[Congressional Record Volume 145, Number 88 (Monday, June 21, 1999)]
[Senate]
[Pages S7322-S7323]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   WHY I OPPOSE THE STEEL QUOTA BILL

  Mr. GRASSLEY. Mr. President, I rise today in strong opposition to 
both cloture on the steel quota bill, and to the bill itself.
  I oppose this dangerous and misguided legislation for three reasons.
  First, the steel quota bill is really a phony bill of goods. It does 
not do what it promises. It will not restore the vitality of troubled 
elements of the U.S. steel industry. That's because foreign imports 
have little to do with the problems facing the American steel industry.
  Why? Because the American steel industry is much more efficient than 
at almost any time in our past history. Fewer steel workers are 
producing more steel today than they were 10 years ago. In 1987, when 
the domestic industry produced 77 million short tons, 163,000 workers 
were employed in the steel industry. In 1997, 10 years later, when the 
domestic industry produced 106 million tons, employment was 112,000 
workers. During that 10 year span, our steel mills made 29 million more 
tons with 51,000 fewer workers.
  Using the logic behind this quota legislation, the more efficient our 
steel industry becomes, the more it requires protection from foreign 
imports. But in fact, the opposite is true. The more protection an 
industry gets, the more inefficient it becomes. That is not good for 
our economy, or for American consumers. During the next few years, we 
may see steel employment fall even further, perhaps by as much of 5,000 
workers per year, as inefficient integrated mills are closed. New, more 
efficient minimills will take up any slack. All of this will happen 
whether or not steel quotas are imposed.
  Who will really benefit from the quota bill?
  According to the Institute For International Economics, one of this 
country's most distinguished and highly regarded think tanks, few steel 
workers will benefit. But steel importers and profitable, efficient 
steel makers will win big.
  The Institute's report states:

       The annual costs to American households for each steel job 
     saved would exceed $800,000. But steel workers would receive 
     less than 20 percent of this huge sum; lucky firms would 
     collect more than 80 percent of the jackpot. . . . Quotas 
     will enrich lucky steel importers (often those with the best 
     political connections) and efficient steel producers (they 
     are doing well enough already--11 of the 13 largest mills 
     earned more than $1 billion in 1998). . . .

  The United States Senate should not help enrich a few lucky 
importers. It should not give windfalls to companies earning a billion 
dollars a year.
  I have the deepest concern for any American who loses his or her job 
for any reason. It is a terrible, wrenching thing to lose a job. It 
affects families as well as communities. We must help where we can, 
through programs like trade adjustment assistance, that help displaced 
workers through job retraining and placement assistance. But the one 
thing we must not do is react in haste, in a way that will kill far 
more jobs than it will ever save, and in a way that will reward healthy 
companies with windfall profits.
  The second reason I oppose the steel quota bill is that it flat-out 
violates our WTO international trade obligations.
  There are some who claim this is not the case. But, I want to read 
the exact words of Article 11 of the GATT. This rule is part of the WTO 
rules that we and 133 other nations are committed to observe:

       No prohibitions or restrictions other than duties, taxes, 
     or other charges, whether made effective through quotas, 
     import or export licenses or other measures, shall be 
     instituted or maintained by any contracting party on the 
     importation of any product of the territory of any other 
     contracting party or on the exportation or sale for export of 
     any product destined for the territory of any other 
     contracting party.

  We helped write that law. We demand that our trading partners observe 
it. We defend it when other countries try to keep our goods out of 
their markets. And most of the time, we win these cases.
  Now, I'm not a lawyer. Maybe that's my problem. Perhaps I'm not 
clever enough to figure out where Article 11 says that quotas are OK. 
It seems pretty clear to me. It says that you can't have restrictions 
other than duties, taxes, or other charges. But Article 11 goes even 
farther than banning quotas. It says that you can't have any type of 
government measure that leads to the imposition of a quota.
  One important panel decision, the GATT panel on Semiconductors, 
affirmed this broad interpretation in 1988. It said that Article 11, 
unlike other GATT provisions, does not refer solely to laws or 
regulations. It has an even broader application, and refers to all 
``measures'' that restrict exports.
  There are some exceptions to Article 11's broad ban on any measures 
restricting exports. But the most relevant of these exceptions, the so-
called Safeguard exception, does not apply because there is no proof 
that our domestic steel industry has suffered serious injury from 
import competition. Moreover, safeguard actions usually involve 
imposing increased customs duties, rather than quotas. Yes, there has 
been illegal dumping of steel by some countries into the United States. 
But the surge of that dumped steel has largely been stopped. And even 
during the highest point last year of the so-called

