the 
building blocks of manufacturing. All mass manufactured objects begin 
at the hands of a tool and die maker.
    Unfortunately, the demise of U.S. manufacturing and therefore the 
tool and die industry is accelerating at an alarming rate. Unlike 
typical business downturns of the past when manufacturers simply cut 
back and waited for recovery, in the current downturn manufacturers are 
rapidly relocating outside the U.S. and large numbers of small and mid-
sized U.S. manufacturers are closing down permanently due to foreign 
competition. The resulting loss of family sustaining blue-collar jobs 
is undermining the U.S. middleclass and devastating rural communities 
where manufacturing is essential to the local economy.
    Many have argued that manufacturing is just facing a down cycle and 
will rebound. However, I wonder that any increase in domestic steel 
costs relative to steel costs in foreign markets provides an added 
incentive for customers to move production overseas. For example, 
Delphi, the world's largest automotive parts maker, has announced that 
it has already begun to place contracts for some new steel-intensive 
parts and products with overseas manufacturers as a result of costs 
increases related to rising steel prices. Although the additional 
duties are staged and will expire after 3 years, it is unclear whether 
any stamping production that actually moves from the U.S. would return 
at the end of the program.
    The International Trade Commission (ITC) has recently completed its 
(332-435) investigation on the conditions in the U.S. Tool, Die and 
Mold industry and submitted their report to the House Ways and Means 
Committee. The study paints a very bleak picture of the tool and die 
industry and the future of the U.S. economy. The industry is currently 
facing a problem with overcapacity. The overcapacity has been created 
in part because American companies are closing their U.S. manufacturing 
plants and moving offshore in search of fewer government regulations, 
lower taxes and cheaper labor. The steel tariffs have only made a bad 
situation worse.
    ITC pg 3-16. Of greater concern for die producers were the effects 
of tariffs and increased prices on sheet steel used by their stamping 
customers. According to industry officials, higher sheet steel prices 
have adversely affected the price of domestic stamped parts, causing 
companies to seek out foreign stamped-parts sources, thereby reducing 
domestic demand for stamping dies. Discussions with officials of U.S. 
firms involved in the production of stamped parts confirm that the 
effect the program has had on sheet steel pricing and availability in 
the U.S. market has caused them to start investigating the relocation 
of stamping operations offshore.
    The steel tariffs imposed by the President last March, which were 
intended to provide the domestic steel industry with protection from 
imports and an opportunity to restructure in order to become 
competitive on a global scale, have unfortunately resulted in 
dramatically higher prices, longer delivery times, shortages, 
allocations and lower quality for steel consumers. The tooling industry 
is poised to collapse under the additional weight of the steel 
safeguard tariffs.
    What will happen to this country if things continue to go poorly 
for the manufacturing sector? The U.S.'s economic strength has been 
based on its manufacturing capability. In order for these companies to 
continue to improve and grow they have relied on innovations in 
manufacturing that are brought on by the tooling and machining 
industry. If we are to continue to grow economically we need innovative 
American companies. For every manufacturing job lost we see ripple 
effects throughout the economy. However, as the market continues to 
falter for the industry, fewer companies are open and thus a large 
percentage of the creativity and innovations are lost.
    The broader U.S. economy is suffering as well because manufacturing 
does more than any other sector to stimulate the economy. The average 
income of $44,700 for an employee and the consequent spending power of 
manufacturing workers is higher than that of any other sector and, due 
to its high multiplier effect, manufacturing directly or indirectly 
generates more jobs than any other sector. The manufacturing sector and 
the non-manufacturing industries that are directly linked to 
manufacturing, account for 45 percent of U.S. GDP and 41 percent of 
national employment. In fact, a study done by Penn State University 
showed that when a manufacturing company cut 155 jobs, the total 
direct, indirect and induced effect on the community for employment saw 
an additional loss of 227 jobs; total economic output lost $19,758,655; 
sales of goods and services fell $8,212,764; personal income dropped 
$3,330,358; and local payroll taxes fell $3,330. But as we see the 
closure of business, many of the new jobs created by small 
manufacturers in recent years are being permanently lost.
    In summary, the U.S. tool, die, mold and precision machining 
industries as well as general manufacturing are in serious trouble. The 
causes and solutions are broad and complex. I encourage the 
Subcommittee to hold future hearings to examine the findings of the 
International Trade Commission's 332 investigation into the Tool, Die 
and Mold industry. Also, the Committee should pay close attention to 
the ITC's 332 investigation into the impact of the President's 
imposition of the tariffs of certain steel on consuming industries to 
help steer future actions. You as our elected officials have a huge 
job, but in order for them to keep our economy growing and our Nation 
safe we need your support for the tooling and machining industry.

                                 

    Chairman CRANE. Mr. Jones?

  STATEMENT OF JAMES M. ``JIM'' JONES, VICE PRESIDENT, DIXIE 
 INDUSTRIAL FINISHING COMPANY, TUCKER, GEORGIA, AND PRESIDENT, 
    GEORGIA INDUSTRY ASSOCIATION, ON BEHALF OF THE NATIONAL 
  ASSOCIATION OF METAL FINISHERS, ORLANDO, FLORIDA, THE METAL 
       FINISHING SUPPLIERS ASSOCIATION, AND THE AMERICAN 
  ELECTROPLATERS & SURFACE FINISHERS SOCIETY, ORLANDO, FLORIDA

    Mr. JONES. Mr. Chairman, Members of the Committee, I am Jim 
Jones, Vice President of Dixie Industrial Finishing Company. We 
are located in Tucker, Georgia, and have 85 employees. For 43 
years, we have supplied metal finishing services on steel and 
other metals to a range of industries, including automotive, 
aerospace, construction, lawn and garden, heavy equipment, 
electronic cabinetry and a host of others.
    I am testifying today on behalf of the National Association 
of Metal Finishers, the Suppliers of the Metal Finishing 
Industry, the American Electroplaters and Surface Finishing 
Suppliers, and I am also the current President of the Georgia 
Industry Association, who has established an existing industry 
task force on saving jobs and growing our manufacturing base.
    My reason for being here today is jobs. Leaders in our 
industry are commenting this year that the metal finishing is 
possibly experiencing the worst period we have seen in the past 
40 years. Some in our industry tell us they have seen declines 
by as much as 60 percent and others are closing their doors. 
One metal finishing company in the Atlanta area operating for 
over 100 years is now completely out of business as of this 
year.
    Our own company has 25 fewer employees since the beginning 
of last year. Our experience is typical of the industry as a 
whole, though not as drastic as some. We believe that one of 
the major reasons for this is the downstream or ripple effect 
of the Section 201 steel trade action on key segments of the 
U.S. manufacturing base. This effect is now becoming painfully 
clear to industries like the metal finishing. Our economic 
livelihood depends on the health of our customers, the steel-
consuming industries. When our customers suffer, we suffer.
    Like numerous other industries, we play a significant 
value-added role in the steel manufacturing supply chain. We 
make most of the things Americans come in contact with every 
day work better, look better and last longer. We apply a range 
of coatings onto literally millions of different types of 
fabricated steel, castings, stampings, forgings and wire. Steel 
products account for an estimated 60 percent of finished goods 
by volume, and our role in corrosion protection alone in the 
United States provides about a $200 billion economic benefit.
    As others have testified here today, material costs for 
steel are increasing significantly, and the steel consumers 
face extremely difficult times. Once the business of a domestic 
steel-consuming industry disappears, another piece of the metal 
finishing market disappears, and seldom does it return.
    In fact, not only are metal finishing firms seeing a 
dropoff in business from their steel-consuming customers, many 
finishers are taking price reductions from customers just to 
keep the work they have. The dynamics have become very 
destructive. Essentially, the steel consumer that is 
fabricating a part is faced with uncontrollably higher 
materials cost, but he must find a way to lower the overall 
cost of his product.
    What are his options? One is to make up for his higher raw 
material costs by extracting a lower price for his metal 
finishing services. Another, if he can, is to simply source the 
manufacturing and the finishing out of country.
    This puts in motion a second problem: Most finishing firms 
are quite small, and therefore are true price-takers in this 
market, so they end up competing against one another just to 
get the business in the door, even if they have to lose money 
in the short term. Thus, the steel tariffs have both shrunk 
domestic demand and have increased downward pricing pressures 
for metal finishing services. These combined effects have had a 
significant negative impact on the U.S. metal finishing 
industry.
    While my industry clearly recognizes there is a combination 
of factors responsible for our financial pain, tariffs on steel 
have played a significant role in compounding and accelerating 
the problem.
    We thank the Committee for the opportunity to appear today 
and request that the ITC conduct a section 332 investigation to 
consider the impact of the steel tariffs on the U.S. economy. 
We hope that in the context of that investigation, the ITC will 
include consideration on the impact that the steel tariffs have 
had on the U.S. metal finishing industry. Thank you.
    [The prepared statement of Mr. Jones follows:]
 Statement of James M. ``Jim'' Jones, Vice President, Dixie Industrial 
  Finishing Company, Tucker, Georgia, and President, Georgia Industry 
Association, on behalf of the National Association of Metal Finishers, 
 Orlando, Florida, the Metal Finishing Suppliers Association, and the 
 American Electroplaters & Surface Finishers Society, Orlando, Florida
    Good morning, Mr. Chairman and Members of the Subcommittee. I am 
Jim Jones, Vice President of Dixie Industrial Finishing Company. We are 
located in Tucker, Georgia, and have 85 employees. For 43 years, we 
have supplied metal finishing services on steel and other metals to a 
range of industries, including automotive, aerospace, construction, 
lawn and garden, heavy equipment, electronic cabinetry, and a host of 
others.
    I am testifying today on behalf of the National Association of 
Metal Finishers (NAMF), the leading industry trade association for the 
metal finishing industry, as well as its sister organizations, the 
Metal Finishing Suppliers Association (MFSA) and the American 
Electroplaters and Surface Finishers Society (AESF). I am also the 
current President of the Georgia Industry Association, which has 
established an existing industry task force focusing on saving jobs and 
growing our current manufacturing base.
    My reason for being here today is simple. Leaders in our industry 
are commenting this year that metal finishing is possibly experiencing 
the worst period we have seen in the past 40 years. Some in our 
industry tell us they have seen declines by as much as 60 percent, and 
others are closing their doors. One metal finishing company in the 
Atlanta area operating for over 100 years is now completely out of 
business as of this past year. Our own company has 25 fewer employees 
since the beginning of last year. Our experience is typical of the 
industry as a whole, though not as drastic as some.
    We believe that one of the major reasons for this is the 
downstream, or ``ripple effect,'' of the 201 steel trade action on key 
segments of the U.S. manufacturing base. This effect is now becoming 
painfully clear to industries like metal finishing. Our economic 
livelihood depends on the health of our customers--the steel consuming 
industries. It's basic economics--when our customers suffer, we suffer.
    Like numerous other industries, we play a significant value-added 
role in the steel manufacturing supply chain. We make most of the 
things Americans come in contact with every day work better, look 
better and last longer. We apply a range of coatings onto literally 
millions of different types of fabricated steel, castings, stampings, 
forgings, and wire. Steel products account for an estimated 60 percent 
of finished goods by volume, and our role in corrosion protection alone 
in the U.S. provides about a $200 billion annual economic benefit.
    As others have testified here today, materials costs for steel are 
increasing significantly, and the steel consumers face extremely 
difficult times. Once the business of the domestic steel consuming 
industries disappears, another piece of the metal finishing market 
disappears, and seldom does it ever return.
    In fact, not only are finishing firms seeing a drop-off in business 
from their steel-consuming customers, many finishers are taking price 
reductions from customers just to keep the work they have. The dynamics 
have become very destructive. Essentially, the steel consumer that is 
fabricating a part is faced with uncontrollably higher materials costs, 
but he must find a way to lower the overall cost of his product. What 
are his options? One is to make up for his higher raw material costs by 
extracting a lower price for his metal finishing service. Another, if 
he can, is to simply source the manufacturing--and the finishing--out 
of country.
    This puts in motion a second problem. Most finishing firms are 
quite small and therefore are true ``price takers'' in this market, so 
they end up competing against one another just to get business in the 
door, even if they have to lose money in the short term.
    Thus, the steel tariffs have both shrunk domestic demand and have 
increased downward pricing pressures for metal finishing services. 
These combined effects have had a significant negative impact on the 
U.S. metal finishing industry.
    Many who follow the chronology of the Nation's economic plight 
recognize that the current downturn for manufacturing began in the 2nd 
quarter of 2000. While my industry clearly recognizes there is a 
combination of factors responsible for our financial pain, tariffs on 
steel have played a significant role in compounding and accelerating 
the problem.
    We thank the Committee for requesting that the ITC conduct a 
section 332 investigation to consider the impact of the steel tariffs 
on the U.S. economy. We hope that in the context of that investigation 
the ITC will include consideration of the impact that the steel tariffs 
have had on U.S. metal finishers.
    Thank you for this opportunity to appear before you today.

                                 

    Chairman CRANE. Thank you. Ms. Moncrief, some of the 
testimony has focused on the number of jobs lost in your 
industry that are attributable to higher steel tariffs. Of 
course, this discussion today is about these jobs versus steel 
jobs. Can you comment on how you feel about the government 
making decisions that cut jobs in your business in order to 
save jobs in another business?
    Ms. MONCRIEF. Yes. I mean, I am not following the question. 
Are you asking me a question about that?
    Chairman CRANE. Yes.
    Ms. MONCRIEF. My steel prices are not affected, but my 
customers' steel prices are affected. Our industry is facing 
the exact same thing that the steel industry is facing: high 
health costs, high utilities, high taxes, Occupational Safety 
and Health Administration, the whole 9 yards. So, we are facing 
the same things, as well as foreign competition. China is a 
dollar an hour compared to us in our industry, and so we are 
facing the exact same things the steel industry is facing, but 
the steel tariff has been destructive to our customer base who 
now can't compete, is moving overseas, and when they move that 
business overseas, they buy the tooling overseas. Did that 
answer the question?
    Chairman CRANE. Mr. Jones, do you want to comment on that?
    Mr. JONES. I would agree with Ms. Moncrief. When the tool 
and die go overseas, the stamped parts go overseas, the 
finished product goes overseas, the finishing of the 
electroplating, normally, the packaging, then we just have an 
importation and a distribution. We have then lost many, many 
jobs in the steel-consuming sector, and it goes beyond tools, 
dies, and stampings.
    Chairman CRANE. Mr. Bradford, in your written testimony, 
you state that reputable analysts show the average domestic-
integrated steelmaker has much higher costs than its foreign 
competitors, as well as its domestic mini-mill counterparts. 
What do you think are the long-term prospects for integrated 
mills who have recently restructured, such as the ISG?
    Mr. BRADFORD. It is actually a quite different and 
difficult problem, because if you were to pick a place to build 
a steel mill, integrated, you would go to Brazil, you would go 
to South Africa, places that have cheap iron ore. Their waste 
iron ore is higher than what we mine in the United States, and 
that is a major cost. This is not a favorable place. Frankly, I 
know that President Bush has been against the Kyoto Protocol, 
something I applaud, that would wipe out the integrated steel 
industry because the integrated steel companies emit three 
times more carbon dioxide than the mini-mills do.
    I saw a study done by one of the integrated companies, so 
you have to take it with a little bit of a grain of salt, that 
suggested that there would have to be a tax of $25 per ton of 
carbon dioxide emitted, which would be $75 per ton of steel for 
an integrated, $25 for a mini-mill. That is not sustainable.
    Actually, the restructuring of LTV Steel with ISG, 
principally the labor contract, is what I think led to the 
consolidation of the industry. You didn't have any of the 
integrated companies consolidating or talking about until that 
labor contract was signed or at least agreed to. Why? It 
eliminated a lot of the legacy liabilities that the integrated 
steel companies were afraid of taking over. Nucor did make a 
couple acquisitions, but they were adding to capacity. The real 
big changes came with that ISG labor contract. It makes a big 
difference.
    Consolidation may not be the panacea that people say it is. 
I think the most respected steelmaker in the United States in 
the last couple generations was a guy by the name of Tom 
Graham, who the union has called a smiling barracuda, but who 
ran U.S. Steel's steel-making operations and took it from 
rivers of red ink to quite substantial profits.
    He has recently put out a paper--actually, maybe it is a 
year and a half ago--claiming that, first of all, computer 
systems will not be able to communicate with each other. If you 
have the same largest customer, you may lose some business. 
Management salaries may be different at the two companies that 
merge, and you would end up with the higher one. They had a 
whole long list of reasons against consolidation.
    I am personally in favor of consolidation because I think 
we have had an unbalanced playing field, with three big 
customers beating up on nine suppliers. If there were three big 
automobile companies against three or four steel companies, 
there wouldn't have been continuous steel price declines for 
the last decade. So, I would like to see consolidation from a 
commercial standpoint. I am not an operating guy, so I am the 
wrong guy to talk about in that regard, but Graham I think was 
the best operator that I have ever seen, and he was against 
consolidation.
    Chairman CRANE. Mr. Schulingkamp, I appreciate the 
cooperation and communication with your Washington 
representation. What is the overall effect on the New Orleans' 
economy or the change in make-up of steel imports as a result 
of Section 201?
    Mr. SCHULINGKAMP. Well, as I have testified, we have lost 
over a half million tons of cargo that was passing over our 
docks in 2001 from 2002, and you have to put that in the 
context of in 1998 we had almost 8 billion tons of cargo 
coming. As Mr. Gerard testified correctly, largely due to the 
efforts of the successful dumping and countervailing duty 
complaints which he won, that had been reduced to about 2.8 
million tons in 2001, even before Section 201 was enacted.
    So, the effects on the economy, my colleague, Mr. Campbell, 
I think has already testified about direct jobs. The Port of 
New Orleans has lost revenue, but our tenants, who are the 
stevedores and the terminal operators, the barge lines, the 
handlers, the truckers, all of those people involved in steel, 
including, by the way, the Admiralty Bar in New Orleans, who 
handles cargo claims, their business is down significantly 
because of lost steel.
    Chairman CRANE. Mr. Levin.
    Mr. LEVIN. Thank you, and welcome. Mr. Bradford, it seems 
like it was a day ago, but it was just, what, about 45 minutes 
ago, you testified about the surge that occurred, and I just 
went back quickly with the help of staff. I don't have the 
exact figures, and I am going partly also from my memory, but 
when you look at the surge in 1998, I think the bulk of it came 
from Russia, Japan, Brazil and Korea, and they are not 10-
cents-an-hour economies, steel producers, but they are heavily 
subsidized, and also the wages are much, much lower. In Russia, 
they weren't paying people anything. So, I think to simply 
dismiss it is really a mistake.
    The surge, in substantial measure, came as a result of 
excess capacity, with a good portion of that capacity coming 
from economies that heavily subsidize their steel production. 
That is part of the problem.
    Mr. BRADFORD. I didn't refer, frankly, to 1998. I was 
talking about 2002 figures. I would agree with you that there 
was a----
    Mr. LEVIN. Okay, but the surge occurred, that is when the 
surge occurred. It started, it really hit us in 1998.
    Let me just ask, so I am clear, in terms of the port, and, 
Mr. Jefferson, my pal, will go into this further, are steel 
shipments up or down this year and last year from 2001?
    Mr. SCHULINGKAMP. Yes, the amount of steel, and I think the 
statistics come from the Customs Department, that have come in 
through the Customs Port District of New Orleans have 
increased. However, what has gone over the docks and has 
happened within the physical limits of the port has gone down. 
Moreover----
    Mr. LEVIN. Explain that.
    Mr. SCHULINGKAMP. The Customs Port District runs beyond the 
physical limits of the Port of New Orleans. Additionally, a big 
part of the increase which came was a result of two main 
products. One is steel slabs, which of course were imported for 
the domestic steel industry, which was I think favorably 
treated under Section 201. While we welcomed that business, 
that business has an economic value much less than the other 
types of steel that were more prevalent prior to Section 201.
    For example, to unload slabs, that cost can be less than 
$2, $1.75, or $1.85 a ton. The cost for handling coils runs in 
the neighborhood of $6 to $8. Additionally, of course, Mr. 
Levin, the further handling of that cargo through the docks 
creates further value. So, we are not complaining about the 
business that came; we are just distinguishing it and saying 
that it actually resulted in a net economic loss.
    Mr. LEVIN. That helps. Ms. Moncrief, let me just say a 
word. The irony is the machine tool and tool and die business 
has been in trouble for years. I come from near you, and I have 
seen the decline. The irony is that those who don't like the 
steel tariffs, by and large, here are also those who opposed 
any action to help the tool and die or the machine tool 
industry. Those who felt that there had to be something done 
about the steel industry after the surge in 1998, including 
myself, have been those who have urged there be some attention 
to the health of the tool and die industry.
    As I understand it, if you look at the causation factors, 
the price of steel over the last 6, 7, or 8 years, hasn't been 
the major source of decline, right? Canada, as I understand it, 
there is an influx from Canada, where there is some heavy 
subsidization of your competitors.
    So, I think if you put them on a scale, you have to look 
far beyond the price of steel, in terms of the decline of your 
industry in our State in the last 10 years; isn't that true?
    Ms. MONCRIEF. Yes, I do agree with that. As I said in my 
statement, and in accordance with the ITC study, there are 
other problems in our industry. Actually, those other problems 
are very similar to what the steel unions or the steel mills 
are facing.
    Mr. LEVIN. Right.
    Ms. MONCRIEF. We are facing the same things they are, but 
the steel tariff added to our problems.
    Mr. LEVIN. I finish by I think saying what you were saying. 
You are in the same boat with them on most factors, and you 
have picked out one where you have conflict, but the rest of 
the time you are facing some of the competitive factors that 
they are.
    Ms. MONCRIEF. Yes, that is exactly true. I totally agree 
with the statement that something needs to be done with--it 
needs to be a fair playing field.
    Mr. LEVIN. Right.
    Ms. MONCRIEF. The tooling, we are facing the exact same 
thing with the dumping, and Canada, and the dollar, and 
everything is the exact same.
    Mr. LEVIN. Okay, thanks.
    Ms. MONCRIEF. We don't have a tariff, and I don't think it 
is the answer because then it is just going to push it onto 
somebody else.
    Mr. LEVIN. Thanks.
    Chairman CRANE. Mr. English.
    Mr. ENGLISH. Thank you. I would like to follow up on that, 
Ms. Moncrief. The gentleman from Michigan, as always, is 
extremely knowledgeable on points of trade policy. You had 
mentioned the section 332 study, which I happen to have right 
here. My role in this was that I had requested that the 
Committee move forward with it and, as a result, we have a 
better picture of the tool and die industry than just about any 
industry in the manufacturing sector in crisis today. You are 
picking on one factor which I think, as a stamping operation, 
particularly affects you.
    Having actually read this report and having reviewed it, 
what I have found is that raw materials, as a cost share, only 
make up typically 19 percent on the average within tool and 
die. Also, the concerns of tool and die producers who testified 
before the ITC were in this order: One, competition from low-
cost imports; two, shift of production by U.S. customers to 
foreign production locations; three, high U.S. labor costs, 
health care costs, insurance costs, and then the market forces 
of the slow economy.
    My concern with the testimony I have heard today is we have 
had almost a single-minded focus on one factor that has been 
changed, but as a practical matter, doesn't this report suggest 
that the problems with tool and die are not only hardly limited 
to the steel pricing, but more to the point, for most tool and 
die producers, steel price fluctuations have been a very minor 
factor; is that not the case?
    Ms. MONCRIEF. Yes. As I stated earlier, we buy domestic 
steel, and actually tool steel is exempt from the tariff--both.
    Mr. ENGLISH. Absolutely, and I think there was a reason for 
that exemption.
    Ms. MONCRIEF. Yes, there is.
    Mr. ENGLISH. The other point is I took the liberty of 
reading your testimony before the section 332, and at the time 
you testified before the ITC, you didn't cite steel as one of 
your concerns. What has changed your mind since then?
    Ms. MONCRIEF. Well, as in my statement, and the ITC's 
investigation, Delphi is a very big customer of ours. 
Automotive----
    Mr. ENGLISH. I understand they are a substantial customer 
of yours, but at the time you were testifying, in your verbal 
testimony, you didn't cite the pricing of steel as a problem, 
did you?
    Ms. MONCRIEF. Well, at that time, our customers were not 
relocating at the rate they are currently. Business has gone 
down significantly even since that hearing.
    Mr. ENGLISH. I understand that, but obviously the crisis in 
the tool and die industry, which some on Capitol Hill are 
wholly attributing to the price of steel, is something that 
pre-dates the steel policy, and for most tool and die 
manufacturers this has really been only a marginal factor.
    In fact, when you testified before the ITC, weren't you 
seeking remedies that were similar to what the steel industry 
has been seeking?
    Ms. MONCRIEF. As a matter of fact, I don't think, again, 
the tariff is the answer. Remedies may be one thing. We never 
pinpointed any specific remedies, nor did I choose any specific 
remedy in my testimony.
    Mr. ENGLISH. Well, we are delighted to have you here 
because I know, from my tool and die guys, that you are highly 
regarded in the industry, and it is a real privilege to have 
someone here of your stature.
    Now, quickly, while I have time left, Mr. Bradford, do you 
agree that the U.S. steel industry has undergone extensive 
consolidation and restructuring in the last year? Based on 
this, do you agree that the industry is using its remedy period 
to adjust to import competition, as the President has 
requested?
    Mr. BRADFORD. Actually, there hasn't been much 
consolidation yet, other than by Nucor. There are proposals by 
U.S. Steel to acquire National, A.K. to acquire National, ISG 
to acquire Bethlehem.
    Mr. ENGLISH. Don't those take a long time in the pipeline?
    Mr. BRADFORD. Oh, they do. They do. They absolutely do.
    Mr. ENGLISH. Now, spot prices for flat products have fallen 
25 percent or more from their peaks in July 2002. An article, 
on March 24, 2003, in American Metal Market, states that an 
attempted price increase on sheet products, one that was sought 
in order to offset scrap-price increases fell flat. Would you 
agree, then, that the price trends continue to point downward?
    Mr. BRADFORD. I would say they are more stable, but 
certainly the price increases did not go into effect.
    Mr. ENGLISH. Final question. According to World Steel 
Dynamics, hot-rolled sheet prices in the United States are now 
lower than those in many other countries, including our buddies 
in France, Germany, China and the United Kingdom. Doesn't this 
confirm that the President's Section 201 program is not 
creating unusually high price levels for steel consumers in the 
United States?
    Mr. BRADFORD. I am not so sure, frankly, that it is the 
Section 201 or the weaker dollar, but clearly you are correct 
that prices today are very, very close all around the world 
except for Korea where prices are the lowest in the world. 
There is a gap in China, until recently, and now the Chinese 
have shut off the market. I just hope, frankly, that the U.S. 
mills who have shipped a lot to China will get paid.
    Mr. ENGLISH. A ray of light. Thank you very much.
    Chairman CRANE. Mr. Jefferson.
    Mr. JEFFERSON. Thank you, Mr. Chairman.
    I would like to take the special privilege of welcoming 
these two distinguished men from my home city of New Orleans, 
Mr. Schulingkamp and Mr. Campbell, who represent different 
sides of the street there--one management and one labor--but 
who are together on this issue because of the effect of it. It 
crosses both in quite significant ways, and I am very 
privileged to have you in front of our Committee, and welcome, 
and I have enjoyed your testimony.
    Mr. Levin cleared up an issue for me from the last round of 
testimony from I think Mr. DiMicco, who said I guess what is 
true; that you can prove anything with figures if you decide 
how you want to argue them. The fact of it is that, as you 
point out, as slab and other products were not subject to the 
tariff, they have increased as they have moved through the 
port, but, nonetheless, the cost of handling them has been 
quite less than for the higher priced goods, and so it explains 
a great deal about what happened there, when you talk about 
increases in activity and loss of money at the same time.
    I want to ask one question before I ask anything be cleared 
up on that. I don't often quote the Times Picayune, my 
newspaper. I don't always agree with it, but it says something 
here that a policy, speaking of the President's Section 201 
tariff policy, that requires 1,022 exemptions, so much 
tinkering, it says, in such a short period of time, clearly, is 
a bad one.
    Have you ever seen a Section 201 action put in place or any 
other action that has required this many exceptions to try to 
make it right? Would you conclude that, as our newspaper, 
anyone here, that if you have to do that much tinkering to it, 
it couldn't be a good policy to start with, huh?
    Mr. BRADFORD. Are you asking me?
    Mr. JEFFERSON. Yes, or anyone.
    Mr. BRADFORD. I am not a trade expert, but I have talked to 
the people involved with those exemptions, and the steel 
business is not as homogeneous as people think it is. There are 
a lot of very specialty products that aren't made in this 
country.
    Mr. Gerard talked about rail. There are no producers of 
really high-quality rail in this country. There will be in a 
couple weeks. There is a brand new mill about to start up, but 
there hasn't been any, so that has been imported, and it is not 
part of Section 201 anyway.
    Mr. JEFFERSON. If you put together a Section 201 policy 
that requires 1,022 exemptions in less than 18 months--in 12 
months or so--that is a sign of a pretty bad policy, at least 
one that was not well thought-out, don't you think or a 
shortsighted one?
    Mr. BRADFORD. Let me give you a couple thoughts you might 
find interesting. Of all of the products covered by the Section 
201, the only ones that really ran up in price were flat-rolled 
steel. Rebar prices didn't go up, even though they had a 15-
percent tariff; merchant bars had 30-percent, they didn't go 
up; plate had 30-percent, it didn't go up. The difference was 
the closure of LTV Steel, the sudden closure panicked their 
customers, and they not only rushed out to find new suppliers, 
they double ordered. By last summer they ended up with excess 
inventory.
    It wasn't, I don't think, the Section 201 that did it, and 
I don't think the Section 201 also did the consolidation, but 
the fear of the coming Section 201 did contribute. It was the 
industry that asked for the Section 201. I don't think the 
President would have done it on his own, but I don't know the 
man, so I don't want to put words in his mouth.
    Mr. JEFFERSON. Dave. Mr. Schulingkamp.
    Mr. SCHULINGKAMP. Well, I think that your illustration just 
shows how difficult it is for government to attempt to 
interfere and impose broad policies in the economic arena. We 
heard from so many witnesses today about the downstream effects 
in a variety of industries, and if they all came in and asked 
for intervention by the executive or congressional branch, I 
think that we would find a situation where we would have 
confusion and more distortions of the market.
    Mr. JEFFERSON. Mr. Campbell, you represent not just the 
Port of New Orleans, but there are workers all over this 
country who have been affected in the same way. How large is 
this coalition that you and Mr. Schulingkamp represented, and 
others here, with respect to those who have come together to 
fight against these tariffs who represent ports, and labor 
unions, seafarers and longshoremen, across the----
    Mr. CAMPBELL. It is really growing, but may I correct 
something here? When we get talking about the Port of New 
Orleans and the increase of steel, we are talking about steel 
slabs and rail rods which is up. It represents 25 percent of 
the steel in the Port of New Orleans, and that is up 26 percent 
from what it was the year before.
    So, somewhere we might have got some misreading here, but 
overall, steel is up slightly, but we are talking about the 
steel that affects our work force here in the Port of New 
Orleans.
    I sympathize with my other steel mill brothers because each 
and every one of us has the same amount of salt in our sweat, 
blood and tears. I feel their pain, and I hear their cry. The 
reason why I can say that, because I represent the people in 
the Port of New Orleans that is being unemployed with the 
Section 201 tariffs on steel. I represent the people that are 
part-time employed now because of the Section 201 on steel.
    We got to talking about loss of health care, I have got 
people that are not going to have health care, no kind of care, 
not even funds to purchase groceries during the week because of 
jobs lost.
    So, I understand. I understand a whole lot more than some 
of us think that we understand, but we are talking about the 
effect that the Section 201 imposes on the worker and 
especially the maritime industry in the United States.
    Mr. JEFFERSON. Thank you, Mr. Chairman.
    Chairman CRANE. Thank you. Mr. Becerra.
    Mr. BECERRA. Thank you, Mr. Chairman, and thank you all for 
your testimony today.
    I would like to follow up on a question that I asked of the 
last panel with regard to consumer prices, not the steel-
consuming industries, but to the end consumer folks out in 
America, the 280 million Americans.
    We were told that to impose these Section 201 tariffs would 
ultimately lead to higher prices for consumers, and my 
understanding is that, over the last 6 or 7 months that have 
seen these tariffs in place, that consumer prices on products 
that contain substantial amount of steel, that those prices 
have not gone up; in fact, in many cases, they have gone down.
    Now, I know there are a lot of factors involved here. We 
have got a slowing of the economy. We have got other factors 
that could be involved as well, but can you give me your sense 
of what the impact has been of the tariff to the American 
consumer? To date, I don't think we have seen a lot of 
increases in prices of products that contain a substantial 
amount of steel.
    Mr. BRADFORD. If you want to overly generalize, there are 
really two kinds of steel consumers in the United States. There 
are those that are capital related--heavy construction, 
machinery and that type--and there are the consumer goods. Now, 
the consumer goods tend to be sheet steel products made by 
automobile, appliance and companies of that type. They did not 
have to pay higher prices last year.
    Those contracts, as someone had said earlier, were signed 
either in late 2001 or, in some cases, 3 years earlier, and 
those prices went down 2 to 3 percent last year, despite the 
spot price going up in hot-rolled coils 100 percent. The hot-
rolled coils going into the construction market to people who 
are putting up factory buildings, which is not a good market 
these days. It goes into a number of the heavier goods. The 
automobile companies have protected themselves.
    The people that got hurt were the guys in the middle who 
were supplying auto parts, didn't have the contract pricing, 
but had to pay the spot price. Those are the people that got 
caught, and it was a timing issue.
    Mr. BECERRA. To go further into that point, and I think 
that my friend from Pennsylvania, Mr. English, got into this a 
bit as well, it appears that the actual price of hot-rolled 
steel is actually less in America than it is with many of our 
competitors abroad.
    So, again, the question comes back, how are we providing 
the steel-consuming industry or placing them at a disadvantage, 
placing our steel-consuming industries at a disadvantage, if 
the price of, in this case, hot-rolled steel is actually less 
in America than it is in many of the countries that compete 
with us?
    Mr. BRADFORD. I do a lot of work in Asia and Europe, and 
the prices right now are very, very close. You have got to 
convert to metric tons, but if you take the U.S. price, which 
is about $300 a ton, as someone said, that is $330 metric.
    Mr. BECERRA. Right.
    Mr. BRADFORD. The Japanese charge the Korean re-rollers 
$300. That is a big market. The Korean price is $275 per net 
ton.
    Mr. BECERRA. Then, maybe the information we have is 
incorrect.
    Mr. BRADFORD. That is close.
    Mr. BECERRA. I am looking at a chart that says--and the 
source is CRU International, Limited, this is from some of the 
steel publications--that the price out of Japan is closer to 
$360 a metric ton versus the U.S. price at about $325/$330 a 
metric ton.
    [The chart follows:]

    [GRAPHIC] [TIFF OMITTED] 89863A.002
    

                                 

    Mr. BRADFORD. Well, the $350/$360 is a list price to some 
markets, but I know, specifically, to the re-rollers in Korea, 
which is a very big market, it is $300.
    Mr. BECERRA. Now, you are getting into some specific niche 
areas, and it would be difficult to make the comparisons.
    Mr. BRADFORD. A lot of people have list prices, and they 
are not the real prices.
    Mr. BECERRA. Let me make one other----
    Mr. BRADFORD. There was some going into China, by the way, 
at $400, now down to less than $300.
    Mr. BECERRA. Ms. Moncrief, I think we all appreciate your 
testimony because too often we see industries showing signs of 
illness, and by the time we try to address the problem, it is 
too late, and we see the industry die away. Perhaps that is one 
of the reasons why, for many of us, Section 201 is so 
important. This is too important an industry to let it die 
away.
    Tool and die, I don't think anyone wants to see that die 
away because we know how important it is. The jobs that you 
offer are critical to a lot of folks and helping families 
retain a status within the middle class, and so I think a lot 
of us want to hear very closely what you say.
    I think one of the difficulties I have is that, when you 
take a look at the price of steel over the last 10 or 20 years, 
it is actually much lower today than it has been in the past. 
So, if you are suffering right now, compared to the prices of 
5, 6, or 7 years ago when they were twice as high, I am not 
sure what your status was then, how you were surviving then, 
but right now the prices are certainly lower than they were 
well before, they are obviously higher than they were a year 
ago perhaps, but given the trends, it is a much lower price.
    So, I am wondering how you relate that to your current 
prices and relate that to your last 10 years of prices, and I 
think you said you have been around since 1948.
    Ms. MONCRIEF. Yes, I have not, personally, been around, 
thank you, since 1948.
    [Laughter.]
    Mr. BECERRA. Absolutely not.
    Ms. MONCRIEF. I think that was a slam.
    Mr. BECERRA. Absolutely not. Please let me make sure that 
that is clear for the record, that 1948 you were still 
someone's imagination and beautiful thought, okay.
    [Laughter.]
    Ms. MONCRIEF. Again, tool steel is exempt from the tariff. 
So, the steel prices, and the increase in the steel prices, are 
not affecting me directly. What I get from my customers, the 
Delphis, the Chamberlains, the large corporations are telling 
us, ``Our sales are way down, our manufacturing is way down, 
steel prices are up, and we are moving to China. So, thanks, we 
don't need any more tools.'' That is what we are hearing.
    Mr. BECERRA. Thank you. Thank you, Mr. Chairman.
    Chairman CRANE. Thank you all.
    Well, that concludes our hearing, and the record will be 
open until the close of business on April 9, 2003, but let me 
again express appreciation to all of you for your 
participation. It is vitally important for us in the decision-
making process, and this input today has been valuable.
    So, with that, we will adjourn.
    [Whereupon, at 4:22 p.m., the hearing was adjourned.]
    [Submissions for the record follow:]

                                        Advance Transformer Company
                                           Rosemont, Illinois 60018
                                                      April 4, 2003

Honorable Phil Crane
Chair, Subcommittee on Trade
Committee on Ways and Means
House of Representatives
Washington, DC 20515

Dear Chairman Crane:

    Please accept this letter as testimony for the record in lieu of a 
personal appearance at the hearing held on March 26th on the topic of 
the ``Impact of the Section 201 Safeguard Action on Certain Products.'' 
I submit this testimony as Chief Executive Officer of Advance 
Transformer Company, a division of Philips Electronics.
    Advance Transformer Company, headquartered in Rosemont, Illinois is 
the market leader in manufacturing and sales of electronic and 
electromagnetic ballasts for fluorescent and High Intensity Discharge 
lamps. Advance employs 400 people in its Rosemont headquarters, and 
operates three U.S. factories employing 450 in Boscobel, WI, 175 in 
Monroe, WI and 20 in Chicago. Advance also operates manufacturing 
facilities in Mexico and is a sister company to other Philips 
Electronics ballast businesses that manufacture in Asia, Europe and 
South America. North American sales approximate $500 million annually.
    The 201 tariffs have severely harmed Advance Transformer Company. 
The tariffs have caused severe disruptions in steel supplies, double 
digit increases in steel prices, and substantial market share losses to 
our competitors, who manufacture nearly all of their products outside 
of the United States.
The 201 tariffs created severe supply disruption.
    Advance purchases 60,000 tons of steel annually, nearly all of 
which is purchased from multiple domestic steel producers. Advance 
typically negotiates annual contracts with these suppliers that cover a 
calendar year. The terms of the contracts set prices and expectations 
for quantities to be delivered and other performance standards. 
Historically, this arrangement has been beneficial, and only rarely has 
any supplier missed a delivery date. All this changed dramatically 
beginning July 2002. Two of our suppliers, including our largest, 
routinely missed scheduled deliveries of substantial quantities of 
steel. In some weeks, less than 70% of steel ordered was received (see 
attachment). This disruption continued until the end of the year, when 
Advance began purchasing steel at the higher prices that went into 
effect in 2003.
    I believe that the 201 Action created such a substantial increase 
in demand for domestic steel, that our suppliers could not meet it all. 
Rather than deliver steel to Advance at a price negotiated prior to the 
201 Action, these manufacturers chose to sell to those who would pay 
the price commanded in a protected market.
LThe 201 has led to substantial steel price increases which in turn 
        have been the direct cause of substantial lost business for 
        Advance.
    Steel represents 30% of material costs for electromagnetic 
ballasts. Our steel contracts beginning January 2003 carried an average 
price increase exceeding 10%. In turn, Advance increased its prices to 
customers and immediately experienced a drop of 18% in its 
electromagnetic ballast sales. This occurred because our competitors 
manufacture nearly all their product outside the U.S. Already they 
enjoy substantially lower labor costs than Advance. They now have the 
additional benefit of purchasing steel at lower prices, undistorted by 
the 201 tariffs.
LThe 201 puts at risk the 600 manufacturing jobs in Advance's three 
        United States factories.
    Advance is the market leader in its product line because it 
successfully responds and adjusts to marketplace demands and 
challenges. An 18% loss in market share is not an acceptable situation 
when a remedy is available, as it is in our case. Advance must be able 
to obtain steel at globally competitive prices, and can do so by 
relocating its U.S. manufacturing to existing Philips facilities in 
Central or South America, Asia or Europe. Advance can import to the 
U.S. finished products made in most of those locations with no tariff. 
Doing so will allow us to be price competitive and recapture lost 
business.
LCongress should urge the International Trade Administration to 
        consider the effect of the tariffs on steel consumers.
    The ITC will issue its legally mandated report on the effects of 
the 201 on steel producers by September 22nd. This report can and 
should include a thorough analysis of the tariff's effects on steel 
consuming industries. It is my fervent hope that the President will, 
upon reviewing the report, eliminate the 201 tariffs and end this 
distortion of the marketplace.
    Thank you for your consideration of our views.

                                                       Brian Dundon
                                                  President and CEO

                                 ______
                                 

                                 [GRAPHIC] [TIFF OMITTED] 89863A.003
                                 

                                 [GRAPHIC] [TIFF OMITTED] 89863A.004
                                 

                                 [GRAPHIC] [TIFF OMITTED] 89863A.005
                                 

                                 

                                       AllTrans Port Services, Inc.
                                           Galena Park, Texas 77547
                                                     March 26, 2003

Chairman Philip Crane
Committee on Ways and Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington, DC 20515

Re: LWritten statement for consideration by the Committee and for 
inclusion in the printed record of the hearing.

