[Congressional Record Volume 148, Number 118 (Wednesday, September 18, 2002)]
[House]
[Pages H6357-H6359]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        TARIFF ON STEEL IMPORTS

  The SPEAKER pro tempore (Mr. Putnam). Under the Speaker's announced 
policy of January 3, 2001, the gentleman from Michigan (Mr. Smith) is 
recognized for 60 minutes as the designee of the majority leader.
  Mr. SMITH of Michigan. Mr. Speaker, I am going to make some comments 
on the tariff on steel imports. Several companies in my congressional 
district, the Seventh Congressional District of Michigan, which is 
roughly the bottom center of Michigan, have come to me as steel users 
and said that they have got a huge problem. The steel suppliers are 
saying, We don't care about the contract. We're going to increase the 
cost of the steel and you have to pay us double what the contract was. 
The company says, Well, we can go to court. The steel suppliers say, 
Well, you can do that. We'll probably fight it in court for 3 years, 
but tomorrow we're not going to deliver the steel that you need to meet 
your contracts.
  What is the solution? President Bush approved the new tariffs on 
steel imports, I think, to help give the steel industry and our 
American steelworkers really a chance to make changes so they might 
compete in the long term. I suspect the President, who as a young man 
did the hard physical work in the oil fields, wanted to give a chance 
to save some of the jobs of the people that do the hard physical work 
in the steel industry. However, the high tariff restrictions on steel 
imports have turned out to be a mistake with a potential of losing more 
jobs than they save.
  The price of steel in the United States has risen since last March by 
30 to 50 percent. In addition to the large price increases, there has 
been a reduction in the amount of steel available because of the 
reduced imports coming in. This has made it impossible for many steel-
consuming industries to find the steel that they need on the one hand 
and they are obligated to pay this new higher price that means that in 
many cases they are actually losing money filling their particular 
contracts. Domestic steel producers have in many cases reneged on the 
long-term contracts now that the steel prices have leaped, with the 
result that the consuming industries have been forced to pay that 
higher price than the agreed-on prices or have been forced into the 
volatile spot market for steel.
  The President's action, I think, turns against what he said on free 
trade and on taxes. First, by definition, free trade implies that it is 
unencumbered by demands of third parties. When government imposes 
tariffs on products, it reduces the ease with which they come across 
borders, either way, back and forth. Second, tariffs are just taxes by 
another name. Steel tariffs raise the cost of buying products that 
contain steel, cars, refrigerators, for instance, just as raising the 
sales tax on those products would. So it means not only are they in 
trouble, but once they produce the goods to the extent that they are 
able to pass that increased price on, American consumers pay the cost 
of that higher tax or tariff.