[[Page S7323]]

steel crisis, 11 of the 13 largest steel mills were profitable, earning 
collective profits of more than $1 billion. So much for serious injury.
  The final reason I oppose the quote bill--and the most important 
reason--is that it will invite retaliation and perhaps spark a trade 
war that no one would win, and in which everyone would lose.
  We are approaching the 69th anniversary of the Hawley-Smoot Tariff 
Act of 1930. This legislation, which was enacted in July 1930, was one 
of the major mistakes of the Hoover Administration and the Seventy-
first Congress.
  The Hawley-Smoot Tariff Act also started out with good intentions. 
Its aim was to help the American farmer with a limited, upward revision 
of tariffs on foreign produce. But it had the opposite result. It 
strangled foreign trade. It deepened and widened the severity of the 
Depression. Other countries faced with a deficit of exports to pay for 
their imports responded by applying quotas and embargoes on American 
goods.
  I went back to the historical record to see what happened to United 
States agricultural exports when other countries stopped buying our 
agricultural products after we enacted that tariff. I was shocked by 
the depth and the severity of the retaliation.
  In 1930, the United States exported just over $1 billion worth of 
agricultural goods. By 1932, that amount had been cut almost in half, 
to $589 million. Barley exports dropped by half. So did exports of 
soybean oil. Pork exports fell 15 percent. Almost every American export 
sector was hit by foreign retaliation, but particularly agriculture. As 
United States agricultural exports fell in the face of foreign 
retaliation, farm prices fell sharply, weakening the solvency of many 
rural banks. Their weakened condition undermined depositor confidence, 
leading to depositor runs, bank failures, and ultimately, a contraction 
in the money supply.
  Farm prices for many agricultural products are already at rock-bottom 
levels. Can we in good conscience put so much of our economy at risk?
  In 1998 the United States exported agricultural products worth more 
than $53 billion dollars, accounting for one-third of America's total 
agricultural production, and nearly one million jobs. Agriculture is 
perhaps the most vulnerable sector of our economy to foreign 
retaliation, and our trading partners know it.
  If you think the Depression is ancient history, and that retaliation 
against agriculture is a thing of the past, just look at our recent 
history.
  In 1995, when the United States threatened to impose 100% tariffs on 
imports of Japanese luxury cars, Japan appealed the case to the WTO and 
stated that it might retaliate imposing duties on U.S. exports of 
agriculture products.
  In 1983, China temporarily stopped buying U.S. wheat in retaliation 
for the Reagan Administration's unilateral imposition of quotas on its 
textile and apparel exports after negotiations to renew a bilateral 
agreement under the Multi-Fiber Arrangement broke down.
  In 1985, the European Community raised tariffs on U.S. lemons and 
walnuts in response to U.S. retaliation against subsidized EC pasta 
exports.
  Even though we have made vast progress in managing our trade 
relationships since the passage of the Hawley-Smoot Tariff Act, in many 
ways the world is still just one trade war away from a global economic 
crisis.
  In 1930, 1,000 of the nation's leading economists signed a letter 
urging the President and the Congress to not enact the infamous 
legislation we now know as the Smoot-Hawley Tariff. They were ignored. 
Politics carried the day. American paid a steep price. Let us not 
repeat the mistakes of the Seventy-first Congress. The quota bill is 
bad trade policy. It is bad for agriculture. It is bad for America.

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