Dear Chairman Crane and Subcommittee Members:

    I am writing to inform you of the impact that the 201 investigation 
and resulting tariffs have had on my businesses. I am one of few known 
woman-owned businesses functioning within the Port of Houston as a 
material handler and transloader. I have an additional company that is 
a local steel transporter. My company has been in the material handling 
business since 1993 and had previously enjoyed steady growth.
    Being located within the Port of Houston we see economic impact in 
the economy almost immediately, usually within 2-3 weeks of the actual 
event. Since the announcement of the 201 investigation and the 
terrorist attacks, both within approximately one (1) week of each other 
in 2001, we saw a huge drop in shipping orders.
    While we tried to hold on to our best people, the two companies had 
to release approximately 29% of our staffs between the period of 
September 2001-June 2002, when we began to see new orders for July due 
to the tariff reductions on specific products such as carbon steel 
pipe, structural steel beams, abrasion resistant plate and forty plus 
categories of specialty metals. Wages decreased accordingly and wage 
increases were frozen. As for me, I have not been able to take a 
paycheck since September 2001. As you can imagine, this has not been 
easy, and has resulted in my having to liquidate investments for money 
to live on. I had hoped to have these investments for retirement.
    As for additional investments, no new or replacement steel handling 
equipment (forklifts, cranes, etc.) could be purchased nor could any 
new steel hauling equipment be bought.
    Even though we have drastically cut our expenses, we have been 
unable to achieve profitability quarter-to-quarter or for the year on 
either company. Once the 201 tariffs were lifted on carbon steel pipe, 
structural steel beams, abrasion resistant plate and forty plus 
categories of specialty metals, we actually thought for a while we 
might break even due to our careful scrutiny and reduction of expenses. 
There are however some fixed costs of doing business and the 
replacement of inventories on these items by steel consumers was short-
lived; thus revenue losses have continued into the 1st quarter of 2003.
    Steel consuming industries must receive their products via truck or 
rail and therefore neither transportation nor rail shipments can be 
ignored as major components to be considered in the impact of steel 
consumption.
    Since the inception of the 201 tariffs, we have seen some increase 
of rail movements of domestic steel plate to steel consumers. 
Unfortunately, the loss of import steel shipments, moving by rail and 
truck has not come close to being replaced by shipment of domestic 
products.
    While I completely understand the focus of this hearing is the 
impact of Section 201 regarding small and large steel consuming 
businesses, safeguards for U.S. steel producers and testimony of 
economic and financial analysts in the steel industry, indicators in 
transportation movements via truck and rail cannot be ignored as 
additional industries feeling the negative impact that the Section 201 
has had on the economy.
    As difficult as business has been since the announcement of the 201 
investigation and the placement of high tariffs on steel imports, the 
negative economic impact of the 201 tariffs is ``snowballing.'' With 
the general public opinion of economic uncertainty, fueled by terrorism 
and the necessity of war, the result is compounding the lack of 
consumer confidence.
    Mr. Chairman, let me close by simply saying that over the past two 
(2) weeks, I have seen two (2) of my competitors sell out to larger 
firms. There are relatively few of us material handlers and 
distributors remaining in the Port of Houston, and if business remains 
at it's current level of orders and revenue, many more businesses may 
fall to a single larger firm within the Port, who is seeking a 
monopoly. I believe that the result of allowing one company to 
monopolize this business within the Port would be disastrous.
    Small businesses are the ``heartbeat'' of our Nation. If the 201 
tariffs are allowed to continue until 2005 with no tariff relief, 
during these complex economic times, the small business in this 
industry will become a thing of the past. I respectfully request that 
the Congress and the President remove all import tariff restrictions 
for the duration of the armed conflict with Iraq, as a measure of 
relief of the wide-reaching economic negative impact created by the 
tariffs. Once the war has ended, new hearings could be conducted 
regarding the 201 which are inclusive of not only domestic steel, but 
steel consumers and manufacturing, transportation, rail, handling and 
distribution industries.
    If I can provide additional information I am happy to provide my 
companies' historical data. Thank you for your attention in this 
important matter.

                                                     Donna V. Rains
                                                          President

                                 

                                American Axle & Manufacturing, Inc.
                                    Rochester Hills, Michigan 48309
                                                     April 10, 2003

House Ways and Means Committee:

    On behalf of American Axle and Manufacturing, Inc. I am pleased to 
hear that this Committee has agreed to hear witness accounts on the 
unintended consequences and impact that the steel tariffs are having on 
steel consumers. American Axle and Manufacturing is headquartered in 
Detroit, MI and operates numerous plants in Michigan, Ohio and New York 
and also has operations in the UK, Mexico and Brazil. American Axle 
employs over 12,000 people in these plants with the overwhelming 
majority employed in the U.S.
    We are the largest consumer of hot-rolled SBQ bar in the country 
and a member of the SBQ Bar Coalition. We purchase approximately 
350,000-400,000 tons of SBQ bar annually. This is currently 100% 
supplied by steel mills in the U.S. and Canada. Therefore, you can see 
that we strongly support the need for a viable domestic steel industry. 
That said, we have serious concerns regarding the impact of the steel 
tariffs on our business.
    We are a major tier one and tier two supplier to the automotive 
industry in this country. The effects of the tariffs have impacted us 
dramatically on not only the steel we buy directly but also on tubing 
for axles as well as propeller shafts (made from flat rolled product 
and rolled and welded into tubes), stampings (produced from flat rolled 
product and stamped into brackets etc. for welding to the tubes), and 
fasteners. Many of these component parts are produced by small 
businesses that have been seriously hurt by the higher steel costs 
imposed by domestic mills. These increases are directly tied to the 
steel safeguard program. As I am sure you will hear from others, these 
higher costs cannot be passed on to the customers and must be absorbed 
by the steel consumer. Many of the increases experienced have been in 
the area of 30% or more.
    American Axle has several issues related to the imposed steel 
tariffs. First of all, the SBQ steel bar industry represents a very 
small portion of domestic steel production. The largest SBQ bar 
consumers, i.e. members of the SBQ Coalition, have historically 
purchased approximately 95% of their needs in North America. Hence, one 
could argue that these producers had not been injured by off-shore 
steel suppliers. Secondly, it is important to note that not all SBQ bar 
produced either domestically or internationally meets the stringent 
quality requirements of the automotive industry. Many steel suppliers 
who produce SBQ bar in this country, some of whom objected to the 
coalitions' exclusion requests as well as those of individual companies 
in the coalition, cannot meet these requirements and are not today 
approved for these items, many of which are safety critical.
    The SBQ bar industry in this country, able to meet these very tight 
quality requirements, is much smaller than publicized. American Axle 
suffered extreme shortages throughout the fall and into late last year. 
In some cases, we were forced to ship steel via air freight in order to 
meet production requirements and keep our plants running. Even today, 
we are being told in some cases that our requirements cannot be met and 
the amount of steel we can purchase is being limited. As a result of 
these type of difficulties, American Axle believes we must be able to 
purchase internationally in order to protect our customers and in fact 
our very existence.
    The automotive industry in this country will not allow any downtime 
due to parts shortages or price increases. If we are not able to supply 
parts due to material shortages and stay competitive globally, our 
customers have the ability and in fact are buying parts anywhere in the 
world, in order to satisfy their production requirements. This very 
situation makes it vital for us to be able to compete internationally. 
Our competitors overseas are now at a competitive advantage due to 
steel costs. As a result, American Axle is in a position in which we 
must look at options of sourcing parts off-shore or manufacturing off-
shore to meet competitive pressures. This will no doubt lead to a loss 
of jobs in this country.
    The exclusion requests American Axle submitted represented less 
than 5% of our total steel requirements, leaving 95% to be purchased in 
North America and 99% of that in the U.S. We are only attempting to 
supplement current supply and maintain our competitiveness. As stated 
earlier we strongly support our domestic steel industry, however, we 
want to survive as well.

            Sincerely,

                                                       Jim Thompson
                      Commodity Manager-Direct Material Procurement

                                 
     Statement of William A. Sullivan, American Micro Steel, Inc., 
                         Watertown, Connecticut
    On March 26, 2003, Puerto Rico Resident Commissioner Anibal 
Acevedo-Vila presented testimony before this Subcommittee in support of 
relief for a Puerto Rico enterprise from a trade ruling. As the 
President of a company soon to make a major investment in Puerto Rico, 
I congratulate the Resident Commissioner for his initiative in taking 
the lead to support an important Puerto Rico company. The encouragement 
received from the government of Puerto Rico has been a major factor in 
the decision of American Micro Steel to invest in Puerto Rico. The 
willingness of the Resident Commissioner to bring the issue before this 
Subcommittee is further evidence of the commitment of the government of 
Puerto Rico to support local business ventures and reinforces our 
belief that Puerto Rico is a good place to do business.
    In this instance, American Micro Steel has a somewhat different 
perspective on the impact of Section 201 tariffs on Puerto Rico and I 
would like to share that perspective with the Subcommittee.
    American Micro Steel, Inc. (AMS) was organized under the laws of 
Puerto Rico after a five-year review of steel market opportunities in 
the Caribbean. In the course of the review, AMS has studied both the 
gross demand for rebar in Puerto Rico and the distribution system for 
rebar in Puerto Rico. In terms of market size, AMS has found the data 
available from the Junta de Planificacion, Programa de Planificacion 
Economica v Social subprograma de Analisis Economico (the Puerto Rico 
Planning Office) to be the most reliable and that is the source of the 
import numbers used in this testimony.
    Rebar is used exclusively in the construction industry. Before it 
is used, it is cut and bent to engineering specifications either in the 
field by the contractor or in one of three major or two or three minor 
``fabricating'' shops. Fabricators differ from main-line manufacturers 
in two significant respects. First, they are ``job shops'' cutting and 
bending to the customer's order rather than producing a standard 
``product.'' Second, the economics of the business make the import of 
pre-fabricated rebar impractical. This is extremely important. The 
traditional manufacturer of a steel widget can logically argue that an 
import tariff on raw steel can lead to domestically made steel widgets 
being displaced by imported steel widgets. The facts may or may not 
support the manufacturer's claim, but it has a logical basis. That is 
not the case for fabricated rebar for two reasons. First, no fabricated 
rebar is being imported into Puerto Rico and second, if it were, it 
would be subject to the same tariff.
    Were there credible evidence of a shortage of rebar in Puerto Rico 
resulting from Section 201 tariffs, AMS would be the first to support 
relief, however no such evidence has been presented. Indeed, during the 
first year of Section 201 tariffs (2002) imports of rebar into Puerto 
Rico reached a record high.\1\ It seems to AMS that it is significant 
that only a single importer/fabricator has come forward to seek relief 
from the Section 201 tariff. The other major importers and fabricators, 
the Island's construction companies and the Associated General 
Contractors have not sought relief and the Puerto Rico Housing 
Department has stated that Section 201 is not creating any problems for 
the Puerto Rico housing industry.\2\
---------------------------------------------------------------------------
    \1\ The Puerto Rico Planning Board data reports imports of 286,416 
tons in the year 2000, 286,267 tons in 2001 and 301,722 in 2002.
    \2\ ``For the moment, I don't think it will have a negative 
effect.'' Quote attributed to Puerto Rico Housing Department Deputy 
Secretary at page 38 of the April 1, 2003, San Juan Star, in an article 
titled Conflicting reports on the impact of steel tariff increase.
---------------------------------------------------------------------------
    One of the inherent risks of an import-dependent business is the 
danger of becoming overly dependent upon a single source. While there 
are many exporters of rebar to Puerto Rico, from the tenor of the 
testimony, one suspects that the company for whom the Resident 
Commissioner seeks relief has become dependent upon a Venezuelan 
supplier. With privatization of a significant amount of capacity, 
dumping of steel products on their domestic market and a challenging 
domestic economy, the problem faced by Venezuelan steel exporters goes 
far beyond Section 201 duties.
    The lack of any showing of widespread concern within the Puerto 
Rico housing or construction industry, of course, is not determinative. 
In reviewing the testimony of the Resident Commissioner, AMS has 
identified five premises with which it cannot concur.
---------------------------------------------------------------------------
    \3\ Testimony of Resident Commissioner Anibal Acevedo-Villa, 
paragraph 2. ``However, in certain cases, for reasons of geography and 
cost, we must rely on imports from our neighbors in the region.''
---------------------------------------------------------------------------
1. Puerto Rico must rely (for rebar) on imports from (its) neighbors in 
        the region.\3\

                                                                                      REBAR IMPORTS IN TONS
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                             Country                                                       2000                        2001                        2002                        TOTALS
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Brazil                                                                                     6,449                      23,059                      14,068                  43,576     5.0%
Dominican Republic                                                                             0                           0                      37,393                  37,393     4.3%
Mexico                                                                                    39,733                      10,805                      23,984                  74,522     8.5%
Trinidad & Tobago                                                                            331                       6,742                           0                   7,073     0.8%
USA                                                                                       14,374                       3,737                       9,333                  27,444     3.1%
Venezuela                                                                                  7,767                      44,952                      27,534                  80,253     9.2%
Region Total                                                                              68,654                      89,295                     112,312               270,261
Region Market Share                                                                        24.0%                       31.2%                       37.2%                 30.9%
Non Region Total                                                                         217,762                     196,972                     189,410               604,144
Non Region Market Share                                                                    76.0%                       68.8%                       62.8%                 69.1%
Grand Total                                                                              286,416                     286,267                     301,722               874,405
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


    The preceding chart, based upon Puerto Rico Planning Office data 
shows that for the years 2000, 2001 and 2002, the region (defined as 
the Americas plus the Caribbean) never supplied as much as one-third of 
the rebar imported into Puerto Rico. Interestingly, the region's share 
increased (in terms of both total tons and market share) after the 
Section 201 duties were imposed.
    Equally interesting is the fact that of the countries exporting a 
total of over 50,000 tons to Puerto Rico in the last three years for 
which data is available, five were far removed from the ``region''--
Turkey, Moldova, Korea, Latvia and Japan. From the region, only Mexico 
and Venezuela made the list and, as the following chart illustrates, 
the shipments from these countries was far from consistent even over a 
short three-year period. The evidence suggests that Puerto Rico 
importers aggressively work the spot market for the lowest available 
price. Price, not geography has driven the market.


------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               COUNTRY                                                                                                           2000                                   2001                                   2002                                   TOTAL
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Turkey                                                                                                                                                                          22,688                                 49,719                                 79,787                                 152,194
Venezuela                                                                                                                                                                        7,767                                 44,952                                 27,534                                  80,253
Mexico                                                                                                                                                                          39,733                                 10,805                                 23,984                                  74,522
Latvia                                                                                                                                                                          15,616                                 31,178                                 26,751                                  73,545
Korea                                                                                                                                                                           62,488                                 10,090                                      0                                  72,578
Japan                                                                                                                                                                           26,521                                      0                                 39,532                                  66,053
Moldova                                                                                                                                                                         58,434                                      0                                      0                                  58,434
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2. Section 201 measures have had a very negative effect on Puerto 
        Rico's ability to source rebar from traditional and highly 
        efficient foreign suppliers.\4\
    The reported data suggests that part of Puerto Rico's rebar supply 
problem has been that it lacks ``traditional suppliers.'' Again looking 
at the years 2000 through 2002, twenty different countries exported to 
Puerto Rico. Eleven different countries placed within the top 5 
exporters to Puerto Rico during those three years. Rather than being 
served primarily by a cadre of dependable ``traditional'' suppliers, 
the data indicates that Puerto Rico has been primarily supplied by a 
shifting band of predatory ``dumpers.'' In the year 2000, sixty-three 
percent of the rebar imported into Puerto Rico came from countries that 
have since been found guilty of dumping.\5\ This would seem to place in 
doubt the conclusion that Puerto Rico has traditionally been served by 
``efficient producers.''
---------------------------------------------------------------------------
    \4\ Testimony of Resident Commissioner Anibal Acevedo-Villa, 
paragraph 5. ``The Steel 201 measures implemented last year have had a 
very negative effect on Puerto Rico's ability to source rebar from 
traditional and highly efficient foreign suppliers.''
    \5\ Moldova, Indonesia, Korea, Latvia, Turkey, Belarus and the 
Ukraine.
---------------------------------------------------------------------------
3. Section 201 measures have added $2,000 to $3,000 to the cost of a 
        low-income home.\6\
    One can only suspect that this contention reflects a misplaced 
decimal point. A $2,000 to $3,000 increase resulting from a 12% tariff 
would require the use of between $16,666 and $25,000 of rebar in each 
house.\7\ The San Juan Star reports that a low-income home in Puerto 
Rico is defined as a home selling for $70,000 or less.\8\ To increase 
the cost by $2,000 to $3,000, rebar would need to represent between 23% 
and 25% of the total cost of the home.
---------------------------------------------------------------------------
    \6\ Testimony of Resident Commissioner Anibal Acevedo-Villa, 
paragraph 5. ``They (Steel 201 measures) are adding $2,000 to $3,000 to 
the cost of a low-income home.''
    \7\ 12%X=2000, X=2000/.12, X = 16.666  12%X = 3000, X=3,000/.12, 
X=25,000.
    \8\ San Juan Star, April 1, 2003, in an article titled Conflicting 
reports on the impact of steel tariff increase.
---------------------------------------------------------------------------
    Even at a base price of $350 per ton, that translates to between 41 
and 71 tons of rebar per unit. Assuming #4 bar (\1/2\" diameter) that 
tonnage amounts to between 137.725 and 212,575 running feet of rebar 
per unit.\9\ That simply isn't possible.
---------------------------------------------------------------------------
    \9\ #4 bar weighs .668 lbs/ft. 46 tons = 46  2000 lbs = 
92,000 lbs. 92,000 lbs/.668 lbs per ft = 137,725 feet 71 tons = 71 
 2000 lbs = 142,000 lbs. 142,000 lbs/.668 lbs per ft = 212,575 
feet.
---------------------------------------------------------------------------
4. Venezuela used to be a primary supplier (of rebar) to Puerto 
        Rico.\10\
    The maximum Venezuelan market share in the years 2000, 2001 and 
2002 was 16% (in 2001). In the year 2000 (when there were no Section 
201 tariffs) the Venezuelan market share was 3%. While 2002 imports 
from Venezuela were 17,000 tons below 2001 levels, they were nearly 
20,000 tons above the 2000 imports. While Venezuela has from time to 
time been a major exporter to Puerto Rico, it stretches credulity to 
call it a primary supplier.
---------------------------------------------------------------------------
    \10\ Testimony of Resident Commissioner Anibal Acevedo-Villa, 
paragraph 10. ``Venezuela used to be a primary supplier to Puerto 
Rico.''
---------------------------------------------------------------------------
5. Section 201 has limited foreign sources creating unnecessary 
        shortages and windfalls to foreign mills.\11\
    This argument seems contradictory on its face. To create a 
shortage, foreign mills would need to stop exporting to Puerto Rico--
but if they stopped exporting one cannot perceive how they could at the 
same time enjoy a ``windfall.'' ``Without sales there can be no 
``windfall.''
---------------------------------------------------------------------------
    \11\ Testimony of Resident Commissioner Anibal Acevedo-Villa, 
paragraph 13. ``Section 201 has limited foreign sources of smaller-
sized rebar into Puerto Rico, creating unnecessary shortages and a 
windfall to the foreign mills lucky enough to win what might be 
described as the `201 lottery.' ''
---------------------------------------------------------------------------
    The testimony suggests that the only alternative to Venezuelan 
rebar is U.S. rebar while at the same time noting that the U.S. has 
never been a major supplier of rebar to Puerto Rico. In fact there are 
a multitude of options to replace Venezuelan rebar if the 12% tariff 
has driven them from the market.
    In 2000 there were 14 countries exporting to Puerto Rico, in 2001 
there were 16 and in 2002 (after Section 201 sanctions) there were 12. 
It was not Section 201 that forced countries out of the market, 
however, it was anti-dumping duties. Moldova, Indonesia, Korea, Belarus 
and the Ukraine exited the Puerto Rico market as a result of anti-
dumping duties. Interestingly enough, since the 201 sanctions, the 
Dominican Republic has entered the Puerto Rico market and more than 
made up for a decline in Venezuelan exports. If one looks at the sum of 
imports from Venezuela and the Dominican Republic, the total increased 
by 20,000 tons after Section 201 remedies.\12\
---------------------------------------------------------------------------
    \12\ The combined imports from Venezuela and the Dominican Republic 
totaled 7,767 tons in 2000; 44,952 tons in 2001 and 64,927 tons in 
2002.
---------------------------------------------------------------------------
    AMS has no doubt that the company for which the Resident 
Commissioner seeks relief has been disadvantaged by Section 201 tariff. 
The damage, however, is to one company whose primary supplier has 
decided that Section 201 makes the Puerto Rico market less attractive. 
It is the unfortunate nature of an import dependent industry that 
whenever there is a shift in trade patterns, someone is disadvantaged. 
It is also reality that shifting trade patterns are inevitable. The 
world steel industry is in flux. A chronic problem of non-economic 
export dependent capacity is finally being addressed. The United States 
steel industry has been given minimal protection for a minimal time to 
reorganize itself. Without government fiat it is doing so with no 
little pain to its investors, managers and workers.
    Importers, with little regard to quality or loyalty grew fat in the 
days of government subsidized dumping. Those days are coming to an end. 
Those who grew fat on dumping will now grow lean. They have no room to 
complain.
    Rebar fabricators, whether in Ohio or Puerto Rico are an integral 
part of the American steel industry and are not exempt from the 
commitment of the industry to restructure for the new century.
    AMS urges the Committee to resist special pleading that will 
inevitably erode the program the President has launched and inevitably 
undermine the tremendous effort being made by the American steel 
industry to reinvent itself--to the ultimate benefit of the steel 
consumer and the whole nation.

                                 
      Statement of Larry Yost, ArvinMeritor, Inc., Troy, Michigan
    This written testimony is submitted on behalf of ArvinMeritor, 
Inc., in connection with the March 26, 2003, hearing conducted by the 
House Ways and Means Subcommittee on Trade. The purpose of this hearing 
was to examine the impact of the President's Section 201 safeguard 
action on the U.S. steel consuming industries, the domestic steel 
producers, and the U.S. economy.
    ArvinMeritor thanks Chairman Crane and the Members of the 
Subcommittee for the opportunity to present this testimony. 
ArvinMeritor is a premier, Tier One automotive supplier offering the 
world's largest Original Equipment Manufacturers (``OEMs'') a broad 
range of integrated systems, modules and components. We serve the 
passenger car and commercial truck and trailer markets, as well as 
their related aftermarkets. ArvinMeritor has 32,000 employees among 
more than 150 facilities in 27 countries. ArvinMeritor's 2002 sales 
were $6.8 billion, of which 62 percent were in North America, 30 
percent were in Europe, and 8 percent elsewhere in the world. Our 
products include air and emission, aperture (door and roof), and 
undercarriage systems and components for light vehicle OEMs, complete 
drivetrain systems for heavy and medium duty trucks and trailers and 
their related aftermarkets, as well as ride control, exhaust, and 
filters for light vehicle aftermarket.
    A key common denominator of the above-mentioned products is that 
each has significant steel content. In 2002, ArvinMeritor purchased 
more than 1 million tons of steel globally. In excess of 95 percent of 
the steel consumed by ArvinMeritor in the United States in 2002 was 
sourced from North American steel mills. With virtually all of our 
steel coming from North American sources, a healthy and competitive 
domestic steel industry is vital to our U.S. and North American 
operations. Toward this end, ArvinMeritor endorses the President's 
efforts to reduce global overcapacity and market-distorting government 
subsidies.
    The President's additional action of proclaiming safeguard tariffs 
on a broad range of steel products, however, is having unexpected, but 
nonetheless tremendously damaging, impact on a wide cross section of 
steel using industries and companies, including automotive suppliers 
such as ArvinMeritor. In our case, since the tariffs were proclaimed, 
we have been subject to price increases ranging from 7 to 15 percent on 
long-term contracts, and up to 40 percent or more on spot market 
purchases. Additionally, and perhaps more significantly, we are 
increasingly faced with supply uncertainty. For example, U.S. capacity 
to produce special bar quality steel (``SBQ'')--one of the steels we 
consume in great quantities--is approximately 30 percent lower today 
than just a few years ago.
    As those on the Subcommittee who are familiar with the auto sector 
are aware, suppliers cannot pass on raw material or other price 
increases to OEM customers--particularly ``artificial'' price increases 
that are inconsistent with global market conditions. Indeed, in our 
industry, OEM customers expect annual price decreases from their 
suppliers. While ``cost down'' formulas differ from OEM to OEM and from 
component to component, it is not uncommon for the expected price 
reductions to equal 20 percent or more over a four or five year period. 
In other words, if an OEM customer purchased a particular part from 
ArvinMeritor for 100 dollars in the year 2000, this year, 2003, that 
OEM expects the exact same part for 80 dollars. While this is a 
difficult challenge in a perfect world, it is nearly impossible when 
the price of the input steel has increased 40 percent. Profit margins 
are simply too thin to absorb the safeguard tariffs.
    With regard to steel prices, ArvinMeritor would like to address a 
misperception that may exist among the Subcommittee Members. Although 
we cannot pass our increased raw material costs on to our customers, 
the OEMs, in the event we could, the ultimate cost to the consumer 
would be quite substantial. The domestic steel industry often suggests 
that the safeguard tariffs might increase the cost of an average car by 
65 dollars or so. However, that figure is misleading as it is derived 
from the amount of steel purchased directly by the OEMs and does not 
include parts purchased by the OEMs.
    But again, it is not just price that is a problem, it is 
availability. While ArvinMeritor managed to put under contract 
sufficient quantities of steel for 2003, it was at great expense. And 
going forward, we do not know whether these sources will continue to 
supply. Particularly for SBQ steel, certainty of North American supply 
is tenuous.
    Indeed, the tariffs do not just threaten our bottom line, they 
severely jeopardize our industry's competitive position in the U.S. 
automotive supply chain. Foreign companies that were never before 
competitive for our U.S.-based customers, suddenly can compete for 
lucrative, long-term contracts, because their automotive parts are 
produced with globally priced steel.
    On behalf of our shareholders and our global employee base, we are 
responding to the tariffs aggressively and proactively. For example:

     LWe are purchasing semi-finished and finished products 
from both related and unrelated offshore suppliers, whose steel costs 
are far lower than that which ArvinMeritor must pay in the United 
States.
     LWe are developing steel suppliers among producers in 
exempt, non-NAFTA countries.
     LWe have begun downsizing U.S. operations as a result of 
these other actions.

    In other words, to protect our shareholders and our enterprise-wide 
operations, we must export manufacturing jobs and import components. 
And, this is really just the beginning. Resourcing decisions will 
accelerate this calendar year, especially in view of the 
Administration's rejection of the vast majority of exclusion requests 
filed by the automotive supplier sector.
    We are heartened by the fact that more policymakers are beginning 
to understand the impact of the tariffs on the steel consumers like 
ArvinMeritor. In the House of Representatives, 72 Members have 
cosponsored Congressman Knollenberg's resolution (House Concurrent 
Resolution 23), which calls upon the Administration to review the 
impact of steel tariffs on consuming industries, as well as the steel 
industry. In addition, Chairman Thomas recently requested the 
International Trade Commission to conduct a ``section 332'' 
investigation of the impact of the steel tariffs on consuming 
industries. This study is to be conducted in conjunction with the 
statutory mid-term review of the impact of the steel tariffs on the 
steel industry. And in just the past few days, Senators Bond, Dodd, 
Landrieu, Hagel, and Fitzgerald, introduced in the Senate a companion 
measure to Congressman Knollenberg's resolution. Taken together, the 
Knollenberg and Bond resolutions and Chairman Thomas' request, 
represent reasoned, measured approaches on this issue and are an 
important step in the process.
    Thank you for the opportunity to submit testimony as the 
Subcommittee investigates the array of consequences associated with the 
proclamation of steel safeguard tariffs in March of 2002.

                                 
     Statement of Association of Cold-Rolled Strip Steel Producers
    On behalf of the Association of Cold-Rolled Strip Steel Producers 
(``Association''), we submit this statement regarding the impact of the 
Section 201 safeguard action. The Association is composed of twelve 
domestic producers of cold-rolled carbon steel flat products: Blair 
Strip Steel Company, Duferco Farrell Corporation, Gilbraltar Group of 
Companies, Greer Steel Company, Rome Strip Steel Company, Samuel-
Whittar, Inc., Steel Technologies Inc. (``Steel Technologies''), 
Stripco Inc., Theis Precision Steel Corp. (``Theis''), Thomas Steel 
Strip Corp., Thompson Steel Company, Inc., and Worthington Steel.
    The Association participated in the Section 201 safeguard action. 
As set forth below, the members of the Association have already 
benefited from the relief provided by the Section 201 safeguard action 
and very much need this relief to continue for the full term of the 
Section 201 safeguard action.

A. LThe Relief Provided by the Section 201 Safeguard Action Has Had a 
        Positive Effect on the Members of the Association

    The relief provided by the Section 201 safeguard action has had a 
positive effect on the members of the Association. It has, among other 
things, provided the members the opportunity to evaluate and recoup 
business lost due to low import prices and has allowed the members to 
find ways to regain market competitiveness.
    Since the relief has been instituted, the members of the 
Association have received many more inquiries, as well as orders, for 
their cold-rolled products. For example, Theis has seen many customers, 
who in the past purchased cold-rolled products produced mainly 
overseas, inquire, and order Theis' cold-rolled products. Accordingly, 
Theis, like other members of the Association, has been able to increase 
its sales volume. This increased sales volume provided by the Section 
201 relief has, in turn, enabled the members to maintain their present 
workforce and avoid layoffs that would otherwise have occurred. Members 
of the Association, like Theis, have invested in productivity system 
improvements in order to be able to compete successfully in the future.
    The Section 201 relief has also had the desired effect of 
stabilizing the overall price of the members' cold-rolled products in 
the marketplace. The historic and severely damaging price deflation 
that resulted from the enormous flood of imported steel prior to the 
Section 201 safeguard action has subsided, bringing relative stability 
to the marketplace.
    In short, the Section 201 safeguard action has been effective and 
essential for the members of the Association. They have begun to 
reverse the trend of layoffs and plant shutdowns and have begun to 
rebuild the cold-rolled strip segment of the American flat-rolled steel 
industry with increased hiring and capital investment.
    Unfortunately, however, the positive effect of the Section 201 
relief has been dampened by the granting of product exclusion requests. 
Product exclusion requests have been granted in extraordinary numbers 
and have been granted for products that members of the Association 
clearly produce in the United States. In the initial round of product 
exclusion requests, the government received more than 1,300 product 
exclusion requests. The government granted 727 of these requests, 
accounting for about 3.2 million metric tons (out of 13.0 million 
metric tons), or approximately 25%, of foreign steel initially subject 
to the safeguard action. In the second (anniversary) round of product 
exclusion requests, the government received 661 product exclusion 
requests. The government granted 295 of these requests, accounting for 
an additional 400,000 metric tons (out of 4.0 million metric tons of 
requested exclusions).
    The granting of product exclusion requests has damaged the 
profitability of the members of the Association. Foreign competitive 
cold-rolled products granted exclusion are no longer subject to Section 
201 relief, and as such, are allowed into the U.S. market without any 
tariffs and at lower prices. Members have, in turn, had to reduce their 
prices to remain competitive. This has been an especially pronounced 
problem with respect to some of the niche, high value-added products 
that the members of the Association produce.

B. LThe Relief Provided by the Section 201 Safeguard Action Has Had a 
        Positive Effect on Members of the Association's Efforts to 
        Restructure

    As a microcosm and subset of the larger flat rolled steel industry, 
members of the Association have begun to restructure as a result of the 
Section 201 safeguard action. In their efforts to reduce fixed costs, 
some members of the Association have changed their corporate structure 
to become more competitive. For example, Theis now has one manager for 
sales and operations, whereas prior to the Section 201 safeguard 
action, there were two. In addition, Theis' reporting structure is more 
focused and streamlined to solve problems and to create new 
opportunities more quickly.
    The Section 201 relief has also resulted in consolidation. While 
one member (Cold Metal Products) has been forced to go out of business, 
the consolidation of that former member's more modern assets into a 
current member (Steel Technologies) and the shutdown of the former 
member's older, non-competitive plants has begun to reduce excess 
capacity and build a healthier industry that is better able to compete 
on a global playing field. In addition, the members of the Association 
have benefited from International Steel Group's (``ISG's'') restarting 
of production at Acme, as ISG is able to provide raw input material--
i.e., hot-rolled steel--at competitive prices to members of the 
Association due to its lower fixed cost structure and leaner startup 
costs.
    While the need continues to restructure in the broad steel 
industry, in general, and for producers of strip steel, in particular, 
the members of the Association have already begun to improve 
productivity and increase global competitiveness through the 
restructuring that has already occurred.

C. LThe Relief Provided by the Section 201 Safeguard Action Must 
        Continue for its Full-Term

    The benefits of the Section 201 safeguard action have only just 
begun to provide the ``safeguard'' environment necessary to 
restructure, to encourage financial investment, and to move the 
strategic focus of the members of the Association from survival to 
development and growth. Just as consolidation and investment efforts by 
ISG and Bethlehem, U.S. Steel and National, and Nucor and others have 
recently begun at the sheet mill level, so, too, have the consolidation 
and investment efforts by Steel Technologies and Cold Metal, and Blair 
Strip Steel and others at the strip mill level. The benefits of this 
restructuring are not yet in place. More time--the complete three-year 
program outlined by the President--will be necessary to encourage long-
term spending and hiring and investment among the members of the 
Association.
    In addition, the Section 201 safeguard action should proceed to its 
full term because the actions that members of the Association are 
implementing to become more productive are gradually recognized over 
time, and the effects of the Section 201 relief take time to manifest 
themselves. For example, the new orders that members of the Association 
now are receiving as trials and early production orders would likely be 
canceled if the Section 201 relief were now terminated. The time 
granted by the Section 201 safeguard action allows the members to 
recover some of the volume lost over the years to foreign imports. 
Further, inventories of imported products are slowly being depleted, 
and only now are U.S. consumers searching domestically for a new 
supply.
    Moreover, continuing the Section 201 relief for its full term would 
not be detrimental as the product exclusion mechanism provides for 
companies that are truly unable to find a supply of their needed steel 
products in the United States an avenue to have such products exempted 
from Section 201 relief. Exclusion requests that have been granted have 
already reduced the coverage of the Section 201 relief by over twenty-
five percent in terms of volume.

                               *  *  *  *

    Based upon the foregoing, the relief provided by the Section 201 
safeguard action has already benefited members of the Association. 
However, the members of the Association need this relief to continue 
for the full term of the Section 201 safeguard action.

                                 

        Association of International Automobile Manufacturers, Inc.
                                          Arlington, Virginia 22209
                                                      April 9, 2003

The Honorable Philip Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
Washington, DC 20515

RE: LWritten statement for 3-26-03 hearing entitled ``The Impact of the 
Section 201 Safeguard Action on Certain Steel Products.''

Dear Mr. Chairman:

    The Association of International Automobile Manufacturers (AIAM) is 
pleased to submit this written statement for the record in conjunction 
with the March 26th Trade Subcommittee hearing on ``The Impact of the 
Section 201 Safeguard Action on Certain Steel Products.''
    AIAM member companies procure more than 95% of the steel consumed 
in their U.S. operations from domestic sources. AIAM therefore supports 
a strong, profitable and viable U.S. steel industry. As steel 
consumers, however, AIAM companies believe that the U.S. auto industry 
must also have access to fairly priced steel products from U.S. and 
global sources to remain competitive.

Background

    AIAM is a trade association representing 15 international motor 
vehicle manufacturers who account for 40 percent of all passenger cars 
and 20 percent of all light trucks sold annually in the United States. 
AIAM members have invested over $26 billion in U.S.-based production 
facilities, have a combined domestic production capacity of 2.8 million 
vehicles, directly employ 75,000 Americans, and generate an additional 
500,000 U.S. jobs in dealerships and supplier industries nationwide. 
AIAM members include Aston Martin, Ferrari, Honda, Hyundai, Isuzu, Kia, 
Maserati, Mitsubishi, Nissan, Peugeot, Renault, Saab, Subaru, Suzuki 
and Toyota. AIAM also represents original equipment suppliers and other 
automotive-related trade associations.

Importance of Auto Industry

    The domestic auto industry has been an integral and important 
component of the health of the U.S. economy. Commerce Secretary Don 
Evans recently stated, ``The auto industry has been a driving force 
behind the economic recovery since the [terrorist] attacks on 
America.'' New vehicle sales account for roughly one-fifth of all 
retail sales in the United States.

Health of Auto Industry

    Economic uncertainty and other factors have led many auto analysts 
to forecast a decline in overall auto sales during 2003. In addition, 
the unintended consequences associated with the President's Section 201 
steel program have and will continue to harm the auto industry. 
Specifically, the industry is concerned with the impact of this 
decision on steel prices and steel supplies.

Steel Prices

    Within weeks of the President's decision to place tariffs on 
imported steel in March 2002, companies without long-term contracts 
faced price hikes as high as 50%. Prices for steel needed for 
automobile production surged to $300 a ton from approximately $200 
prior to the imposition of tariffs. Toyota has estimated that this 
increase will add as much as $100 to the cost of every vehicle it 
produces in North America.
    Additionally, Honda Motor Company was compelled to take 
extraordinary measures in the aftermath of the tariff decision and 
airship more than 2,000 tons of steel from Japan to its production 
facilities in the United States. This move became necessary when a key 
U.S. supplier of high-grade steel demanded an immediate 30 percent 
price increase.
    Finally, while many auto companies have had long-term contracts 
with U.S.-based steel suppliers, these contracts are beginning to 
expire, and steel makers are demanding price increases ranging as high 
as 15%. These increases are likely to extend into 2004 as well.

Steel Supply

    According to recent analysis, AK Steel is one of only three 
integrated steel companies in North America with the financial health 
to reliably supply the large quantity of coated steel critical to the 
auto industry. Last year, bankruptcies forced eight flat-rolled steel 
mills to close. Four of those mills are resuming production, but annual 
production capacity suffered a net loss of 10 million tons. AIAM fears 
that the U.S. steel industry could continue to deteriorate in early 
2003, leading to further reductions in domestic supplies and higher 
prices.
    In the end, steel tariffs are threatening the very industry that 
the U.S. Commerce Secretary and many economists have cited as an 
integral part of our Nation's economic recovery.

Steel Consumers as a Whole

    According to the Consuming Industries Trade Action Coalition 
(CITAC), there are at least 50 U.S. manufacturing jobs in steel 
consuming industries for every one job in the steel making industry. To 
protect one steel producing job, therefore, places 50 other jobs at 
risk.
    A recent economic study commissioned by CITAC found that 200,000 
steel consuming jobs were lost between December 2001 and December 2002 
due to higher steel prices. This loss represents more jobs than the 
entire steel producing industry employs nationwide--about 180,000. 
These lost jobs represented approximately $4 billion in lost wages over 
ten months. Every State lost employment as a result of the higher steel 
costs.
    It is important to note that another segment of the automotive 
industry that has been adversely impacted by the Section 201 tariffs is 
the automotive supplier industry, because they too are major steel 
consumers. Many of these companies have experienced steel prices 
increase between 5 to 30 percent. Such price increases have had serious 
consequences for parts suppliers and in many cases have seriously 
harmed their ability to remain globally competitive.

Conclusion

    AIAM members remain concerned about the unintended consequences of 
the steel tariffs, particularly the adverse impact on the industry of 
higher prices, supply shortages, and unreliable deliveries. These 
unintended results should be considered as the Administration conducts 
its upcoming mid-point review of the program.
    AIAM supports House Concurrent Resolution 23, sponsored by 
Representative Joseph Knollenberg and supported by over 60 of his 
colleagues from both parties. Consistent with this resolution, AIAM 
supports an examination of the impact of the Section 201 tariffs on 
U.S. steel consumers by the International Trade Commission (ITC). Such 
information is crucial to any determination regarding whether to 
continue or modify this safeguards program.
    AIAM also supports the section 332 investigation by the ITC 
recently requested by House Ways and Means Committee Chairman William 
Thomas. This investigation also focuses on the impact of the Steel 
Safeguard program on steel consuming industries in the United States.
    Thank you for the opportunity to submit these comments. We 
appreciate your assistance and interest in the impact of the steel 
tariffs on the U.S. auto industry. Should you have any questions or 
require additional information, please do not hesitate to contact me.

            Sincerely,

                                                  Timothy MacCarthy
                                                  President and CEO

                                 
              Statement of Automotive Trade Policy Council
    On behalf of its member companies--DaimlerChrysler Corporation, 
Ford Motor Company and General Motors Corporation--the Automotive Trade 
Policy Council (ATPC) submits the following statement for the record:
    The Automotive Trade Policy Council recognizes that both a strong 
domestic steel industry and a strong domestic manufacturing base are 
vital to the U.S. economy. In that light, ATPC has and continues to 
urge Congressional support of H. Con. Res. 23 (sponsored by Congressman 
Knollenberg), which is a constructive and meaningful attempt to broaden 
the mid-term review of the temporary steel safeguards on steel to 
include the impact on domestic steel consuming industries. ATPC 
supports the resolution's request that the International Trade 
Commission initiate a process to monitor and review the ongoing impact 
of temporary steel safeguards on steel consuming industries, including 
the U.S. automotive supplier industry. ATPC also supports Chairman 
Thomas' recent request for the ITC to hold a section 332 hearing on the 
impact of Section 201 steel safeguards on steel consuming industries, 
which include the U.S. automotive sector.
    The U.S. automotive supplier industry is presently facing 
considerable challenges as a result of the Steel Safeguard Program 
implemented in March 2002, as well as shifts in domestic steel capacity 
that occurred around the same timeframe. Over that period, American 
manufacturers of vehicles and automotive parts, components and systems 
have witnessed sudden changes in the price of domestic steel. If this 
situation is left unresolved, along with the shift in domestic steel 
capacity, it could have the possibility of disrupting automotive 
production by ATPC member companies across the United States. Last 
year, ATPC member companies purchased over $500 billion in automotive 
components and supplies from Tier I, II and III automotive supplier 
companies.
    The U.S. auto industry serves as leading purchasers of steel within 
the broader U.S. automotive sector. ATPC member companies consume 
roughly 13% of all steel in the United States annually. Further, the 
U.S. automotive and auto supplier industry purchase the majority (over 
95%) of its steel from U.S. domestic mills. This dependence has left 
the industry vulnerable to price adjustments and supply disruptions. 
Although several suppliers have filed for product exclusion requests 
under the guidelines of the Safeguard Program, this particular avenue 
of relief does not address the scope of the industry's dilemma.