                              {time}  1800

  The new Bush tariff is expected to hike the cost of steel products by 
6 to 8 percent in the first 12 months, and in our State of Michigan, 
Michigan citizens will be hit hardest.
  Here is why: One of the most basic propositions of economics is the 
inverse relationship between price and quantity demanded. When the 
price of some goods, steel in this case, rises, less of it is going to 
be demanded, and the result is fewer sales of products containing steel 
and fewer jobs are going to be available for those industries that use 
that steel, the steel user industry that are ultimately making those 
finished goods with steel.
  This harms the Michigan workers and it harms the American workers in 
a number of ways. First, some American producers lose out because they 
are now competing with foreign companies that have access to cheaper 
steel. So I have got some companies in my district that say, well, we 
are considering moving to Mexico, Canada or someplace else, because 
they are paying a much lower price for steel. They are paying the world 
market price, where here in the United States, because we restrict the 
availability of steel and held out, the competition, the foreign 
competition, if you will, are paying a much higher price. Their 
products then become relatively more expensive because the steel in 
them costs our American producers more.
  Second, many American firms have simply had trouble securing 
sufficient supplies of steel in quantities to keep the factory 
operating. I have had layoffs in my district because plants have closed 
for the lack of steel.
  The third point I would make: It gives American firms, I think, a 
powerful incentive to move production out of the United States to 
foreign plants where steel is available at the lower world market 
price. This is so they can compete and can survive as a company. So it 
is hard to blame them, if that is their only recourse to survive.
  So that is what we are being threatened with in Michigan, some of 
these companies moving out of the State, and that is what is happening 
in many other areas of the United States where steel users are faced 
with a problem.
  A couple of economists, Joseph Francois and Laura Baughman, working 
on behalf of the Consuming Industries Trade Action Coalition, have 
estimated the impact of the Bush tariffs on the American economy in 
terms of their economic benefits and costs. For instance, they found 
that every State in the Union will suffer net job losses as a result of 
the tariffs. Ironically, the biggest job losses will occur in the Steel 
Belt, states such as Pennsylvania, such as Michigan. For every steel 
job saved as a result of the tariff, eight jobs will be lost in all 
sectors of the economy.
  Another point: The steel-producing industry would save between 4,400 
and 4,800 jobs at a cost of about $439,500 to $451,000 per steel job 
saved. Higher prices for steel products and related inefficiencies 
would decrease U.S. national income someplace around $500 million, at a 
time when policymakers are talking about ways to improve the U.S. 
economy.
  Again, back in my State of Michigan, Michigan will suffer from the 
negative consequences of tariffs, and these economists found that 
Michigan will lose more jobs in steel-related industries than every 
State in the Union, save California. Under the most conservative 
scenario, Mr. Speaker, Michigan will lose almost five jobs in steel-
consuming industries for every one job that is saved in Michigan steel-
producing industries.
  Here is the point: There are 57 workers employed in the steel-using 
companies, 57 workers employed in the steel-using companies, for every 
one worker that is employed in the steel-making industry. Steel-using 
industries account for more than 13 percent of gross domestic product. 
Steel-using industries account for more than 13 percent of GDP, where 
the steel industry accounts for only about one-half of 1 percent of 
GDP. So the result, thus, the steel tariff has threatened many more 
jobs than it has protected.

[[Page H6358]]

