[Congressional Record Volume 149, Number 105 (Wednesday, July 16, 2003)]
[Senate]
[Pages S9484-S9486]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STEEL TARIFFS
Mr. ALEXANDER. Mr. President, President Bush is working very hard to
get this economy moving again. I have strongly supported his jobs
growth and tax cut plans. I believe his hard work and those plans are
paying off. But in one case I want to respectfully suggest that the
President consider making a midcourse correction. That case is the sad
story of steel tariffs. It is a story of an honest effort by our
President to save jobs that has backfired.
The backfire could not be coming at a worse time. As our economy
recovers--and I believe that it is--the last thing our country needs is
a wave of plant closings in the auto and auto parts industry. But that
is exactly what will happen if the steel tariffs continue. The tariffs
have become a job killer in the United States and a jobs growth program
for Korea, Japan, Germany, and other countries that produce quality
auto parts.
In March 2002, the Bush administration imposed tariffs of up to 30
percent on 10 different categories of steel imported from Europe, Asia,
and South America. The tariffs may have saved a few steel-producing
jobs for the time being. But since their institution in March 2002, the
steel tariffs have already destroyed nearly as many jobs in the steel-
consuming companies of America as exist in the entire domestic steel-
producing industry.
Some auto parts plants in my State of Tennessee are already closing
because of the higher cost of steel imposed by the tariffs. On top of
that, last Friday the World Trade Organization ruled that these U.S.
Steel tariffs are illegal and in violation of global trade rules. The
European Union has already announced that it intends, therefore, to
impose $2.2 billion in retaliatory sanctions on American imports sold
in Europe, ranging from footwear to fruits and vegetables. And that
would destroy still another batch of American jobs.
If these steel tariffs continue through the years 2004 and 2005, as
scheduled, there will be a wave of plant closings across Tennessee and
other steel-consuming States, especially among auto parts suppliers.
Ironically, many of the steel-producing jobs themselves will also
disappear for two reasons: One, when the tariffs eventually end, the
protected and inefficient steel mills will find they are unable to
compete in the world marketplace. And second, the demand in this
country for this kind of steel will have dropped because automakers and
auto parts suppliers will be buying parts overseas instead of buying
U.S. steel to make parts in the U.S.A.
Fortunately, the President has an opportunity in September to review
the decision that he made in March 2002 to impose steel tariffs. I
respectfully urge him to chalk this one up to experience, to
acknowledge that this exercise proves once again that protective
tariffs are self-defeating and usually boomerang and to finally end the
tariffs. Ending the tariffs would allow America's steel-consuming auto
parts manufacturers and other American manufacturers a fair chance to
make their products in the U.S.A. instead of overseas.
I began to first notice the effects of the new tariffs during my
campaign for the Senate during 2002. Tennessee is home to at least 900
auto parts suppliers employing almost 100,000 people. Let me describe
just how important these jobs are to us Tennesseans.
Before the auto industry came to Tennessee in 1980, we were the third
poorest State. Only Mississippi and Arkansas were below us in family
incomes. Our average family incomes were 80 percent of the national
average family income. Then Nissan came to Tennessee. Then Saturn came
to Tennessee. Then BMW and Toyota and other automobile plants put their
assembly plants in other parts of the South and the Southeast.
These automakers wanted just-in-time quality auto parts suppliers
close by. So to attract them, Tennessee built the best four-lane
highway system in the United States. As a result, and as a result of
our central location, over the last 20 years, the number of auto parts
suppliers in our State has grown phenomenally, from a couple dozen to
at least 900. These auto parts suppliers became the greatest
contributors to a new prosperity in our State.
[[Page S9485]]
During the 1980s, Tennessee became the fastest growing State in
family incomes. Our incomes by 1990 became 100 percent of the national
average family income--from 80 percent in 1980 to 100 percent by 1990.
During this time, of course, we were losing many other jobs, especially
in the textile industry, but the textile jobs were being replaced by
new higher paying jobs in the auto industry, and these auto parts
plants usually came to smaller communities, to Shelby, to Rogersville,
to Lexington, and to dozens and dozens of smaller Tennessee
communities, usually adding 100, 200, 300 $30,000- to $50,000-a-year
jobs with good benefits. And because labor costs of these auto
suppliers are low--typically 15 to 25 percent of the cost in an auto
supplier's budget is labor cost these higher wages are not enough of
the whole total to justify having to move the plant overseas.
At a time when our greatest challenge seemed to be how do we keep our
manufacturing jobs from moving to China or to Mexico or to Southeast
Asia, the auto parts suppliers in Tennessee seemed like a godsend. They
were good jobs that seemed likely to stay--stay, that is, unless some
unexpected new costs forced the auto plants and suppliers to look
outside the United States for a more competitive environment.