                                 
 Statement of The Honorable Marion Berry, a Representative in Congress 
                       from the State of Arkansas
    Mr. Chairman, much has been written and said in the way of dire 
predictions about this program and its consequences on American 
industry and jobs. Well, a year has passed now since the President 
imposed his program and we can look at the actual experience of the 
program, its actual effects, not just on predictions, some of which 
strained the imagination. From what I am hearing, I expect that the 
record will show that the President's steel program is working well. We 
are rebuilding our steel industry, to make it healthy and competitive 
in world markets in the long run.
    No other Member in this body will be happier to see the President's 
program succeed than I will because my district produces more steel 
than any other district in this Nation. I saw the devastating effects 
of the flood of foreign steel imports, not only on the plants and their 
workers, but also on the surrounding economy. Across the country, about 
50,000 American steel workers and iron ore miners lost their jobs as a 
consequence of these imports. Even the most efficient American 
technology and 21st century management cannot hope to compete with 
steel imports that are subsidized by foreign governments or dumped on 
our shores at prices that are less than the cost of production.
    While my district is very steel intensive, I remind my colleagues 
that downstream manufacturing in the United States cannot exist without 
a healthy and strong domestic supply of steel. That includes our 
defense industries. There are manufacturing companies that tried to 
play the foreign spot market for steel. Things looked good for them 
when spot prices were down. But the inevitable volatility of spot 
prices can, and does, catch up with them. Even U.S. companies who buy 
foreign steel on long-term contracts don't have the flexibility 
available to companies who buy steel from domestic sources. It's nice 
to be able to pick up the phone, give a change order, and expect in 
short order to see a truck roll up with the steel you really need. And 
of course, the domestic steel companies depend on downstream 
manufacturing in the U.S. for the core of their business. This mutual 
reliance has been the base of manufacturing in the U.S. for more than a 
century. So all of us have a stake in the success of the President's 
program.
    After a year of the President's program, we see several thousand 
steel workers have now returned to work. The President is also pursuing 
multilateral negotiations at the Organization for Economic Cooperation 
and Development to reduce global excess steel making capacity and to 
eliminate subsidies in the global steel sector. Those negotiations are 
essential if we are to fix the underlying problem that caused so much 
misery for American steel workers and their employers. The negotiators 
would not be making progress without the Safeguard remedy--it's what 
brought our trading partners to the negotiating table.
    The President's program is designed to phase out over three years. 
That was the prescribed remedy for the domestic steel industry and the 
world steel industry. Some are suggesting now that we should cut the 
program short because mills are reopening, workers are being rehired, 
and a recovery is clearly beginning. Well, I was trained as a 
pharmacist. I learned very early in that career that if a medicine is 
working, you don't stop taking it just because you feel a little 
better. You administer the full regimen of prescribed doses, and that 
is what the President should do with his steel program.
    I also learned early on in my life as a farmer, that our ability to 
produce a bountiful supply of food is a paramount to our national 
security. Our domestic steel industry works on this same principle. We 
must maintain a strong steel industry in this country, our national 
security depends on it.

                                 
    Statement of Thomas Reardon, BIFMA International, Grand Rapids, 
                                Michigan
    On March 5, 2002 President Bush announced that he would impose 
tariffs of up to 30% on imports of selected steel products. Cold-rolled 
steel is the single largest raw material used by many in the office 
furniture industry and is subject to the maximum 30% tariff. 
Regrettably, this tariff action has had an immediate and increasingly 
dramatic detrimental effect on an already reeling U.S. office furniture 
industry.
    U.S. office furniture manufacturers are in the midst of a business 
climate never before experienced. Office furniture shipments in 
calendar year 2002 were down over 33% from their peak in 2000. The 
industry has laid off more than an estimated 20,000 workers and closed 
several production facilities over the past two years. Now the 
furniture industry is experiencing dramatic cost increases and 
potential supply problems in an economic environment where it is 
virtually impossible to recover these increases.
    Price increases of 25% to 85% on raw material have been reported. 
Steel price contracts are being broken, and reports of supply 
interruptions and material shortages are increasing. Material shortages 
are the combined result of U.S. anti-dumping duties that range from 5% 
to 125%, the imposition of tariffs and U.S. steel mill closures.
    In this global economy, an increasingly occurring response to 
tariffs is the sourcing of component parts offshore. Higher prices and 
material shortages are forcing manufacturers to source steel components 
from foreign suppliers who have a cheaper raw material source. This 
inevitable action will cause further harm to the U.S. economy and U.S. 
workers. In fact, some furniture component suppliers have already 
indicated that they are now sourcing component parts offshore rather 
than producing the components domestically. These instances will surely 
increase in the months ahead unless quick action is taken.
    Another very likely possibility is the further erosion of U.S. 
market share for U.S. furniture manufacturers. U.S. office furniture 
imports already exceed U.S. exports by 5 to 1. The steel tariff 
situation will only serve to make U.S. products less price competitive 
and further open our market to offshore competition.
    Certainly, the Administration could not have foreseen the drastic 
impact (i.e. cost increases, supply interruptions, profitability, jobs, 
taxes, market share, etc.) that steel tariffs would have on U.S. steel 
consuming industries. The U.S. office furniture industry implores our 
legislature and the Administration to grant immediate relief from the 
detrimental impact that the steel tariffs have had on an already 
depressed industry. The office furniture industry respectfully requests 
a significant reduction in the tariff rates and/or an accelerated phase 
out in order to halt the loss of additional jobs in the U.S. office 
furniture industry.

                                 

                                      U.S. House of Representatives
                                               Washington, DC 20515
                                                      April 8, 2003

Chairman Phil Crane
Trade Subcommittee
House Committee on Ways and Means
1104 Longworth Building
Washington, DC 20515

Dear Chairman Crane:

    I would like to submit the following study to be made part of the 
record for the House Trade Subcommittee hearing on March 26, 2003 
regarding the Impact of the Section 201 Safeguard Action on Certain 
Steel Products.
    The study, The Unintended Consequences of U.S. Steel Import 
Tariffs: A Quantification of the Impact During 2002, was done at the 
request of the Consuming Industries Trade Action Coalition (CITAC) 
Foundation to illustrate the impact of higher steel costs on American 
steel-consuming industries. The tariffs, combined with other challenges 
present in the marketplace at the time and in the months that followed, 
boosted steel costs to the detriment of American companies that use 
steel to produce goods in the United States. Thank you for your 
attention to this request.

            Sincerely,

                                                          Dave Camp
                                                 Member of Congress

                                                         Attachment

                                 ______
                                 
      The Unintended Consequences of U.S. Steel Import Tariffs: A 
                Quantification of the Impact During 2002
The Cause
    On March 5, 2002, President Bush imposed tariffs on imports of many 
steel products into the United States for three years and one day. The 
duties became effective March 20, 2002.\1\ They affect a wide range of 
steel products used by American manufacturers to produce steel-
containing products in the United States, which in turn are sold to 
U.S. and international customers.
---------------------------------------------------------------------------
    \1\ See Proclamation 7529, 67 Fed. Reg. No. 45 (March 7, 2002); 
Department of the Treasury, Customs Service, ``Payment of Duties on 
Certain Steel Products,'' Federal Register, Vol. 67, No. 54, March 20, 
2002.


                     Steel Products Subject to Import Tariffs, March 20, 2002-March 19, 2003
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Plate                                                                                                     30.0%
Hot-rolled sheet                                                                                           30.0
Cold-rolled sheet                                                                                          30.0
Coated sheet                                                                                               30.0
Tin mill products                                                                                          30.0
Hot-rolled bar                                                                                             30.0
Cold-finished bar                                                                                          30.0
Rebar                                                                                                      15.0
Certain welded tubular product                                                                             15.0
Carbon and alloy fittings and flanges                                                                      13.0
Stainless steel bar                                                                                        15.0
Stainless steel rod                                                                                        15.0
Stainless steel wire                                                                                        8.0
Slab                                                                  A quota of 5.4 million short tons, plus a
                                                                                                         tariff
                                                                      of 30.0% for shipments in excess of quota
----------------------------------------------------------------------------------------------------------------
Source: Office of the U.S. Trade Representative, ``Background Information,'' March 5, 2002.

The Effect
    To understand the impact of the steel tariffs on steel consumers, 
it is helpful first to understand the dynamics of U.S. steel-consuming 
industries. Steel-consuming industries in the United States span a 
broad range of manufacturing sectors, including fabricated metal 
products, machinery and equipment, and transportation equipment and 
parts. Companies in these sectors often produce parts, components and 
subassemblies to very exacting customer specifications (such as 
original equipment manufacturers or aftermarket suppliers of parts and 
components for automobiles and appliances). But steel consumers also 
include chemical manufacturers, who use steel products extensively to 
store and transport the products they manufacture; petroleum refiners 
and their contractors, who use steel pipe and oil field equipment to 
drill for and transport petroleum and natural gas; tire manufacturers, 
which put steel belts and beads in tires for safety and durability; and 
nonresidential construction companies, which use a variety of steel 
products to build office buildings, bridges, and roads. All these 
industries need to purchase steel and steel-containing products readily 
at internationally competitive prices or lose business. The ability to 
do so is crucial to the economic health of these sectors.\2\ This 
analysis focuses on the impact of higher steel prices on these 
industries.
---------------------------------------------------------------------------
    \2\ Our definitions of steel consumers are conservative. The narrow 
definition includes manufacturers and workers in the metal 
manufacturing sector (Standard Industrial Classification Code 34), 
machinery manufacturing (SIC code 35) and motor vehicle equipment and 
parts (SIC 37). The broader definition includes manufacturers in the 
following sectors: fabricated metal products (SIC 34); industrial 
machinery and equipment (SIC 35); electric distribution equipment (SIC 
361); electrical industrial apparatus (SIC 362); household appliances 
(SIC 363); electric lighting and wiring equipment (SIC 364); 
transportation equipment (SIC 37); chemicals and related products (SIC 
28); tires (SIC 301); petroleum refining (SIC 291), and nonresidential 
construction (SIC 15-17 minus SIC 152). These other sectors should be 
included in any definition of steel consumers because they use 
important quantities of steel as inputs to production. For example, 
according to 1998 input-output tables, steel products represent 5.8 
percent of the non-petroleum intermediate inputs in the petroleum 
sector, 18.0 percent in the new construction sector, and 5.0 percent in 
the industrial and other chemicals sector. See Table 2, ``The Use of 
Commodities by Industries, 1998,'' Mark A. Planting and Peter D. 
Kuhbach, ``Annual Input-Output Accounts of the U.S. Economy, 1998,'' 
Survey of Current Business, December 2001, page 62.
---------------------------------------------------------------------------
    The vast majority of steel-consuming manufacturers are small 
businesses. In fact, 98 percent of all the 193,000 U.S. firms in steel-
consuming sectors employ less than 500 workers, according to the Small 
Business Administration.\3\
---------------------------------------------------------------------------
    \3\ Small Business Administration, Office of Advocacy, www.sba.gov/
advo/stats/us99_n6.pdf.
---------------------------------------------------------------------------
    Thus, most significantly, the majority of these companies are 
generally described as ``price takers.'' This means that they have 
little or no influence over the prices at which they can sell the 
products they make. They are simply too small to be able to demand that 
their customers pay more for the products they sell because their input 
costs, for example, have gone up.\4\ Indeed, the prices of key products 
made by steel consumers have been dropping significantly over recent 
years. Charts below show that producer prices for metal cans today are 
7.6 percent lower than they were in January 1996, motor vehicle parts 
prices are 3.4 percent lower, and machinery and equipment prices are 
3.8 percent lower. Steel consumers have been reducing prices in recent 
years because of intense competitive pressures; and they are in no 
position to exact higher prices from their customers now because their 
steel costs have soared.
---------------------------------------------------------------------------
    \4\ Even U.S. automobile producers are becoming ``price takers'' in 
today's marketplace. Car purchasers have become accustomed to zero-
percent financing, cash-back discounts, and other incentives that eat 
into auto-producer profits. There is very little leeway for auto makers 
to increase prices, despite material cost increases. Over the last four 
quarters for which data are available (fourth quarter of 2001 through 
third quarter of 2002), companies in the motor vehicles and equipment 
sector lost a total of $36.1 billion (U.S. Department of Commerce, 
Survey of Current Business, ``Table 6.16C, Corporate Profits by 
Industry Group,'' January 2003). See, for example, Sholnn Freeman, 
``Clearing the Lot: Detroit Rolls Out Best Deals Yet,'' The Wall Street 
Journal, December 24, 2003 (``I've never seen it like this. It is truly 
a buyers' market,'' says Ronald Thomas, a Cadillac sales manager in New 
Orleans. ``The competition is very fierce.''); Jeremy Grant, ``Car 
chiefs expect recovery in two years,'' Financial Times, January 2, 2003 
(``The global automotive industry is not expected to return to the 
record levels of profitability seen three years ago until at least 
2005, according to a survey released today by KPMG, the auditing and 
consulting group'').
[GRAPHIC] [TIFF OMITTED] 89863A.006

---------------------------------------------------------------------------
    Source: U.S. Department of Labor, Bureau of Labor Statistics.

    [GRAPHIC] [TIFF OMITTED] 89863A.007
    
    Source: U.S. Department of Labor, Bureau of Labor Statistics.

    [GRAPHIC] [TIFF OMITTED] 89863A.008
    
    Source: U.S. Department of Labor, Bureau of Labor Statistics.

    It is also important to note that other events were affecting steel 
markets immediately before and after the Section 201 steel tariff 
remedies were imposed. In early 2002, steel supplies were beginning to 
tighten. Several million tons of steel-making capacity had shut down 
over recent years, with significant amounts at LTV Steel, one of the 
largest U.S. producers, leaving the market in the last half of 2001, 
most notably in December 2001. Total U.S. steel shipments dropped from 
8.6 million tons in October 2001, to just 6.9 million in December 
2001.\5\ International Steel Group ultimately purchased LTV and other 
failing steel companies, and brought some of that production back on 
line, but it did not start resupplying the market in any significant 
manner until May 2002. So during the first quarter of the year steel 
producers began to push for higher prices and they had the market power 
of steel shortages to force through some price increases.\6\
---------------------------------------------------------------------------
    \5\ American Iron and Steel Institute (AISI), ``Steel Industry 
Data,'' www.steel.org/stats.
    \6\ Tom Stundza, ``Steel Flash Report: No End to Confusion About 
Pricing,'' Purchasing Magazine Online, 2/28/2002.
---------------------------------------------------------------------------
    In addition, a host of antidumping and countervailing duties went 
into effect at the end of 2001, raising steel costs. Antidumping and 
countervailing duties were imposed on imports of hot-rolled carbon 
steel flat products imported from 11 countries between September and 
December 2001, boosting costs--or eliminating foreign supply--of this 
important product. Antidumping or countervailing duties were imposed on 
imports of stainless steel bar from five countries in March 2002 with 
the same consequences. These duties were imposed in addition to the 
steel tariffs. Ultimately unsuccessful investigations were launched 
against imports of oil country tubular goods and cold-rolled carbon 
sheet, disrupting supplies and prices of these products during the 
course of the investigations.
    The steel supply shortage problem deepened because of uncertainty 
associated with the tariffs. Importers stopped ordering steel in 
January waiting to see what the President would decide. Thus, product 
that would have been entering the market in March, April and May was 
absent. Import supply did not recover to the benefit of steel consumers 
until September (and it has since fallen off again). Steel consumers 
scrambled to order steel from U.S. producers, many of whom would not or 
could not supply them with needed product, and spot prices for steel 
soared.\7\ Domestic steel supplies were so tight that in May 2002 U.S. 
producers supplied over 90 percent of the market, when 80-85 percent is 
more typical.\8\
---------------------------------------------------------------------------
    \7\ In April, it was reported that some U.S. steelmakers were 
rationing sheet steel to their customers because their main steelmaking 
plants were near capacity and their rolling mills were fully booked 
through June. Tom Stundza, ``Steel Flash Report: Short-Term Spot Prices 
Will Continue to Escalate,'' Purchasing Magazine Online, 4/30/2002.
    \8\ Derived from AISI data, www.steel.org/stats.
    [GRAPHIC] [TIFF OMITTED] 89863A.009
    
    * ``Raw Steel'' includes ingots, steel for castings, blooms, 
billets and slab--products imported for use by the steel industry.
    Source: U.S. Department of Commerce.

    The results: shortages and very high prices, particularly last 
summer and fall. Steel transaction (spot) prices--more than half of 
major carbon and stainless steel producers purchase steel on the spot 
market \9\--began to accelerate in March, reaching a peak in July and 
August. According to price tracking data from Purchasing Magazine, hot-
rolled sheet transaction prices were 81.8 percent higher in July 2002 
than in January 2002; cold-rolled sheet prices were 69.4 percent 
higher, and hot-dipped galvanized prices 62.1 percent higher. These are 
key products, used to make products ranging from cars to lawn-mower 
blades. Increases in the prices of steel sold directly by steel 
manufacturers (the so-called ``producer price index'') to their 
customers also showed strong increases over the period. In December 
2002, the producer price index for hot-rolled steel was 27 percent 
above the index recorded in December 2001, and the index for cold-
rolled steel was 19 percent higher over the same period.\10\
---------------------------------------------------------------------------
    \9\ Steel Service Center Institute, ``Statement of The Steel 
Service Center Institute Before the Congressional Steel Caucus,'' March 
21, 2001, found at Internet address http://www.ssci.org/
final_caucus.adp, cited in International Trade Commission, op.cit., 
OVERVIEW-53.
    \10\ In light of pressures to cut end-product prices noted earlier, 
the steel industry's effort to suggest that recent increases in the 
cost of steel are unimpressive because steel prices today are still 
lower than they were in the mid-1990s is hardly persuasive. (See, for 
example, Peter Morici, ``The Impact of Steel Import Relief on U.S. and 
World Steel Prices: A Survey of Some Counterintuitive Results,'' July 
2002, www.steel.org.) It matters little what steel costs were six to 10 
years ago. What matters is what steel-containing products can be sold 
for today and how U.S. steel costs compare to those abroad (see next 
page).
[GRAPHIC] [TIFF OMITTED] 89863A.010

---------------------------------------------------------------------------
    Source: Purchasing Magazine, Flash Reports, various issues.

    [GRAPHIC] [TIFF OMITTED] 89863A.011
    
    Source: Bureau of Labor Statistics.

    On top of a domestic competitive squeeze, steel consumers faced an 
international squeeze as well. U.S. steel market prices were generally 
higher than steel prices paid by competitors abroad (the only major 
exception was the price of steel in the United Kingdom, see charts), so 
foreign producers of steel-containing products maintain a cost 
advantage over U.S. producers of steel-containing products. The result: 
customers began to shift orders for steel-containing products from U.S. 
manufacturers to foreign manufacturers.
[GRAPHIC] [TIFF OMITTED] 89863A.012

    Source: CRU Monitor.

    [GRAPHIC] [TIFF OMITTED] 89863A.013
    
    Source: CRU Monitor.

    [GRAPHIC] [TIFF OMITTED] 89863A.014
    
    Source: CRUspi (Steel Week Online), January 2003.
Quantifying the Unintended Consequences
    Thus, American steel consumers have borne heavy costs from higher 
steel prices caused by shortages, tariffs and trade remedy duties. Some 
customers of steel consumers moved sourcing offshore as U.S. producers 
of steel-containing products became less reliable and more expensive, 
due to steel supply problems. Other customers refused to accept higher 
prices from their suppliers and forced them to absorb the higher steel 
costs, which put many in a precarious financial condition. The worry of 
many proved true: that the high prices would cancel or delay the 
manufacturing recovery that had begun to show signs of finally 
materializing.\11\
---------------------------------------------------------------------------
    \11\ A March 2002 Purchasing Magazine survey on the business 
environment found that 71 percent of metals buyers thought business was 
the same or better than the month before, leading the publication to 
conclude that ``the metalworking recession appears to be over.'' Tom 
Stundza, ``Steel Flash Report: Spot Prices Exploded in March,'' 
Purchasing Magazine Online, 3/29/2002. However, by June the same 
publication was reporting that metalworking growth had slipped for two 
consecutive months. Tom Stundza, ``Steel Flash Report: `Steel Has 
Become a Major Headache,' Say Buyers,'' Purchasing Magazine Online, 6/
28/2002.


                                                                          Steel Consumers' Corporate Profits Evaporated
                                                                                      (Billions of Dollars)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     Seasonally Adjusted at Annual Rates 2001                    2002
 
                                                      2000         2001  -----------------------------------------------------------------------------------------------------------------------
                                                                                    III                      IV                       I                      II                     III
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Primary metals industries *                           $1.0         $-1.6            $-0.1                    $-2.2                    $0.5                    $0.3                   $1.3
Steel consumers **                                    27.4          -1.0             -3.1                    -14.2                   -11.5                    -1.5                   -2.0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Largely, steel producers.
Narrowly defined as fabricated metals producers, industrial machinery and equipment manufacturers, and motor vehicle and equipment manufacturers.
Source: U.S. Department of Commerce, Survey of Current Business, ``Table 6.16C, Corporate Profits by Industry Group,'' January 2003.


    Eventually steel-consuming manufacturers lost business due to the 
high steel prices. And while it was delayed as long as possible, some 
steel consumers were forced to lay off workers. The continuing 
recession also cost jobs. Over the last two years, total employment in 
steel-consuming sectors dropped by about 915,000 jobs. In just the last 
year (2002), 224,400 jobs were lost in the metal manufacturing, 
machinery and equipment manufacturing and transportation equipment and 
parts manufacturing sectors alone.\12\
---------------------------------------------------------------------------
    \12\ Bureau of Labor Statistics, Covered Employment and Statistics 
Survey, total employment, not seasonally adjusted.
---------------------------------------------------------------------------
    How many of these job losses are attributable to high steel prices?
    This is not an easy question to answer. To explore the apparent 
linkages over the 2001-2002 period between steel prices and downstream 
employment, we employed a straightforward log-linear regression 
model.\13\ (We used a variety of combinations of price and employment 
data to maximize the reliability of the results.) Our methodology and 
results are detailed in Annex A. Briefly, we disaggregated the impact 
on steel-consuming sector employment of general conditions in the 
manufacturing sector (i.e., the recession), and steel price 
changes.\14\ The results give an estimate of the recent sensitivity of 
employment in steel-consuming industries to price changes in steel.
---------------------------------------------------------------------------
    \13\ Regression analysis is a standard and widely-accepted 
technique for quantifying relationships between data (like economic 
price and quantity data). It involves finding the equation that best 
fits a set of data points. This ``best-fit'' estimate is then used to 
measure quantitative relationships within the data. In other words, we 
look for an equation that generates as closely as possible the actual 
data sets examined, in this case employment and general economic 
conditions. ``Log linear'' regression analysis involves evaluating the 
relationships between data in natural logs. It is a standard approach 
in economics because the resulting coefficients can be interpreted as 
``elasticities'' that measure relative sensitivities--in this case, the 
sensitivity between steel prices and employment levels. A good ``fit'' 
means that the equation soundly predicts actual data within the sample. 
In the present case, model ``F-statistics'' tell us that we are more 
than 99 percent certain that the relationships modeled are significant, 
and over 95 percent certain that the negative relationship we identify 
with respect to steel prices is significant (based on a one-sided ``t-
test''). See the Annex for more detail.
    \14\ We present here results based on a composite price index, 
representing the average of PPI price data for hot-rolled and cold-
rolled steel. Almost identical results hold for alternative steel price 
indexes (other BLS series, and CRUspi index data).
---------------------------------------------------------------------------
    Despite the fact that the tariffs and other factors raising prices 
have not been in place long, some simple relationships are apparent in 
the data, no matter which data sets are used. To gauge these 
relationships, we used the estimated steel price elasticity of 
employment (the value a2 in Annex Tables A-1 and A-2) to 
calculate the apparent impact of steel price increases on downstream 
employment. If we take December 2001 as a ``benchmark'' for steel 
prices, then higher steel costs reduced steel-consuming sector 
employment in December 2002 by roughly 200,000 (of that, 50,000 jobs 
were lost to higher steel costs in the metal manufacturing, machinery 
and equipment and transportation equipment and parts sectors). Steel-
consumers have lost more jobs to higher steel costs than the total 
number employed by steel producers in December 2002 (187,500).
    These lost jobs represent about $4 billion in lost wages from 
February-November 2002, assuming workers found new jobs within four 
weeks.\15\
---------------------------------------------------------------------------
    \15\ We multiplied the number of job losses for a given month by 
the average monthly wage for steel consumers during that month, and 
then summed the results from February 2002 (the first year of price-
related job losses) through November 2002 (the last year wage data for 
all these relevant SICs are available). Unpublished Bureau of Labor 
Statistics data indicate that in 2001 (the most recent year for which 
data are available) manufacturing workers went a median 4.4 weeks 
without work. Data are from the Bureau of Labor Statistics, National 
Employment, Hours and Earnings Database, and Table A-3 of this study 
(in Annex).
---------------------------------------------------------------------------
    Charts 1 and 2 show actual employment relative to what employment 
would have been in the absence of increases in steel prices on a 
monthly basis.
                                Chart 1
[GRAPHIC] [TIFF OMITTED] 89863A.015

                                Chart 2
[GRAPHIC] [TIFF OMITTED] 89863A.016

State Impacts
    Statewide employment effects were estimated on the basis of 
national effects and the State distribution of employment by sector. 
Every State lost jobs due to higher steel costs. The States 
experiencing the greatest employment losses in steel consuming-
industries resulting from higher steel prices include California 
(19,392 jobs), Texas (15,826 jobs), Ohio (10,553 jobs), Michigan (9,829 
jobs), Illinois (9,621 jobs), New York (8,901 jobs), Pennsylvania 
(8,402 jobs) and Florida (8,370) jobs. Sixteen States lost at least 
4,500 steel-consuming jobs each over the course of 2002.


                                                                                   Employment Effects by State
                                                                                        (Number of jobs)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                               Fabricated Metals,         Other Steel            Total Steel
                                                                                                                                 Machinery, and           Consuming              Consuming
                                                                                                                               Transport Equipment ---------------------------------------------
                                                    State                                                                    ----------------------                        SIC: 15(less152), 16,
                                                                                                                                                    SIC: 15(less152), 16,    17, 291, 301, 331,
                                                                                                                                  SIC: 34, 35, 37     17, 291, 301, 331,   34, 35, 37, 361, 362,
                                                                                                                                                        361, 362, 364               364
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Alabama                                                                                                                                       -731                 -2,459                 -3,190
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Alaska                                                                                                                                          -6                   -284                   -290
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Arizona                                                                                                                                       -632                 -3,023                 -3,655
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Arkansas                                                                                                                                      -522                 -1,279                 -1,800
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
California                                                                                                                                  -4,628                -14,764                -19,392
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Colorado                                                                                                                                      -516                 -3,009                 -3,524
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Connecticut                                                                                                                                 -1,011                 -1,820                 -2,831
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Delaware                                                                                                                                       -86                   -833                   -919
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Florida                                                                                                                                     -1,140                 -7,230                 -8,370
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Georgia                                                                                                                                     -1,032                 -4,335                 -5,367
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Hawaii                                                                                                                                          -9                   -388                   -397
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Idaho                                                                                                                                         -144                   -679                   -824
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Illinois                                                                                                                                    -2,760                 -6,861                 -9,621
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Indiana                                                                                                                                     -2,419                 -3,624                 -6,043
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Iowa                                                                                                                                          -732                 -1,551                 -2,283
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Kansas                                                                                                                                        -821                 -1,363                 -2,184
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Kentucky                                                                                                                                      -991                 -2,085                 -3,076
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Louisiana                                                                                                                                     -496                 -3,157                 -3,653
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Maine                                                                                                                                         -167                   -531                   -698
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Maryland                                                                                                                                      -341                 -2,999                 -3,339
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Massachusetts                                                                                                                               -1,031                 -2,843                 -3,874
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Michigan                                                                                                                                    -5,127                 -4,703                 -9,829
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Minnesota                                                                                                                                   -1,157                 -2,451                 -3,607
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Mississippi                                                                                                                                   -487                 -1,472                 -1,960
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Missouri                                                                                                                                    -1,192                 -3,332                 -4,524
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Montana                                                                                                                                        -34                   -327                   -361
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Nebraska                                                                                                                                      -268                   -915                 -1,183
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Nevada                                                                                                                                         -74                 -1,575                 -1,649
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
New Hampshire                                                                                                                                 -259                   -534                   -793
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
New Jersey                                                                                                                                    -677                 -4,560                 -5,237
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
New Mexico                                                                                                                                     -59                   -779                   -838
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
New York                                                                                                                                    -1,660                 -7,241                 -8,901
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
North Carolina                                                                                                                              -1,293                 -5,540                 -6,833
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
North Dakota                                                                                                                                   -88                   -314                   -403
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Ohio                                                                                                                                        -3,855                 -6,699                -10,553
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Oklahoma                                                                                                                                      -666                 -1,397                 -2,064
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Oregon                                                                                                                                        -507                 -1,564                 -2,071
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania                                                                                                                                -2,163                 -6,239                 -8,402
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Rhode Island                                                                                                                                  -148                   -384                   -532
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
South Carolina                                                                                                                                -774                 -2,677                 -3,451
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
South Dakota                                                                                                                                  -170                   -300                   -470
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Tennessee                                                                                                                                   -1,389                 -3,474                 -4,863
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Texas                                                                                                                                       -2,937                -12,889                -15,826
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Utah                                                                                                                                          -338                 -1,396                 -1,734
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Vermont                                                                                                                                        -92                   -261                   -353
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Virginia                                                                                                                                      -789                 -4,250                 -5,038
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Washington                                                                                                                                  -1,269                 -2,761                 -4,030
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
West Virginia                                                                                                                                 -138                   -839                   -977
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Wisconsin                                                                                                                                   -1,910                 -3,062                 -4,971
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Wyoming                                                                                                                                        -20                   -351                   -371
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    TOTAL                                                                                                                                  -49,753               -147,401               -197,153
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Starting basis is Statewide employment levels as reported by U.S. Bureau of Labor Statistics.

Conclusion
    Clearly, higher steel costs hit American manufacturers of products 
using steel quickly after the tariffs were imposed, and with force. 
Because their customers for the most part have sufficient market power 
to refuse to accept price increases from steel-consuming manufacturers, 
steel consumers had to look for other ways to pay for higher-priced 
steel. Some absorbed the higher costs out of profit margins; others had 
insufficient profits to fund the higher costs. Some simply lost 
customers to foreign competitors. Many had to lay off workers.
    Unfortunately, insufficient data exist at this time to measure the 
precise role steel tariffs played in causing such significant price 
increases, relative to the other factors that pushed steel prices up. 
But this much is certain: tariffs clearly played a leading role. As 
noted, steel tariffs caused shortages of imported product and put U.S. 
manufacturers of steel-containing products at a disadvantage relative 
to their foreign competitors. In the absence of the tariffs, the damage 
to steel consuming employment would have been significantly less than 
it was in 2002.
                     Annex A: The Employment Models
Overview
    We estimated the impact of steel price increases using a 
combination of producer price and employment data. Obviously, the 
remedies have not been in place long, and relevant data are quite 
limited in availability. Even so, some simple relationships are 
apparent in the data. Using a simple log-linear regression model, we 
have explored the apparent reduced-form linkages between employment in 
two definitions of steel-consuming industries, general conditions in 
the manufacturing sector, and steel price changes.
Data
    Price data are taken directly from the U.S. Bureau of Labor 
Statistics published producer price index (PPI) price series for steel. 
We constructed an average of the PPI for cold-rolled steel (series: 
PCU3316#71) and hot-rolled steel (series: PCU3312#311). Employment 
data, on an SIC basis for the total number of workers, not seasonally 
adjusted, are also from the U.S. Bureau of Labor Statistics. Our narrow 
definition of steel-consuming industries includes SIC 34, 35, and 37 
(metal fabrication, machinery, and transport equipment). Our broader 
definition includes SIC 15 (less 152), 16, 17, 28, 291, 301, 34, 35, 
361, 362, 363, 364, and 37. We use monthly data from January 2000 
through December 2002.
Method
    For both our narrow and broad steel-consuming employment series, we 
regressed the log of employment on the log of overall manufacturing 
employment and the log of steel prices.

(1)    ln(E) = a0 + a1  ln(M) + 
a2 ln(PPI) + e

    In equation (1), E is downstream employment, M is our indicator of 
overall manufacturing employment (less the most steel-intensive 
sectors), and PPI is our steel price index. Manufacturing employment M 
serves to capture combined effects related to the general health and 
related trends of the overall manufacturing sector. The a2 
term measures the reduced-form sensitivity (elasticity) of employment 
to changes in the price for steel.
Results
    We estimated equation (1) using ordinary least squares (OLS). The 
overall fit is actually quite good, as summarized in Charts A-1 and A-2 
and also in Tables A-1 and A-2 below. For the narrow definition of 
steel-consuming industries (metal manufacturing, machinery and 
equipment and transportation equipment and parts), 98 percent of total 
variation in employment over the 2000-2002 period (measured by the 
model R-squared) is accounted for. For the broader definition, 82 
percent of the variation in employment is accounted for over the same 
2000-2002 period covered by our data. (Seasonal dummies are also 
included, though not shown in the table.)
    In our narrow downstream sector, a 10 percent increase in steel 
prices yields a 0.41 percent drop in employment. For the broader 
sector, a 10 percent increase in steel prices yields a 0.64 percent 
drop in employment. To estimate employment effects of recent price 
increases, we use the a2 coefficients to calculate the 
implied difference in employment if steel prices had stayed at December 
2001 levels throughout 2002. Once we have an estimate of the change on 
ln(E) due to steel price changes, we estimated a notional level of 
employment E which equals actual employment plus any notional change in 
employment following from restoring steel prices to December 2001 
levels.
    For example, formally, we calculate the change in employment from 
price increases between December 2001 and December 2002 in natural 
logs, Dln(E), as follows:

(2)    Dln(E) = a2[ln(PPIDec2001) - 
ln(PPIDec2002)]
                               Chart A-1
[GRAPHIC] [TIFF OMITTED] 89863A.017

                               Chart A-2
[GRAPHIC] [TIFF OMITTED] 89863A.018



                           Table A-1  Narrow Definition of Steel-Consuming Industries
----------------------------------------------------------------------------------------------------------------
                                                                                    Standard
                                                              --------------------------------------------------
                     Independent Variable                                                 t-
                                                               Coefficients   Error    statistic  Significance *
----------------------------------------------------------------------------------------------------------------
a0 : Constant                                                     -2.8806     0.2722    -10.583       3.8E-12
a1 : Change in General Conditions Index                            1.2337     0.0259     47.506       5.8E-32
a2 : Change in Steel Prices Index                                 -0.0414     0.0138     -2.998       2.5E-03
----------------------------------------------------------------------------------------------------------------
Number of observations: 36
Adjusted R2: 0.98
F-statistic: 1328.6
F-significance: 2.9E-32
Durbin-Watson statistic: 2.11
* based on one-tailed test for price index



                            Table A-2  Broad Definition of Steel-Consuming Industries
----------------------------------------------------------------------------------------------------------------
                                                                                    Standard
                                                              --------------------------------------------------
                     Independent Variable                                                 t-
                                                               Coefficients   Error    statistic  Significance *
----------------------------------------------------------------------------------------------------------------
a0 : Constant                                                      7.5674     0.3325     22.759       1.8E-20
a1 : Change in General Conditions Index                            0.2577     0.0295      8.737       9.6E-10
a2 : Change in Steel Prices Index                                 -0.0643     0.0356     -1.807       4.0E-02
----------------------------------------------------------------------------------------------------------------
Number of observations: 36
Adjusted R2: 0.79
F-statistic: 26.7
F-significance: 3.3E-10
Durbin-Watson statistic: 1.82
* based on one-tailed test for price index



     Table A-3  The Monthly Impact of Price Increases: Relative to December 2001, Not Adjusted for Seasonal
                                                   Variations
----------------------------------------------------------------------------------------------------------------
                                   Broad Definition of Steel-Consuming     Narrow Definition of Steel-Consuming
                                          Industries (Thousands)                  Industries (Thousands)
                                --------------------------------------------------------------------------------
                                                B Estimated        C                    E Estimated        F
                                 A    Actual   Total Employ-   Estimated       D       Total Employ-   Estimated
                                     Em-      ment with- out   Impact of  Actual Em-  ment with- out   Impact of
                                   ployment        Price         Price     ployment        Price         Price
                                                 Increases     Increases                 Increases     Increases
----------------------------------------------------------------------------------------------------------------
Dec-01                                 12475       12475            0        5051           5051            0
Jan-02                                 12053       12050            3        4965           4965            1
Feb-02                                 11997       12009          -12        4957           4960           -3
Mar-02                                 12052       12097          -44        4944           4956          -12
Apr-02                                 12218       12283          -65        4940           4956          -17
May-02                                 12393       12503         -110        4942           4970          -28
Jun-02                                 12587       12720         -133        4959           4993          -34
Jul-02                                 12571       12718         -147        4890           4927          -37
Aug-02                                 12588       12756         -168        4906           4948          -42
Sep-02                                 12492       12672         -180        4876           4921          -45
Oct-02                                 12424       12608         -184        4859           4905          -46
Nov-02                             (p) 12292       12494         -202        4837           4888          -51
Dec-02                                (p, e)       12478         -197        4827           4876          -50
                                       12281
----------------------------------------------------------------------------------------------------------------
p = preliminary
e = partly estimated
 
B = exp(ln(A) + a2(ln(PPIsteel,DEC01) - ln(PPIsteel)))
 
C = A - B
 
E = exp(ln(D) + a2(ln(PPIsteel,DEC01) - ln(PPIsteel0)))
 
F = D - E
 
Note that for column B, the value of a2 is taken from Table A-1. Note that for column E, the value of a2 is
  taken from Table A-2.


                                 
    Statement of Michael L. Shor, Carpenter Technology Corporation, 
                         Reading, Pennsylvania
    My name is Michael L. Shor, and I am the Senior Vice President of 
Carpenter Technology Corporation's Specialty Alloy Operations. 
Carpenter Technology Corporation is a major U.S. producer of specialty 
metals and other high-performance materials, including stainless steel 
bar, stainless steel rod and stainless steel wire.
    I am submitting this statement on behalf of Carpenter and the other 
domestic producers of stainless steel bar, rod, and wire. Our company 
and our industry have been hurt by imports, leading to lay-offs, job 
eliminations and historically low volumes. The Industry desperately 
needed a relief package to position itself to compete head-to-head with 
imports upon the expiration of a relief program.
    When the President ordered relief to our industry, we were very 
hopeful that the relief would allow the domestic industry to accomplish 
three important goals.
    First, the domestic industry must be able to increase its sales 
volume and recapture the market share it has lost to imports. 
Increasing sales volumes will enable us to run our mills more 
efficiently, by permitting a more widespread absorption of the 
significant fixed costs associated with our industry. With respect to 
Carpenter, an increased sales volume will permit us to take full 
advantage of the investments totaling more than $500 million dollars 
that we have made in facilities, equipment and acquisitions over the 
past five years.
    Second, we need to restore prices to levels that allow a fair 
return on our investments for our stainless steel products. We are very 
conscious, however, of the impact that price changes may have on our 
customers. We recognize that our ability to increase sales volumes is 
linked directly to our customers' willingness to purchase our products. 
Our goal is to produce and market stainless steel long products in a 
way that maximizes our customers' ability to grow and excel in the 
markets in which they operate. It should be noted, that in stark 
contrast with the carbon steel industry, our stainless steel prices 
since the 201 was enacted have actually decreased due to a combination 
of poor business conditions, over-supply, reduction of inventory and 
the massive exclusions involved with the first round of the 201.
    Finally, the domestic industry must return to profitability in 
order to generate the returns required to continue to invest in the 
people and equipment that will keep domestic producers competitive in 
the future.
    The Section 201 import relief program has started to help the 
stainless industry, but we have not yet seen the full benefits that we 
still hope we can realize by the end of a full-term relief program.
    For example, even with the Section 201 program, we still see 
negative pricing trends and capacity utilization that is even lower 
than it was during the time of the Section 201 investigation. While 
import penetration of stainless bar and rod decreased marginally, 
imports still control more than 42% of the stainless bar market and 65% 
of stainless rod market in the United States.
    However, I can assure you that the conditions in our industry today 
would be even worse had we not received the relief. We need to continue 
the relief if we are to have any chance of reaching the three goals I 
just outlined.
    We also have been very mindful of our customers' needs throughout 
this time. We have worked with our customers and have agreed to product 
exclusions where they are appropriate. We have accommodated customers 
by agreeing to increased import volumes for certain products. We also 
have had to object to certain exclusion requests, however, where the 
requests simply had no merit--because Carpenter and other industry 
members already can or have produced these products.
    For example, one of our most important products is high-performance 
machining bar. Despite our strenuous opposition to exclusion requests, 
and our demonstration to the Administration that we produce large 
quantities of these exact products on a daily basis, the government 
granted very generous exclusions. At the same time, the investment in 
equipment we made to produce even more of these products, is under 
utilized. These exclusions directly benefit two of our biggest foreign 
competitors. This surprised and hurt Carpenter driving us to our first 
operating loss in 114 years of business. To date, we have been forced 
to eliminate 1,300 salaried and manufacturing positions. This has 
seriously undermined the relief we need.

                                 
                                       Century Metal Products, Inc.
                                        Lowell, Massachusetts 01851
                                                      April 7, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
Washington, DC 20515

Re: L3-26-03 hearing titled ``The Impact of the Section 201 Safeguard 
Action on Certain Steel Products''

Dear Congressman Crane:

    I am writing on behalf of my company, Century Metal Products, Inc. 
We are located in Lowell, MA and we employ 20 workers. We need your 
help.
    The steel tariffs imposed by the President last March, which were 
intended to provide the domestic steel industry with protection from 
imports and an opportunity to restructure in order to become 
competitive on a global scale, have unfortunately resulted in 
dramatically higher prices, longer delivery times, shortages, 
allocations and lower quality for steel consumers. We have seen a 15-
20% increase in the cost of raw material.
    As a result of the tariffs and the slowing economy, my company has 
had to lay off 20% of our employees. Unless things change rapidly, my 
company will continue to lose business to foreign competition that now 
has a built-in cost advantage, thanks to the actions of our own 
government. I believe these tariffs should be removed at the earliest 
possible time to prevent further damage to the steel-using economy.
    Thank you for your consideration.