  The Bush administration, I think, has recognized some of the distress 
that the steel tariffs are causing, so it has issued rulings that 
exclude 727 products from the tariff. Of course, this has set off a 
frenzy of lobbying as some of the steel-using companies angle for 
exemptions. That is what is happening now. This causes distortions not 
only in the cost of foreign and domestic producers, but also in 
Michigan and the United States between competing domestic producers as 
well.
  The timing of the decision to impose the tariff is also a problem. 
Steel imports into the United States have been declining. Steel 
imports, after reaching a high of 4 million tons in August of 1998, had 
declined by 36 percent to 2.6 million tons in November of 2001. 
Moreover, the market share of foreign steel producers has fallen from 
28 percent in 1998 to 21 percent in 2001. This made the imposition of 
the tariff less pressing, and maybe we could have gone along without 
it.
  The challenge has got to be on the steel industry, and I think on 
government as well, as we look at how can we help this industry without 
hurting so many other workers and so many other industries that are 
steel users.
  It has been argued that the real threat to most of the domestic steel 
industry is not foreign steel at all. Steel is manufactured in the 
United States at mini-mills and integrated steel mills. It is the 
integrated mills that are having the greatest difficulty in making a 
profit right now.
  Mini-mills are much more efficient at producing steel than the 
integrated steel mill and have a 25 percent cost advantage over 
producing steel than the integrated mills do. As a result of their cost 
advantage, mini-mills have increased their market share from 10 percent 
in the 1970s to about 50 percent today. Over the same time period, the 
share of imports in the United States market has increased by only 10 
percent. Therefore, the real threat to the integrated steel mills are 
not imports, but our own American mini-mills.
  Finally, the steel tariff encourages retaliation from our trading 
partners. If you look at the European Commission, it is now threatening 
retaliatory tariffs of 100 percent on a 22-page list of goods ranging 
from rice to grapefruit to shoes to brassieres to nuts to bib overalls 
to billiard tables to ballpoint pens, and the list goes on. So 
retaliation could develop into the kind of price war that is going to 
hurt the United States a great deal.
  The Japanese, for example, are also drawing up their steel payback 
list. Steel-exporting Russia, looking for ways to retaliate, has said 
we are going to fence out the U.S. chickens that are coming into 
Russia. Even though Russia does not produce chickens, they need the 
chickens, but they are looking for ways to retaliate. Hopefully that 
issue is going to be resolved.
  Mr. Speaker, we can ask if the tariff has done that much for the 
steel industry. I would mention that I was going to mention that 
Florida is a significant steel-using state, but I see our Speaker has 
changed. But I will mention that steel-using industries are all over 
the United States.
  Over the past 30 years, the Federal Government has been implementing 
policies to keep the steel industry in business, despite its 
inefficiencies. These policies have included voluntary quotas and 
antidumping, and that is the thing that has got to continue. If some 
other country is dumping below the cost of production, then we are 
going to stop that kind of dumping. So that is going to take place and 
should take place, regardless of whether we lift the current 
restrictions on imports.
  The countervailing duty measures are another. Some of the companies 
have moved up and are now competitive, but much of the industry, 
instead of resulting in a stronger manufacturing efficiency, these 
policies are allowing companies to continue with production methods, 
with labor contracts, that keep it perpetually at the risk of 
dissolution and keep it out of reach of real competition with other 
mills in the United States and the international steel producers.
  Standard and Poor, for example, was not optimistic when the President 
announced the tariff restrictions on steel imports, and they responded 
to the tariffs by refusing to raise the industry's credit rating.
  The steel tariff has turned out to be a mistake that is harming many 
industries, both in my State of Michigan and across the country. It is 
having the result of losing American jobs.
  We need to repeal this kind of tariff restriction to allow our steel-
using companies to again be competitive and keep those companies in the 
United States. We need to start reviewing the kind of overzealous 
regulations and overzealous taxation that we put on the steel industry. 
So let us look at the tax imposition that we put on our steel 
manufacturing industries compared to what other countries are doing 
with their steel manufacturing industries.
  We need to assist, I think, in research and technology. I am chair of 
the Subcommittee on Research in the Committee on Science. So we need to 
continue making sure that our research and our technology is available, 
and we can look at ways of expanding the technologies that are 
applicable to that industry to help allow these steel-producing 
industries to be more competitive in the international market. There 
are a lot of things we can do without challenging and disrupting the 
many workers in America that are working in the steel-using industry.
  Mr. Speaker, I would like to also make a couple comments on our 
spending and our budget.
  Right now we have got a challenge of where do we go on spending. We 
are in a war. We are going to be required to make sure that, to the 
greatest extent possible, we assure the safety of American citizens. We 
are probably going to waste a lot of effort, a lot of talent, a lot of 
money, and, in some cases, go further than we really would have needed 
to go in terms of protecting ourselves against terrorists. But the 
challenge, of course, for Members of Congress and for the President is 
making sure that we go far enough in our protections to have the 
greatest assurance possible.
  As we spend a tremendous amount of money in our war against terror, 
and that is approaching $90 billion now, I think we have got to remind 
ourselves that we are in a war and that some of the other traditional 
spending, some of the maybe less important spending, needs to be held 
only to a modest increase.
  Nobody is suggesting a cut in how we spend money, but we are 
suggesting that we hold the line and we hold tight to the President's 
budget suggestions so that discretionary spending is not going to 
continue to spiral, if you will, out of control.
  The 10-year spending history on discretionary spending has gone from 
a little over $500 billion to approaching someplace between $758 
billion, is what the President has suggested for discretionary 
spending, compared to the Senate is now looking at $770 billion for 
discretionary spending.
  We hear some people suggest, ``Well, boy, you should not have had 
that tax cut. The tax cut is really what has caused all this problem in 
terms of the budget so that we do not have all this extra money.'' Let 
me just point out that the tax cut represents only 13 percent of the 
problem of overspending.

                              {time}  1815

  We are looking at overspending this year that is going to approach 
$150 billion. Not good. We recently increased the debt limit; and I 
think when we do that, we need to make sure that someplace down the 
road we are going to be able to say to our kids and our grandkids that 
we are going to start paying this debt down again.
  We have paid about $500 billion down on the debt held by the public 
over the last half a dozen years. I mean, that is good news. That was 
good. We said we were not going to spend the surplus coming in from 
Social Security; but now, with the war on terror, we started spending 
the surplus on Social Security again, and we have increased the 
allowable debt limit of this country. And it should be just somehow a 
strong message from every fiscally responsible individual in Congress 
and around the United States to say, hey, look, we are in a war, it is 
time that we held the line on increased spending in other areas.
  Let me give my colleagues some quick examples. We have 13 
appropriations bills that handle the discretionary spending. The Labor-
HHS-Education bill, under the House plan, spending would grow 60.5 
percent since 1998. That is almost between five and