Enter the steel tariff. The President's decision in March 2002 boils
down to this: It slapped a tariff of up to 30 percent on 10 different
categories of imported steel. For Tennessee, most of it affected hot
and cold rolled steel, the kind that is used to make cars and trucks in
our country. Here is the irony. At the time of the tariff in March
2002, many auto parts suppliers in America were buying only about
5 percent of their steel overseas. In other words, of about $5.4
billion the U.S. auto industry purchased in 2002 of steel, only about
$270 million came from overseas. But as soon as this tariff was placed
on the 5 percent that came from overseas, domestic steel producers in
this country raised their prices on the 95 percent of steel that was
being produced in the United States, and suddenly auto parts suppliers
and other steel-consuming businesses were paying up to 30 percent more
for all their steel. In some cases, even more than that because of
shortages.
In addition, steel companies broke their contracts in order to charge
higher prices to auto parts suppliers. The auto parts suppliers then
turned to their customers, the big automobile companies, and tried to
pass along these price increases. The answer from the auto companies
was: Sorry, we are cutting costs; we are not increasing them. So
because the auto suppliers could not raise prices to cover increased
costs, they suffered losses, and they began to lay off employees. In a
few instances, entire plants closed.
Both the automakers and the auto parts suppliers began to consider
the next logical step: looking offshore in another country for a place
to build parts where steel is cheaper and is pegged at the global
market price, not an artificial price as it is here.
Most small American manufacturers live on the edge. They are
constantly under pressure to cut costs, and if costs cannot be cut,
they cut a job or two. And if cutting a job or two does not do it, the
only option is to move all the jobs overseas where costs are lower. It
is that or go out of business.
Let us think what will happen during 2004 if the tariffs continue. It
is very predictable, and it is this: Auto parts suppliers will move
from Tennessee, from Wisconsin, from West Virginia, from Minnesota,
from steel-consuming States, particularly auto parts suppliers. They
will move to Mexico, to Korea, to Japan, and to Germany. There are many
such countries capable of making quality auto parts where steel is at
global market prices.
Since the United States tariffs do not apply to auto parts, only to
the steel material, the auto parts suppliers will do only what they can
do: Make the parts in Japan and ship them to the Nissan plant in
Tennessee at a much lower cost than what they can make in Tennessee
using United States steel.
This means small manufacturing plant after small manufacturing plant
in small American town after small American town in State after State
in 2004 will be closing their doors and shipping those good paying jobs
with benefits to Korea, to Germany, to China, and to Japan. These same
jobs that more than any other factor helped my State of Tennessee
become prosperous will be gone, and I am afraid it will be hard to get
them back.
Let me say just a word about steel-consuming jobs, like auto
suppliers, versus steel-producing jobs, like steel plants. This tariff
is a good-faith effort by the administration to save jobs in U.S. steel
mills. There are more than 200,000 of these steel-producing jobs
nationwide.
Here is the backfire. According to a study by Dr. Joseph Francois and
Laura Baughman, almost 200,000 Americans in steel-consuming industries
have lost their jobs in the last year since the imposition of the steel
tariffs.
So when one considers the huge number of jobs in the steel-consuming
sectors of American business, especially the auto industry, compared
with a relatively small number of steel-producing jobs, I am afraid
what happened last year is only a fraction of the job losses that will
occur during 2004 and 2005.
Tennessee, for example, has only 3,396 steel-producing jobs, but
Tennessee has 100 times that many steel-consuming jobs, 328,000, and
95,000 of those jobs are those auto-related jobs, those $30,000 to
$50,000 jobs with good benefits that are in the small towns of
Tennessee.
This is not just a Tennessee story, Mr. President. The United States
has 12.8 million steel-consuming jobs, 2.1 million of which are auto
related. The United States has only 226,000 steel-producing jobs.
I have selected at random a dozen other States and compared the
number of steel-consuming jobs versus the number of steel-producing
jobs. I will run through just a few of them.
Ohio has 770,000 steel-consuming jobs. Those are the auto parts
suppliers. Ohio has over 38,000 steel-producing jobs; Florida, over
470,000 steel-consuming jobs. Florida has only a little over 1,500
steel-producing jobs. Even Pennsylvania, 72,300 jobs are auto related;
553,315 jobs are steel consuming like the autoparts suppliers. Only
35,730 are steel-producing jobs. Michigan, nearly 800,000 are steel
consuming, 11,744 steel producing. West Virginia, 8,800 are auto
related, 57,932 steel consuming, only 6,718 steel producing. Same in
New Mexico. Same in Iowa.
Here is an interesting one. Minnesota has 248,047 steel-consuming
jobs; 36,550 of those are autoparts suppliers. Minnesota has only 1,087
steel-producing jobs. The same in Wisconsin, Washington, Oregon, and in
many other States.
In conclusion, let me say a word and give two or three specific
examples of how the steel tariff has affected my State, Tennessee,
during the last year. Tennessee ranks fourth in production of cars and
trucks in the United States. It has nearly 100,000 employees in the
automobile industry. It is the seventh largest State employed by the
auto industry and a growing number of indirect and direct jobs in this
sector.
According to the Motor Equipment Manufacturers Association, more than
70 percent of the employment of the auto industry comes from auto-parts
suppliers. One example of how a steel-consuming company has been
affected by the tariffs is Arvin Meritor. Arvin Meritor is a leading
automotive supplier. It sells to the passenger car and commercial truck
and trailer markets, as well as their related aftermarkets.