            Sincerely,

                                                    Jeremy D. Field
                                                          President

                                 
        Statement of Consuming Industries Trade Action Coalition
    The Consuming Industries Trade Action Coalition Steel Task Force 
(CITAC STF) is a coalition of companies and associations--many of them 
small businesses--that rely on open channels of trade to be competitive 
in their U.S. manufacturing, transportation, construction, retailing, 
energy production and other activities. CITAC STF commends the 
Subcommittee for conducting this hearing and for finally allowing steel 
consuming industries to be heard concerning the impact of the steel 201 
remedies on our businesses and workers.
    CITAC STF also commends the Ways and Means Committee for requesting 
that the ITC initiate a Section 332 investigation to institute a fact-
finding investigation of the current competitive conditions facing the 
steel consuming industries in the United States with respect to the 
steel safeguards measures and to foreign competitors not subject to 
such measures. This investigation is critically important to steel 
consumers. The steel safeguard remedies have had a profound and 
negative effect on steel consumers since their imposition in March 
2002. Steel-using manufacturers have lost numerous orders and many 
thousands of jobs to offshore competitors. These unintended effects are 
clearly relevant in the President's determination whether the safeguard 
remedies should last another 18 months at further cost to steel 
consuming industries. The Mid-Point Review provides the opportunity for 
a full analysis. The 332 study, which will be presented to the 
President in the same document as the mid-point review report, must 
provide that information.
    Since the hearing on March 26, 2003, the International Trade 
Commission (ITC) has formally initiated the 332 investigation on the 
impact of the steel remedies on steel consumers. CITAC STF urges the 
Committee to assure that the 332 investigation and the Mid-Point Review 
of the safeguard remedies are integrated and complement each other, as 
was the Committee's intention.

The Safeguard Measures Should Be Terminated as Soon as Possible

    CITAC STF's top priority is the termination of the steel safeguard 
measures because they are wreaking havoc in the markets for downstream 
steel-using manufacturers. Skyrocketing prices, uncertain supply due to 
allocations and lengthening lead-times, broken contracts and growing 
quality problems are forcing many steel users to the brink of disaster. 
These unintended consequences are not only disastrous for steel users 
but for steel producers as well. We hope that the Bush Administration 
will act to end this destructive tax on American steel-using industries 
as soon as possible.
    At the March 26 hearing, several steel producer witnesses suggested 
that the steel industry's survival is essential in this time of war. 
While we agree that it is in everyone's interests to have a strong U.S. 
steel industry, any concerns about defense are misplaced. The Defense 
Department's usage of domestic steel only amounts to 0.3% of domestic 
steel delivery and the Department of Defense generally does not buy 
imported steel. The steel safeguard measures are completely irrelevant 
to national defense.
    The tariffs should be ended at the Mid-Point Review for the 
following reasons:

    1. LThe tariffs are doing far more harm to steel consumers than any 
benefit to steel producers could justify.
    2. LThe economic downturn since March 2002 has vastly magnified the 
injury to steel using manufacturers.
    3. LPrice increases during 2002, which have abated only moderately 
in 2003, are far beyond any predicted level of price increases. These 
prices have seriously damaged the international competitiveness of 
American manufacturers that use steel.
    4. LThe steel safeguards threaten trading relationships. When the 
WTO case is over this fall, a loss in the WTO could result in 
retaliation against exports of U.S. products of $1 billion or more.
    5. LThe safeguards can do no more than they have already done to 
realize the goal for which they were imposed--the rationalization, 
restructuring and consolidation of non-competitive U.S. steel capacity.
    6. LThe safeguards do not address the root causes of the steel 
industry's problems, which is the non-competitiveness of certain 
integrated producers due to relatively high costs and operating 
inefficiencies.
    7. LThe safeguards interrupt critical steel imports that are 
absolutely essential, since we must depend on imports to supply 20 to 
25 percent of our domestic demand. Exclusions have not permitted 
sufficient quantities of the steel American manufacturers need.

More Jobs Have Been Lost From The Tariffs Than Have Been ``Saved''

    A particularly onerous consequence of the tariffs is the threat to 
U.S. jobs--many of which are union jobs--in steel-consuming sectors. 
Steel-using jobs vastly outnumber steel-producing jobs in every state. 
Nationally, the ratio is 59 to 1. Already, jobs are being lost as 
business leaves the country. As the damage mounts, studies show that 
eight steel-using jobs will be lost for every steel-producing job 
``saved,'' even in the short run. We believe that steel-using jobs are 
no less important than steel-producing jobs.A recent economic analysis 
published by the CITAC Foundation, Inc. concluded that about 200,000 
jobs were lost in steel consuming industries due to higher prices. The 
steel safeguard measures caused the price increases in large part.
    The CITAC Foundation study evaluated job effects in steel consuming 
industries both narrowly and broadly defined. In the steel consuming 
industries, narrowly defined, about 50,000 jobs were lost in 2002 from 
higher steel prices. In steel consuming industries, broadly defined, 
some 200,000 jobs were lost in 2002. The CITAC study's numbers indicate 
that serious damage was done to downstream industries from steel price 
increases and the safeguard tariffs.\1\
---------------------------------------------------------------------------
    \1\ The study used a commonly employed regression analysis to 
develop these estimates of job losses. No other analysis exists of the 
jobs effects of the steel safeguard measures. Clearly a government-
sponsored analysis is long overdue.
---------------------------------------------------------------------------
    Between 1995 and 2001, steel-using manufacturers added 1,255,000 
new jobs to the economy, according to the Bureau of Labor Statistics 
(while jobs in the manufacturing sector as a whole actually declined by 
829,000). Today, steel-using manufacturing employ nearly 13 million 
Americans, compared to less than 200,000 jobs in steel-production. Many 
steel users are small businesses, which have been and remain the engine 
of growth for the American economy. Steel-using industries provide good 
jobs and are invaluable contributors to their communities. Furthermore, 
the steel safeguards have had a ripple effect. As U.S. steel-consuming 
industries suffer, so do the companies that supply those industries, 
such as service centers, finishers, platers, assemblers and port 
workers. We urge the Committee to find policy options that assist 
industries throughout the economy, rather than imposing tariffs, which 
only transfer pain from producing to consuming industries.

The Steel Safeguards Have Made U.S. Steel Consumers Uncompetitive

    Steel consumers are in trouble because of price hikes and other 
dislocations in the U.S. that have resulted in a severe competitive 
disadvantage for steel consumers compared to their overseas 
competitors. While some of these price increases have moderated in the 
last few months, as indicated on the attached chart, the United States 
remains at the high end of the world's steel price markets. As a 
result, U.S. manufacturers that use steel are operating under a 
competitive disadvantage compared with their foreign counterparts. It 
is not important to compare prices to the levels in the past; it is 
important to compare U.S. prices to overseas prices to competitors.
    Accurate international pricing data is a key component of sound 
policy making. Unfortunately, data in this area is very incomplete. For 
example, a chart published by the American Iron and Steel Institute in 
January provided an incomplete and misleading picture of the situation 
faced by steel consumers in the United States. The AISI chart was 
misleading in the following respects:

     LAISI only posted prices for hot-rolled steel and excluded 
cold-rolled and galvanized steel--the latter products are more 
important to steel consumers than hot-rolled. When all three flat-
rolled products are included in the calculations, and countries such as 
Russia and Japan are added (Russia, for example, is the world's largest 
steel exporter, although trade restrictions keep much Russian steel 
from the U.S. market), the U.S. is shown to have higher prices than in 
most markets.
     LAISI failed to include prices on the West Coast of the 
U.S., where a large portion of steel users manufacture products, and 
where prices are substantially higher than in the Midwest or Gulf 
Coast.
     LAISI failed to note that prices in most world markets are 
stated in ``C&F'' or ``delivered'' terms, while U.S. prices are listed 
in ``FOB mill'' terms. This means that world market prices are based on 
the steel cost plus freight charges, while the U.S. prices are based on 
the price of steel at the factory gate, with no freight charges added 
in. AISI, in making a comparison using the FOB mill prices for the 
U.S., therefore understates U.S. prices.

    The attached CITAC STF information corrects these problems and 
gives a more accurate picture of global market prices. The price 
differential between steel in the U.S. and foreign markets has led to a 
dramatic increase of imports of value-added products made from steel, 
as well as shifts in production of these value-added products offshore. 
These production shifts have occurred very rapidly in response to the 
steel safeguards. As Timothy Taylor testified before this Subcommittee, 
in our globally competitive economy, production changes happen far more 
rapidly than they did 30 years ago. Thus, if the tariffs remain in 
effect for another year and a half, even more U.S. steel-consuming jobs 
will be lost. Once these jobs are lost, they are lost forever.\2\
---------------------------------------------------------------------------
    \2\ Obviously, the steel safeguard measures are one of several 
factors affecting U.S. manufacturers. We believe the evidence indicates 
that it is an important factor and one that the U.S. government is 
truly able to control. It has made a bad situation much worse and will 
continue doing so as long as it remains in effect.
---------------------------------------------------------------------------
    In recent Senate Steel Caucus testimony, steel producers repeated 
their refrain about pricing. It is important to note that their 
attempts to rebut the hard evidence of competitive disadvantage for 
steel consumers are entirely wrong. For example:

     LUS Steel Claims: Prices have risen faster abroad than in 
the United States.
         LThe Facts: Even if true, what matters is whether prices are 
        lower abroad than in the U.S. for comparable steel products. 
        They are lower abroad, and domestic producers do not argue the 
        contrary.
     LUS Steel Claims: Steel tariffs are not responsible for US 
manufacturers moving offshore.
         LThe Facts: Because prices abroad are lower than in the U.S., 
        our steel consuming manufacturers are at a competitive 
        disadvantage. Jobs are being lost every day because prices in 
        the U.S. are higher than they would be without the tariffs.
     LUS Steel Claims: Steel consumers have not been denied 
important steel imports, because imports are higher for flat-rolled 
steel than they were in 2001.
         LThe Facts: Steel consumers need certain grades and 
        specifications of steel. Many cannot get them due to the 
        safeguard measures. Exclusions do not fill the gap. Aggregate 
        import levels do not change this fact. Indeed, a major reason 
        for increased imports of ``flat-rolled'' steel is the slabs and 
        hot bands that are used by the steel companies themselves. Even 
        steel companies, therefore, are steel-using manufacturers.
     LUS Steel Claims: Inventory levels of flat-rolled steel 
were higher at the end of 2002 than the end of 2001, meaning that there 
were not shortages of steel.
         LThe Facts: Increasing inventory levels from one year to the 
        next do not reveal whether companies suffered from steel 
        shortages during 2002. In fact, many companies did suffer 
        supply disruptions, and these continue.
     LUS Steel Claims: Steel consumers aren't hurt by price 
increases, because prices have come down from levels of last summer and 
fall.
         LThe Facts: Price levels in mid--to late 2002 had risen 50-70 
        percent for flat rolled products from January 2002 levels. 
        Steel users could not absorb these increases. Jobs lost 
        overseas, plus the general economic downturn, led to a decline 
        in demand, and prices moderated. But prices are still well 
        above 2001 levels, continuing to hurt steel users.
     LUS Steel Claims: 201 tariffs are not hurting 
manufacturing because the ISM Index has gone up 10 of the 12 months 
since the steel tariffs were put in place.
         LThe Facts: US Steel apparently is unaware of the serious 
        plight of US manufacturing. The ISM Index in March 2003 is at 
        its lowest level in nearly two years. The steel tariffs are 
        contributing to the malaise in US manufacturing.

Price ``Restoration'' Is Not a Measure of Success

    U.S. steel producers have persistently tried to portray the damage 
of steel tariffs to steel-using manufacturers as either non-existent or 
a ``payback'' for ``unsustainably'' low steel prices in the past.
    The underlying premise of the steel producers' argument is that 
higher steel prices somehow help steel consumers, and that, in any 
event, the dramatic steel price increases currently being visited on 
steel users are somehow justifiable because prices are only at or below 
their 20/22 year ``historical averages.'' CITAC STF rejects the notion 
that the ``fairness'' of prices should be measured by their 20- or 22-
year averages. This is an obviously meaningless benchmark. Televisions, 
computers cars, auto parts and many other products have been declining 
in price for years. Productivity improvements and technological 
innovation enable companies in many industries to reduce costs and, in 
competitive markets, end product prices. Steel is no different from 
other industries in this respect. Nor have the steel producers made any 
connection between 20-year average prices and ``sustainable'' prices.
    Steel users are largely unable to pass along price increases to 
their customers. Several witnesses made this point on March 26. The 
squeeze of sharply rising steel prices against product prices that are 
not changeable puts steel using manufacturers at risk of destruction. 
The steel safeguards, imposed by our own government, have sharply 
aggravated this problem.
    Steel as a production input should be priced by the market. In the 
United States, the price must be comparable to prices charged in other 
world markets. Higher prices will damage American manufacturers that 
use steel by driving business offshore. This is precisely what is 
currently happening in the U.S.
    The steel producer witnesses on March 26 largely ignored the fact 
that the safeguards inevitably hurt their customers. They cannot be 
successful by imposing punishing price increases on their own 
customers. The safeguard measures therefore are doomed to fail in their 
goal of making the U.S. industry internationally competitive. They are 
driving steel purchasers, and steel purchasing offshore--never to 
return. While some may argue that long-term decisions are not based on 
a three-year tariff program, our observation is exactly the opposite. 
Thus, the longer the steel safeguard measures remain in effect, the 
more damage will be done to consuming industries.

Exclusions Have Not Solved the Problems of Consuming Industries

    While exclusions have benefited some steel consumers, the exclusion 
process has not solved a primary concern of small- and medium-sized 
steel-consuming businesses in the U.S.--reliable and competitively 
priced steel.
    The exclusion process has many shortcomings. The tariffs had an 
impact on all steel, both imported and domestic. Steel consumers buying 
100 percent of their steel from U.S. producers also experienced price 
hikes, shortages and long lead times. Exclusions do nothing to help 
these steel consumers. Also, exclusions do not benefit steel consumers 
that buy steel from service centers. Finally, the process is complex--
some steel consumers cannot afford to apply for exclusions that are at 
best uncertain.
    Thus, the exclusion process cannot be viewed as a substitute for 
resolving the challenges the steel safeguards pose for steel consumers. 
Steel consumers who are continuing to suffer from prices and supply 
shortages from the steel tariffs should not have to come to Washington 
to buy steel.

The Safeguard Measures Have Served Their Purpose

    Since the steel safeguard remedies were put into effect, the 
following significant changes have occurred:

     LThe U.S. steel industry has initiated significant 
consolidation and restructuring.
     LThe ``legacy'' costs of several bankrupt companies have 
been reduced or eliminated.
     LThe Administration has made significant progress in its 
multilateral steel initiatives (especially defining subsidies).

    To the extent these changes are a function of the tariffs (a 
doubtful proposition, since the consolidation and restructuring were 
poised to happen in any event), the tariffs have achieved a 
considerable measure of success. Little purpose would be served, 
however, by keeping the tariffs in place for another 18 months. Mergers 
and acquisitions without plant closures are not helpful to the industry 
since the excess capacity remains. To the extent that the tariffs allow 
uncompetitive plants to come back on-line and produce longer, the 
tariffs are, in fact, counterproductive to the long-term health of the 
steel industry.
    Efforts to reduce the world excess capacity of non-competitive 
steel production are laudable (assuming governments of the world can 
define what is ``excess'' capacity). However, steel using manufacturers 
who are struggling now for their survival should not be held hostage to 
this process. The steel negotiations have proceeded to the point where 
they can clearly proceed without the ``stick'' of the tariffs--
especially when the tariffs have caused such harm to the economy as a 
whole.

Conclusion

    The Section 201 steel tariffs are clearly causing far more harm 
than benefit to the U.S. economy. Thousands of American small 
businesses are threatened, and the threat is worsening. All available 
data support this conclusion. Yet until now, there has been no 
government analysis of the impact of the steel tariffs on steel 
consumers. We applaud the Committee's role in initiating such a study. 
We now urge the Committee to monitor the progress of the study and the 
statutory Mid-Point Review of the steel safeguard measures to assure 
that the ITC and the President give full consideration to the effects 
of this program on the entire economy.
    CITAC STF stands ready to work with the Committee toward these 
ends. We thank you for the opportunity to include our views in the 
record.
                                 ______
                                 
                                 [GRAPHIC] [TIFF OMITTED] 89863A.019
                                 
    SOURCE: CRU Monitor, January 2003

                                 
   Statement of The Honorable Jerry F. Costello, a Representative in 
                  Congress from the State of Illinois
    Thank you, Mr. Chairman, for holding this hearing and allowing me 
to testify on the impacts of the Section 201 agreement on the domestic 
steel industry.
    President Bush's decision last year to impose temporary tariff 
relief on behalf of the domestic steel industry has allowed for 
substantial recovery of the domestic steel industry.
    Since 1998, our domestic steel industry has been in crisis, with 
the worst year coming in 2001. The fundamental cause of this crisis was 
massive foreign overcapacity, which had caused the United States to 
become the dumping ground for world excess steel products. As a result 
of this, 35 steel companies have filed for bankruptcy, and over 50,000 
American steel workers have lost their jobs.
    In my home state of Illinois, the crisis has resulted in four steel 
companies filing for bankruptcy, including Laclede Steel and the parent 
company for Granite City Steel, which are in the Congressional District 
I represent. Approximately 5,000 steel workers have lost their jobs in 
Illinois alone.
    In 2000, I joined my colleagues on the Congressional Steel Caucus 
in urging the President to implement a Section 201 investigation by the 
International Trade Commission to determine if our domestic markets had 
been harmed by illegal dumping. I also testified before the ITC to 
express my concerns regarding the steel crisis. The ITC ruled 
unanimously that the steel industry had indeed been harmed.
    While the ITC's decision was welcome, it didn't guarantee relief 
for the domestic steel industry. That decision was left to the 
President to determine what type of remedy should be afforded to the 
industry. I was pleased that the President decided to impose the 
tariffs, rather than quotas, which would not have been as helpful to 
the industry.
    In the past year, we have seen the positive results of the 
President's decision to impose tariffs. The steel industry is beginning 
to show signs of recovery. Prices are stabilizing and steel companies 
are returning to profitability. The industry is restructuring and 
consolidating. All of this has happened without hampering the 
availability of competitively priced steel products. In fact, steel 
imports were higher in 2002 than they were in 2001.
    However, for the industry to continue its recovery, it is 
imperative that as the Section 201 tariff measures are reviewed, they 
remain fully enforced for at least three years as ordered by the 
President, and that exemptions to the tariffs are limited.
    I urge my colleagues to join me in supporting our domestic steel 
industry by supporting the existing tariffs on foreign steel. This 
support will allow for the continued recovery of this nation's domestic 
steel industry.
    Thank you, Mr. Chairman.

                                 
              Statement of Dana Corporation, Toledo, Ohio
    Dana is one of the world's largest suppliers of products and 
systems for the automotive commercial and off-highway vehicle 
manufacturers and their related aftermarkets. The company was founded 
in 1904, and is headquartered in Toledo, Ohio. Dana employs 
approximately 40,000 people in the United States and 60,000 throughout 
the world.
    Dana believes that it consumes approximately 1% of the total volume 
of steel consumed in the U.S. per year. Of this amount, Dana estimates 
that roughly 95% is sourced from United States sources. Dana, 
therefore, has a major interest in the United States steel industry.
    The Section 201 safeguard action has created very real hardships 
for Dana, compromising its ability to realize an adequate return on its 
investments, and in some instances, forcing Dana to utilize foreign 
manufacturing options for some of its products that would otherwise 
have been produced in the United States.

Overview

    The vehicular supply industry has been under intense domestic and 
international pressure in recent years. During this time, Dana has 
undertaken the most aggressive restructuring effort in the company's 
history. This has been a very difficult and painful process, but it has 
been necessary in order for Dana to remain viable and competitive in 
the global marketplace. Consequently, Dana is particularly sensitive to 
the difficult decisions that must be made by the United States steel 
industry as it undertakes changes that may be necessary for it to 
adjust to international competition. While Dana appreciates the 
difficulty of the restructuring efforts undertaken by the U.S. steel 
industry, Dana does not support the imposition of safeguard duties, and 
the corresponding increase in the price of steel.
    Dana must buy steel. Dana's customers are unwilling to accept price 
increases that reflect Dana's increased costs. Consequently, Dana and 
similarly situated companies have borne nearly the entire burden of the 
steel industry's restructuring efforts. This is an unfair burden on 
Dana, its employees, and its shareholders, and compromises Dana's 
ability to compete in the global marketplace.

The Scissors Effect

    Dana operates in a global marketplace. Today's global vehicular 
manufacturers can, and will, source their parts from any supplier, 
foreign or domestic, that can reliably deliver quality merchandise at 
the lowest cost. Therefore, Dana must ensure that its pricing is in 
line with its competitors around the world. When confronted with 
uncontrollable rising prices from either its domestic steel suppliers, 
or its domestic component suppliers, Dana is caught in a dangerous 
``scissors effect'' which diminishes Dana's ability to compete with its 
global competitors.
    As noted, Dana's customers have been unwilling to accept any price 
increases from Dana in response to its higher steel costs. This 
reflects the difficulties that the automotive industry is undergoing. 
Indeed, manufacturers have been offering zero interest rate loans and 
similar incentives to spur new car sales to counter the current 
difficult economic environment. In fact, there has already been 
testimony before this subcommittee indicating that wholesale prices for 
motor vehicles actually fell by 2.2% last year. This demonstrates the 
constant pressure on the automotive manufacturers to contain costs. In 
light of this pressure, the automotive manufacturers simply will not 
accept price increases from its suppliers.
    Imported automotive components, modules, and assemblies not subject 
to the safeguard duties add to the economic pressure encountered by the 
U.S. automotive suppliers. Vehicular components manufactured off-shore 
typically enter the United States at either very low duty, or duty 
free. Thus, foreign suppliers have ready access to the United States 
market while U.S. suppliers must compete with one hand tied behind 
their back. This is true even where the foreign manufacturers use the 
same foreign steel in their production that Dana may use in its 
production. This creates the highly inequitable situation where Dana 
must pay increased material costs for the identical material to produce 
the identical component in the United States.
    While Dana's customers require that it maintain, if not lower, its 
prices, it is now also subject to cost increases as direct result of 
the safeguard duties that it cannot refuse. For products such as 
automotive stampings, where 80% of the cost of the product is 
attributable to the cost of sheet steel, the safeguard duties have led 
to huge increases in Dana's costs. Dana cannot refuse to pay its steel 
suppliers these higher costs without risking cutoff of supply. 
Similarly, where Dana subcontracts elements of production to smaller 
subcontractors, those companies are typically not in position to 
bargain with their steel suppliers, and are not financially able to 
bear the rising cost if Dana refuses to accept the increase. Thus, Dana 
must either absorb the increased price from its subcontractors, or 
refuse to accept it, and likely drive these companies out of business.

Dana's Response to the ``Scissors Effect''

    In response to this situation, Dana has been forced to go to 
offshore sources to supply components when it is no longer possible for 
the current suppliers to compete. For instance, Dana's Commercial 
Vehicle Systems division has awarded 90% of its new steel containing 
component supply subcontracts to offshore producers. This is an 
unprecedented volume of component supply contracts to be sourced 
offshore, and includes components that had been manufactured in the 
United States for a majority of the last century. Similarly, Dana's 
Automotive Systems Group has already begun to purchase some steel 
containing components from overseas, switching away from suppliers that 
use U.S. steel content. Dana's Automotive Systems Group is expected to 
triple its offshore purchases of finished steel components in the near 
future.
    It is important to note that the ``scissors effect'' is not only a 
tremendous burden on Dana and companies like Dana, but it is also 
inequitable. Dana has been undergoing a significant restructuring to 
ensure that the company puts itself in as good a position as possible 
to compete in its market. There has been no governmental or other 
outside subsidization of this activity. Instead, the burden of Dana's 
restructuring has fallen on Dana its employees, and shareholders. Now a 
disproportionate amount of the steel industry's efforts to restructure 
are also falling on Dana and companies like Dana. This additional 
burden is simply not fair.

Domestic Disruptions to Dana's Production

    At the same time that Dana is facing the ``scissors effect'' 
described above, it has experienced serious operational disruptions in 
its United States manufacturing plants as a result of long lead times 
for steel orders, and the inability, in many cases, of the domestic 
steel producers to react to changing customer schedules. Since the 
imposition of the steel duties, Dana has experienced more production 
interruptions than at any other time in the company's history. The 
ripple effect of this is tremendous. In several instances, while Dana 
waited for its suppliers to replenish their steel inventories, Dana's 
production was disrupted, while suppliers were forced to close their 
facilities until steel could be procured. In these instances, idled 
workers are typically not paid.
    In order to try to minimize these sorts of disruptions in both 
Dana's production, and the production of its customers, Dana has been 
forced to more than double its raw steel inventory investment. This 
action is very costly. First, the necessity of maintaining this volume 
of inventory has had serious negative effects on both Dana's operating 
cash flow and working capital. Also, Dana's ability to purchase new, 
more efficient manufacturing equipment and invest in research and 
development is significantly decreased.

Conclusion

    As Dana seeks to maintain its global competitiveness and 
profitability, it cannot stand idly by in the face of rising costs that 
cannot be passed on to its customers, disruptions in its production 
capabilities, and the enormous costs of inventory maintenance. Dana has 
no choice but to explore shifting more manufacturing abroad and 
importing finished components. By the time the tariffs expire according 
to the present three year schedule, it is likely Dana will have already 
shifted significant production overseas to minimize the impact of the 
safeguard tariffs on its operations. Such unavoidable production shifts 
will result in Dana purchasing correspondingly less United States made 
steel. This will also result in the tremendous disruption and 
dislocation of both Dana employees, and employees of Dana's U.S. based 
suppliers.
    For the reasons stated above, Dana believes that the steel 
safeguard duties are having tremendous unintended negative 
consequences, and are bad for both the domestic consumers of steel, and 
domestic producers of steel.

                                 
          Statement of Emergency Committee for American Trade
    Chairman Crane, Representative Levin, Members of the Trade 
Subcommittee of the House Ways and Means Committee, the Emergency 
Committee for American Trade (ECAT) is an association of the chief 
executives of major American companies. Three decades ago, at a 
difficult and challenging time in U.S. trade policy, David Rockefeller 
and other prominent U.S. business leaders founded ECAT to promote U.S. 
economic growth through opening doors to U.S. trade and investment. 
Today, ECAT's members include many of America's largest global 
companies. We represent all of the principal sectors of the U.S. 
economy, including manufacturing, finance, agriculture, and services. 
Our companies have annual sales of nearly $2 trillion, and employ over 
5 million people.
    ECAT wants to express our appreciation for the Ways and Means 
Committee's bipartisan leadership on trade and for the Subcommittee's 
decision to hold a hearing on the impact of U.S. steel safeguard 
tariffs on America's steel-consuming industries. For decades, this 
Committee has been at the forefront of efforts to liberalize U.S. trade 
and build a strong, open, rules-based global trading system through the 
GATT and the WTO. The Committee can be justly proud of the many 
accomplishments of U.S. trade policy, including the Tokyo Round 
Agreement, the Uruguay Round Agreements, the North America Free Trade 
Agreement, Permanent Normal Trade Relations with China, and the GATT/
WTO system itself.
    The U.S. integrated steel industry is not alone in facing global 
competition. In the 1980s, at a time when many experts believed that 
the United States was in the midst of a precipitous economic decline, 
the Ways and Means Committee challenged America's major companies to 
rebuild U.S. economic leadership. Our ECAT companies worked with this 
Committee to meet this challenge. We embraced innovation and change; 
adopted best practices from around the world; pioneered six sigma 
quality controls; invested in innovative products and technologies; and 
accepted the unrelenting discipline required to compete and win in the 
global marketplace. Today, the United States is again recognized as a 
global leader in manufacturing, finance, agriculture, and services, and 
the U.S. economy is viewed as the world's key economic engine. American 
companies succeeded in meeting these challenges by embracing 
competition, innovation, and globalization, not protectionism.
    These are not easy times. American manufacturing and agriculture 
are in the midst of a prolonged economic downturn. Sales are flat, even 
at leading U.S. companies. America's consumers are worried. In February 
2003, over 50,000 U.S. factory jobs vanished. The European and Japanese 
economies are also struggling, and may require long-term structural 
reforms. As a result, overseas demand for U.S. products is likely to be 
uncertain for some time. Even the best U.S. companies face intensifying 
global competition, and the looming threat of price deflation in some 
overseas markets.
    Despite these challenging times, we at ECAT are confident that once 
a sustained global economic recovery takes hold, America's leading 
businesses will again prosper, creating good high-paying jobs and 
renewed U.S. growth, if the United States continues to adhere to sound 
economic principles, such as our traditional support for open trade and 
investment policies in the United States and around the world.
    Mr. Chairman, the long-running debacle of steel protectionism 
underscores that trade protection for one sector of the U.S. economy 
can have serious consequences for other industries and for tens of 
thousands of American manufacturing workers, who are hammered by the 
unintended consequences of government intervention. The steel industry 
has benefited from various forms of trade restrictions for over 30 
years. Such protection has accomplished little, since the integrated 
steel industry is facing problems other than imports: most notably, the 
sustained market share gains by U.S. mini-mills and massive and 
economically unsustainable pension and health care obligations owed to 
retirees from commitments that were made decades ago.
    The bottom line is: a sustained U.S. economic recovery requires a 
healthy U.S. manufacturing sector, and a healthy American manufacturing 
sector requires a timely end to steel protectionism.
    ECAT's member companies produce some of America's best-known 
industrial products--construction equipment, electric motors, tools, 
household appliances, food processing machinery, and automobiles. Our 
factories go head-to-head with competitors from around the world. There 
are over 3.1 million workers employed in America's steel-consuming 
industries, compared to just under 200,000 in the integrated steel 
industry, over half of whom are employed by highly efficient and 
competitive U.S. mini-mills.
    The U.S. steel industry cannot prosper if protectionist steel 
tariffs continue to undermine America's vital manufacturing base and 
drive its key customers offshore. Our members include some of America's 
best-known companies. These companies are also huge steel purchasers 
and among the American steel industry's best customers. The 
overwhelming majority of steel purchases by many ECAT companies have 
traditionally come from domestic mills. Our members have longstanding 
supply relationships with many American integrated steel producers. We 
know that the steel industry wants the best for their workers and 
shareholders, just as we do for ours.
    However, the current trade protection for the steel industry poses 
a real and imminent threat to the rest of American manufacturing and to 
tens of thousands of high-wage, highly-skilled American workers whose 
jobs are now at risk.
    Last year, U.S. steel tariffs were increased by 30 percent on many 
categories of imports under Section 201 of the Trade Act of 1974, as 
amended. Despite repeated assurances to the contrary, the results of 
steel protectionism have been devastating for some of America's major 
industrial companies.
    The prices of some key steel products--inputs that are vital to the 
competitiveness of American steel-consuming industries--quickly 
skyrocketed by nearly 45 percent. While prices have since declined 
somewhat subsequently, U.S. steel-consuming manufacturers continue to 
pay much more for their steel and steel components than competitors in 
Europe, Japan, Brazil, Asia, Russia, and Latin America. The result has 
been an increase in imports of many steel-intensive products.
    Because of widespread shortages, U.S. steel producers put even 
longstanding loyal U.S. customers on ``allocation.'' While large steel 
purchasers were supposed to be insulated from the 30 percent tariffs by 
their 3-year supply contracts, this expectation also proved wrong. 
Quickly after the adoption of the 30 percent safeguard tariffs, pricing 
and on-time delivery came under pressure. U.S. steel producers tore up 
many existing contracts and insisted on hefty price increases. Supplies 
of many key grade and gauge combinations became difficult to obtain 
from U.S. producers, even under the clear terms of written supply 
agreements. We believe that the primary reason was that U.S. steel 
producers diverted steel into the higher-priced spot market in order to 
reap a quick, short-term profit.
    If the price of one of its key input goes up, a U.S. manufacturing 
company must cut costs elsewhere to remain competitive. If prices for 
our U.S.-manufactured products are not competitive, our European, 
Canadian, Japanese, Chinese, and Brazilian companies will win our 
customers. In many cases, such ``adjustments'' mean laying off loyal, 
hard-working U.S. employees, negotiating further cost reductions with 
our key U.S. suppliers, and when we have no absolutely other choice, 
moving production and sourcing offshore to an overseas plant which has 
access to cheaper steel.
    ECAT companies have some leverage because of our size and large 
steel needs in dealing with U.S. steel mills, but we are also concerned 
about our network of small parts and component suppliers. Every large 
U.S. manufacturing company depends on hundreds of small, often family-
owned businesses to supply parts and components. We have worked with 
these small U.S. suppliers for many years. We trust them to supply 
high-quality inputs for American industrial products. These 
relationships are vital to our competitiveness and quality, and cannot 
easily be replaced. Without a network of trusted suppliers, we cannot 
meet our commitment to build high-quality cars, construction equipment, 
appliances, and farm machinery that meets our customers' needs at a 
price they can afford. Today, because of protectionist Section 201 
tariffs, many small U.S. steel fabricators and U.S. auto parts 
companies are being ravaged by price-increases and widespread shortages 
triggered by safeguard tariffs. Because small U.S. companies typically 
lack the leverage and finances to negotiate long-term supply contracts, 
they are at the mercy of the steel spot market, where prices fluctuate 
rapidly.
    ECAT is deeply concerned that America's steel predicament could 
worsen shortly. There are reports that the United States may have lost 
a key WTO ruling regarding the Section 201 steel safeguard, and copies 
of the draft ruling are circulating on the Internet. This outcome would 
not come as any surprise. Experts have long pointed out that the GATT/
WTO safeguard rules were designed for situations where increasing 
imports are causing serious injury, but the U.S. International Trade 
Commission found serious injury even though imports of flat-rolled 
steel products declined during the period of investigation. The remedy 
chosen by the Administration also went well beyond even the 
recommendation by the Commission majority of a 20 percent tariff. It 
should come as no surprise if the WTO were to approach the U.S. 
safeguard with a high degree of skepticism.
    If the United States were to lose a WTO ruling, we must either 
comply by lifting the safeguard tariffs, or face potential WTO-
sanctioned retaliation against billions of dollars of America's leading 
industrial and agricultural exports. This would be a disaster for 
America's trade. In effect, the United States would be required to 
sacrifice our most globally-competitive export industries--
manufacturing, high-technology, and agriculture--in order to continue 
to protect an industry which does not compete significantly in foreign 
markets.
    We believe that there's got to be a better way. ECAT has the 
following preliminary recommendations:
    First, a key objective of the Section 201 safeguard tariffs was to 
support a fundamental restructuring of bankrupt integrated steel 
companies. It is clear that this process is already well underway, and 
that this process, moreover, is primarily being driven by the hard 
realities of the bankruptcy process. Because the finances of the 
integrated producers are no longer sustainable, the industry is finally 
making the tough decisions that were avoided for decades, such as 
closing antiquated mills, seeking to reduce its massive pension and 
health care liabilities, cutting costs, and seeking to compete 
globally, as opposed to focusing exclusively on supplying the U.S. 
market. These difficult steps, which were implemented by other American 
manufacturers twenty years ago, should eventually make the industry 
leaner, more efficient, and more globally competitive.
    A continuation or expansion of government protection will 
undermine, not advance, the restructuring process by encouraging the 
reopening of bankrupt mills, expanding excess U.S. capacity, driving 
down prices, discouraging cost-cutting and needed efficiencies, and 
encouraging the industry to continue to focusing on lobbying the 
government for additional protection, as opposed to getting its 
economic house in order. We, therefore, seek the elimination of these 
tariffs as soon as possible.
    Second, we applaud the strong leadership from Chairman Thomas and 
Representative Knollenburg in requesting the U.S. International Trade 
Commission (ITC) to investigate the impact of steel tariffs on 
America's steel-consuming manufacturing industries. The failure of our 
trade laws to take account of the downstream costs of trade 
protectionism for other American manufacturers is a slap in the face to 
tens of thousands of U.S. companies and U.S. workers, whose jobs are on 
the line. We urge the ITC to thoroughly review the impact of steel 
tariffs on steel-consuming American industries as part of the Section 
332 investigation requested by the Ways and Means Committee, and the 
President to take these concerns into account as part of his Mid-Point 
review of the steel import safeguards under Section 204 of the Trade 
Act of 1974.
    Third, we support Chairman Crane's recommendation that the 
Administration work with steel-consuming manufacturers to address the 
burdens imposed by the Section 201 safeguard tariffs. While we 
appreciate the Administration's willingness to consider product 
exclusions when key steel inputs are not available from U.S. producers, 
this process is not a substitute for an end to steel protectionism. 
Instead of product exclusions, a far better approach would be to 
include America's steel-consuming manufacturing industries in the 
decision-making process.
    Finally, we believe that the best way to support a restructuring of 
the integrated industry would be to explore innovative approaches to 
assisting dislocated workers and retirees. It is becoming increasingly 
clear that the benefits of steel protection for workers and retirees 
are illusory. Given their unsustainable financial circumstances, 
bankrupt integrated steel producers have little choice but to reduce 
current employment and shed massive unfunded pension and health care 
obligations. While the restructuring process will lead to the 
consolidation of the integrated steel sector into a handful of 
globally-competitive and financially viable producers that can compete 
with the U.S. mini-mills, the beneficiaries will be astute investors 
and turn-around specialists, not steel workers or retirees. 
Protectionism won't bring these jobs back or restore lost benefits. We 
believe that more innovative approaches than protectionism need to be 
developed to promote the long-term restructuring of these industries, 
while providing needed assistance to their workers and retirees. 
Congress undertook just such an innovative approach in the Trade Act of 
2002 with respect to the major reforms to the Trade Adjustment 
Assistance programs. It can and should be done again here.
    Last year, in a speech to factory workers in Moline, Illinois, the 
President said: ``Fearful people want to build walls around American. 
Confident people want to tear them down. . .I'm confident we need to 
open up markets, not close them.'' We agree.
    In these difficult and uncertain times, the world needs strong U.S. 
leadership on trade, not protectionism. Because of this Committee's 
leadership on free trade and free markets, the U.S. economy is the most 
open, prosperous, innovative, and dynamic in the world. We urge the 
United States and other steel-producing nations to intensify their 
efforts in the OECD to reduce excess global steel capacity and refrain 
from a dangerous protectionist spiral. We urge the Administration and 
the Congress to redouble U.S. efforts to open markets, strengthen the 
rules-based global trading system, and bring the benefits of free trade 
and open markets to millions of people around the world. Such 
leadership requires a new approach to U.S. steel policy.

                                 

      Statement of Energizer Battery Company, St. Louis, Missouri

I. Background

    On March 5, 2002, pursuant to Sec. 203 of the Trade Act of 1974, 
President Bush announced a series of trade measures to protect the U.S. 
steel industry against competition from foreign steel imports. As a 
result of the ensuing International Trade Commission (``ITC'') 
investigation, additional import duties were imposed upon steel 
products--ranging from 8 percent to 30 percent on nine broadly defined 
categories of steel. The additional duties against imported steel took 
effect on March 20, 2002. The duty rates are scheduled to decrease 
until phased out after three years and one day (March of 2005).
    While the Administration's plan to protect the domestic steel 
industry excluded free trade agreement partners from the remedy as well 
as certain developing countries, the bulk of imported steel products 
are covered by the additional 201 steel import taxes. Because the steel 
products covered by the 201 duties are so broadly defined by the 201 
investigation and because the products of countries with specialized 
and unique steel production capacities are included in the 201 
penalties, many domestically unavailable steel products upon which U.S. 
steel consumers rely were included in the Section 201 case.
    The overly broad scope of the 201 steel duties has negatively 
impacted U.S. steel consumers--resulting in economic and employment 
burdens for U.S. manufacturers and their employees. While the USTR has 
granted product exclusions to those steel consumers who have the 
wherewithal and the resources to seek an exclusion for products that 
the domestic steel industry does not or cannot produce, the domestic 
steel industry has opposed many of these exclusion requests with 
inflated or unsubstantiated claims that they can or do produce some of 
the products for which exclusions have been requested.
    In accordance with section 204 of the Trade Act of 1974, the 
International Trade Commission is scheduled to release a mid-term 
review of the safeguard measures by September 20, 2003. The Commission 
must admit that the United States' domestic manufacturing community, 
which relies upon access to a global free market for steel, has been 
injured by the 201 case's overly broad inclusion of products that the 
domestic steel industry does not or will not produce.
    The ITC's determination that imported steel constituted a primary 
cause of serious injury to the domestic steel industry failed in two 
respects. First, the ITC failed adequately to include product 
exclusions in its decision. Second, the ITC decision failed to consider 
whether other causes of injury to the domestic steel industry i.e. 
massive legacy costs, caused more of the steel industry's current 
status than imported steel products.
    Unfair trade practices by foreign steel producers have been 
assertively investigated and neutralized through the application of 
antidumping and countervailing duties for decades. The purpose of those 
duties is to level the playing field so that foreign steel products 
received no market advantage and domestic producers suffered no 
corresponding disadvantage from the unfair practices. The 201 
investigation, by its nature, admits that domestic steel requires help 
despite the lack of unfair trading practices. However, the ITC 
investigation focused on the depth of injury that the domestic steel 
industry has suffered, not its actual causes nor the likely costs of 
201 duties to the greater United States economy.
    Energizer supports a healthy domestic steel industry and would 
welcome a domestic producer's entry into a niche steel market, known as 
Battery Quality Hot Band. However, in the spirit of free trade, open 
competition, and healthy U.S. manufacturing bases, the ITC's mid-term 
review should admit that the Section 201 steel remedy applied tariffs 
to steel products that were too broadly defined. In accordance with 
that conclusion, the Subcommittee on Trade should recommend that the 
remedy be more narrowly tailored so as not to unduly burden U.S. 
consumers of steel products.
    Because no domestic steel mill produces the steel product upon 
which domestic battery producers rely, a product exclusion was 
solicited. Certain members of the domestic steel incorrectly based an 
opposition to the exclusion request upon an unsupported claim that a 
domestic producer makes the product. No one has approached Energizer 
with product and, when Energizer requested product sample in 1994, the 
domestic product failed the same quality specifications that steel 
imported from the Netherlands has consistently satisfied. In spite of 
the domestic industry's lack of interest in making the product, the 
USTR and Department of Commerce refused to grant an exclusion for 
Battery Quality Hot Band, but, instead, granted a tariff rate quota 
that allows for exclusion from 201 duties for the first 25,000 metric 
tons of product to enter on an annual basis.