[[Page H6359]]

six times the inflation rate. So with the problem of a tremendously 
progressive tax system, we are in a situation where, according to the 
Heritage Foundation, over 50 percent of the benefits from Federal 
spending go to individuals who collectively pay less than 1 percent of 
the income tax. So the old safeguard, if you are going to have more 
government spending, somebody has to pay for it, we have to now in our 
collective efforts divide the wealth and try to make sure that there is 
some good distribution, to make sure that people are not going to go 
hungry and have a home, and our welfare systems and our food systems 
and, at the same time, reducing the amount of tax that low-income 
people pay. We have redistributed wealth to the extent where most, the 
top 10 percent of taxpayers, pay approximately 90 percent of the total 
income taxes in this country.
  As we look at the challenges of where we go on spending, there are a 
lot of people in everybody's district that say, well, we would like you 
to spend a little more on this program or that program; and quite 
often, these individuals, and that represents maybe 50 percent of the 
constituency of many of us in Congress, are looking at a situation 
where it does not cost them very much in their income taxes, so their 
willingness to call for increased spending is at little or no cost to 
themselves.
  We have had a system from the founders of our country, and it was 
interesting that we went up to New York, the first time this Congress 
left session in Washington, D.C. in over 200 years and went to the 
Federal building up in New York where George Washington was first sworn 
in and where, in 1789, the first Congress presided and we passed the 
Bill of Rights. We have had a country that sort of has the motivation, 
the incentive that those that learn, that try, that save and invest end 
up better off than those that do not. I mean, that has been our 
motivation. As we keep trying to divide the wealth, where we lose that 
kind of motivation, we are going to lose some of the incentives that 
have caused such a great success, I think, in the American economy over 
the 226-odd years that we have been in existence.
  Let me briefly look at some of the other increases in spending, and 
these dramatic increases in spending have even been during a Republican 
majority for many of these years. The Interior spending, we are now 
looking at spending that is going to be 40 percent higher than 1998, or 
about a 7.1 percent average. So that is maybe 2\1/2\ times the rate of 
inflation that we have grown in the Interior spending. The Treasury and 
Postal spending has gone up 41 percent since 1998, an average of 7.2 
percent per year increase in spending, much higher than inflation.
  I have another chart here, this is a so-called spending history; and 
discretionary spending growth will average at least 7.5 percent each 
year since we balanced the budget in 1998. So you see, since 1998 we 
have just really taken off. What we did was we balanced the budget, we 
said it is important to balance the budget, and then we have sort of 
extra money, so everybody came up with ideas of how we could spend that 
extra money.
  What it means is that it is going to be more difficult to face the 
challenges of a good Medicare program, a good Medicaid program, a 
solvent Social Security plan. I think it should be another incentive to 
this body and the body on the other side and the President to hold the 
line on less important spending as we face the war on terrorism.
  Veterans Affairs, HUD, International, it has grown 39 percent since 
1998, an 8 percent increase per year. Commerce, Justice and State also 
has grown with an average of 29 percent, 29 percent since 1998. 
Defense, not including our extra money that we have spent on terror, 
has gone up 46 percent, almost four times the rate of inflation. 
Transportation, it has increased by 52 percent since 1998, 9 percent 
average per year increase. Agriculture has gone up 21 percent since 
1998.
  My point is that we are spending a lot of money, and are we doing a 
proper job of prioritizing that spending? In some areas I think we are, 
because for example, we have had a 132 percent increase in education 
spending since 1996. In Health and Human Services, almost a 100 percent 
increase; in December, a 48 percent increase that does not include the 
extra money since last September 11, a year ago.
  In conclusion, Mr. Speaker, I call on my colleagues, I call on the 
President to hold the line on spending and resist some of the pressures 
coming in from all of these special interest lobbyists that are giving 
millions of dollars toward campaigns for this election on November 5, 
saying we want more money for our constituency, for our particular 
clients. And so often, a Member of Congress, when they come up with 
more spending and new programs, they end up back home cutting a ribbon 
on some project they have taken back to their district, they get on 
television and in the newspaper. So the tendency has been for a Member 
of Congress to increase their chances of being reelected if they spend 
more money and take more pork barrel projects home to their particular 
district.
  So, Mr. Speaker, it is going to take the President, number one, and 
it is going to take the American people, number two, to say, look, now 
is the time to hold the line on spending.

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