II. Effects of the Section 201 Steel Action Against Domestic Battery 
        Producers

    Steel used in battery can production must satisfy out-of-the-
ordinary product purity and quality requirements. Domestic battery 
producers rely upon a specialized steel product known as Battery 
Quality Hot Band (``BQHB''). BQHB is an extremely pure steel product 
that is essential to making battery cans.
    Battery cans are the cylindrical, steel tubes that most consumers 
recognize as giving a battery its recognizable shape. More importantly, 
the use of BQHB in the manufacture of battery cans is crucial for 
product safety, quality, and reliability. Battery cans are functional 
parts of batteries that not only play a role in the distribution of 
energy, but also protect users from injury that could be caused by the 
release of substances contained within the batter can. Use of inferior 
materials may result in increased battery rupture and leakage.
    BQHB is not available from domestic steel producers.
    Energizer's understanding of battery production is second to none. 
Energizer produces more than 6 billion primary batteries annually and 
has been producing and selling alkaline batteries in the United States 
since the mid 60's. In fact, the inventor of alkaline batteries, Lou 
Urry, still works for Energizer. Of the 6 billion batteries produced 
annually, all alkaline batteries (or approximately 4 billion) utilize 
BQHB steel for indispensable reasons generally described as safety and 
quality reasons.
    Battery cans are pressure vessels which interact, directly and 
indirectly, with caustic substances contained within the battery. This 
interaction along with the physical stresses that battery cans endure, 
such as being dropped and naturally existing within a corrosive 
environment, requires hot-rolled steel that is extremely pure, clean, 
and workable. We believe that our standards have allowed Energizer's 
brand names, ``Eveready'' and ``Energizer,'' to become synonymous 
throughout the world with quality, reliability and safety.
    Energizer's research shows that no U.S. domestic producer has the 
combination of capability and interest to produce battery-quality 
steel. In 1994, Energizer conducted domestic sourcing and testing 
investigations. Our testing showed that the use of domestic hot-rolled 
steel for battery-can manufacture significantly increased the incidence 
of battery failure and leakage.
    Leakage of potassium hydroxide, which is contained in all alkaline 
batteries, has, in the past, resulted in severe, acid-like burns to 
those who have come into contact with it.
    Battery leakage can cause human contact with dangerous battery 
substances. For example, small children may not be aware that battery 
leakage should not be ingested or placed in contact with one's eyes. 
Additionally, battery leakage or ruptures may also damage the devices 
into which the batteries are incorporated, making them inoperable. 
Given the extreme range of use of Energizer batteries, quality issues 
easily overlap with safety issues. For example, emergency devices may 
be battery powered. Battery failure due to poor quality battery can 
material could also create a safety concern.
    Consumers of specialized steel products that are not available 
domestically have been placed in the unenviable position of bearing the 
substantial costs of the 201 case for products that do not injure the 
domestic steel producers because the domestic industry lacks the 
interest or the ability to produce these products. The cost to the U.S. 
battery production industry has been great, there are no corresponding 
benefits to domestic steel producers.

 a) The Section 201 Duties Have Been Applied Too Broadly

    As stated above, there is no domestic source of BQHB. Energizer has 
tested domestic product. It has failed to pass the same tests that 
certain, high-quality, foreign products pass. The product 
specifications are not arbitrary. They are directly correlated to 
battery quality and safety.
    Section 201 duties are not imposed in retaliation for unfair trade 
practices. They are extreme measures that our WTO trading partners have 
challenged before international dispute resolution bodies. Our 
international obligation is to impose these extreme measures in a 
targeted manor that avoids unnecessary damage to other industries (both 
foreign and domestic) where the intended beneficiaries, U.S. steel 
producers, receive no benefit.
    U.S. steel producers cannot and do not benefit from 201 steel 
categories that are so broadly defined that they include products like 
BQHB. It is the responsibility of the U.S. steel producers and the duty 
of the ITC to narrowly tailor Section 201 duties to avoid collateral 
damage to U.S. steel consumers. The ITC's mid-term review must refine 
the scope of the 201 duties to completely exclude BQHB.

b) LThe Costs of the Section 201 Steel Duties to Domestic Battery 
        Manufacturers have Outweighed any Corresponding Benefits to the 
        Steel Producers

    Section 201 duties have made U.S. steel the most expensive steel. 
The duties have artificially inflated prices in the United States to 
levels far exceeding the global steel market's free trade prices. 
However, Energizer and most domestic battery producers are American 
companies that must compete in the global arena.
    The 201 duties have created an uneven playing field where domestic 
battery producers must pay exaggerated prices for raw materials, but 
their foreign competitors do not. A review of the testimony provided 
before the Subcommittee by those who support the 201 duties repeat two 
points. First, the 201 case is part of a larger steel initiative that 
seeks to remove distortions from global steel markets by removing 
excess global capacity. Second, the initiative sought to effect this by 
increasing steel prices, and domestic steel prices have increased. The 
failure of 201 steel duties is evidenced by the interplay of these two 
governing objectives.
    While the initiative seeks to remove global market distortions by 
artificially inflating domestic prices, there is neither testimony nor 
indication that global steel markets outside of the United States have 
been proportionately impacted by the 201 duties. There is no evidence 
that excess foreign capacity is diminishing or that it will diminish 
during the next two years. Continuing along the present course will 
increase costs for domestic producers without significantly impacting 
the March 2005 global steel production capacity. While the present 
duties have failed to promote the desired impact, given the testimony 
about the negative impact on the U.S. economy, increasing them is out 
of the question.
    The increased costs to domestic steel consumers, caused by the 201 
environment, disproportionately decreases the competitiveness of 
manufacturers without any real proof that domestic steel will be able 
to compete in the global market. Free trade decisions in the present 
recessed economy have been complicated by strong dollars, escalating 
health cares costs, and foreign competition. They have been distorted 
by 201 duties directly and indirectly. The direct price increases are 
readily apparent. The indirect distortions of 201 have damaged long 
term relationships with reports of broken supply contracts, supply 
shortages, allocations.
    The costs of producing batteries domestically have increased even 
with the granting of a tariff rate quota for some quantities of BQHB. 
The costs of acquiring exclusions are substantial. TRQ's tend to 
inspire ``races to the port,'' where buyers abandon established, 
rational supply schedules and attempt to lock-in all purchases at or 
near the time when the tariff quota first opens. This decreases a 
company's market responsiveness throughout the year and escalates 
inventory costs. The dollar costs to domestic battery producers exceed 
the large percentage increases that would apply to over quota steel. 
The indirect costs are substantial, as well.

c) LForeign Battery Producers Have Benefited from the Section 201 
        Duties against Battery Quality Hot Band, Not the Domestic Steel 
        Industry.

    Only one group has benefited from the 201 process that sought to 
impose up to 30% duties on BQHB, then required a lengthy exclusion 
petition process, and finally resulted in a tariff rate quota. Foreign 
battery producers have benefited. No one else.
    Domestic steel producers do not make or sell BQHB. The domestic 
mills do not receive additional sales or revenue for 201 steel products 
they do not sell. Domestic battery producers have endured upward 
pricing pressure despite the tariff rate quota exclusion for limited 
quantities of BQHB. Foreign battery producers have access to BQHB 
without paying 201 duties. Foreign battery production is not a novel 
idea or in its infancy. It is a well-established industry that is 
perfectly situated to enjoy the competitive advantage that the 201 
duties have handed to it.
    While domestic battery producers have incentive to remain in the 
United States because batteries marked ``Made in the USA'' are 
perceived to enjoy a marginal competitive advantage in certain domestic 
markets, the corresponding disadvantage would disappear if the 
production of high-quality batteries were moved to foreign locations. 
It is Energizer's opinion that all major domestic battery producers 
already have foreign production facilities. A shift to foreign battery 
production could occur rapidly--much more rapidly than a return to 
domestic production.

III. Conclusion

    The Section 201 duties have disproportionately damaged domestic 
battery producers when compared to the negligible benefits to the 
domestic steel industry, if any. The 201 duties have not been well 
targeted or responsibly applied. Energizer supports a stronger domestic 
steel industry and notes that the costs discussed above are harmful, 
but unintentional. The 201 duties are not producing a stronger domestic 
steel industry that would be significantly more competitive in the 
global steel market of March 2005. It is damaging U.S. manufacturers 
who depend upon access to globally competitive steel markets. Foreign 
competitors, more than anyone else are benefiting from the increased 
costs that American manufacturers have endured.
    U.S. steel producers have cited consolidation as a major effect of 
the 201 case. The merits of consolidation are highly debatable in a 
society that champions anti-trust laws and believes in free 
competition. Legacy costs, such as unfunded pension funds, are probably 
more significant causes of the current steel industry's status. Section 
201 duties are inappropriate solutions to these causes. Antidumping and 
countervailing duty investigations are more appropriate to help the 
domestic steel industry protect itself from unfair trade.
    The domestic steel industry has benefited from a long history of 
antidumping and countervailing duties. If the industry failed to 
compete in that leveled playing field, the 201 duties will also fail. 
The 201 duties have been more damaging to other sectors of our economy 
than AD or CVD's. They have done more harm than good.

                                 
   Statement of Ramzi Hermiz, Federal-Mogul Corporation, Southfield, 
                                Michigan
    Mr. Chairman and members of the Subcommittee, on behalf of Federal-
Mogul Corporation I would like to thank you for the opportunity to 
submit these comments regarding the impact of the Section 201 steel 
tariffs on our company.
    Federal-Mogul Corporation is a $5.5 billion global supplier of 
automotive components and sub-systems serving the world's original 
equipment vehicle manufacturers and the aftermarket. Headquartered in 
Southfield, Michigan, Federal-Mogul was founded in Detroit in 1899 and 
today employs 47,000 people at 130 manufacturing plants in 24 
countries. Federal-Mogul employs 20,000 people at 40 manufacturing 
plants in 21 U.S. states, including Michigan, Pennsylvania, Ohio, 
Illinois and Indiana.
    Familiar Federal-Mogul brands servicing the aftermarket include 
Champion spark plugs, Anco windshield wipers, Moog chassis 
components, Fel-Pro automotive gaskets, Sealed Power engine 
components and Wagner brake and lighting products. The majority of 
parts manufactured by Federal-Mogul are produced from steel. These 
parts include automotive sealing gaskets, engine bearings, brakes, 
rings and liners, and chassis components.
    Federal-Mogul consumes approximately 300,000 tons annually in 
direct steel purchases or $135 million. We consume another $512 million 
annually in indirect steel purchases from stampings, castings, forgings 
and other steel-related component parts. Approximately 80 percent of 
the steel Federal-Mogul consumes globally is purchased from domestic 
steel suppliers and over 96 percent of Federal-Mogul's domestic 
consumption is purchased from domestic sources. Federal-Mogul supports 
a strong and profitable steel industry. It is obvious from the above 
that our global operations depend on it.
    Since the advent of the Section 201 steel tariffs, Federal-Mogul 
has experienced significant price increases on direct steel purchases 
as well as for indirect purchases in the steel-related components it 
buys. Federal-Mogul's firm pricing contracts have been broken by many 
of its steel suppliers in favor of higher pricing. Approximately 90 
percent of Federal-Mogul's major steel supply contracts were broken, 
shortly after the implementation of the Section 201 in March of 2002. 
As a result, we have seen price increases as high as 30 percent. On 
some manufactured products, such as brake friction components, the raw 
material portion represents 50 percent of the total cost of the 
product. A 30 percent steel price increase therefore represents a 15 
percent direct price impact in the total cost of these products. Our 
customers will not and have not accepted any price increases related to 
steel. On the contrary, they expect year-over-year decreases in the 
price of our products. Needless to say, this results in an extremely 
challenging situation requiring drastic measures to resolve.
    Federal-Mogul, like all other OEM automotive suppliers, relies on 
consistent and competitive production supply to survive and compete in 
a global marketplace. Our customers, vehicle manufacturers, Tier-1 
automotive suppliers and aftermarket distributors, demand high-quality 
products at competitive prices and in most instances, just-in-time 
delivery. We pride ourselves on meeting those challenges. Yet, over the 
past year, as a direct result of the steel tariffs, we have experienced 
an interrupted supply of steel that has jeopardized our ability to 
serve our customers. On several occasions we have drawn close to 
shutting down a vehicle manufacturer's production line as a direct 
result of a steel shortage. We find this unacceptable. In some 
instances we have incurred significant and unrecoverable production 
costs to maintain a consistent production supply to our customers. Due 
to the reduced volumes of steel available over the past several months, 
Federal-Mogul has been forced, on a number of occasions, to pursue 
additional capacity on the spot market at significantly higher prices--
in some instances at a premium of 100 percent.
    In this environment of rising steel prices, Federal-Mogul has 
pursued and will continue to pursue a number of strategies, drastic in 
some cases, aimed at mitigating these price increases. Federal-Mogul, 
unlike the majority of small domestic automotive supplier businesses, 
can produce identical products and systems at our sister plants in 
Mexico, Europe, Eastern Europe and Asia. This manufacturing flexibility 
affords us the opportunity to shift production overseas, thereby 
avoiding tariffs by importing Federal-Mogul produced finished goods 
into the U.S., manufactured from steel that is more globally 
competitive. In many cases we are also able to supply to OEM customers 
who have increased their manufacturing capability in these established 
regions.
    We are also aggressively pursuing alternative sources for steel. 
Recently we returned from a trip to Eastern Europe to pursue steel 
suppliers in a region consisting of countries that are exempt from the 
Section 201 steel tariffs. We have been quoted prices from suppliers in 
this region that remain extremely competitive to pre-Section 201 market 
pricing.
    Both of the actions briefly described above will ultimately result 
in the loss of manufacturing jobs in the U.S., including steel industry 
jobs. The current policy has had serious unintended consequences on the 
automotive supplier industry as well as other steel-consuming 
industries in the U.S. Consideration must be given to a policy that 
seeks to strengthen not only the steel industry but the manufacturing 
industry as a whole. The current Section 201 is not accomplishing this. 
It is simply transferring this burden from one industry to another that 
quite frankly cannot absorb the impact.
    Federal-Mogul Corporation, along with the Motor and Equipment 
Manufacturers Association (MEMA) strongly supports House Concurrent 
Resolution 23, introduced by Congressman Joe Knollenberg (R-MI) on 
January 29, 2003 and supported by 73 Republican and Democratic co-
sponsors. Federal-Mogul would also like to thank the House Ways & Means 
Trade Subcommittee for its decision to request a 332 investigation on 
behalf of the U.S. steel consuming industry. The 332 ``fact finding'' 
investigation will result in the much-needed assessment and evaluation 
of the impact the Section 201 has had on the steel consuming industry.
    Finally, on behalf of Federal-Mogul, I would like to thank Chairman 
Philip Crane of the House Ways & Means Trade Subcommittee for the 
opportunity to express our views on the Section 201 steel tariffs. 
Please feel free to contact me with any questions or comments.

                                 

                                      Gross-Given Manufacturing Co.
                                        Saint Paul, Minnesota 55107
                                                      April 1, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
Washington, DC 20515

Dear Chairman Crane:

    I am writing on behalf of my company, Gross-Given Manufacturing Co. 
We are located in St Paul, Minnesota and we employ 300 workers 
producing glassfront snack-vending equipment. Our production workers 
are members of local 1042 CWA/IUE. I am writing to you to request your 
help.
    The steel tariffs imposed by the President last March were intended 
to provide the domestic steel industry with protection from imports and 
an opportunity to restructure in order to become competitive on a 
global scale. Instead, they have unfortunately resulted in dramatically 
higher prices, longer delivery times, shortages, allocations and lower 
quality for steel consumers.
    Gross-Given Manufacturing Co. processes 8 million pounds of steel 
annually. Since the implementation of the steel tariffs, we have 
experienced a 30% increase in our steel costs and longer delivery 
times, which required us to increase our steel inventories by 20%. We 
have also experienced lower quality steel, which increases our setup 
times and our scrap rates. Due to foreign competition in our markets, 
we are unable to pass these costs on to our customers. Thus, we find 
ourselves struggling to stay competitive. We not only lack the capital 
to reinvest into the business for future growth; we are forced to look 
overseas for cost saving solutions.
    Unless things change very soon, Gross-Given Manufacturing Co. will 
continue to lose market share to foreign competition that now has a 
built in cost advantage. I believe these tariffs should be removed at 
the earliest possible time to prevent further damage to the steel using 
economy.
    Thank you for your consideration.

            Sincerely,

                                                         Jack Flynn
                                       Vice President-Manufacturing

                                 

                                        Guarantee Specialties, Inc.
                                              Cleveland, Ohio 44108
                                                     March 25, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
Washington, DC 20515

Dear Congressman Crane:

    I am writing on behalf of my company, Guarantee Specialties, Inc. 
and its Garvin Division. We employ 33 people in Cleveland, Ohio and 25 
people in Adamsville, PA. Our production workers are members of UAW 
locals 70 and 204. We need your help.
    The steel tariffs imposed by the President last March, which were 
intended to provide the domestic steel industry with protection from 
imports and an opportunity to restructure in order to become 
competitive on a global scale, have unfortunately resulted in 
dramatically higher prices, longer delivery times, shortages, 
allocations and lower quality for steel consumers. Some of our lead 
times have increased by 50%, we have had numerous rejections of 
material for quality specifications and recently have had a supplier 
tell us that they will no longer be able to supply a raw material that 
we use for one of our higher volume parts. Attrition has prevented 
layoffs, but the fact of the matter is that we now employ fewer 
regular, full-time people than we did and make no use of temporary help 
when we used to use as many as 12 temporary workers per day between our 
two plants.
    As a result of the tariffs, my company has incurred expenses that 
have forced us to lose some or all profitability from various products. 
We have lost one customer

and are considered to be in bad standing with another. Unless things 
change rapidly, my company will lose more business to foreign 
competition that now has a built-in cost advantage, thanks to the 
actions of our own government. I believe these tariffs should be 
removed at the earliest possible time to prevent further damage to the 
steel-using economy.
    Thank you for your consideration.

            Sincerely,

                                                    Frank R. Makar,
                                                  Materials Manager

                                 

                               Hearth, Patio & Barbecue Association
                                          Arlington, Virginia 22209
                                                      April 3, 2003

The Honorable Philip M. Crane, Chairman
Subcommittee on Trade
Committee on Ways and Means
United States House of Representatives
Washington, D.C. 20515

Re: LStatement for the Record--``The Impact of Section 201 Safeguard 
Action on
Certain Steel Products'' Hearing, March 26, 2003

Dear Chairman Crane:

    On behalf of our more than 2,400 members, representing 
manufacturers, distributors, and retailers of fireplaces, woodstoves, 
and barbecue grills, I appreciate the opportunity to provide our 
comments on the impact of the Section 201 tariffs on certain steel 
products to the Subcommittee on Trade. I commend you for your decision 
to hold this important hearing on such a crucial issue.
    Our members represent a diversity of interests that cover all 
aspects of the hearth, patio, and barbecue industries. Combined, the 
industries together generate $9 billion worth of economic activity in 
the United States. Most of our members are small and medium-sized 
manufacturers or specialty retailers. Because of the relative size of 
our members' businesses, it is critical that they be afforded a level 
playing field with respect to production, distribution, and sale of 
product in the United States. The Section 201 steel tariffs directly 
affect our members' market share, both in price and quality, against 
larger U.S. companies and offshore competition. Our American members 
are not large enough to absorb the costs of trade protection for steel 
producers in the United States, nor are they fairly placed to compete 
against foreign companies who can purchase globally-priced steel while 
they are forced to pay a premium.
    Since implementation of the Section 201 steel tariffs, our hearth 
manufacturers are paying higher prices (approximately 20%) for the 
steel used to manufacture fireboxes and our propane tank manufacturers 
are forced to compete with Korean manufacturers who can purchase steel 
cheaper and import finished product into the U.S. tariff-free. I urge 
the Subcommittee to consider that protecting the U.S. domestic steel 
industry at the expense of its customers, i.e., steel consumers like 
our members, is a significant hardship on small and medium-sized 
manufacturers and retailers and these grave effects should be examined 
carefully before the Section 201 midterm review in September 2003.
    Steel tariff proponents argue that foreign steel producers are 
heavily subsidized by their governments and have been dumping cheaper 
steel into the U.S. for years, specifically leading to the crises faced 
in the last few years. But, to respond to this alleged subsidization 
with protective tariffs for the U.S. steel industry cannot be the 
solution to controlling foreign governments' policies with respect to 
their own industrial output. If anything, the United States' support of 
the tariffs will generate even further ire among the WTO and our 
trading partners and in these unstable economic and political times, 
that is not the vulnerable position the U.S. should be in.
    More than 70 of your colleagues are currently supporting House 
Concurrent Resolution 23--The Knollenberg Resolution--primarily because 
they realize that a balanced, complete review of the tariffs with 
respect to both producers and consumers of steel is fair and warranted. 
To argue that an additional 18 months of tariff protection for the U.S. 
steel industry will cure all the problems they've encountered with 
legacy costs and lack of global competitiveness is flatly unreasonable. 
Furthermore, industries like ours, who comprise mostly small and 
medium-sized manufacturers and businesses, depend on the ability to get 
reasonably-priced materials for production, distribution, and sale in 
order to remain viable and stay in business.
    The impact of the Section 201 steel tariffs on smaller steel-
consuming industries like ours needs to be carefully examined and 
reviewed in full by the International Trade Commission (ITC) at its 
midterm review in September. I urge the Subcommittee on Trade to 
encourage the ITC to consider the unintended and negative impacts of 
the tariffs on consumers of steel. The Section 201 steel tariffs' 
detriment to consumers far outweighs its benefit to the domestic steel 
industry and a prompt removal of the tariffs before they expire is both 
justified and economically defensible.
    Thank you for the opportunity to comment on this important issue.

            Respectfully,

                                                    Carter Keithley
                                                    President & CEO

                                 

                                               Hedstrom Corporation
                                        Bedford, Pennsylvania 15522
                                                     March 31, 2003

Honorable Phillip M. Crane, Chairman
Subcommittee on Trade
Committee on Ways and Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington, D.C. 20515

Dear Representative Crane:

    Hedstrom Corporation is a manufacturer of gym sets and trampolines 
sold through mass merchants for resale to consumers. We are one of the 
largest employers in Bedford County, Pennsylvania. And, believe we are 
a very important party of the local economy. The imposition of 201 
duties has been crippling to our business. In 2002 we incurred a cost 
increase of over $1.8 million compared with our cost for steel in 2001. 
For the first Quarter of 2003 alone we will incur a cost increase of 
over $1.1 million over the prior year. We have worked hard to find 
alternate domestic sources for steel, but have suffered these dramatic 
increases despite those efforts.
    In addition to our strenuous efforts to source steel at the best 
prices possible, we have invested heavily in our business to improve 
efficiencies and reduce costs. We believe we are a low cost 
manufacturer and can be competitive against foreign manufacturers, 
except for our steel costs resulting from the 201 duties. As you can 
imagine, increases of this magnitude are threatening our continued 
ability to manufacture our products domestically. We are not able to 
pass these cost increases along to our mass merchant retailers. For 
example, Wal-Mart, our largest customer, purchased 50,000 trampolines 
from China last fall and is considering another 100,000 Chinese 
trampolines this coming fall, at a lower price than ours.

            Sincerely,

                                                    Craig S. Marton
                                   Vice President & General Manager

                                 
Statement of Eric Arroyo, Henry Technologies, Inc., Woodstock, Illinois
    Thank you for the opportunity to submit this testimony to the House 
Ways and Means Committee regarding the impact of the Section 201 
tariffs on steel consumers, especially on small to medium companies.
    My name is Eric Arroyo and I am Vice President and General Manager 
of Henry Technologies, Incorporated. Henry Technologies manufactures 
components used in commercial and industrial refrigeration and air 
conditioning systems. Henry Technologies has been privately held since 
its inception in 1914 and employs about 350 in the United States, 
Canada and the United Kingdom. Our plant in Melrose, IL employs 150 
workers.
    We are a Tier 1 and Tier 2 supplier, providing our customers, as 
well as our customers' customers, with components used to manufacture 
air conditioning and refrigeration equipment. Henry Technologies sells 
to leading companies such as Carrier Corporation, Trane and York 
International, and also supplies replacement parts to wholesalers and 
exporters. The material content of our product is significant and 
encompasses various materials with steel as the primary metal used in 
the form of castings and tubing as well as machined components. Due to 
the variety of product manufactured and our relative size in the 
industry, it is difficult to offset the effect of major industry price 
increases for material.
    Since the imposition of tariffs, our average cost has risen 10-20% 
for a representative sample of our affected purchases. With the 
industry softness as well as competition from larger companies, we have 
had to absorb 90% of the increased costs. The impact on our 
profitability has been significant for those products--with a dollar 
for dollar reduction in profits for each dollar increase in cost we 
cannot offset.
    To compensate for the increased cost of steel, we have reduced 
spending, including employment in the United States. It is difficult to 
reduce costs further without seriously impacting our ability to 
compete.
    The steel tariffs also caused a temporary shortage of some of the 
steel products we purchase. This resulted in late deliveries from 
suppliers and increased cost on our part to compensate with overtime in 
production and, in some cases, premium freight costs to deliver our 
products.
    There are foreign competitors, particularly from Mexico, who pose a 
continuing threat to our market position. If we are forced to increase 
prices, because additional cost reduction is not possible, we most 
certainly will suffer serious loss of market share to those foreign 
competitors. This will impact our ability to continue to produce those 
products in the United States. In addition, we supply over 33% of the 
finished goods sold by our UK company into Europe. These additional 
costs will cause loss of market share in what has been a strong market 
for our U.S. produced products.
    Continuation of these tariffs will force us to seriously consider 
off-shore production with its negative impact on our U.S. employment 
and our contribution to the local economy.
    It is critical that these tariffs be removed as soon as possible. 
Our situation cannot be unique. Significant United States manufacturing 
capability of small to medium-sized companies utilizing steel affected 
by the tariffs is at stake. We need relief from this artificial cost.
    Thank you.

                                 

                                                  Hi-Craft Products
                                          Gardena, California 90248
                                                     April 10, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
Washington, DC 20515

Re: Steel Tariff

Dear Congressman Crane,

    I am writing on behalf of my company, Hi-Craft Metal Products. We 
are located in Gardena, California, and employ 20 workers. We need your 
help.
    The steel tariffs imposed by the President last March, which were 
intended to provide the domestic steel industry with protection from 
imports and an opportunity to restructure in order to become 
competitive on a global scale, have unfortunately resulted in 
dramatically higher prices, longer delivery times, shortages, 
allocations and lower quality for steel consumers. As a supplier, our 
profit margins have been slashed in order maintain our customer base. 
Our customers simply will not share in the expense of these material 
cost increases.
    As a result of the tariffs, my company has been late on orders, 
lost contracts to foreign suppliers, and been forced to lay off 5 
employees. Unless things change rapidly, my company will continue to 
experience these devastating problems. I believe these tariffs should 
be removed at the earliest possible time to prevent further damage to 
the steel-using economy.
    Thank you for your consideration.

            Sincerely,

                                                        Bill Gerich
                                                          President

                                 

                                           Illinois Tool Works Inc.
                                           Glenview, Illinois 60025
                                                     April 11, 2003

Mr. Chairman and Members of the Committee:

    If you leave with no other impressions from our comments today, let 
it be:

    1. LSteel is not steel is not steel;
    2. LMarket dynamics have changed inalterably; and
    3. LThe tariffs are a manufacturing issue not just a steel producer 
issue.

    Mr. Chairman, in meetings here in the District, you have referenced 
to the decisions the US sheep industry were forced to make when lamb 
produced in Australia could be delivered to American kitchens cheaper 
than could be produced here at home. That example, Mr. Chairman, is 
appropriate when comparing commodities; but does not apply to all types 
of products.
    ITW produces value-added proprietary products for which specific 
requirements are generated for the entire production process, including 
raw materials. That means we must be able to source raw materials of 
specific and consistent quality at a globally competitive price. We 
must also contend with rapidly changing market dynamics, even for our 
proprietary value-added products, which has changed inalterably from 
those which existed even one year ago. Yet, domestic steel producers 
would have Congress and the Administration believe that they operate in 
a ``closed system'' and that the government can virtually stop all 
competitive imports by imposing tariffs and duties with little or no 
impact on their customers or other sectors of the economy. They are 
dead wrong.

Steel is not steel is not steel

    The process by which the International Trade Commission 
investigates claims by domestic steel producers is constrained somewhat 
by our system of identifying products and materials, regardless of 
where from around the globe they are made. This system, Harmonized 
Tariff Schedule of the US (HTSUS), makes a credible effort, via a ten 
digit designator, to segregate what appear to be ``like'' products. But 
within the context of this discussion, it fails.
    While a Fortune 200 Company with global revenues of $9.5 billion, 
ITW operates nearly 400 separate operational units here in the United 
States as entrepreneurial enterprises run by dedicated men and women 
based in 145 congressional districts. For ITW, the tariffs and 
complementary duties cost our individual business units over $6 million 
net of accepted price increases in 2002 and this number is expected to 
increase by $3 million in 2003. While price, an ongoing lightning rod 
of this debate, is important to ITW, we are even more concerned about 
the issues of chemistry and quality.
    When one examines the President's Proclamation, you will count 
dozens of HTS codes as being subject to the tariffs. Even when taken to 
their tenth digit, the HTS codes are still only categories of products 
not descriptions. An examination of the exclusion requests will provide 
the committee with true material descriptions. The list of exclusions 
for cold rolled and hot rolled steel, in our opinion, are so numerous 
because American industry has, over the past decade, continued to 
achieve significantly higher levels of productivity by refining the 
chemistry and quality requirements of their raw materials and sourcing 
those materials from suppliers who choose to provide them, regardless 
of their geographic location. In many cases, these requirements alone 
increased the cost of the material; but these costs were offset by the 
savings derived from dispensing with some end of line inspection 
processes and far fewer defective parts. Domestic steel suppliers, as 
evidenced by their testimony, would have you believe that there are 
minor differences in steel and that their customers are simply fickle 
and are buying on price alone. For many companies that use ``vanilla-
type'' steel for their products, price can be the most critical 
determinant in their sourcing efforts; but many, many fabricators will 
cite chemistry and quality as the most critical purchasing criteria.
    Every ITW manager lives by the 80/20 Rule. That is, 20% of our 
customers generate 80% of our revenue; or 20% of our products generate 
80% of our revenue. We will turn away or find an alternative source for 
a customer when their business declines below the 80/20 point. We 
accept a steel supplier's decision to not produce or even bid on an 
order for a steel chemistry that does fit their 80/20. We are outraged, 
however, when that same company(ies) turn(s) around and seek(s) 
protective tariffs or duties on products they either choose not to make 
or have been unable to demonstrate an ability to produce to our and our 
customers' satisfaction.
    For example, the domestic steel wire rod industry brought a 
dumping/countervailing duty case against several offshore producers of 
wire rod. The HTSUS does not distinguish clearly between industrial 
quality (IQ) and cold heading quality (CHQ) wire rod. CHQ wire rod is 
used in the production of many, many safety related components for the 
automotive industry, for example, and is often specified by the OEM 
customer. In fact, ITW may be one of the largest domestic consumers of 
CHQ in the United States. All of ITW's recent sourcing of CHQ has been 
foreign (including Canada) because the two domestic producers chose not 
to meet our chemistry, quality and/or servicing requirements.
    The domestic fastener industry asked the International Trade 
Commission (ITC) during a public hearing (since purchasers have no 
standing in a dumping case) to find CHQ wire rod to be a similar like 
product. We cited the fact that neither of the two domestic mills, 
Charter and Republic, which produce CHQ were parties to the petition 
before the ITC because they knew they already could not meet domestic 
demand. Nonetheless, petitioners claimed a Texas-based company, North 
Star Steel, had recently announced its CHQ wire rod production and was 
prepared to take orders in the rear of the Commission's chambers. Since 
that claim was made, Republic Steel has announced plans to focus its 
operations on steel bar, limiting, we suspect, its likelihood to 
produce CHQ wire rod and North Star still does not produce the 
chemistry, quality or quantity we require of CHQ wire rod. Hence, the 
domestic industry manipulated the market for its own benefit and to the 
detriment of its customer base.
    ITW is also one of America's largest consumers of stainless steel 
sheet, a product not subject to the President's tariffs. For decades, 
we have purchased virtually all our raw material from domestic mills. 
However, soon after the imposition of the tariffs, we found that 
domestic mills began shifting production and attention to products 
directly benefited by the tariffs. Customers of products produced by 
domestic mills, which did not fit their new profit equation, were 
informed that contracts would not be honored and we saw quality 
degenerate because they shipped virtually everything they produced. 
ITW's business units that consume stainless steel sheet found that 
nearly 30% of deliveries fell below contracted quality requirements 
forcing our plants to slow production and extend delivery times to our 
customers.
    Overall, where offshore suppliers refused to ship steel because of 
the tariffs, we moved our purchases to the spot market and saw our 
productivity decline, in some cases by over 30%. This meant that we had 
to implement manual inspections, early tool replacement and other 
heretofore abandoned practices which do little but increase the cost of 
production--on top of the tariff enriched steel prices.
    However, where our chemistry and quality requirements could be met 
only by off shore producers, we continue to purchase offshore, 
regardless of the cost; but these costs are not recoverable from our 
customers.

Market dynamics have changed inalterably

    Mr. Chairman, for nearly forty years, the domestic steel industry 
has sought and, for the most part, received decisions from the ITC that 
imposed duties and tariffs on many different types of steel products. 
The purpose of these suits and subsequent decisions was to provide the 
petitioners the opportunity to modernize, consolidate and become 
profitable and globally competitive despite challenging market 
conditions.
    Productivity gains achieved by steel consumers over the last 
decade, we now realize, were only a warm-up for the pressure Original 
Equipment Manufactures (OEMs) now impose on their supply chains. 
Suppliers are now expected to create the products/materials and 
processes that enable OEMs to lower their costs. Not only are suppliers 
not allowed to pass along price increases, they are expected to cut 
their prices every year. On top of these pressures, the nation's 
largest auto producers, General Motors and Ford Motor Company have 
announced their intention to lower costs further by sourcing over $10 
billion in components in China. The inference is that if, as a 
supplier, you want to continue in that role, you will establish 
operations in China. Lurking behind this inference is the reality that 
the single largest cost driver for many suppliers is raw material 
savings.
    Mr. Chairman, ITW had planned to open a manufacturing plant in 
China for the sole purpose of serving the growing (Chinese) domestic 
automobile industry. This business model has worked for ITW for 
decades. Now, through the interaction of our government and the 
domestic steel industry we find several of our American operations 
unable to procure reliable sources of globally competitive steel. 
Concurrently, we are challenged constantly by automotive and other 
OEM's absolute unwillingness to accept any increase in end-product 
pricing, especially when they can import the end products duty free. 
Hence, no matter how we try to keep production in the United States, 
the aforementioned facility in China will be designed to produce 
finished products for export to the United States--to the detriment of 
our employees in Illinois, Michigan, Ohio, Wisconsin and several other 
states.

The tariffs are a manufacturing issue not just a steel producer issue

    Last year, the National Association of Manufacturers was faced with 
a plethora of its members who urged the Organization to change its 
decade old policy with regard to steel. At the same time, steel 
producing members urged the NAM to refrain from becoming embroiled in 
this debate since, in their opinion, it was a ``single sector'' issue.
    Nonetheless, after many hours of testimony from representatives of 
some 100 members and associated trade associations and some additional 
sixteen hours of intense negotiations and wordsmithing, participants 
from steel producing and steel consuming interests, together with the 
assistance of NAM staff, forged a consensus document that was adopted 
by the full NAM Board of Directors on February 8, 2003.
    This new NAM Policy contains the following statements:

     L``Changes in the steel market affect multiple sectors in 
the US economy, including agriculture, construction, plastics, 
appliances, electrical equipment, automotive, aerospace and defense 
equipment.''
     L``A vigorous debate within the NAM has helped to 
illuminate the competitive difficulties of both the steel producing and 
steel consuming sectors of the US economy.''
     L``Subsequently, . . . Many steel consuming firms have 
found that, due to the lack of pricing power, this caused business and 
financial losses and employment reductions.''
     L``The NAM believes that the needs of steel producers and 
consumers should be taken into consideration in formulating 
international policy on steel. The NAM supports . . . the timely phase 
out of Section 201 measures . . . .''
     L``. . . the NAM recommends that the President appoint a 
blue ribbon  . .  panel . . . to analyze the competitive challenges 
faced by all manufacturers . . . . AND the analysis should include 
input from manufacturers that produce raw and semi finished products in 
the United States as well as those who import such products . . . to 
make finished goods in domestic plants.''
     L``The [Blue Ribbon Panel] report should be completed by 
July 2003 so that it can lay the foundation for actions in the course 
of the year.''
     L``. . . the NAM recommends that the President instruct 
the International Trade Commission to gather evidence on the impact of 
the Section 201 steel tariffs on both steel producing and steel 
consuming industries and to report its findings no later than July 31, 
2003; . . . .''

    In the end, Mr. Chairman, I reiterate the three points articulated 
at the outset of our comments--steel is not steel is not steel; the 
market dynamics of the 21st century does not resemble even those of the 
last decade of the 20th century; and the tariffs effect a broad segment 
of US manufacturing not just steel producers. The consequences of the 
domestic mills' decisions over the last four decades, which have caused 
them to seek and secure repeated market protection from the government, 
should not be borne by their customers who have worked diligently to 
change with the times.
    American consumers of raw material, of any kind, have only a 
marginal statutory voice in trade law and practice. We appreciate your 
effort to provide us a venue where we can speak publicly on this 
matter. We encourage you further to address the inequities of trade law 
that limit severely the role of purchasers in trade actions.

            Respectfully,

                                                   Michael J. Lynch
                                           Director, Public Affairs

                                 

                              Indianapolis Metal Spinning Co., Inc.
                                        Indianapolis, Indiana 46214
                                                     March 25, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
Washington, DC 20515

Dear Congressman Crane:

    I am writing on behalf of my company, Indianapolis Metal Spinning 
Co., Inc. We are located in Indianapolis, IN and we employ 13 workers. 
We need your help.
    The steel tariffs imposed by the President last March, which were 
intended to provide the domestic steel industry with protection from 
imports and an opportunity to restructure in order to become 
competitive on a global scale, have unfortunately resulted in 
dramatically higher prices, longer delivery times, shortages, 
allocations and lower quality for steel consumers.
    As a result of the tariffs, my company has my customers are moving 
away from me to oversea companies. Unless things change rapidly, my 
company and other companies like me will continue to lose business to 
foreign competition that now has a built-in cost advantage, thanks to 
the actions of our own government. I believe these tariffs should be 
removed at the earliest possible time to prevent further damage to the 
steel-using economy.
    Thank you for your consideration.

            Sincerely,

                                                   James C. Kaufman

                                 

                                                          KMS, Inc.
                                West Columbia, South Carolina 29170
                                                      April 2, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
Washington, DC 20515

Re: L3-26-03 hearing titled ``The Impact of the Section 201 Safeguard 
Action on Certain Steel Products''

Dear Congressman Crane:

    I am writing on behalf of my company, KMS, Inc. We are located in 
West Columbia, South Carolina and we employ 75 workers. We urgently 
need your help.
    The steel tariffs imposed by the President last March, which were 
intended to provide the domestic steel industry with protection from 
imports and an opportunity to restructure in order to become 
competitive on a global scale, have unfortunately resulted in 
dramatically higher prices, lower profit margins, longer delivery 
times, shortages, allocations and lower quality for steel consumers. As 
a direct result of these tariffs, many of our competitors have been 
forced to close their doors.
    As a result of the tariffs, my company has lost contracts to 
foreign suppliers and has been forced to cut salaries just to stay in 
business. Unless things change rapidly, my company will lose business 
to foreign competition that now has a built-in cost advantage, thanks 
to the actions of our own government. I believe these tariffs should be 
removed at the earliest possible time to prevent further damage to the 
steel-using economy.
    Thank you for your consideration.

            Sincerely,

                                                 Jeffrey S. Dickson
                                                             C.O.B.

                                 

                                         Larson Tool & Stamping Co.
                                      Attleboro, Massachsetts 02703
                                                      April 8, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
Washington, DC 20515

Re: L3-26-03 hearing titled ``The Impact of the Section 201 Safeguard 
Action on Certain Steel Products''

Dear Congressman Crane:

    I am writing on behalf of my company, Larson Tool & Stamping Co. We 
are located in Attleboro, Massachusetts and we employ 85 workers. We 
need your help.
    The steel tariffs imposed by the President in March, 2002, which 
were intended to provide the domestic steel industry with protection 
from imports and an opportunity to restructure in order to become 
competitive on a global scale, have unfortunately resulted in 
dramatically higher prices, longer delivery times, shortages, 
allocations and lower quality for steel consumers.
    We use a blend of foreign and domestic steel, but for quality 
reasons have historically relied heavily on foreign material for the 
production of fire extinguisher cylinders that must undergo rigorous 
safety testing procedures. The imposition of tariffs resulted in price 
increases of 25-30% and, for a time, elimination of the foreign mill as 
a source. We were forced to order solely from the domestic mills and 
deal with the quality problems that ensued. Not only did we have higher 
priced metal, but also the added expense of higher scrap and reduced 
productivity. This goes against every effort that my employees and I 
put forth on a daily basis to help ensure the success and financial 
health of this company.
    As a businessman I am willing to compete in the global economy, but 
disparities in labor and transportation factors alone, for example, 
make competing hard enough without the government imposing additional 
roadblocks. My company this year has lost $500,000 in annual sales to a 
company in France, and lost a bid on $1,500,000 worth of business to a 
company in South Africa.
    If the tariffs remain in place for another two years, I am sure 
there will be other lost orders, lost profit, lost investment and lost 
growth. The tariffs should be removed at the earliest possible time to 
prevent further damage to the steel-using economy.

            Sincerely,

                                                   Daniel G. Larson
                                                          President

                                 

                                           Lincoln Electric Company
                                              Cleveland, Ohio 44117
                                                      April 9, 2003

Honorable Phil Crane
Chairman
House of Ways and Means Trade Subcommittee
Washington, D.C. 20500

Re: Foreign Steel Tariffs

Dear Mr. Crane:

    I wish to add the voices of the 2,800 Lincoln Electric employees in 
northeast Ohio to those concerned that well-intentioned efforts to 
protect our nation's steel industry have had a detrimental impact on 
our own industry. Lincoln Electric is the only American owned producer 
of certain welding wires used in the defense industry (submarine and 
tanks). Our plant in Mentor, Ohio is the largest welding wire facility 
in the world.
    We join the National Electrical Manufacturers Association and 
National Association of Manufacturers in urging the termination of 
Section 201 foreign steel tariffs. These tariffs have negatively 
affected Lincoln Electric, the world's leading designer, developer and 
manufacturer of arc welding products, and are contributing to major job 
losses.
    We sell welding products to fabricators of steel. Our customers 
have suffered injury due to these tariffs which impose unacceptable 
cost increases. The result is that fabricators are leaving our shores 
in droves.
    The raw materials price increases that followed last year's 
implementation of the tariffs have also negatively affected our cost 
structure and put us at a distinct disadvantage relative to our 
competitors. While we must incur higher costs to source steel from 
outside the United States, our competitors can ship their welding 
consumables into our country without penalty because their products are 
viewed as ``finished goods.''
    We reiterate the position of NEMA and the electrical industry that 
the U.S. government must take seriously the statutory language of 
Section 201, which requires that any remedy adopted by the President 
must ``provide greater economic and social benefits than costs.'' 
Unfortunately, the additional tariffs placed on imported steel last 
March have done much more harm than good for our industry and for 
electrical manufacturing. Many more jobs have been lost in consuming 
industries than have been protected in the steel industry by the steel 
tariffs, and the trend is going in the wrong direction very rapidly.
    I am certain that the International Trade Commission would confirm 
the negative impact on U.S. steel-consuming industries. Therefore, I 
urge you to look beyond the steel industry and consider the wide-
ranging implications of the Section 201 foreign steel tariffs. It is 
not too late to remove the restrictions and allow U.S. manufacturers to 
compete fairly in the global economy on an equal footing.

            Sincerely,

                                               John M. Stropki, Jr.
                                           Executive Vice President
                                           President, North America

                                 

                                               LMC Industries, Inc.
                                             Arnold, Missouri 63010
                                                     March 22, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
Washington, DC 20515

Dear Congressman Crane:

    I am writing on behalf of my company, LMC Industries, Inc. We are 
located in Arnold Missouri and we employ 300 associates. We need your 
help.
    The steel tariffs imposed by the President last March, which were 
intended to provide the domestic steel industry with protection from 
imports and an opportunity to restructure in order to become 
competitive on a global scale, have unfortunately resulted in 
dramatically higher prices (as much as 30%), longer delivery times 
(some have doubled), and lower quality.
    As a result of the tariffs, my company has lost contracts to 
foreign suppliers totaling 12%. We had to lay off 18 employees as 
result of this loss. Other customers are looking at China and will move 
business soon if we cannot compete. Unless things change rapidly, my 
company will continue to lose business to foreign competition that now 
has a built-in cost advantage, thanks to the actions of our own 
government. I believe these tariffs should be removed at the earliest 
possible time to prevent further damage to the steel-using economy.
    Thank you for your consideration.

            Sincerely,

                                               Keith A. Suellentrop
                                            Chief Financial Officer

                                 
    Statement of Doug Ruggles, Martin Supply Co., Sheffield, Alabama
Introduction

    My name is Doug Ruggles, and I am the owner and vice president of 
Martin Supply Co. My company, like hundreds of other small businesses 
across the United States that supply goods and services to the steel 
industry, had been badly hurt by the flood of illegally traded steel 
imports prior to the imposition of the President's steel 201 remedy. 
Without a healthy domestic steel industry, small businesses like ours 
cannot survive. The President's decision to provide relief to the 
domestic steel industry has benefited us directly.
    I understand the Committee requested a study of the impact of 201 
relief on steel users. Unfortunately, companies that service and supply 
the steel industry are not covered under the request. The President's 
program is helping hundreds of small businesses around the United 
States. Not only is there a direct benefit to companies like mine, but 
Martin sources materials and supplies for use in steel mills from 
hundreds of vendors nationwide.

About Martin Supply Co.

    Martin Supply Co. is a supplier of industrial products and services 
based in Sheffield, Alabama. The company was founded by my grandfather 
in 1934, in the depths of the Great Depression, to provide industrial 
and maintenance supplies to local industry. The company has expanded to 
16 branches and 200 employees. We offer a range of products and 
services to manufacturing companies. With the exception of raw 
materials, the company provides its customers with the supplies and 
services needed to operate a factory.

Martin and the Alabama Steel Industry

    When LTV's Trico Steel began production in 1996, Martin Supply saw 
a unique opportunity to expand its operations. Trico quickly became 
Martin's largest customer in the material management area, with 
Martin's sales to Trico totaling as much as $15 million per year. 
Because Trico was such a promising customer, Martin was willing to 
invest in the resources needed to serve Trico, including the 
accumulation of $3 million in inventory. Three million dollars may not 
sound like very much, but for a small company like Martin it was a very 
substantial investment.
    In 1998, though, Trico began to suffer declining sales, largely 
because of competition from unfairly traded imports. These imports had 
a dramatic negative effect on domestic steel prices and sales, as we 
saw almost daily in our dealings with Trico. Finally, on Thursday, 
March 22, 2000, at 5:05 p.m., Trico shut its doors. It is no accident 
that I remember the precise date and time, because my company's future 
hung in the balance. We all wondered how we would survive the closure 
of Trico.
    We survived, but it was not easy. Unfortunately, we had to lay off 
the 14 employees who worked full-time on our contract with Trico. Much 
of the inventory we had accumulated was geared specifically to steel 
mills. Despite scouring the globe, we were only able to find buyers for 
about 10% of it. Our ability to borrow was devastated. By the end of 
2000, we had run through all the company's cash, and were trying to 
come up with some plan to revive our company's fortunes.

The Impact of the President's 201 Decision

    Things started looking up in 2001, when Nucor Corp. announced an 
offer to buy Trico's assets and recommence production as Nucor-Decatur. 
We immediately contacted them to see if we could provide Nucor with the 
same sorts of products and services we had provided to Trico--and 
received a positive response. For the first time since Trico shut down 
in 2000, there was excitement and optimism in our community.
    We became even more hopeful a year ago, when President Bush 
announced his decision to provide meaningful relief to the domestic 
steel industry under Section 201.
    I believe our optimism was well-founded. Because of the stability 
the President's decision has brought to the U.S. steel market, Nucor 
got the mill up and running in record time. As a result, steel workers 
in Decatur went back to work--and employees at small businesses 
throughout the community went with them. Martin has hired twelve 
additional employees to service the Nucor-Decatur mill.
    The President's decision has helped Martin directly. Because of 
Nucor's decision to restart production at Decatur so quickly, we have 
begun selling the inventory of mill supplies we had accumulated, and 
started a new relationship with a valuable customer we hope will last 
for many years.

Remembering The Supply Side

    In assessing the impact of the President's 201 decision on the U.S. 
economy, I think it is very important that the Committee take into 
account the beneficial impact that decision has had on small businesses 
like ours that supply the U.S. steel industry, and its employees, with 
goods and services. The President's decision has literally been the 
difference between life and death for hundreds of small businesses 
across the country. The President's decision has helped put the 
domestic steel industry back on its feet--and that action has helped 
hundreds of small businesses across the United States, including ours.

                                 
       Statement of Mastercoil Spring Company, McHenry, Illinois
    The Mastercoil Spring Company is a medium size spring maker with 
sales in excess of $12,000,000. Mastercoil is a major producer of 
springs for the aerosol pump and trigger spray industry and consumes 
approximately 3,000,000 pounds of stainless wire per year. The majority 
of this wire is less than .039'' in diameter.
    When we began in this business, we purchased wire domestically, but 
as our business grew, the requirements for the wire became more 
stringent. We found that, by using Sandvik Steel wire from Sweden, we 
reduced our internal rejects and improved our running speeds. This was 
over 10 years ago and our primary reason for switching to a Foreign 
source was the quality, which was not available domestically. In the 
ensuing 10 years, we tried repeatedly to purchase this material 
domestically, but we were unable to find any supplier with the same 
commitment to our market that we had in Sandvik. Recently, another 
source, KOS of Korea has presented us with comparable quality and 
pricing and a commitment to our market. We have had little or no active 
interest by domestic producers during this same period. Domestic 
producers are interested when business is slow in other areas, but lose 
interest quickly when other, more profitable, products are available. 
This is a high volume, low margin product for us and it is the same for 
the wire producer. Unfortunately, domestic wire drawers expect it to be 
a high volume, high margin product.
    It is a bit disingenuous for these domestic producers to now object 
to our request for an exclusion by claiming that they can produce the 
product in the quality and the quantity we require when they have shown 
no such interest in the past.
    We would like to have a level playing field so that our 
competition, which is primarily European, has no advantage due to the 
wire price. Prior to the tariffs, the price of stainless wire in Europe 
was approximately 25% less than the United States. With the addition of 
the 8% tariff, we are now at a 33% disadvantage. We have been able to 
maintain our market share by reducing internal costs and taking a lower 
profit margin than we should. This has now reached the point where we 
can no longer do this by internal cost cutting. The wire cost 
represents approximately 65% of the final selling price and any upward 
trend is devastating unless it is felt by all producers. Since our 
major competitors in the world market are all located in Europe, we 
must view their costs as being the ones to follow. Unfortunately, the 
domestic wire producers have lived in a protected vacuum for so long 
that they have failed to keep pace with the reality of the world 
market.
    Sumiden states in their Objection that we buy wire at 35% below 
domestic pricing. This is incorrect. What we told them was that their 
prices were 35% higher than we were currently paying. We are buying 
wire from the domestic production units of Sandvik Steel and KOS at 
these prices. Secondly, Sumiden claims we want to buy at less than our 
competitors. For all intents and purposes, we have no domestic 
competition at our major accounts. There are two other producers of 
these springs in the US and they produce for their own internal 
consumption and do not sell on the outside. No one else buys this size 
wire in these quantities in the United States, period. In addition, I 
was told that they were really uninterested in this volume of business 
even at the higher prices they quoted. When they say that they informed 
us that they could not immediately supply our requirements, it is, 
quite simply, not true. What they said was, ``SWPC does not have 
production capacity to produce 100% of requirements. We would have to 
provide delivery information on an order-by-order basis.'' Sumiden 
knows how this market operates and that we that have a need for them to 
maintain inventories and production schedules based on our estimates. 
Our current suppliers are willing to do so and if they want to play the 
game, they will have to do so, also. In addition, they are requiring 
sensitive information not required by our current vendors as well as 
payment terms that are totally unacceptable. What this means is that 
they have no real interest in this market or in our business unless we 
are willing to conform to their way of doing business.
    The objection by Industrial Alloys is more of the same. Only after 
we contacted them subsequent to the tariffs did they show any interest. 
In the past, they had refused to even respond to our inquiries. When 
they did respond, it was with significantly higher prices and had a 
``take it or leave it'' attitude. One would think that, if they were 
truly interested, they would come to us and sit down and discuss the 
situation to see if there were any way to negotiate. They did not. More 
to the point, they have studiously resisted responding to our 
subsequent inquiry and only made an effort to contact us after we filed 
the second exclusion request. Their actions speak louder than words and 
by their inaction; they show their lack of interest in our business. 
I'm sure that if we were to show an interest in buying at their 
inflated pricing, they would happily drop other business in favor of 
this very profitable business.
    Quite simply put, both objectors have offered pricing which is, in 
our opinion, at a level that appears to be price gouging. Our current 
sources sell to our market at prices that are 20 to 35% less than the 
objectors pricing. They understand that our market is different than 
the general spring wire market and treat it accordingly. Treating 
different markets with different pricing is a well accepted practice 
both legally and practically. Unfortunately, these objectors appear to 
be unaware of this.
    These two companies have filed their objections not because of any 
real interest in our business or this market, but rather as a means to 
punish us for even daring to buy from their competitors. The fact that 
our two suppliers produce this product in the US at the same pricing 
would seem to indicate that they are better at it than the two 
objectors. If we were to pay the pricing that they ask, we would be out 
of business very quickly. At that point, the domestic market would have 
disappeared and all the springs would be produced offshore. The 
objectors appear either unable or unwilling to understand the dynamics 
of the market.
    Both Objectors have filed objections which are filled with the same 
half-truths and innuendo as they had in their objections to our 
original filing. For instance, Industrial Alloys says that, ``This is a 
relatively common product for which Industrial Alloys or most other 
domestic spring wire producers could supply trial shipments within a 
few weeks. Under these conditions, the approval process should be 
between one and three months.'' If they truly believe this, then they 
are completely unfamiliar with this market segment and the requirements 
of our customers. Both objectors have listed numerous customers to whom 
they ``say'' that they sell the exact product. Since we are unable to 
see the names of these customers, we cannot refute them specifically. 
We can say, however, that none of these customers would buy the exact 
product that we do. The reason I can say this is that none of them deal 
with our customers. We were able to show this in a response to the 
Trade Commission, but nothing was done. It appears that the mere 
presence of an objection, whether valid or not, is sufficient for the 
Trade Commission to uphold the tariff and fail to grant the exclusion.
    We should not be penalized in the world market because US wire 
producers have failed to keep pace with the rest of the world. This is 
the same thing that has happened with the US steel industry, in 
general, and the resulting loss of jobs in the steel consuming 
industries is tragic.
    We have taken steps to ensure our continued presence in this 
market. We have recently purchased an Italian spring making company so 
that we can be competitive in the European market. At present we still 
hope that this will be an addition to our current operations rather 
than taking away from them. However, if the tariffs continue and the 
disparity of costs between Europe and the United States continues, we 
may well see additional jobs produced in Europe to be sent back to the 
USA. This is the real danger for the economy, that the tariffs will 
force production out of the country, but will not result in any 
meaningful improvements in the domestic steel industry. By the 
continued protection of this industry, they are encouraged to maintain 
the status quo, rather than accepting that they need to make changes.

                                 

                                               Matenaer Corporation
                                         West Bend, Wisconsin 53090
                                                     March 26, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
Washington, DC 20515

Dear Congressman Crane:

    I am writing on behalf of my company, Matenaer Corporation. We are 
located in West Bend, Wisconsin and we employ 55 workers.
    The steel tariffs imposed by the President last March, which were 
intended to provide the domestic steel industry with protection from 
imports and an opportunity to restructure in order to become 
competitive on a global scale, have unfortunately resulted in 
dramatically higher prices, longer delivery times, shortages, 
allocations and lower quality for steel consumers. Every grade of steel 
we purchase has become much more expensive. For example the cost of 
high carbon strip steel, the second most common type we require has 
increased by 40-70%. Often, we can not even obtain certain grades 
because of shortages. We are then forced to cancel the order from our 
customer. The customer then finds an offshore producer who can obtain 
the steel. Believe me, that work is never coming back!
     As a result of the tariffs, my company has lost millions of 
dollars of work to offshore suppliers. I never thought I would say 
this, but our next expansion will be offshore--hiring foreign workers, 
not American workers. Unless things change rapidly, my company will 
continue to lose business to foreign competition that now has a built-
in cost advantage, thanks to the actions of our own government. I 
believe these tariffs should be removed at the earliest possible time 
to prevent further increases in unemployment and damage to the economy.
    Thank you for your consideration.

            Sincerely,

                                               Warren Stringer, Jr.
                                                          President

                                 
Statement of G.J. Bliss, Sr., Metal-Matic, Inc., Minneapolis, Minnesota
Background

    Metal-Matic, Inc. is a Minneapolis-based manufacturer of carbon and 
alloy welded tubular products. Established in 1951, it now operates 
from three facilities: two in Minneapolis and one in Bedford Park, 
Illinois. With over 600 employees at these locations, the company 
manufactures welded steel tubes serving customers in the automotive, 
defense, furniture, appliance, construction, and agriculture equipment 
industries, among others. Each of these products is carefully crafted 
to one of various specifications, including DIN 2393, ASTM A513, SAE 
J356 and J525, and other proprietary customer specifications. Each one 
is individually engineered and custom made by Metal-Matic, Inc. to meet 
specific performance and durability criteria required in various 
applications by its customers, including the automobile industry. 
Considerable resources are invested into the development of each 
product including development of modified steel grades with our flat 
rolled steel suppliers. Metal-Matic, Inc. has a well-earned reputation 
for quality and ability to meet its customers' product demands, 
specifications and delivery requirements.
    The mounting turmoil in the domestic steel industry has created a 
serious operating hardship for the entire domestic steel tube 
manufacturing industry. Metal-Matic, Inc. is especially vulnerable to 
these difficulties because as steel producers disappear from the 
landscape it becomes increasingly difficult to find producers willing 
to provide steel to the very demanding specifications (i.e. uniform 
mechanical properties, modified chemistries, free of non metallic 
inclusions) needed to reliably perform in the end use.
    In addition, upheaval in global markets adds to the inability of 
U.S. manufacturers to purchase raw materials at a price even close to 
prices available to their European competition.

          See Fig. 1: ``2 year steel price trend''

    Simply put, European manufacturers can produce and ship most steel 
tubing to U.S. customers cheaper than domestic producers, such as 
Metal-Matic, Inc. Prior to the exemption granted to a European 
competitor, Rothrist Tube (Switzerland), Inc. (``Rothrist''), domestic 
manufacturers, most notably Metal-Matic, Inc. the leading manufacturer 
of these exempted products, were in a serious competitive disadvantage. 
Now the future is even more bleak. If Rothrist is able to further 
undercut domestic tube prices and Metal-Matic, Inc.'s market share 
shrinks it will have dire consequences on its ability to purchase 
custom alloys from steel producers, perhaps at any price. Therefore, 
Metal-Matic, Inc. and domestic steel producers will suffer additional 
loss of business.

Overview of the Current Situation

    In November of 2001 a request for an exemption from Section 201 was 
filed on behalf of Rothrist. Section 201 was established by the United 
States Government as a safeguard measure on steel products. Section 
203, the regulation under which the exemption was sought, was 
established to protect U.S. customers unable to obtain the required 
products domestically and also fully meet the standard of not 
undermining the steel safeguard's relief.
    Three product exemptions were granted to Rothrist in the action of 
the USTR of August 22, 2002. Those products now excluded from Section 
201 are:

    1. LWelded drawn over mandrel tubes for swaged or straight prop 
shafts--X-162.2
    2. LWelded drawn over mandrel tubes for shock absorbers--X-162.3
    3. LWelded drawn over mandrel tubes for gas springs--X-162.4

Metal-Matic Inc.'s Objection

    Metal-Matic, Inc. maintains that the above exemptions were granted 
in error. At the most basic level U.S. customers are able, and do, 
obtain the required products necessary to meet their product or 
inventory needs. Further Metal-Matic, Inc. maintains that this action 
provides Rothrist and other European companies with a competitive 
advantage, and directly undermines the relief intended by the Section 
201 safeguards.
    The document filed on behalf of Rothrist has several gross errors 
and omissions. In the public version provided by USTR dated November 
13, 2001, Rothrist states that ``The U.S. tube industry does not 
produce like or competitive products and where it does, production is 
limited . . ..'' (exh. 1). In fact Metal-Matic, Inc. and other domestic 
competitors manufacture these products serving the same customers as 
Rothrist as a matter of regular course. Metal-Matic, Inc. can and will 
document, when requested, its customer base and would request 
documentation from Rothrist or the USTR of any customers for whom we 
have been unable to meet the needs in these product areas, in terms of 
specifications or supply.
    Rothrist infers that its sales of precision tubes demand a quality 
not otherwise available (page 3, Ibid.). These products are available 
and provided by Metal-Matic, Inc., again on a regular basis, meeting 
specifications and supply demands. Rothrist also asserts that its price 
is generally higher on the majority of the tubes than similar U.S. 
products. Rothrist makes this assertion several times, but see exh. 2 
for one example. While it is interesting to note that Rothrist 
acknowledges the production of similar tubes in the U.S., but claims to 
charge higher prices than U.S. producers charge, Metal-Matic, Inc. has 
data from our customers which indicates otherwise. Metal-Matic, Inc. 
will provide this data upon request. Metal-Matic, Inc. does not export 
gas spring or shock absorber tubes to Europe, even though we are 
acknowledged by our customers to be a quality supplier (exh. 3). 
Stabilus is the largest gas spring manufacturer in the world and the 
U.S. We do not supply Stabilus of Germany. This is certainly evidence 
that our prices are not competitive in Europe.
    The comments made in the U.S. industry's document, while true for 
the various affiliates it represents, is grossly incomplete as it might 
apply to Metal-Matic, Inc. because the exempted products have been, and 
continue to be a significant part of Metal-Matic, Inc.'s business. In 
addition, Metal-Matic, Inc. has the capacity, and has in fact supplied 
all the domestic demand for gas spring tubing, including the demand for 
Mexico.
    In addition to the Rothrist exemptions, we believe exemptions have 
been granted to Sumitomo for welded, square SCM 815 alloy steel tubes 
for TV picture tube frames. There is also an exemption N-458, for 
drawn-over mandrel steel tubing for gas springs. Metal-Matic, Inc. can 
and does manufacture both these products, from domestic produced steel.
    In summary, the increased tariff, while protecting the U.S. steel 
producing industry, has caused prices to increase to users (including 
Metal-Matic, Inc.). We must attempt to recoup these increased costs, 
but to grant exemptions to our foreign competitors, who for a number of 
years (strong dollar and cheap foreign steel, plus help from their 
governments?) have been underselling us by 20-30%, could cause our 
company to fail.
    Metal-Matic has already lost $20 million in orders since the 
exemption was granted to Rothrist, and this has involved our largest 
volume, most efficiently produced goods. In addition, productivity in 
the facilities has dropped 3 to 5 percent since 2000. It should have 
increased during that period by 5 percent as a result of substantial 
equipment changes but has been badly hurt by foreign under pricing and 
other developments in the industry. As a result, employment in our 
facilities has already been reduced about 10 percent since 2000.

Metal-Matic Inc.'s Request

    Metal-Matic, Inc. accordingly has requested that the Administration 
reconsider the exemptions granted to Rothrist. To paraphrase the trade 
act of 1974 itself, the company believes that the current exemption is 
damaging to the short--and long-term economic and social costs relative 
to the short--and long-term economic and social benefits. Specifically, 
if unchecked we believe that this action, coupled with the continued 
uncertainty in the steel industry, will have a dire impact on the 
company, its 600 employees and several hundred customers.
    Your help in this matter is greatly appreciated.
                                 ______
                                 
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                                             MiTek Industries, Inc.
                                       Chesterfield, Missouri 63017
                                                      April 9, 2003

Chairman Philip M. Crane
Subcommittee on Trade
Committee on Ways and Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington, D.C. 20515

Subject: LThe Impact of the Section 201 Safeguard Action on Certain 
Steel Products

    As a steel consumer, MiTek Industries, Inc. has suffered both 
business and financial losses resulting from the Section 201 steel 
tariffs imposed by the Bush Administration in 2002. Unless these 
tariffs are removed, many unintended, adverse conditions will continue. 
The losses to MiTek Industries, Inc. include:

     LOur steel costs increased over 27% from March 2002 
through December 2002, of which less than 6% was recovered during 2002 
because MiTek Industries, Inc. honored all pre-existing customer 
pricing contracts. As a note, all of our steel suppliers broke 
agreements during 2002.
     LMiTek Industries, Inc. has historically purchased 
material from both U.S. and foreign suppliers to meet steel 
requirements, diversify our supply base, and obtain the most 
competitively priced steel available to us. Since enactment of Section 
201, foreign sources are hesitant to supply any pricing and will not 
commit to any tonnages even after pricing is agreed upon.
     LDuring the 3rd and 4th quarters of 2002, MiTek 
Industries, Inc. realized a supply shortage as we were put on 
allocation with some of our steel suppliers and could not obtain 
foreign material. Our customers were negatively impacted, as we could 
not provide finished goods to meet their timing requirements. To 
minimize this effect from reduced tonnages and late deliveries, we were 
forced to either pay excessive freight charges to ship product from 
another MiTek facility, or purchase more costly material on the spot 
market. MiTek spent over $200,000 to transfer steel intra-company to 
ensure operations were not impacted by steel shortages.
     LHowever, we were not able to cancel any purchase orders 
with mills behind on delivery, so we received highly priced, unneeded 
material at yearend and into 2003. The inventory carrying costs on this 
higher priced steel, which we are unable to pass through to our 
customers, exceeds $150,000 minimum.
     LThe majority of MiTek Industries, Inc. products are used 
for residential building structures. The costs of higher steel and late 
deliveries are impacting not only our company, but also our customers--
the truss manufacturers, and the end consumer--the American home buyer.

    MiTek Industries, Inc. is in favor of the early termination of the 
Section 201 tariffs. While MiTek Industries, Inc. believes that 
industry consolidation is required within the steel market, we do not 
believe the consumer should bear the cost of this process. We are 
evaluating every aspect of our business looking for efficiency 
improvement opportunities in an attempt to offset our ever-rising 
costs. We applaud those steel producers who are actively doing the 
same. However, we believe other steel producers are using the Section 
201 tariffs as a crutch to artificially inflate pricing to compensate 
for their inefficiencies. The free market supports natural selection, 
which ensures survival of the fittest. The Section 201 tariffs are 
prolonging this process, with significant cost to all parties involved.

            Respectfully submitted,

                                                  Thomas J. Manenti
                                           Executive Vice President

                                 

                              Mitsubishi Motors North America, Inc.
                                             Normal, Illinois 61761
                                                      April 9, 2003

The Honorable Philip Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
1104 Longworth House Office Building
Washington, D.C. 20515-6354

RE: LWritten Statement for 3-26-03 hearing entitled, ``The Impact of 
the Section 201 Safeguard Action on Certain Steel Products''

Dear Mr. Chairman:

    Mitsubishi Motors North America, Inc. (``MMNA'') appreciates this 
opportunity to present its views to the Trade Subcommittee of the House 
Ways and Means Committee on the impact of the Section 201 safeguard 
duties imposed on certain steel products. From the perspective of MMNA, 
the provision of safeguard relief to the U.S. steel industry has had an 
extremely undesirable affect on the cost of steel, on its availability, 
and on its quality. This is so even though MMNA has adopted a policy of 
obtaining all of its steel from U.S. sources whenever possible, and 
imports steel only when it is not available from U.S. sources.
    Since March 20, 2002 when the safeguard duties became effective, 
Mitsubishi Motors has seen a significant increase in the cost of the 
U.S. produced steel it purchases. These price increases have not been 
negotiated, but unilaterally imposed at times, despite the existence of 
supply contracts (which have been deliberately breached by the U.S 
steel companies). Essentially, MMNA was told that if it wanted steel, 
it would have to agree to these unilateral price increases, some for 
periods that far exceed normal contract terms and exceed the Section 
201 safeguard timeframe.
    MMNA's experience in purchasing steel for its resale program 
mirrors its experience in purchasing steel for in-house use. For 
example, in March, 2002, hot rolled steel sold at approximately $370.00 
per ton. On April 15 of that year a price increase of $25.00 per ton 
was announced, followed by increases of another $25.00 per ton on May 
1, 2002 and another $20.00 per ton on June 1, 2002. In six weeks, the 
price of hot rolled steel increased by $70.00 per ton (almost 19%). 
Then, on August 1, 2002, another increase of $60.00 per ton was 
announced, resulting in a $130.00 per ton (35%) increase in the price 
of hot rolled steel in three and one-half months.
    The situation with respect to cold rolled steel and coated steel 
was similar. Before the imposition of the safeguard import duties, cold 
rolled steel sold for approximately $440 per ton, and coated steel sold 
at approximately $540 per ton. On April 15, seven months after the 
safeguard duties were imposed on imported steel products, a price 
increase of $80 per ton was announce for both products, followed by a 
second increase of $70 per ton on July 1. Thus, over a two and one-half 
month period, the cost of cold rolled steel increased 34%, while the 
cost of coated steel increased 28%.
    The unilateral price increases imposed by U.S. steel companies for 
steel purchased for MMNA in-house and resale program use resulted in 
cost increases of nearly $14 million in 2002-2003.
    Since 1994, Mitsubishi Motors has purchased virtually all of its 
steel from U.S. sources. In May of 2002, however, MMNA was forced to 
seek a small amount of specialty steel from a foreign supplier due to 
its unavailability from U.S. sources. Our experience with this imported 
steel mirrored our experience with domestic steel. It was originally 
quoted $988.00 per ton in May 2002. By September, the steel was subject 
to three separate price increases, raising the price to $1,214.00 per 
ton--an increase of about 23%. The safeguards appear to have resulted 
in price inflation globally.
    However, it is not just the price increases that adversely affect 
Mitsubishi Motors. It is also the fact that supply contracts are not 
being honored by either U.S. or foreign suppliers. For example, it is 
not uncommon that steel which is under contract to MMNA be sold to a 
third party if that party is willing to pay a higher price. The 
resulting uncertainty in supply (and price) leads at times to an 
inability to source steel, or to source it in a timely fashion, 
resulting in production delays.
    Further, because of the difficulty of getting steel from suppliers, 
steel that at one time would have been rejected for not conforming to 
customer requirements has had to be purchased and refined in-house 
(resulting in additional costs) so as not to compromise the quality of 
the finished product. Thus, MMNA, a company that has made a conscious 
decision to source steel from U.S. suppliers, finds itself in a 
position where it is paying higher and higher prices for steel which at 
times is of a quality that would not have been accepted in the pre-
safeguard period. Additionally, the supply of product has become 
uncertain, and contracts are routinely ignored, with customers having 
to accept unilaterally imposed price increases, or face the prospect of 
having steel already contracted for sold to other customers.
    From the perspective of Mitsubishi Motors, the safeguard relief 
provided to the U.S. steel industry has proven to be an incredibly 
disruptive force in the steel marketplace. It appears that U.S. steel 
companies, instead of using this relief period to adjust to import 
competition, are using it as an opportunity to make as much money as 
possible during the period that these additional tariffs are imposed on 
imported product, and even beyond. This surely was not the intent 
behind the safeguard remedy.
    MMNA appreciates the opportunity to present its view on the impact 
of the steel tariffs on our company to the House Ways and Means Trade 
Subcommittee. Should the Subcommittee or its members have any questions 
concerning these comments, please do not hesitate to contact me at 
(309) 888-8210.

            Sincerely,

                                                        Gary Shultz
                                 Vice President and General Counsel

                                 
   Statement of The Honorable Alan B. Mollohan, a Representative in 
                Congress from the State of West Virginia
    Mr. Chairman and Members of the Subcommittee: My Congressional 
District is home to both Weirton Steel Corporation and Wheeling 
Pittsburgh Steel--respectively the nation's seventh and eighth largest 
integrated steel producers. Steel mill related employment--in the 
mills, at suppliers, transportation companies, customers located close 
to the mills, and jobs in the service sectors--are the livelihood of my 
district.
    I commend the President for taking the important first step in 
defense of the steel industry with the Section 201 tariff program. The 
tariffs have provided Weirton Steel and Wheeling Pitt with a much 
needed ``time-out'' from years of surging steel imports.
    Of particular importance to these companies was the tariff set on 
Tin Mill Products, or TMP for short. Weirton is the nation's second 
largest TMP producer, with approximately 25 percent of the domestic TMP 
market, accounting for nearly 50 percent of its annual revenues. 
Wheeling has a subsidiary across the Ohio River, Ohio Coatings, which 
produces TMP and utilizes a significant portion of Wheeling's 
production.
    Both Weirton and Wheeling have used the first year of the program 
to restructure their companies. Though these restructurings cost jobs, 
they will hopefully result in the continued steelmaking in the Ohio 
Valley, which has now gone on for a century. Weirton trimmed its work 
force, reduced its debt by $115 million dollars, and lowered its 
interest costs by $25 million dollars each year for the next three 
years. Because of the relief the tariffs provided, this comprehensive 
restructuring prevented the company from filing for bankruptcy.
    Wheeling, which has been in Chapter 11 for two years, trimmed its 
workforce, reduced costs significantly, and just obtained loan 
financing which will allow it to emerge from bankruptcy and install a 
state of the art electric furnace.
    There is no question that, without the respite provided by the 
tariff program, these companies would not have been able to engage in 
their restructuring plans, more steel companies would have filed for 
Chapter 11, and I believe some of the bankrupt steelmakers may have 
liquidated by now.
    Upon delivering the tariff program, President Bush made it clear he 
expected the domestic steel industry to use the program's three-year 
duration to rebuild itself through consolidations, acquisitions and 
restructurings. One year into the program, the industry has made good 
use of the time, and progress is being made towards the 
Administration's expectations.
    It is unfortunate that a World Trade Organization panel recently 
ruled against the U.S. 201 case. We know the Administration plans to 
appeal the WTO ruling. However, we know we cannot take anything for 
granted. Given the massive problems in the U.S. manufacturing sector 
and repeated WTO rulings against the U.S., I urge the Ways and Means 
Committee to hold hearings on the harm to the U.S. trade deficit and 
employment caused by the WTO.
    I now want to switch to an issue that is deeply disturbing--one I 
and others believe must be expeditiously addressed.
    When the tariff program began, the Administration exempted certain 
``developing countries'' from the process. As the tariff program 
unfolded, we began to notice a growing trend.
    While steel imports from nations saddled with the tariffs 
decreased, many of the exempted developing countries have taken, and 
continue to take, advantage of the void in the domestic marketplace by 
increasing their steel shipments to the U.S. As a result, producers in 
developing countries are the benefactors from the 201 relief instead of 
the domestic steel industry.
    The tariff program is working. However, the rise in imports from 
the exempted countries is chiseling away at its effectiveness. The U.S. 
industry is not benefiting from the full force of the program because 
of growing imports from the developing nations.
    For this reason, I encourage the Ways and Means Committee to urge 
the Administration to reconsider its position on these particular 
countries and include them in the tariff program. At the onset of the 
tariff program, the Administration indicated it would monitor the 
developing nations' import rates to determine whether or not 
significant increases were taking place. We know now that increases 
have occurred and action should be taken. The attached chart 
demonstrates the surge in imports from these developing countries.
    Clearly, these import surges must be stopped. Again, I ask that you 
help us address and resolve this issue with the Administration. The 
Appropriations Committee is addressing its concerns on these 
enforcement issues with Ambassador Zoellick and Secretary Evans.
    My District is also home to many steel consumers, large and small. 
I know that many steel consumers testified at your hearing on the harm 
to consumers of the 201 program. I believe their testimony was 
misguided. First, without the program, the steel companies in my 
District and many other producers would have gone out of business, 
forcing U.S. consumers to be dependant on imported steel instead of 
having local suppliers. Second, while steel prices initially increased 
as a result of the tariffs, though they never reached the pre-crisis 
levels of 1996, they have since receded and are well below ten-year 
averages. Steel consumers cannot base their business models on access 
to steel at unsustainably low prices that will force their suppliers 
out of business.
    I am very sensitive to the competitive pressures on steel 
consumers. I believe many of these pressures come from our unfair 
trading relationship with China. Your Committee has primary 
jurisdiction over trade and I urge you to address China trade issues, 
in particular, our continued tolerance of the Chinese government fixing 
their currency at an undervalued rate.
    Thank you for this opportunity to present testimony in this 
hearing.
                                 ______
                                 
                                 [GRAPHIC] [TIFF OMITTED] 89863A.025
                                 
                                 
  Statement of Christopher M. Bates, Motor & Equipment Manufacturers 
          Association, Research Triangle Park, North Carolina
    On behalf of our more than 700 member and affiliated companies, the 
Motor & Equipment Manufacturers Association (MEMA) appreciates the 
opportunity to provide our comments on the impact of the Section 201 
tariffs on certain steel products to the House Ways & Means Trade 
Subcommittee. This hearing marks a critical landmark for our member 
companies, both large and small, and the 2.2 million individuals that 
they employ in the United States. Automotive suppliers serve as one of 
the country's leading steel consuming sectors, with an overwhelming 95 
percent of that consumption stemming from U.S. steel producers. We 
thank Chairman Philip M. Crane and the members of the Subcommittee for 
their decision to convene this hearing and permit debate on this grave 
issue.
    MEMA represents and serves manufacturers of motor vehicle 
components, tools and equipment, automotive chemicals and related 
products used in the production, repair and maintenance of all classes 
of motor vehicles. The association represents the three distinct 
segments of the motor vehicle supplier industry: aftermarket, heavy 
duty, and original equipment. Combined, MEMA serves and represents more 
than 700 companies. The automotive supplier industry encompasses 
thousands of large, medium and small companies in all 50 states, 
directly employing more than two million Americans.
    Thousands of these jobs are located in the key states of 
Pennsylvania, Ohio, Illinois, Indiana and West Virginia, as well as 
Michigan. The average vehicle sold in the U.S. contains more than 1,810 
pounds of steel parts and, with the evolution of the automotive 
industry over the past few years, suppliers have assumed a far greater 
percentage of the industry's overall steel purchases and heavy 
manufacturing. Combined with the supplier industry's present lack of 
pricing power in the global automotive market, our sector has faced 
significant financial and competitive ramifications due to the Section 
201 steel tariffs.
    MEMA's principle argument in addressing the steel safeguard program 
and the related tariffs is that difficult economic times require sound 
economic policies. The current policy has had serious, albeit 
unintended, consequences on the automotive supplier industry, as well 
as other steel consuming industries in the United States. This 
additional pressure and financial instability comes at a time when the 
manufacturing sector of this nation is already in a weakened state. 
According to the Bureau of Labor Statistics, the United States has lost 
1.8 million manufacturing jobs in the last two years. This nation now 
registers only 16.5 million factory jobs--the lowest number in 40 
years. Given this set of circumstances, an analysis of the consequences 
of the steel tariffs on steel consuming manufacturers becomes of even 
greater importance. The Administration must seek to collect and analyze 
this data in order to properly assess the interaction between the 
nation's economic health and the steel safeguard program. Consequently, 
MEMA strongly recommends that the Administration commence the 
collection of this information in order to ensure its integration with 
the formal mid-term review in September 2003. From our perspective, 
government and industry must cooperate to craft a preferable 
alternative for all manufacturers in the United States.
    The Section 201 steel tariffs sparked a rapid and dramatic 
escalation in the price of the domestic steel products utilized by 
automotive suppliers in the United States. Suppliers of all sizes have 
incurred significant financial loss as a result of this shift, but the 
impact on small and medium sized automotive suppliers, who possess the 
least bargaining power against large steel producers, has been far more 
damaging. Upon the implementation of the tariffs in March 2002, many 
domestic steel producers and distributors simply disregarded existing 
supply contracts. Automotive suppliers remain among the leading 
customers of the domestic steel industry; thus, many of our companies 
had long standing relationships with mills, mini-mills and service 
centers in the United States. They did not anticipate the nullification 
or amendment of their existing contracts and were not in the financial 
position to suddenly absorb sharp price increases.
    Despite the general expectation that steel prices would rise in the 
United States following the announcement of the tariffs, the automotive 
supplier industry has witnessed price peaks far beyond the predicted 
levels. A survey of our members, taken in December 2002, revealed the 
following range of price increases pursuant to the President's 
announcement in March 2002:

Hot Rolled Sheet                             +18 % to 65%
Cold Rolled Sheet                            +10% to 65%
Galvanized                                   +35% to 43%
Welded Tube                                  +28% to 30%
Tin Plate                                    +30%
AKDQ                                         +36%
Bar Stock                                    +15% to 77%
 

    MEMA gathered data from 17 select automotive parts suppliers to 
assess the financial and business impact of the steel tariffs on the 
industry. Our survey of this sample set of 17 companies indicated 
losses in 2002 of $122 million directly attributable to higher steel 
prices. Our sample set of only 17 automotive suppliers projected a 
staggering cumulative cost of $224 million in 2003 due to increased 
steel prices alone. This small sample points to far greater financial 
and employment loss and diminished competitiveness throughout the 
American automotive industry, as well as other steel-consuming sectors. 
Recent reports indicate that certain domestic steel producers intend to 
institute additional price increases of up to 10 percent in order to 
recoup their production costs. These demands will be placed on top of 
the steel industry's present pricing structure for auto suppliers; a 
burden that our industry cannot sustain.
    Price increases, however, are only one of the mechanisms by which 
the Section 201 tariffs have caused disruption and dislocation in our 
industry. After the tariffs took effect, many steel producers and 
distributors placed their automotive supplier customers on allocation 
and failed, or refused, to make timely deliveries. Among the same 
sample set of automotive suppliers lead times (the period of time 
necessary for a steel mill or distributor to make delivery on a 
shipment) increased from approximately 8 to 12 weeks before the tariffs 
took effect to approximately 16 to 20 weeks. Losses due to longer lead 
times and delivery problems arising from the steel tariffs in 2002 
totaled $12 million among the sample set of 17 automotive suppliers. It 
is now clear that the supply and delivery problems present in 2002 are 
not a temporary or transitional distortion and will, unfortunately, 
continue to affect our industry throughout 2003. Automotive suppliers 
run on strict ``just-in-time'' delivery systems; balancing a complex 
and sensitive supply chain that depends heavily on the prompt delivery 
for materials and the reduction of inventory as a cost-efficient 
mechanism. Supply problems, triggered by the tariffs, have disrupted 
production schedules, budgets and in some cases prevented our companies 
from fulfilling promises made to their customers. Many automotive 
suppliers have been forced to idle production lines and send employees 
home over the past 13 months due to missed steel shipments. This 
irrevocably damages the supplier and its employee base.
    The Section 201 steel tariffs were imposed upon the sometime 
supplier industry at a time when the industry is already facing a 
number of considerable challenges. Many of these challenges mirror 
those of the domestic steel industry: global overcapacity in the 
automotive industry, loss of domestic market share over the past 
decades, rising foreign competition, and unfair trade practices by 
which other nations support their domestic automotive industries or 
block the imports of U.S.-manufactured vehicles and automotive parts. 
U.S. automotive suppliers are further facing strict cost reduction 
mandates from their customers. Failure to meet the targets can often 
disqualify a supplier from winning future business with a particular 
automaker and result in the loss of current business. Most U.S. 
automotive suppliers cannot pass higher raw material costs or 
production costs forward to their customers, leaving automotive 
suppliers in a ``cost-price'' squeeze.
    Higher raw material costs and supply disruptions have further 
damaged our competitive position in relation to foreign auto parts 
manufacturers in the U.S. market and in overseas markets. Since March 
2002, automotive suppliers have witnessed a shift in their customers' 
purchases from U.S. to foreign sources of automotive parts and 
components in order to reduce their exposure to the uncertainty created 
by the Section 201 steel tariffs. Based on our experience in 2002, it 
is clear that imports of intermediate and finished products, and the 
related job losses from that shift of sourcing, will continue to grow. 
High steel safeguard tariffs are presently forcing large tier-1 
automotive suppliers to begin manufacturing or buying components or 
complete assemblies, that they previously made or purchased in America, 
from overseas. This development threatens a substantial number of U.S. 
jobs and the viability of smaller U.S. tier-2 and tier-3 automotive 
suppliers who make such products. Other companies are responding to the 
pressure of high steel tariffs by slowing production lines or 
considering the permanent relocation of manufacturing facilities to 
other countries. If these product lines, and the associated 
manufacturing plants, are moved to overseas locations, it is highly 
unlikely that they will ever return to the United States. The loss of 
jobs will be a permanent scar from the steel safeguard program.
    Automotive suppliers, representing each tier of the industry, have 
sought relief under the Administration's steel exclusion process. 
Obtaining exclusions, however, has proved to be an expensive and 
complex legal and regulatory process, essentially out of reach for many 
small and even medium sized automotive suppliers. Other automotive 
suppliers who could not obtain the necessary raw materials from their 
U.S. sources sought exclusions, but failed to secure any relief due to 
opposing claims from the U.S. steel industry. Overall, the exclusion 
process has provided little relief to steel consumers in our industry 
and is not a remedy to the supply problems arising from the tariffs now 
faced by our industry.
    The impact of the steel safeguard program and the Section 201 
tariffs on all stakeholders in the United States--including steel 
consumers--must be considered and factored into the formal mid-term 
review. The current policy is costing America jobs and profits in steel 
consuming sectors and its damage will continue far beyond the next few 
years. Although the tariffs are presently scheduled to phase out in 
2005, automotive suppliers are losing business that is set into place 
several years in advance; thus, we will continue to suffer financial 
and business losses far beyond that point. The cost to our competitive 
stance in the global industry exceeds even those calculations, as it 
will be irrevocable.
    Protecting jobs in the domestic steel industry at the cost of high-
paying manufacturing jobs in the automotive sector is not a sound 
policy nor is it a desired long-term result. From the standpoint of the 
United States' long-term economic and trade policies, we do not view 
this issue purely in terms of comparative job losses and business 
losses between steel makers and steel consumers. That is not our 
intent. Rather, we seek to demonstrate the factual claims concerning 
the impact on our companies and to highlight the potential damage to 
the U.S. manufacturing sector as a whole if the Administration does not 
address this immediate crisis.
    The automotive supplier industry, and the Administration, cannot 
simply wait until the tariffs have diminished American competitiveness 
and employment in our industry and other steel consuming sectors. An 
examination of the tariffs' effects on steel consumers must occur 
before any additional steps are taken to determine the viability of or 
the requisite for the steel safeguard program. MEMA has worked in 
conjunction with other interested parties over the past years to boost 
awareness of the challenges faced by U.S. manufacturers and to 
demonstrate the need for American companies to be able to procure raw 
materials, including steel, at global, competitive prices.
    Congress is now facing a critical opportunity to examine the 
consequences of the Section 201 steel tariffs and to assess the effect 
of the tariffs on both steel producers and steel consumers. Automotive 
suppliers, together with appliance manufacturers, toolmakers, stampers, 
maritime manufacturers, and many other steel consuming industries 
strongly support House Concurrent Resolution 23. Introduced by 
Congressman Joe Knollenberg of Michigan on January 29, this Resolution 
has drawn the support of 69 Republican and Democratic cosponsors. Many 
of these lawmakers represent both steel producing and steel consuming 
constituents, yet they all recognize the need to expand the scope of 
the Section 201 steel tariffs mid-term review to ensure that the costs 
and benefits to steel producers and steel consumers can be assessed 
together. We urge all members of the House to support this critical 
Resolution.
    MEMA also expresses its appreciation to the Trade Subcommittee and 
the full House Ways & Means Committee for its decision to request a 332 
investigation on behalf of U.S. steel consuming industries. The 
Committee's formal petition to the International Trade Commission, 
requesting the completion of a section 332 ``fact finding'' 
investigation to assess and evaluate the impact of the Section 201 
steel tariffs on steel consuming industries, will provide a voice for 
our companies and the many other manufacturers that use steel across 
the country.
    The House Ways & Means document further requests that the 
International Trade Commission consolidate its section 332 ``steel 
consumers'' investigation and its Midterm Review (section 204) into a 
single document for President Bush's review in September 2003. On 
behalf of its member companies, MEMA applauds the Committee's intent to 
ensure that the two reports are presented simultaneously and, thus, 
provide a complete economic assessment of the tariffs and their related 
impact.
    The automotive industry is a leading contributor to our nation's 
economic health and its ongoing recovery. The automotive industry 
remains the single largest manufacturing sector in the United States, 
accounting for more than 5 percent of America's gross domestic product. 
Automotive suppliers serve as one of the nation's leading high 
technology sectors, directly driving much of the overall industry's 
research and development efforts. Suppliers are the foundation for 
vehicle production, sales and vehicle maintenance in the United 
States--a network that provides jobs for 6.5 million Americans. MEMA 
believes that the economic hardships caused by the Section 201 steel 
tariffs have placed thousands of American jobs at risk and may 
significantly erode the ability of our industry to contribute to our 
nation's economic recovery and remain a viable U.S. manufacturing 
sector.
    MEMA thanks Chairman Philip Crane of the House Ways & Means Trade 
Subcommittee for this hearing and for the opportunity to express its 
views on this critical issue. Several of our member companies will 
provide testimony at today's forum. Their stories serve as the best 
means to communicate our industry's present concerns. We thank you for 
their ability to participate as witnesses on the steel consumers panel. 
MEMA would be pleased to be of any assistance we can to the Trade 
Subcommittee as you continue your work in this important area. Please 
feel free to contact MEMA's Washington, DC office with any additional 
questions.

                                 

                                                 M.S. Willett, Inc.
                                       Cockeysville, Maryland 21030
                                                      April 3, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
Washington D.C. 20515

RE: L3-26-2003 hearing titled ``The Impact of the Section 201 Safeguard 
Action on Certain Steel Products''

Dear Congressman Crane:

    I am writing on behalf of my employer, M. S. Willett, Inc. Willett 
is a metalforming company and we manufacture parts for our customers 
from steel. We are located in Cockeysville, MD and we employ 110 
workers. We need your help.
    The steel tariffs imposed by the President last March, which were 
intended to provide the domestic steel industry with protection from 
imports and an opportunity to restructure in order to become 
competitive on a global scale, have unfortunately resulted in 
dramatically higher prices, longer deliver times, shortages, 
allocations and lower quality for steel consumers.
    As a result of the tariffs, Willett is facing the loss of major 
contracts, layoffs of workers and is being pressured to move overseas. 
Unless things change rapidly, Willett will lose business to foreign 
competition that now has a built-in cost advantage, thanks to the 
actions of our own government. I believe these tariffs should be 
removed at the earliest possible time to prevent further damage to the 
steel-using economy.
    Thank you for your consideration.

            Sincerely,

                                                     David R. Sandy
                                    Vice President Support Services

                                 

                                                  Muncy Corporation
                                                   Enon, Ohio 45323
                                                      April 4, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
Washington, DC 20515

Re: L3-26-03 hearing titled ``The Impact of the Section 201 Safeguard 
Action on Certain Steel Products''

Dear Congressman Crane:

    I am writing on behalf of my company, the Muncy Corporation. We are 
located in Enon, Ohio and we employ 85 workers. Our production workers 
are members of International Association of Machinists and Aerospace 
Workers AFL-CIO union. We need your help.
    The steel tariffs imposed by the President last March, which were 
intended to provide the domestic steel industry with protection from 
imports and an opportunity to restructure in order to become 
competitive on a global scale, have unfortunately resulted in 
dramatically higher prices, longer delivery times, shortages, 
allocations and lower quality for steel consumers. Shortly after the 
tariff was imposed our steel prices went up by 30%. They have now gone 
down somewhat but are still over 25% above pre tariff levels.
    As a result of the tariffs, the Muncy Corporation is loosing 
business to Canada and other foreign countries that can import parts 
with-out paying these duties. We have had no new stamping contracts 
since the tariff was imposed and we have lost several contracts that we 
had. Our stamping department is now operating at less than25% capacity.
    Unless things change rapidly, my company will continue to lose 
business to foreign competition that now has a built-in cost advantage, 
thanks to the actions of our own government. I believe these tariffs 
should be removed at the earliest possible time to prevent further 
damage to the steel-using economy.
    Thank you for your consideration.

            Sincerely,

                                                    Wayne Brumfield
                                                          President

                                 
 Statement of National Electrical Manufacturers Association, Rosslyn, 
                                Virginia
    The National Electrical Manufacturers Association (NEMA) strongly 
urges the Administration to end its Section 201 foreign steel tariffs--
tariffs that the World Trade Organization (WTO) have now declared 
illegal. Despite the many exemptions granted since the safeguard 
program was launched a year ago, we firmly believe that protectionist 
steel tariffs such as these do not help the domestic steel industry 
become more globally competitive, and are costing far more jobs in 
consuming industries than might be saved among domestic steel 
producers. Especially in today's economy, NEMA member companies are 
letting us know that they cannot pass the higher prices of steel 
inputs--due to the tariffs and the pricing decisions of protected U.S. 
steel companies--along to their customers.
    As a first step, we would very much like to see the International 
Trade Commission conduct a study of the tariffs' effects that takes the 
concerns of steel consumers into consideration. This would comprise an 
important part of a mid-term review of the ``safeguard'' remedy put in 
place by the President in March 2002--a review that would hopefully 
lead to the tariffs' termination. In this respect, NEMA prefers the 
Administration's initiative to bring together global steel producers 
under the auspices of the OECD to negotiate real and enforceable limits 
on excess steel production capacity.
    NEMA is the largest trade association representing the interests of 
U.S. electrical industry manufacturers. Its mission is to improve the 
competitiveness of member companies by providing high quality services 
that impact positively on standards, government regulation and market 
economics. Our more than 400 member companies manufacture products used 
in the generation, transmission, distribution, control, and use of 
electricity. These products, by and large unregulated, are used in 
utility, industrial, commercial, institutional and residential 
installations. The Association's Medical Products Division represents 
manufacturers of medical diagnostic imaging equipment including MRT, C-
T, X-ray, ultrasound and nuclear products. Domestic shipments of 
electrical products within the NEMA scope exceed $100 billion.
    In closing, the electrical industry asks the U.S. Government to 
take seriously the statutory language of Section 201--which requires 
that any remedy adopted by the President must ``provide greater 
economic and social benefits than costs.'' Based on what our members 
are telling us about the damage these tariffs are causing them, NEMA 
believes that the current safeguard policy clearly fails to meet these 
criteria.
    Thank you for your consideration of these remarks.

                                 
   Statement of Nels R. Leutwiler, Parkview Metal Products, Chicago, 
                                Illinois
    Parkview Metal Products is a second generation, family owned 
business that was founded in Chicago in 1950. Originally located in the 
shadow of Wrigley Field, hence the name Parkview, the Company produces 
precision metal stampings and assemblies for the automotive and 
consumer electronics industries. Parkview's customer base includes 
companies such as: Motorola, Bose, Visteon, Delphi, and Sony.
    Parkview operates five manufacturing plants in North America, 
located in Illinois, Texas, New Mexico, and Tijuana, Mexico, with sales 
in 2002 of $58 million.
    Doing business in the intensely competitive automotive and consumer 
electronics industries, Parkview has seen its profit margins shrink in 
recent years, as our customers have demanded yearly price decreases, 
while our costs for labor, insurance, taxes and technology have 
steadily increased. Our customers are mandating expensive investments 
in quality certifications such as ISO/QS, just in time manufacturing, 
electronic data transfer, etc., while stretching out their payment 
terms.
    Steel comprises roughly fifty percent of the cost of what we 
produce and sell. The competitive steel pricing and stable steel 
supplies we have experienced in the past several years were the only 
factor keeping many metal stampers such as Parkview afloat and 
profitable.
    However, when the tariffs were imposed last year, the days of a 
stable and reliable steel supply abruptly ended. Although Parkview 
purchases almost all of its steel domestically-and all of it under 
twelve month pricing agreements-the imposition of the tariffs resulted 
in almost immediate, and dramatic, increases in price and reductions in 
supply. While the LTV shutdown around this time contributed to the 
problem, the lack of steel had more to do with the fact that the supply 
of foreign steel had dried up due to the looming threat, and subsequent 
imposition, of the tariffs.
    Our steel prices, despite our ``agreements,'' shot up 30 percent or 
more. When we couldn't obtain steel from our suppliers-who had 
committed to have an adequate supply on hand throughout the year as a 
component of our agreement, we were forced onto the open market, where 
we paid as much as 60 percent more per pound for steel.
    In addition, as supplies got tight and deliveries became highly 
unreliable, Parkview was forced to constantly reschedule production to 
conform to the sporadic arrival of our steel. Parkview operated every 
weekend last summer, not because our production volumes warranted it, 
but because we were living hand to mouth on steel, and our customers 
were living hand to mouth on our parts. Parkview also incurred 
significant costs in premium freight, both to get raw material in, and 
to get finished parts to our customers in time to keep their production 
lines operating. Our steel suppliers assumed none of the liability for 
these costs.
    For the most part, Parkview had to absorb these increased costs, as 
most of our customers were adamant that they would not agree to pay 
more for their parts. The net result was virtually a break even year 
for Parkview in 2002, on $58 million in sales! In one instance, we 
forced a customer to accept a price increase, to cover our 40 percent 
increase in steel costs on a very high steel content part. The customer 
has since retooled that project elsewhere, with the resulting loss of 
$2 million in revenue for Parkview.
    The loss of that program, plus other work for our Chicago plant, 
has resulted in a 50 percent reduction in business volume for our 
Chicago plant in 2003. Parkview has begun the painful restructuring 
required in response to that reduction in work, laying off roughly one 
fourth of the Chicago workforce on March 20.
    Serving the consumer electronics and personal computer industries, 
Parkview Metal Products is acutely aware of the threat China and other 
low cost countries pose to manufacturing in the United States. Parkview 
tooled up and built the metal components for Michael Dell's first 
personal computer. At one time Parkview listed Dell, Compaq, and Tandy 
Computers as our top three accounts. Virtually all personal computer 
manufacturing has left the U.S.: it is now leaving Mexico and settling 
into China and India.
    Parkview for fifty three years was a major supplier to RCA (now 
Thomson Consumer Electronics). In fact, we built a 107,000 square foot 
plant in Las Cruces, New Mexico, primarily to serve Thomson. The 
manufacture of DVD players and many of the other products we produced 
components for has now moved to China. Parkview is scrambling 
desperately to find customers to backfill in Las Cruces for that lost 
work.
    Automotive components are now Parkview's leading market segment, 
but we see our major first tier customers, and the big three auto 
makers pushing to source more and more work in China.
    We obviously have an enormous disadvantage to China and much of the 
rest of the world in terms of labor costs. Regulatory costs and 
customary employee benefit costs further add to our higher costs. The 
tariff-driven 30 to 40 percent increase in the price of steel, our 
primary raw material, has greatly increased our competitive 
disadvantage, and has greatly increased the motivation on the part of 
major OEMs in this country to resource products-not just metal parts, 
the entire end products-overseas.
    This results in the loss of jobs, not just in the metal consuming 
industries, but in all the ancillary support industries: equipment 
dealers, painters and platers, plastic injection molders, die casters, 
packaging suppliers, logistics providers, etc. These steel prices, plus 
customer price pressures, the recession, and other cost pressures, are 
driving countless metalformers, tool and die shops, and other related 
companies, out of business at an alarming rate. A week no longer goes 
by that I don't receive a handful of auction notices for companies in 
the Chicago area, and throughout the country, that are being foreclosed 
upon, or closing voluntarily.
    The tool and die industry, once a foolproof source of high paying 
jobs in the metals trades, has absolutely crashed. Where the Chicago 
Tribune used to have two columns of tool and diemakers wanted ads every 
Sunday for decades, a typical Sunday Chicago paper over the past twelve 
months has had one or two ads total!
    The Precision Metalforming Association's membership used to 
consistently identify the lack of skilled employees as the number one 
threat to the industry. This has now been replaced by high steel prices 
and the threat posed by China as the major challenges to the industry.
    There is much talk of how the higher steel prices are not an issue, 
as they have just returned to historic levels from 10 or 20 years ago. 
The problem is that Parkview's prices it receives from our customers 
are significantly lower than 20 years ago. We cannot offer globally 
competitive product, while paying non-competitive steel prices.
    Furthermore, the steel makers claim prices are now moderating. 
While our steel prices, effective April 1, are down roughly ten 
percent, this is not even close to the pre-tariff prices. We can't even 
get pricing beyond the third quarter of this year, as there is still 
too much tariff-driven uncertainty in steel supplies and the resultant 
prices.
    Please urge the President to eliminate the tariffs at the mid-term 
review this September. Parkview Metal Products' 350 U.S. jobs depend 
upon it.

                                 

                                 Perfection Spring & Stamping Corp.
                                     Mount Prospect, Illinois 60056
                                                      April 8, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
Washington, DC 20515

Dear Congressman Crane:

    I am writing on behalf of our company, Perfection Spring & Stamping 
Corp. We are located in Mt. Prospect, Illinois and we employ 103. Many 
of our production workers are members of the Manufacturing, Production, 
& Service Workers Union Local No. 24, AFL-CIO. We need your help.
    The steel tariffs imposed by the President last March, which were 
intended to provide the domestic steel industry with protection from 
imports and an opportunity to restructure in order to become 
competitive on a global scale, have unfortunately resulted in 
dramatically higher prices, longer delivery times, shortages, 
allocations and lower quality for steel consumers. Steel prices have 
increased from an average price per pound of.307# to.37# or 19% since 
March 2002. The delivery and overall product quality has eroded as 
well. It is common to receive quotes of 8-10 weeks for material 
delivery and various material defects are common. Domestic steel mills 
no longer offer many engineered materials i.e. AKDQ R/B hardness 40 
maximum or tight gauge tolerances. This has forced the metal consuming 
industries to make due with run of the mill material, that has a higher 
profit margin for the steel producers.
    Because of the tariffs, our company has lost contracts to foreign 
suppliers (especially China). We have had increased pressure to move to 
Mexico and China by our customers and have had to lay off 40 employees! 
Unless things change rapidly, our company will continue to lose 
business to foreign competition that now has a built-in cost advantage, 
thanks to the actions of our own government. I believe these tariffs 
should be removed at the earliest possible time to prevent further 
damage to the steel-using economy.
    Thank you for your consideration.

            Sincerely,

                                                     David J. Kahn,
                                                          President

                                 

                                                  Port of Milwaukee
                                         Milwaukee, Wisconsin 53207
                                                     April 09, 2003

The Honorable Philip M. Crane
Chairman
House Ways and Means Subcommittee, Trade
233 Cannon House Office Building
Washington, DC 20515-1308

Re: LHouse Ways and Means Subcommittee Hearing Section 201 Steel 
Tariffs and Quotas

Dear Congressman Crane:

    In announcing the above referenced hearing held on March 26, you 
stated, ``the past year has shown us that the steel safeguard action 
has had wide-ranging effects on steel consuming industries and the US 
economy. . .[and] we will examine just how much of an impact that 
action has had on jobs in industries that are key participants in the 
American economy.'' The purpose of this letter is to bring to your 
attention the dramatic negative impact that Section 201 steel tariffs 
and quotas have had on the maritime and transportation industries in 
the Great Lakes region and the Port of Milwaukee.
    The Sec. 201 action has for the past year and a half caused a 
dramatic decline in steel cargoes handled at Milwaukee having fallen 
55%. Longshore, terminal and trucking work hours have declined 
proportionately, as have business revenues and resultant local and 
federal tax receipts.
    We respectfully request that you include the Martin Study in the 
record of the March 26, 2003, House Ways and Means Trade Subcommittee 
Hearing. We would further request that the Subcommittee Report urge the 
ITC to conduct a Section 332 investigation on the impact of the Section 
201 safeguard action on the maritime transportation system as well as 
steel consuming industries.
    We thank you for your support and look forward to working with you 
to ensure that the economic and employment opportunities generated by 
the U.S. port, maritime and transportation industries, are given full 
consideration by the ITC during the Section 201 mid-term review 
process.
    Please feel free to contact me at 414-286-8132 should you have any 
questions regarding this request.

            Sincerely,

                                                    Eric C. Reinelt
                                                  Marketing Manager

                                 

                                 Precision Metalforming Association
                                           Independence, Ohio 44131
                                                      April 8, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Ways & Means Committee
Washington, DC 20515

Re: L3-26-03 hearing titled ``The Impact of the Section 201 Safeguard 
Action on Certain Steel Products''

Dear Congressman Crane:

    The Precision Metalforming Association (PMA) respectfully submits 
the following comments in regard to the March 26, 2003 hearing titled 
``The Impact of the Section 201 Safeguard Action on Certain Steel 
Products.''
    PMA is the voice of America's $41-billion metalforming industry of 
North America--the industry that creates precision metal products using 
stamping, fabricating and other value-added processes. The metalforming 
industry, which employs approximately 380,000 workers in the United 
States, gives utility to sheet metal by shaping it using tooling in 
machines. PMA members include metal stampers, fabricators, spinners, 
slide formers, and roll formers, as well as suppliers of equipment, 
materials and services to the industry.
    Since the Section 201 steel tariffs were imposed by President Bush 
last March, PMA member companies and the entire steel-consuming 
industry have been suffering and the impact has been severe. Our 
members have experienced extreme steel price increases, lengthened 
delivery times, steel shortages and allocations, loss of business to 
foreign competitors and layoffs.
    The tariffs, which were intended to aid the domestic steel 
industry, are threatening the viability of American steel-consuming 
manufacturers that rely on access to fairly priced steel in order to be 
competitive in the global market. Since the tariffs were imposed, PMA 
members have reported raw material price hikes between 20-50 percent. 
The assumption was that the tariffs would not hurt steel-consuming 
companies, as they should be able to pass these price increases along 
to their customers, who could pass the cost on to their ultimate 
consumers or absorb it themselves. However, this does not work in 
reality. Steel consumers have been unsuccessful in trying to pass the 
price increases along to their customers. Some have threatened to take 
their business overseas if our members do not absorb the increased 
cost. In many cases, our members' customers require annual cost 
decreases of 5 to 15 percent. Steel-using manufacturers cannot absorb 
such high steel prices as steel represents 35 to 60 percent of their 
cost of sales and profitability averages only 4.5 to 6 percent before 
taxes.
    Therefore, these conditions make it impossible for U.S. steel 
consumers to compete globally. As a result, our members are laying off 
workers, some have been forced to close their doors and others are 
considering moving their businesses offshore. A January 2003 survey 
found that 68 percent of PMA manufacturing member companies lost 
business to foreign competition in 2002. Unless things change, we 
expect even more of our members to lose business to foreign 
competition, which now has a built-in cost advantage because of the 
tariffs.
    These import restrictions need to be removed at the earliest 
possible opportunity to prevent further damage to the steel-using 
economy. The tariffs are not saving the steel industry; they are 
killing the steel industry's customer base.
    Thank you for the opportunity to voice our concerns on this matter.

            Sincerely,

                                         Christopher E. Howell, CAE
                            Director of Government & Public Affairs

                                 
 Statement of The Honorable Ralph Regula, a Representative in Congress 
                         from the State of Ohio
    Mr. Chairman and Members of the Subcommittee, I thank you for the 
opportunity to testify regarding the positive impact that the 
President's Section 201 Safeguard action has had on the domestic steel 
industry.
    The President took decisive action in March of 2002 to provide the 
U.S. steel industry with some breathing room from the onslaught of low-
priced imports that had reached an all-time high in 1998. This surge of 
imports drove over 35 domestic steel producers to seek bankruptcy 
protection and led to numerous permanent closures.
    I would argue that the President's steel program is having the 
intended effect of allowing the domestic steel industry time to 
consolidate, restructure and become more competitive. There are those 
who argue that the President's program has led to price spikes and 
significant job loss in the steel consuming community. I would argue 
that the President's program allows for exemptions from the tariffs if 
products cannot be produced in the U.S. and there are no functional 
substitutes.
    This process has been effective by allowing a total of 1,022 steel 
products to be exempted from the tariffs.
    I would also like to commend to you a recent study by Dr. Peter 
Morici of the University of Maryland who has studied the impact of the 
Section 201 program after one year. I ask that this study be placed in 
the record. According to this study, steel prices did rise in the first 
half of 2002, but then tapered off and actually fell from the high in 
July by about 25 percent at the end of 2002.
    When the President implemented the Section 201 tariffs, domestic 
steel prices were at a 20-year low. These prices were unsustainable and 
led to the many bankruptcies we witnessed. They also led to the idling 
of nearly 20 million tons of steel-making capacity in the U.S. Prices 
did rise in 2002 due to the loss of steel-making capacity and because 
the tariffs slowed the rate of imports into the U.S. However, the price 
increase during the first half of 2002 tapered off by about 25 percent 
by December of 2002.
    As a result of the stability created by the steel tariffs, new 
investors have come into the market and purchased the assets of 
shutdown plants and restarted them in a lower-cost and more efficient 
manner. There are several examples in Northeast Ohio, including 
selected assets of the bankrupt LTV Corporation being bought and 
restarted by International Steel Group (ISG). The addition of 
substantial capacity, which is being brought on at relatively low cost, 
has again brought down domestic steel prices.
    The consolidation and restructuring of the domestic steel industry 
has not been without pain to many steelworkers and their families. As a 
result of the restructuring, pension obligations of many bankrupt 
facilities have been shifted to the Pension Benefit Guarantee 
Corporation (PBGC). Many workers who were expecting pension benefits 
before the age of 62 now find themselves without those pension benefits 
and without health benefits. As selected assets of these bankrupt 
companies are being purchased and restarted, it does mean jobs for some 
and not for others.
    The President's 201 program has created the environment that has 
encouraged consolidation of the U.S. steel industry. This consolidation 
has led to the closing of inefficient capacity and the restarting of 
efficient plants at much lower costs. This will lead to an overall 
lower cost U.S. steel industry which will be beneficial to all who use 
domestic steel in their manufacturing and production processes. 
However, I would caution that this restructuring is costly and will 
take time to complete and pay for. Therefore, the premature ending of 
the President's 201 program could once again push the industry in the 
wrong direction. I have urged the President and his cabinet members to 
keep the declining three-year tariffs in place for the entire three-
year duration that was announced last March.
    During these difficult times when the U.S. is at war, I do not 
believe that we as a nation would like to become more dependent on 
foreign steel. We need a healthy basic steel industry to ensure that we 
can meet our defense needs. A stable basic steel industry is also 
necessary to ensure that there is a steady supply of steel for all 
steel users in this country. I would urge the Subcommittee not to take 
any action to prematurely end the President's 201 steel import relief 
program. I thank you for the opportunity to appear before the 
Subcommittee.
    [Attachment is being retained in Committee files.]

                                 

                                          Res Manufacturing Company
                                         Milwaukee, Wisconsin 53223
                                                     March 21, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
Washington, DC 20515

Dear Congressman Crane:

    I am writing on behalf of my company, Res Manufacturing Company. We 
are located in Milwaukee, Wisconsin and we employ 50 workers. We need 
your help.
    The steel tariffs imposed by the President last March, which were 
intended to provide the domestic steel industry with protection from 
imports and an opportunity to restructure in order to become 
competitive on a global scale, have unfortunately resulted in 
dramatically higher prices, longer delivery times, shortages, 
allocations and lower quality for steel consumers. During this period 
we have experienced our purchased steel prices increase by at least 
30%. Since raw material costs are the major cost driver of our business 
we have suffered severe erosion of our profitability.
    As a result of the tariffs, my company has seen numerous customers' 
resource to offshore suppliers. In addition several have announced 
plans to relocate their manufacturing operations outside the US. Unless 
things change rapidly, my company will continue to lose business to 
foreign competition that now has a built-in cost advantage, thanks to 
the actions of our own government. I believe these tariffs should be 
removed at the earliest possible time to prevent further damage to the 
steel-using economy.
    Thank you for your consideration.

            Sincerely,

                                                   Dr. John Ormerod
                                                          President

                                 

                                      Free Trade in Steel Coalition
                                   Philadelphia, Pennsylvania 19106
                                                      April 3, 2003

The Honorable Philip M. Crane
Chairman
House Ways and Means Subcommittee, Trade
233 Cannon House Office Building
Washington, D.C. 20515-1308

RE: LHouse Ways and Means Subcommittee Hearing Sec. 201 Steel Tariffs 
and Quotas

Dear Congressman Crane:

    In announcing the above referenced hearing held on March 26, you 
stated, ``the past year has shown US that the steel safeguard action 
has had wide-ranging effects on steel consuming industries and the US 
economy . . . [and] we will examine just how much of an impact that 
action has had on jobs in industries that are key participants in the 
American economy.'' The purpose of this letter is to bring to your 
attention the dramatic impact that these tariffs and quotas have had on 
the maritime and transportation industries.
    The Free Trade in Steel Coalition (FTSC) is compromised of port 
authorities, port terminal operators, long-shore labor unions, and 
other U.S. port and transportation industry organizations who operate 
in the Ports of New Orleans, Los Angeles/Long Beach, Houston, 
Philadelphia/Camden/Wilmington, the Great Lakes port region, and other 
ports throughout the U.S. Attached to this letter is a listing of 
current coalition members.
    As we enter the International Trade Commission (ITC) Section 201 
mid-term review process, significant attention has been paid, and 
rightly so, to the adverse impact these tariffs and quotas have had on 
the downstream steel consuming industries. A recent study commissioned 
by The Consuming Industries Trade Action Coalition (CITAC) entitled, 
The Unintended Consequences of US Steel Import Tariffs: A 
Quantification of the Impact During 2002 demonstrated that over 200,000 
manufacturing and related jobs have been lost since the imposition of 
these tariffs and quotas on March 5, 2002.
    However, it must be pointed out that jobs in the maritime and 
transportation industries are also at risk as a result of this 201 
action. A recently completed study by Martin Associates, The Economic 
Impact of Imported Iron and Steel Mill Products on the Nation's Marine 
Transportation System (Martin Study), concludes that more than 38,000 
direct, induced and indirect jobs for U.S. residents were dependent in 
2000 upon the handling of imported steel products. Furthermore, this 
level of economic activity generated $1.7 billion of direct business 
revenue, $1.7 billion in wages and salaries, and $576.3 million of 
federal, state and local tax revenues.
    We respectfully request that you include the Martin Study in the 
record of the March 26, 2003, House Ways and Means Trade Subcommittee 
Hearing. We would further request that the Subcommittee Report urge the 
ITC to conduct a Section 332 investigation on the impact of the Section 
201 safeguard action on the maritime transportation system as well as 
steel consuming industries.
    We thank you for your support and look forward to working with you 
to ensure that the economic and employment opportunities generated by 
the U.S. port, maritime and transportation industries, are given full 
consideration by the ITC during the Section 201 mid-term review 
process.
    Please feel free to contact me at 215-925-2615 should you have any 
questions regarding this request.

            Sincerely,

                                                    Dennis Rochford
                                                        Coordinator
                                 ______
                                 

                            Membership List

     LAmerican TransPort--Paulsboro, NJ
     LAssociated Branch Pilots of New Orleans
     LAstro Holdings, Inc.--Philadelphia, PA
     LBARTHCO International
     LBoard of Commissioners, Port of New Orleans
     LCalifornia United Terminals, Inc.--Long Beach, CA
     LCeres Terminals Incorporated--Chicago, IL
     LChampion Service Inc.
     LChristina Service Company--New Castle, DE
     LCooper T. Smith Stevedores and Terminal Operators--
Houston, TX
     LCorporation of Professional Great Lakes Pilots
     LD & M Transportation Services, Inc.--Bellmawr, NJ
     LDelaware River Stevedores, Inc.
     LDetroit Marine Terminals
     LEmbarcadero Systems Corporation--Alameda, CA
     LEmEsCo Marine Terminal--Chicago, IL
     LFederal Marine Terminals--Portage, IN
     LGS Profiles--Norcross, GA
     LHolt Cargo Systems, Inc.--Gloucester, NJ
     LIllinois International Port at Chicago International 
Federation of Professional Tech Engineers, Local 18--Audubon, NJ
     LInternational Freight Forwarders and Customs Brokers of 
New Orleans
     LJacobsen Pilot Service--Port of Long Beach, CA
     LLakes Pilot Association, Inc.--Port Huron, MI
     LLogistec USA Inc.--New Haven, CT
     LMarine Terminals--Oakland, California
     LMaritime Association of the Port of New York and New 
Jersey
     LMaritime Exchange for the Delaware River and Bay
     LNational Association of Maritime Organizations--Norfolk, 
VA
     LNicholson Terminal and Dock Company--River Rouge, LAP & O 
Ports New Orleans
     LPan Ocean Shipping Co., Ltd.
     LPasha Stevedoring and Terminals--Port of Los Angeles, CA
     LPhiladelphia Customs Brokers & Forwarders Association
     LPilots' Association for the Bay and River Delaware
     LPort of Detroit Operators Association
     LPort of Milwaukee
     LPort of New Orleans
     LPort of Wilmington, Delaware
     LPorts of Philadelphia Maritime Society
     LPorts of the Delaware River Marine Trade Association
     LReserve Marine Terminals--Chicago, IL
     LShipping Federation of Canada
     LSouth Jersey Port Corporation
     LStevedoring Services of America--Savannah, GA
     LTampa Port Authority
     LTeamsters Local Union No. 500 of Philadelphia, Camden and 
Vicinity
     LTerminal Shipping Co., Inc.--Philadelphia, PA and 
Baltimore, MD
     LThe Holt Group, Inc.--Philadelphia, PA
     LUnited States Great Lakes Shipping Association
     LWest Gulf Maritime Association--Houston, TX
     LWFC Associates--Crofton, MD
     LWWP Maritime Specialists--Glen Eagle, PA

As of February 2003
                                 ______
                                 
                       Maritime Exchange for the Delaware River Bay
                                                      April 3, 2003

The Honorable Philip M. Crane
Chairman
House Ways and Means Subcommittee, Trade
233 Cannon House Office Building
Washington, D.C. 20515-1308

RE: LHouse Ways and Means Subcommittee Hearing Sec. 201 Steel Tariffs 
and Quotas

Dear Congressman Crane:

    In announcing the above referenced hearing held on March 26, you 
stated, ``the past year has shown US that the steel safeguard action 
has had wide-ranging effects on steel consuming industries and the US 
economy . . . [and] we will examine just how much of an impact that 
action has had on jobs in industries that are key participants in the 
American economy.'' The purpose of this letter is to bring to your 
attention the dramatic impact that these tariffs and quotas have had on 
the maritime and transportation industries.
    The Maritime Exchange for the Delaware River and Bay, compromised 
of approximately 300 members, is a non-profit trade association 
representing the ports and related businesses in Philadelphia, 
Pennsylvania, Camden, New Jersey and Wilmington, Delaware.
    As we enter the International Trade Commission (ITC) Section 201 
mid-term review process, significant attention has been paid, and 
rightly so, to the adverse impact these tariffs and quotas have had on 
the downstream steel consuming industries. A recent study commissioned 
by The Consuming Industries Trade Action Coalition (CITAC) entitled, 
The Unintended Consequences of US Steel Import Tariffs: A 
Quantification of the Impact During 2002 demonstrated that over 200,000 
manufacturing and related jobs have been lost since the imposition of 
these tariffs and quotas on March 5, 2002.
    However, it must be pointed out that jobs in the maritime and 
transportation industries are also at risk as a result of this 201 
action. A recently completed study by Martin Associates, The Economic 
Impact of Imported Iron and Steel Mill Products on the Nation's Marine 
Transportation System (Martin Study), concludes that more than 38,000 
direct, induced and indirect jobs for U.S. residents were dependent in 
2000 upon the handling of imported steel products. Furthermore, this 
level of economic activity generated $1.7 billion of direct business 
revenue, $1.7 billion in wages and salaries, and $576.3 million of 
federal, state and local tax revenues.
    Specific to the Delaware River and Bay regional port complex, the 
Martin Study concluded that 4,400 jobs were dependent upon the handling 
of imported steel in 2000, and that this level of economic activity 
generated $303 million in business revenues, $175 million in wages and 
salaries, and $70 million in federal, state and local taxes.
    We respectfully request that you include the Martin Study in the 
record of the March 26, 2003, House Ways and Means Trade Subcommittee 
Hearing. We would further request that the Subcommittee Report urge the 
ITC to conduct a Section 332 investigation on the impact of the Section 
201 safeguard action on the maritime transportation system as well as 
steel consuming industries.
    We thank you for your support and look forward to working with you 
to ensure that the economic and employment opportunities generated by 
the U.S. port, maritime and transportation industries, are given full 
consideration by the ITC during the Section 201 mid-term review 
process.
    Please feel free to contact me if you have any questions regarding 
this request.

            Sincerely,

                                                    Dennis Rochford
                                                          President
                                 ______
                                 
                           Executive Summary
       The Martin Economic Study on Imported Steel and Port Jobs
                            October 25, 2001
    In 2000, 36.4 million net tons of iron and steel mill products were 
imported into the United States. Five port regions in the United States 
handled 70% of the iron and steel imports. These port ranges are:

     LPort of New Orleans Customs District
     LPort of Houston Customs District
     LPort of Los Angeles Customs District including the Port 
of Long Beach
     LPhiladelphia Customs District including the ports of 
Philadelphia, Camden (NJ), and Wilmington (DE).
     LU.S. Great Lakes Port Region including the U.S. customs 
districts of Chicago, Detroit, Cleveland, Milwaukee and Duluth.

    The imported iron and steel products handled at the individual 
ports in these five port regions created the following economic impacts 
to the U.S. economy in the year 2000:

     LMore than 27,000 direct, induced and indirect jobs for 
U.S. residents were created by the handling of the imported iron and 
steel products at the five port regions of entry. Of these 27,148 total 
jobs, 11,676 jobs are classified as direct jobs. As the result of local 
purchases for goods and services by these direct job-holders, another 
8,239 induced jobs were created. Because the firms providing the 
maritime services also make local purchases for goods and services, 
7,233 indirect jobs were also generated.
     L$1.2 billionof direct, induced and indirect wages and 
salaries were created as the result of the import of the iron and steel 
products at the five port regions. Of the $1.2 billion, those 11,676 
directly employed received $465.7 million of wages and salaries, for an 
average salary of about $39,900. As the result of the re-spending of 
the direct income, another $528.4 million of induced wages and 
consumption expenditures were created. The 7,233 indirect jobholders 
received $181.5 million of indirect wages and salaries.
     L$1.1 billion of direct business revenue was created by 
the import of the 23 million tons of imported iron and steel products 
at ports in the five port regions. This revenue was created as the 
result of providing port services and truck, rail and barge 
distribution services. This revenue does not include the local 
purchases supporting the indirect jobs nor the value of the iron and 
steel imports.
     LLocal, state and federal governments received $403.4 
million of tax revenue. Of the total, $285 million was received by the 
federal government as the result of the 23 million tons of imported 
iron and steel products via the five port regions under study.

    It is to be noted that the five port regions under study handled 
70% of the total steel imported into the United States in 2000. Since 
these port regions handle the majority of the steel imports, it is 
possible to use these impacts to estimate the economic impact of the 
total amount of iron and steel products imported in the United States 
in the year 2000. Assuming that the remaining 30% of the steel imported 
is handled and distributed in a similar manner as the 70% under study, 
the total economic impact of the 36.4 million net tons of iron and 
steel products imported into the United States in 2000 is estimated at:

     L38,800 direct, induced and indirect jobs
     L$1.7 billion of direct, induced and indirect wages and 
salaries
     L$1.6 billion of direct business revenue to those 
providing the port and inland transpiration services to move the 
imported iron and steel products
     L$576.3 million of federal, state and local tax revenues, 
of which $407 million is federal tax revenue.

    As demonstrated, the import of iron and steel products provides a 
substantial contribution to the economies in which the importing ports 
are located, as well as to the national economy. Reductions in the 
import levels of iron and steel products will have a direct adverse 
impact on these local economies, as well as to the national economy. 
Based on the 38,800 direct, induced and indirect jobs supported by the 
36.4 million tons of iron and steel products imported through our 
nation's marine transportation system, it can be concluded that for 
every 1 million tons of steel diverted from the nation's port system, 
nearly 1,100 jobs will be lost in the U.S. economy.
Summary of Economic Impacts of Imported Iron and Steel Products In the 
                       Five Key Port Regions 2000
[GRAPHIC] [TIFF OMITTED] 89863A.026

                                 
Statement of The Honorable Tim Ryan, a Representative in Congress from 
                           the State of Ohio
    When President Bush initiated the steel relief program under 
Section 201 of the Trade Act at the behest of tens of thousands of 
steel workers throughout the country, he gave that industry a chance to 
regain its footing in the face of unprecedented and illegal foreign 
steel imports. This action followed a detailed and comprehensive 
investigation by the United States International Trade Commission (ITC) 
to determine whether the industry had been harmed by a surge of foreign 
steel imports. The ITC determination was unanimous: U. S. steel 
companies were being devastated by surging imports of foreign steel and 
measures should be imposed to protect the industry.
    In the 17th District of Ohio, I have seen first-hand the effects of 
illegal foreign steel dumping. Thousands of jobs were lost when CSC 
Inc. in Warren, OH was put out of business in the midst of a declining 
steel market; a nearby LTV facility was saved from bankruptcy only by 
the private dollars of a few anonymous individuals. I have seen 
families lose their breadwinners, cash-strapped local governments lose 
their tax base, school districts lose revenues, and communities lose 
hope.
    The Section 201 steel relief program is a crucial lifeline for an 
industry fighting admirably to survive. These measures must be 
continued for the full three years of the program. The Section 201 
tariffs have enabled the industry to make substantial progress that, if 
allowed to continue, can ensure the long-term health of the U. S. steel 
industry, provide good jobs for hard-working Americans, stabilize steel 
prices, and protect our country's national security interests.
    Even though steel imports covered by the Section 201 tariffs 
account for only 5% of domestic consumption, studies have shown that 
since the measures took effect, there has been increased investment in 
the modernization of facilities--making the steel industry more 
competitive with overseas manufactures, increased consolidation and 
increased restructuring. We have also seen steel prices begin to 
stabilize. In fact, steel prices are now rising faster overseas than 
they are in the United States--making our steel industry much more 
competitive on the global market.
    Despite the tariffs enabling substantial gains for an industry 
almost lost, there are those who are urging the withdrawal of this 
essential lifeline. Some domestic interest groups have cried foul over 
the tariffs, arguing that they have been harmed by increased steel 
prices--despite studies showing the tariffs' effects on steel consumers 
to be negligible. Our so-called trading partners have even threatened 
sanctions against the U.S. unless the tariffs are rescinded.
    On March 26, 2003, a tribunal at the secretive, undemocratic, and 
unaccountable World Trade Organization (WTO) ruled the tariffs 
illegal--setting the stage for trade sanctions against the United 
States. This decision was not surprising since the WTO dispute 
settlement panels have struck down every safeguard measure to come 
before them.
    Congress and President Bush cannot allow our country to be bullied 
by the same international community which shares the blame for causing 
the problem. On behalf of every hard working man and woman throughout 
the 17th Congressional District and our nation, I submit that the 
tariffs are working, and I urge the President and Congress to stay the 
course.

                                 
Statement of Makoto Takahashi, Sharp Manufacturing Company of America, 
                           Memphis, Tennessee
    I am pleased that Sharp Manufacturing Company of America (SMCA) has 
been provided the opportunity to present a statement in connection with 
steel tariff relief.
    Section 201 tariffs have had a dramatic impact on the price and 
availability of steel in the market and have resulted in a substantial 
and harmful impact on steel users, such as our company.
    SMCA's roots in producing microwave ovens in Memphis, Tennessee go 
back to 1979. Currently, SMCA employs approximately 600 workers who are 
represented by the International Brotherhood of Electrical Workers 
(IBEW), Local 474.
    SMCA is the only remaining consumer microwave oven manufacturer in 
the United States. It strongly prefers to remain in Memphis, continuing 
to employ U.S. workers and sustain its contribution to the local, state 
and national economies.
    Unfortunately, SMCA is a relatively small user of steel and does 
not have the leverage to directly negotiate for more competitive prices 
with steel mills. SMCA's yearly purchase of all steel is approximately 
12,850 tons, of which 3,000 tons is

painted product and 2,550 tons is Electro-Galvanized steel (EG). Other 
steel consumption consists of 3,750 tons of Galvanneal, and 2,300 tons 
of Galvanized. This steel is purchased from service centers and 
sometimes through trading companies which in turn deal with the service 
centers. Thus, SMCA's ability to source competitively priced steel is 
constrained under normal market conditions.
    SMCA used the product exclusion process in an attempt to reduce the 
damaging effects of the tariffs. Despite obtaining an exclusion for one 
type of steel it uses, it is evident that it will only provide SMCA 
with very limited relief. The basic problem remains--tariffs have made 
it impossible to compete on a global basis with our foreign competitors 
who manufacture microwave ovens using cheaper foreign steel and are not 
subject to these tariffs.
    In fact, due to the increased price of domestic steel precipitated 
by Section 201 tariffs, SMCA has begun importing microwave oven stamped 
metal door assemblies from foreign sources. The importation of door 
assemblies eliminates the need of slitting and blanking by U.S. service 
centers, the stamping and painting at SMCA's in-house facility, and the 
purchase of all other raw materials that support this operation. This 
affected not only the loss of jobs at SMCA but the loss of jobs at our 
suppliers.
    The tariffs have increased the cost of manufacturing microwave 
ovens at SMCA. Rather than experiencing a gradual and/or steady 
increase, it was immediate and substantial. Moreover, unlike 90% of our 
competitors who import their microwave ovens into the U.S. and are not 
subject to the tariffs, SMCA cannot absorb or pass these costs on to 
its customers. Unless further relief is granted through the elimination 
of these tariffs, SMCA may have no other choice but to join the parade 
of other microwave oven manufacturers who have left the U.S. for China, 
Korea, etc. Clearly, that was not the intent of Section 201 tariffs. As 
one of my manufacturing colleagues noted before this committee last 
week, ``Steel tariffs are the wrong medicine for a sick industry.''
    In conclusion, this committee should understand that it is SMCA's 
intention to survive in this industry. Our roots are firmly grounded in 
this community. Our objective is to stay in Memphis and to expand 
microwave operations. SMCA does not intend to abandon the United States 
as so many of our competitors have done. Unfortunately, without 
immediate relief from the steel tariffs, SMCA might not be able to 
accomplish this objective!
    Thank you for providing SMCA the opportunity to submit this 
statement.

                                 

                       Spring Engineering and Manufacturing Company
                                             Canton, Michigan 48187
                                                     March 24, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
Washington, DC 20515

Dear Congressman Crane:

    I am writing on behalf of my company, Spring Engineering and 
Manufacturing Corporation. We are located in Canton, Michigan and we 
employ 90 workers. We need your help.
    The steel tariffs imposed by the President last March, which were 
intended to provide the domestic steel industry with protection from 
imports and an opportunity to restructure in order to become 
competitive on a global scale, have unfortunately resulted in 
dramatically higher prices, longer delivery times, shortages, 
allocations and lower quality for steel consumers. Since March of 2002 
original raw material prices have increased 15-28%. Our customers have 
refused to accept any price increases, some must absorb the entire cost 
of the tariffs.
    As a result of the tariffs, my company has not been able to compete 
on new work because of the increased costs of steel in our pricing. 
Unless things change rapidly, my company will lose continue to lose 
business to foreign competition that now has a built-in cost advantage, 
thanks to the actions of our own government. I believe these tariffs 
should be removed at the earliest possible time to prevent further 
damage to the steel-using economy.
    Thank you for your consideration.

            Sincerely,

                                                        Tim Tindall
                                                          President

                                 
              Statement of Steel Manufacturers Association
Subject of this Hearing 

    U.S. electric furnace steel producers, i.e. the mini-mills, fully 
support the continuation of the Administration's program under Section 
201, providing safeguard relief for the remaining eighteen months of 
the full three year period accorded to the domestic steel industry. The 
201 relief has already resulted in widespread industry rationalization 
and consolidation. However, further capital investment is required by 
domestic steel companies to implement cost reductions, to improve 
quality, and to expand markets. This will require the additional 
eighteen months of relief, originally drafted in the 201 program.
    The 201 relief already accorded has partially ameliorated the 
import crisis that decimated the entire U.S. industry between 1998 and 
2001. Importers, however, continue to seek sources of imports from 
countries excluded from the 201 relief. Most of these new country 
sources have excess steel-making capacity. Imports, therefore, are 
continuing to enter the U.S. market at high levels. Surging imports 
from non-covered countries, unless contained, will undermine 201 relief 
for the domestic industry and, accordingly, further steps should be 
taken to reduce them.
    For the longer term, U.S. mini-mills actively support a key 
component of the President's program, namely to achieve an 
international steel agreement eliminating subsidies to steel companies 
so that excess, uneconomic, steelmaking capacity is permanently retired 
world wide, eliminating the overhang of excess capacity on world steel 
demand.

The Steel Manufacturers Association 

    We are the trade group representing the North American mini-mills, 
scrap based electric arc furnace (EAF) steel producers--companies that 
produce more than half of U.S. steel output. We have 39 company members 
with 119 North American steel-making plants, widely spread across the 
continent. In the last 30 years, our share of the U.S. steel production 
has risen extraordinarily, from about 15% to approximately 50.8% of 
U.S. raw steel production in 2002 which, overall, totaled 101.6 million 
tons in 2002. Electric arc furnace steel producers now account for the 
preponderant share of U.S. steel production, and our share will 
continue to grow. The SMA represents nearly 100% of the structural 
producers, wire rod producers, re-bar producers, mini-mill plate 
producers, mini-mill hot rolled producers, and a high percentage of SBQ 
producers.

Reasons for Our Growth 

    We have achieved growth through performance. A significant number 
of our mini-mill plants have the highest productivity (man-hours per 
ton of steel produced) in the world, some as low as six tenths of a 
man-hour per ton. On average, our mini-mill, scrap-based productivity 
is double that of ore-based integrated steel producers. Most of the 
developing countries seldom exceed the unit labor cost performance of 
U.S. mini-mills, due to our high world standard of productivity. 
Moreover, our energy consumption per ton of steel produced is only 
about one third that of integrated ore-based steel makers, worldwide.

Our Markets and Trade Issues 

    In year 2002, the U.S. steel market totaled approximately 117 
million net tons of finished steel products. The U.S. steel industry 
shipped approximately 99.5 million tons of finished steel in 2002. We 
exported 6 million tons and had imports of finished steel products of 
23.5 million tons. Please note from the data presented in Table I on 
the next page that finished steel imports have declined little since 
the year 2000, when measured as a percentage or share of the U.S. 
market. They have ranged between 20.1% and 22.3% of the market.

                                 Table I
          Year 2002, 2001, & 2000 Selected Steel Industry Data
------------------------------------------------------------------------
                Production                    2002      2001      2000
------------------------------------------------------------------------
Pig Iron Production                             44.2    46.444    52.787
------------------------------------------------------------------------
Raw Steel (total)                              101.6    99.321   112.241
------------------------------------------------------------------------
Basic Oxygen Production Process                 50.0    52.204    59.485
------------------------------------------------------------------------
% of Total                                      49.2  ........  ........
------------------------------------------------------------------------
Electric Arc Furnace Production                 51.6    47.116    52.756
------------------------------------------------------------------------
% of Total                                      50.8  ........  ........
------------------------------------------------------------------------
Continuous cast (incl. above)                   98.8    96.502   108.175
------------------------------------------------------------------------
Rate of Capability Utilization (%)              86.0      79.2      86.1
------------------------------------------------------------------------
              Mill Shipments
------------------------------------------------------------------------
Total steel mill products                       99.5    98,940   109,050
------------------------------------------------------------------------
Carbon                                          92.6    92,314   101,544
Alloy                                            4.8     4,789     5,380
------------------------------------------------------------------------
Stainless                                        1.9     1,837     2,126
------------------------------------------------------------------------
Exports (000 N.T.)                                 6     6,144     6,529
------------------------------------------------------------------------
Imports (000 N.T.)                              32.5    30,080    37,957
------------------------------------------------------------------------
Carbon                                          27.6    25,273    32,291
------------------------------------------------------------------------
Alloy                                            4.8     3,873     4,487
------------------------------------------------------------------------
Stainless                                        .95       934     1,179
------------------------------------------------------------------------
       Trade in Steel Mill Products
------------------------------------------------------------------------
Imports excluding semi-finished                 23.5    23,640    29,401
------------------------------------------------------------------------
APPARENT STEEL SUPPLY EXCLUDING SEMI-          117.0   116,436   131,922
 FINISHED IMPORTS (000 NET TONS)
------------------------------------------------------------------------
Imports excluding semi-finished as %            20.1      20.3      22.3
 apparent supply
------------------------------------------------------------------------

    Data in the table above for the year 2002 were estimated for the 
full year, based on 11 months of actual data through November, 2002. 
Note that the U.S. market for steel (apparent steel supply) declined 
11.3% in 2002 from the year 2000 level, while the steel imports' share 
of apparent consumption declined from 22.3% to 20.1% of the market, a 
9.8% decline in the market share of imports, compared to the 11.3% 
decline in the market itself. The 201 program, therefore, has had 
little negative impact on the access of imports to the US market.

Industry Restructuring and Consolidation--Effects on Prices 

    A far more important impact on the domestic steel supply have been 
permanent and temporary shutdowns of domestic plants by U.S. steel 
producers, some exiting the business permanently, while others filing 
for Chapter 11 reorganization. Approximately 15 million tons of flat-
rolled capacity (20% of the existing domestic capacity base at the 
start of 2000) was closed in the 18 months from September 2000 to 
December 2001. This was the major cause of any diminution of supply and 
temporary price increases which occurred in flat rolled prices after 
March 2002, when the 201 safeguard program was implemented. Due to 
restructuring and consolidations, we expect three quarters of this lost 
supply will be back on line by the middle of 2003. Moreover, as the 
chart below (Chart I) demonstrates, flat rolled product prices have 
declined 20% to 25% from their temporary surge level in mid-2002, 
caused by domestic capacity shutdowns, not as we have said, lack of 
access to imports.
     Chart I--Flat Product Spot Prices, December 2001--January 2003
[GRAPHIC] [TIFF OMITTED] 89863A.027

    On the long products side, almost all of which are supplied by the 
electric furnace mini-mills, there have been significant capacity 
closures on order of eight million tons of melting and rolling 
facilities. A significant number of these mills have been purchased, 
and with new streamlined financial structures and more competitive 
labor agreements, are coming back on line. In addition, there have been 
significant acquisitions of long product companies by other mini-mills, 
as the drive toward consolidation under the 201 program continues.
    However, as the following chart demonstrates (Chart II), Department 
of Labor, Bureau of Labor Statistics data show that very little price 
relief accrued to long products producers on the long products below 
that are subject to the 201 import duties.
            Chart II--Long Product PPIs, January 1984--2003
[GRAPHIC] [TIFF OMITTED] 89863A.028

Comments on Misrepresentations 

    We believe it is important to correct the record with respect to 
spurious comments made by the CITAC and other sources regarding the 
alleged effects of 201 duties on steel users. First of all, one can see 
from our first table, there has been very little reduction in the 
supply of steel in the American economy resulting from 201 duties. 
Secondly, claims of loss of competitiveness because domestic steel 
prices could not be maintained at twenty year lows are patently absurd. 
Did those complaining steel consumers suddenly become competitive due 
to the collapse of steel prices in 1998--2001 resulting from a deluge 
of imports? Hardly! U.S. steel prices are now below those in other 
major countries. Are U.S. consumers, thus, more competitive now than 
their foreign competitors? The answer is ``NO.'' The facts are that the 
overvalued U.S. dollar has been and should be their prime concern, not 
the de-minimus effects of 201 import duties on a minor fraction of U.S. 
steel consumption.
    We would also like to correct the erroneous impression CITAC 
representatives have given publicly that the steel import duties have 
resulted in stupendous job losses. We believe the article set forth 
below from the London Financial Times (February 10, 2003) is a factual 
rebuttal of their arguments.
               Financial Times Article--February 10, 2003
                       The Devil's in the Details
          Benjamin Disraeli's famous disctum never resonates more truly 
        than in the world of Washington lobbyists. ``There are three 
        kinds of lies,'' the British Prime Minister once said. ``Lies, 
        damned lies, and statistics.''
          But the lobbying group representing U.S. steel users hit a 
        new low with the release of a study claiming that roughly 
        200,000 U.S. jobs had been lost as a result f the U.S. decision 
        to impose tariffs on steel imports.
          The study, conducted for the Consuming Industries Trade 
        Action Coalition, last week claimed that 922,300 jobs had been 
        lost in industries that used steel between December 2001 and 
        December 2002. The one-year loss was attributed to the Bureau 
        of Labor Statistics. Out of that figure, CITAC estimated that 
        200,000 of those losses were due to higher steel prices brought 
        on by the tariffs.
          Two days after the release, CITAC went back and altered the 
        study on its website, claiming now that 915,000 jobs had been 
        lost over two years--not one--yet still citing the BLS. It did 
        not revise the claim of 200,000 jobs lost to the tariffs.
          One of the authors, Laura Baughman, says the initial mistake 
        was a type. ``I assure you it was not misleading,'' she told 
        Observer.
          What the study also failed to mention was that all the jobs 
        lost in 2002 actually occurred in January 2002, two months 
        before tariffs were imposed and when steel prices were near 
        historic lows. Between January and December 2002, total 
        employment in industries that buy steel grew by about 228,000 
        jobs, despite higher steel prices.
          Gary Hufbauer, an economist with the Institute for 
        International Economics which opposes the steel tariffs, calls 
        the claim of 200,000 jobs lost ``way out of bounds'', He 
        estimates that perhaps 5,000 to 10,000 jobs have been lost.
          Mr. Hufbauer attributes the ``mistake'' to the proliferation 
        of economic studies by lobbying groups that put ``a huge 
        premium on splash results''--even if that means distorting the 
        analysis to get attention. ``You would hope that the standards 
        would be higher.'' Evidently not.

Reversal of U.S. Trade and Current Account Deficits Require A Strong US 
        Manufacturing Base 

    But U.S. steel producers and consumers do have a legitimate trade 
complaint. U.S. mini-mills have become increasingly concerned over the 
U.S. trade and current account deficits, each approaching $500 billion 
annually. They are largely attributable to the massive annual deficits 
the U.S. is incurring in manufactured goods . . . not services, in 
which the U.S. is achieving a modest surplus. The negative merchandise 
trade balance is severely impacting the entire U.S. manufacturing 
sector.
    No country in the world has run trade and current account deficits 
of the magnitude of the U.S. Fed Chairman Alan Greenspan has repeatedly 
warned that the rapid growth of imports compared to the modest increase 
in exports cannot go on forever. Further expansion in the current 
account deficit cannot be sustained. The deficit is now at a level that 
leaves the economy vulnerable to a collapse in the value of the dollar 
rather than a needed further gradual reduction of the dollar. A 
collapse would trigger a jump in inflation leading to more extended 
recession. The Federal Reserve, to restore stability, would have to 
push up interest rates rapidly, cutting off increased production and 
consumption. Other major industrial countries and key developing 
countries are running trade and current account balance surpluses, 
largely due to their trade surpluses with the United States. They 
become outraged when their trade with the U.S. is limited, in any way, 
including a justifiable WTO-consistent 201 safeguard action, as in the 
case of steel. They completely fail to understand their own over-
dependence on the U.S. market, due to their own sluggish internal 
growth rates. In response to a modest U.S. safeguard action on steel 
they demand compensation from the trade overburdened U.S., the world's 
engine for export growth.
    The rest of the world should be aware that pushing the limits of 
unfettered over-dependent access to the U.S. market, when there are 
legitimate trade disruption issues, such as steel, of concern to the 
world's most open market, and then demanding compensation due to U.S. 
action on a problem they created, is unacceptable. This approach 
ultimately could lead to world closure, not the trade expansion regime, 
which the world needs. U.S. trading partners should reflect on the U.S. 
trade and current account deficits demonstrating the openness of the 
U.S. market to the rest of the world. A first step would be to press 
for an exchange rate policy for the U.S. dollar, that further gradually 
adjusts it downward to compensate for its continuing overvaluation, 
which is limiting the export capability of U.S. manufactured goods, 
while simultaneously encouraging imports.
    In addition, the Congress and the Executive Branch should review 
the U.S. business tax code to get it more in line with the rest of the 
world, whose indirect tax codes foster exports and impede imports.
    Mr. Chairman, thank you for this opportunity to present our views.

                                 

                                Steel Truss & Component Association
                                           Madison, Wisconsin 53719
                                                     April 10, 2003

The Honorable Philip M. Crane
Chairman-Subcommittee on Trade
Committee on Ways and Means
United States House of Representatives
1102 Longworth House Office Building
Washington, D.C. 20515

RE: Steel Tariff Issue

Dear Mr. Chairman:

    Manufacturers of steel structural building components are 
conducting business within all communities of the U.S., using the most 
efficient, economical resources for construction available. This 
industry includes the Steel Truss and Component Association (STCA).
    STCA is a national trade organization representing the interests of 
structural component manufacturers across the U.S. Their products 
include trusses and wall panels that are engineered structural 
components assembled from light gauge steel and screws, that create 
structural building systems. We purchase more than 200 million dollars 
worth of light gauge, galvanized steel each year.
    The current 30% steel tariff that was imposed in May of 2003 has 
adversely added cost to our economic structure, making others in our 
market more competitive. It has reduced jobs, an estimated 200,000 
American jobs industry-wide, representing approximately $4 billion in 
lost wages. More American workers lost their jobs in 2002 to higher 
steel prices than the total number employed by the U.S. steel industry 
itself, according to Trade Partnership Worldwide, LLC.
    STCA supports free trade and is opposed to artificial restrictions 
on steel imports. STCA supports all actions that will result in 
systemic changes to the manner in which the steel market functions so 
that steel is priced in an open and competitive way, without 
governmentally imposed restrictions.
    It is alarming that our government is still considering drastic 
protectionist measures. These present poorly conceived and highly 
political trade and economic policies that harm construction 
affordability and affects pricing of steel products for millions of 
consumers and workers in steel-dependent industries at a time when the 
economy is struggling to regain its footing. This action threatens to 
delay or impede the nation's economic recovery.
    If you have any questions, or need further information, please feel 
free to contact either Keith Kinser at 502/241-9456 or Kirk Grundahl at 
608/217-3713.
    Thank you for your time and consideration of this important issue.

            Sincerely,

                                                       Keith Kinser
                                                     STCA President

                                                      Kirk Grundahl
                                            STCA Executive Director

                                 

                                           Stripmatic Products Inc.
                                              Cleveland, Ohio 44113
                                                     March 21, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
Washington, D.C. 20515

Dear Congressman Crane:

    I am the President of Stripmatic Products Inc. We are a small metal 
stamping company located near downtown Cleveland, Ohio.
    I am writing to you on behalf of the 27 remaining employees of our 
56 year old company. We are concerned about our company's ability to 
remain competitive in a global marketplace where our own government has 
penalized us with exorbitant steel import tariffs.
    The steel tariffs imposed last March that were intended to rescue 
our domestic steel producers have actually served to severely weaken 
the steel industry's customer base. The action has raised steel prices 
by more than 40% on spot buys, created supply shortages on many grades 
of steel and has resulted in more than five times the normal level of 
quality problems with steel than before tariffs.
    Steel has been difficult to source. We paid over 40% higher prices 
on post-tariff steel spot buys and about 20% higher cost for our long 
run blanket orders since the tariffs were active. At times, we couldn't 
even get steel prices quoted from our suppliers because there were such 
availability problems.
    As a result of the steel tariffs we have lost three of our top five 
jobs and are currently looking at importing our own parts from China, 
which will greatly impact the number of jobs we offer and the type of 
skill level that we currently employ.
    Please help give our company a fair chance to compete; help our 
country avoid losing its manufacturing base to Asia by supporting an 
immediate halt to steel import tariffs.

            Sincerely,

                                              William J. Adler, Jr.
                                                          President

                                 

                                               Su-dan Company, Inc.
                                    Rochester Hills, Michigan 48309
                                                     March 21, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Ways and Means
Washington, D.C. 20515

Dear Congressman Crane:

    I am writing on behalf of my metal stamping company The Su-dan 
Company, Inc. We have manufacturing plants located in the States of 
Michigan and South Carolina and employee over two hundred people.
    The steel tariffs imposed by the President last March, which were 
intended to provide the domestic steel industry with protection from 
imports and an opportunity to restructure in order to become 
competitive on a global scale, have unfortunately resulted in higher 
prices, longer delivery times and reduced quality for steel consumers. 
Our steel prices rose by an average of twenty-seven percent as we 
scrambled just to get steel product on our manufacturing floor in a 
timely manor as delivery times increased.
    As a result of the tariffs, my company recently lost a major 
contract where our competition was going to the supply the manufactured 
parts for our cost of raw materials alone. Our foreign competition 
clearly had a material cost advantage. Our profitability is completely 
absorbed by the higher steel prices that we have not been able to pass 
on to our customers. Unless things change our company will continue to 
loose business to foreign competition thanks to the actions of our 
government. I believe the tariffs should be removed before further 
damage is done to my company and the steel-users.
    Thank you for you consideration.

            Sincerely,

                                                        Dennis Keat
                                                          President

                                 

                                     Tella Tool & Manufacturing Co.
                                            Lombard, Illinois 60148
                                                      April 4, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
Washington, DC 20515

Re: L3-26-03 hearing titled ``The Impact of the Section 201 Safeguard 
Action on Certain Steel Products''

Dear Congressman Crane:

    I am writing on behalf of my company, Tella Tool & Mfg. Co. We are 
located in Lombard, Illinois and we employ 100 workers. We need your 
help.
    The steel tariffs imposed by the President last March, which were 
intended to provide the domestic steel industry with protection from 
imports and an opportunity to restructure in order to become 
competitive on a global scale, have unfortunately resulted in 
dramatically higher prices, longer delivery times, shortages, 
allocations and lower quality for steel consumers. In April 2002 Tella 
Tool & Mfg. employed over 160 people and as you can see from above we 
are now down over 40 %. The SOLE purpose for the drastic layoff of 
employees is directly related to Section 201 steel tariffs. Between 
April 2002 and April 2003 we have paid an average cost increase of 50% 
for steel products, this increase is comparable to material costs for 
the same time period one year prior, needles to say our profits are 
gone and so is the tax revenue paid to our local and federal 
government.
    As a result of the tariffs, my company has lost our competitive 
edge in a global marketplace. Our products are used in Automobiles, 
Appliances, Aerospace and Defense products, all industries in which our 
customers REFUSE to allow price increases. Unless things change 
rapidly, my company will lose business to foreign competition that now 
has a built-in cost advantage, thanks to the actions of our own 
government. I believe these tariffs should be removed at the earliest 
possible time to prevent further damage to the steel-using economy.
    Thank you for your consideration.

            Sincerely,

                                                   Louis C. Mautone
                                                     Vice President

                                 

                                     Tottser Tool and Manufacturing
                              Huntingdon Valley, Pennsylvania 19006
                                                     March 22, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
Washington DC 20515

Dear Congressman Crane:

    I am a second generation owner of two manufacturing facilities in 
the Philadelphia area. I employ 65 workers. We now celebrate our 45 
year anniversary and the steel tariffs have put my company in jeopardy 
of surviving. There is no relief from my customers for the additional 
costs which have escalated up to 40 % in some materials. Not only have 
the steel tariffs increased our cost of material drastically, they have 
also created shortages in steel and longer delivery times.
    As a result of the tariffs, my company has lost several contracts 
and we stand to lose several more to foreign competition that now has a 
built in cost advantage, thanks to the actions of our own government. 
These tariffs must be removed to save not only my company but many 
other small and large manufacturing concerns.
    Thank you for your consideration on such an important matter.

            Sincerely,

                                               Linda Reichart Macht
                                                      President/CEO

                                 

                                        Tro Manufacturing Co., Inc.
                                      Franklin Park, Illinois 60131
                                                     March 21, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
Washington, DC 20515

Dear Congressman Crane:

    I am writing on behalf of my company, Tro Manufacturing. We are 
located in Franklin Park, Illinois, just west of Chicago and we are a 
39 year old small family business with 48 Employees. We need your help.
    The steel tariffs imposed by the President last March, which were 
intended to provide the domestic steel industry with protection from 
imports and an opportunity to restructure in order to become 
competitive on a global scale, have unfortunately resulted in 
dramatically higher prices, longer delivery times, shortages, 
allocations and lower quality for steel consumers.
    The above is boiler plate, but it is accurate. Tro is a Tier 2 
Automotive supplier, meaning we sell to the companies who sell to the 
Big 3. Our primary products are Safety critical metal stampings for 
Vacuum Brake booster manufacturers.
    We recently lost a multi million dollar package that we have been 
quoting for the past year. This work is going to an overseas metal 
stamper with a satellite factory in Mexico. We could not come close to 
their prices, our raw material content alone was as much as they were 
quoting for the finished part.
    If this was one job for a new customer it would be one thing, but 
this is a family of parts for a customer we have supplied very 
competitively for over 25 years. There has never been this much price 
pressure, and Raw material costs are a huge component. There is a very 
real possibility that a good portion of our current work will be moved 
offshore as well, which will have the end result of another US 
manufacturing business shutting it's doors.
    Unless things change rapidly, my company will continue to lose 
business to foreign competition that now has a built-in cost advantage, 
thanks to the actions of our own government. I believe these tariffs 
should be removed at the earliest possible time to prevent further 
damage to the steel-using economy.
    Thank you for your consideration.

            Sincerely,

                                                     Scott D. Sanda
                                                    General Manager

                                 

                                                  Tucker Industries
                                       Bensalem, Pennsylvania 19020
                                                      April 3, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
Washington, DC 20515

RE: L3-26-03 Hearing titled ``The Impact of the Section 201 Safeguard 
Action on Certain Steel Products''

    I am writing on behalf of my company, Tucker Industries. We are 
located in Bensalem, PA., and we presently employ sixty-five people. 
We're having a tough financial time this year, mainly because of the 
steel tariffs, we lost four jobs to China, our industry in general is 
in trouble. We were trying to make it back to normal after 9/11, but 
dumping the steel tariff on our industry dramatically set us back. 
Trying to keep our head above water is a constant struggle, what with 
Mexico, Taiwan, etc. And now with the most formidable competitor, which 
is supported by their government--the Chinese. I have nothing against 
the Chinese, I like Chinese food, Yau Ming is a great Chinese 
basketball player for Houston, however, with the steel tariffs and no 
restrictions, they are overwhelming us with their imports.
    I agree the steel companies should be protected, but not on the 
back of the metal stamping companies. If you want to support the U.S. 
steel companies, and I believe they should have some protection to 
preserve our steel base, put it in the fuel tax, let everyone support 
it.
    To preserve a manufacturing base in this country the steel tariffs 
must go.
    We appreciate your help in making a bad situation better.
    Thank you,
                                                     Herbert Tucker

                                 

                               Volkert Precision Technologies, Inc.
                                     Queens Village, New York 11429
                                                     March 21, 2003

Dear Congressman Crane:

    I am writing on behalf of my company, Volkert Precision 
Technologies Inc. We are located in Queens Village, NY a suburb of New 
York City. We employ 46 workers in this depressed manufacturing 
economy. We need your help.
    The steel tariffs imposed by the President last March, which were 
intended to provide the domestic steel industry with protection from 
imports and an opportunity to restructure in order to become more 
competitive on a global scale. They have unfortunately resulted in 
dramatically higher prices, longer delivery times, shortages, 
allocations and lower quality for steel consumers. Quite frankly the 
steel tariffs have resulted in increases across the board for small 
users like Volkert as the tariff has given mills and service centers a 
license to raise prices regardless of their own experience relative to 
cost. As small consumers we do not know the origin of most of the 
material we consume from distributors and rerollers, we are at their 
mercy and naturally they all claim that the tariff issue is increasing 
their cost. It is true I am sure in many cases but an excuse to raise 
prices in many as well.
    My company has lost over $2 million of sales to Chinese competition 
over the last 3 years. China and other foreign competition has an even 
greater competitive advantage as a result of the steel tariffs. I 
understand the motivations of our government but see the tariffs as a 
Band-Aid on a hemorrhaging wound. The US steel industry problem is 
greater than the tariffs can fix and the tariffs are negatively 
affecting so many other manufacturing entities that their overall 
effect is extremely counter productive. I believe these tariffs should 
be removed at the earliest possible time to prevent further damage to 
the steel using economy.
    Thank you for your consideration.

            Sincerely,

                                                         K. J. Heim

                                 

                                                 Walker Corporation
                                          Ontario, California 91761
                                                     March 24, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
Washington, DC 20515

Dear Congressman Crane:

    I am writing on behalf of my company, Walker Corporation. We are 
located in Ontario, California, and we employ 140 workers.
    The steel tariffs imposed by the president last March, which were 
intended to provide the domestic steel industry with protection from 
imports and an opportunity to restructure in order to become 
competitive on a global scale, have unfortunately resulted in 
dramatically higher prices, longer delivery times, shortage allocations 
and lower quality for steel consumers. My Company is in danger if we 
cannot get steel. Our steel suppliers are demanding 20-40% increase. 
Our customers will not pay the increased prices we are being charged 
for steel. Some of our suppliers are indicating they cannot guarantee 
the amount of steel we need to make product requirements.
    As a result of the tariffs, my company has lost contracts to 
foreign suppliers, has been pressured to move overseas, and had to 
layoff several employees. Unless things change rapidly, my company will 
continue to lose business to foreign competition that now has a built-
in cost advantage, thanks to the actions of our government. I believe 
these tariffs should be removed at the earliest possible time to 
prevent further damage to the steel-using economy.
    Thank you for your consideration.

            Sincerely,

                                                Michael R. Bermudez
                                             Director of Operations

                                                        Audrey King
                                            Human Resources Manager

                                 

                                          Winzeler Stamping Company
                                             Montpelier, Ohio 43543
                                                     March 25, 2003

The Honorable Phil Crane
Chairman, Trade Subcommittee
House Committee on Ways and Means
Washington, DC 20515

Dear Congressman Crane:

    I am writing on behalf of my company, Winzeler Stamping Company. We 
are located in Montpelier, Ohio and we employ 180 workers. We need your 
help.
    The steel tariffs imposed by the President last March, which were 
intended to provide the domestic steel industry with protection from 
imports and an opportunity to re-structure in order to become 
competitive on a global scale, have unfortunately resulted in 
dramatically higher prices, longer delivery times, shortages, 
allocations and lower quality for steel consumers.
    As a result of the tariffs, my company has had to resort to some 
layoffs and cutting of hours, etc. Unless things change rapidly, my 
company will lose business and continue to lose business to foreign 
competition that now has a built-in cost advantage, thanks to the 
actions of our own government. I believe these tariffs should be 
removed at the earliest possible time to prevent further damage to the 
steel-using economy.
    Thank you for your consideration.

            Sincerely,

                                                Michael D. Winzeler
                                                      President/CEO

                                 

                                      Wood Truss Council of America
                                           Madison, Wisconsin 53719
                                                     April 10, 2003

The Honorable Philip M. Crane
Chairman-Subcommittee on Trade
Committee on Ways and Means
United States House of Representatives
1102 Longworth House Office Building
Washington, D.C. 20515

RE: Steel Tariff Issue

Dear Mr. Chairman:

    Manufacturers of structural building components are conducting 
business within all communities of the U.S., using the most efficient, 
economical resources for construction available. This industry includes 
the Wood Truss Council of America (WTCA) and the Structural Component 
Distributors Association (SCDA).
    WTCA is a national trade organization representing the interests of 
wood structural component manufacturers across the U.S. SCDA represents 
the interests of companies that distribute structural components such 
as engineered wood products. There are more than 2,200 structural 
building component manufacturing locations in the U.S. Our industry 
manufactures products worth more than $9 billion annually in sales. 
These products include trusses and wall panels that are engineered 
structural components assembled from wood members and metal plates, 
including all of the hardware required in the field for installation. 
We purchase more than 350 million dollars worth of light gauge, 
galvanized steel each year.
    The current 30% steel tariff that was imposed in May of 2003 has 
resulted in many adverse effects, shifting our industry's cost-
structure and making other markets more competitive. It has reduced 
jobs, an estimated 200,000 American jobs industry wide, representing 
approximately $4 billion in lost wages. More American workers lost 
their jobs in 2002 due to higher steel prices than the total number 
employed by the U.S. Steel industry itself, according to Trade 
Partnership Worldwide, LLC.
    WTCA and SCDA support free trade and are opposed to artificial 
restrictions on steel imports. These organizations support all actions 
that will result in systemic changes to the manner in which the steel 
market functions so that steel is priced in an open and competitive 
way, without governmentally imposed restrictions.
    It is alarming that our government is still considering drastic 
protectionist measures. These poorly conceived and highly political 
trade and economic policies harm housing affordability and affect 
pricing of steel products for millions of consumers and workers in 
steel-dependent industries, at a time when the economy is struggling to 
regain its footing. Tariffs and quotas on steel imports serve only to 
drive up the cost of steel for our industry's metal connector plate and 
hanger suppliers. In turn, the increase in cost ultimately is passed 
down to the structural building component manufacturers, who must pass 
the increased cost to their customer and eventually to the ultimate 
buyer. This action threatens to delay or impede the nation's economic 
recovery.
    It is essential to address and alleviate the unintended 
consequences of this tariff on steel that results in another 
significant disadvantage for the U.S. structural building component 
industry. This comes in addition to the current softwood lumber tariff, 
and exacerbating the problem of U.S. component manufacturer 
competitiveness as a result of the current and ongoing softwood lumber 
dispute. We are the only industry that we are aware of, where both raw 
materials that are used to produce our products are subject to a 
tariff.
    If you have any questions or need further information, feel free to 
contact either Scott Arquilla at 708/774-9500 or Kirk Grundahl at 608/
217-3713.
    Thank you for your time and consideration of this important issue.

            Sincerely,

                                                     Scott Arquilla
                                                     WTCA President

                                                      Kirk Grundahl
                                            WTCA Executive Director

                                                     Ryan J. Dexter
                                            SCDA Executive Director

                                 
                         Statement of Zapp USA
    These comments are submitted on behalf of Stahlwerk Ergste Westig 
GmbH, d/b/a Zapp USA (``Zapp''), for the record of the hearing on the 
Impact of the Section 201 Safeguard Action on Certain Steel Products. 
Zapp opposes the steel safeguard action.
    Zapp is a German producer and exporter of a variety of high-grade 
precision stainless steel and cold-rolled flat products such as 
stainless steel round bar and profile bar used for medical implant 
applications, stainless steel bar used for automotive applications such 
as solenoids, and cold-rolled carbon steel strip used for cutting 
blades. Zapp is also a U.S. consumer of high-grade stainless steel and 
cold-rolled flat products, such as stainless steel wire rod that is 
used in automotive and aerospace applications. Zapp has production 
facilities in the United States in Massachusetts and South Carolina.
    The steel tariffs imposed under Section 201 have had a negative 
impact on Zapp's domestic operations that use imported steel, as well 
as on the operations of Zapp's domestic customers for the imported 
steel Zapp produces and supplies, by increasing the cost of these 
products. Moreover, the tariffs are having a negative effect on the 
U.S. economy generally by unnecessarily imposing additional costs on 
the ultimate U.S. consumers of these products. Zapp has sought and 
obtained exclusions from the tariffs for some of its products. However, 
some are still subject to the additional tariffs. Zapp does not believe 
that there is any justification for maintaining tariffs on these 
remaining products. The tariffs will not assist the domestic industry 
to adjust to import competition because they neither encourage 
purchases from the domestic supplier nor discourage imports of 
allegedly competing products.
    For example, Zapp produces stainless steel medical bar and profiles 
for export to the United States for implant applications, such as bone 
screws and plates. Zapp's domestic competition for the stainless steel 
medical bar and profile products is Carpenter Technology Corporation. 
Zapp's participation in the U.S. market has grown in recent years due 
to the dissatisfaction of its customer base with Carpenter as a 
supplier, including as a result of Carpenter's mill minimum production 
quantities, long lead times, unwillingness to keep customer specific 
inventory and overall poor service. Stainless steel profiles have 
recently received an exclusion from the tariffs, subject to a quantity 
cap, but medical implant bar and profile bar in excess of the cap are 
still subject to the additional duty. Carpenter does not currently 
produce profiles at all, and its production of medical bar is subject 
to the service and availability limitations described above. Thus, when 
customers require this critical product for the medical needs of U.S. 
patients, they must look to foreign sources, such as Zapp, for supply. 
Carpenter chooses not to supply this material as needed by its 
customers, even with the additional tariffs, so imposing these measures 
on Zapp and its U.S. customers does not serve the goals of the 
safeguard measures. The consumers will seek out Zapp regardless, with 
the additional cost being absorbed by the ultimate customers, that is, 
the implant patients, or by their insurance companies.
    In the case of the stainless bar Zapp provides to the automotive 
industry for use in the production of solenoids, Zapp's customer had 
problems with the quality of the product Carpenter supplied, causing 
the temporary shutdown of the customer's entire production operation. 
The customer sought out Zapp as an emergency supplier and continued 
using Zapp as a secondary source even after Carpenter resolved its 
quality issues and was restored as the principal supplier. However, 
Zapp was unable to obtain an exclusion from the tariffs for that part 
of the customer's needs that it will supply even after the customer 
made clear that it would not purchase its entire supply from Carpenter. 
The added costs of the tariffs in that case will simply get passed 
along to the ultimate consumer.
    Zapp is also a purchaser of high-grade precision stainless steel 
wire rod used for automotive and superconductor applications. The 
chemistry of the wire rod needed by Zapp for its U.S. production 
imparts specific properties on the finished products. Zapp has approved 
a limited number of sources for its wire rod needs because these 
sources have developed processes that produce a consistent product, 
which allows ZAPP to maximize its production capabilities and provide 
customers with a specialized product that outperforms previous 
materials. Zapp will not switch to a domestic supplier that cannot meet 
these product specifications simply because the imported materials now 
cost more. Thus, the tariffs in this case also will not assist the 
domestic industry to adjust to the import competition. They will only 
increase the cost to the ultimate purchaser of the products Zapp 
produces in the United States.
    Domestic opposition to the exclusion requests that Zapp and its 
suppliers and customers submitted to the U.S. Trade Representative and 
the Department of Commerce should not have been sufficient to support 
denial of those requests if the domestic industry would not or could 
not supply the needed products. In each case in which Zapp was 
involved, there were legitimate reasons for purchasing from the foreign 
supplier, including lack of domestic supply, and service or quality 
problems with the domestic supplier. In these cases, the imposition of 
tariffs will not serve to shift sales to the domestic industry nor 
curtail imports. The tariffs will simply result in added costs, which 
will be passed on to the ultimate purchasers to their detriment and 
that of the U.S. economy as a whole. If the tariffs do not, in fact, 
provide import relief to the domestic industry, they should be 
eliminated.
    Zapp appreciates the efforts of the House Committee on Ways and 
Means Subcommittee on Trade to examine the impact of the President's 
steel tariffs on steel consuming industries and the U.S. economy as a 
whole. Zapp believes that, in most cases, the tariffs are serving no 
purpose and urges the Subcommittee to take action, where appropriate, 
to seek removal of the safeguards. Zapp would be pleased to provide the 
Subcommittee with any additional information or explanation needed for 
its investigation.

                                   - 
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