Arvin Meritor currently has six facilities in Tennessee in Loudon,
Morristown, two in Pulaski, one in Brentwood, and one in Columbia. It
employs 1,500 people. In 2002, Arvin Meritor purchased more than 1
million tons of steel globally. More than 95 percent of that steel
consumed by Arvin Meritor in the United States during 2002 came from
North American steel mills. Now, Arvin Meritor has faced a number of
critical challenges since the inception of the tariffs.
In terms of pricing, Administration officials advised the company
only to expect a 4 to 6 percent increase in the cost of steel in the
United States after the tariffs, but their experience was far worse.
They found that cold-rolled steel prices from one of the company's U.S.
steel suppliers rose by as much as 25 percent after April 1, 2002, just
a few weeks after the steel tariffs were imposed, as compared to before
the imposition of the tariffs. The current price is 13 percent higher.
[[Page S9486]]
Galvanized steel prices from one of Arvin Meritor's U.S. steel
sources increased as much as 40 percent after April 1 of last year as
compared to before the imposition of the tariffs, and the current price
is 28 percent higher.
Once, Arvin Meritor had seven facilities in my State, but earlier
this year, Arvin Meritor announced the closing of its 317-employee
Gordonsville, TN, facility which produces doors, seats, and sunroofs.
These are the $30,000, $40,000, and $50,000-a-year good jobs with
benefits gone from Gordonsville, TN. This closure and the related
reduction of Arvin Meritor's employment levels at its Pulaski, TN,
facility, which produces aftermarket parts, they have cut down by 100
jobs. Both those incidents were due to the increased cost of the
company's business units attributed in large part to steel tariffs.
A second example, the Dana Corporation, is one of the world's largest
suppliers of axles, driveshafts, frames, brakes, chassis, et cetera.
The company employs approximately 60,000 people worldwide. On April 1,
2002, Dana employed 3,000 people in facilities in Tennessee. Dana is
one of the largest single purchasers of domestic steel in the U.S. with
more than 95 percent of its total steel requirements purchased from
U.S. steel producers.
Due to its product line, steel is Dana's largest single cost. As in
the case of many auto suppliers in Tennessee and across this country,
steel represents a large part of the overall production costs of
automotive components. So after March 2002, Dana experienced steep
price increases on domestic steel ranging from 20 to 50 percent.
Coupled with delivery delays and supply restriction, in other words,
shortages, the tariffs have forced Dana to begin seriously evaluating a
number of steps to limit its exposure to problems arising from steel
tariffs.
Among these steps is the use of offshore facilities to produce
intermediate and finished products, as well as the active procurement
of steel from exempt countries such as Mexico and Canada.
Now, if the goal is to save American jobs, how does it help to cause
Dana, a large auto supplier, to move its facilities offshore--those are
not Tennessee jobs--and to buy steel overseas? Those are not Tennessee
steel producers.
A last example, Dura Automotive Systems, has five facilities in
Tennessee, Gordonsville, Greenbrier, Lawrenceburg, Milan, and
Pikeville. Dura employs 1,765 individuals in my State. It is the
world's largest independent designer and manufacturer of driver control
systems and a leading supplier of seating control systems, engineered
assemblies, and structural door modules.
Dura is a leading supplier of door and window systems. Dura is an
American company that used to purchase 100 percent of its steel from
U.S. steel sources, once again, a prominent supporter of this Nation's
domestic steel industry. Dura experienced a loss of $10 million in 2002
due to the higher steel prices, mainly for hot- and cold-rolled
stripped steel, and was forced to increase its steel purchases from the
spot market which is even more costly.
In addition, Dura's lead time for deliveries of steel from domestic
sources, sources in this country, increased from 10 or 12 weeks to 18
or 20 weeks, adversely affecting just in time the manufacturing process
and imposing significant additional costs on Dura.
American automobile companies and companies from all over the world
that make automobiles in this country do not want delays in their
autoparts. They want them the same day they order them, and if the
tariff produces delays, that is just as costly as tariff price
increases. Overall, the prices for Dura's required steel have increased
by an average of 30 percent since March of last year. The result, Dura
is currently considering a number of strategic alternatives such as
moving production overseas and sourcing its steel from offshore
sources.
That is very bad news to Tennesseans in Gordonsville, Greenbrier,
Lawrenceburg, Milan, and Pikeville; 1,765 families who have these good
jobs.
Our President, George Bush, is working hard to improve this economy.
I am his strong supporter. I believe he is on the right track. I
believe his jobs growth plan is working. I want him to succeed. I
believe the economy is beginning to recover, and the last thing we need
is any new cost on a major segment of American manufacturers that slows
this economy's growth down.
I fear if the steel tariffs stay on as scheduled that we will see
wave after wave of plant closings in the automobile industry across
this State, in Tennessee, Ohio, Florida, Michigan, Pennsylvania, West
Virginia, New Mexico, Illinois, Iowa, Wisconsin, Minnesota, Washington,
and we do not want to see that. So I respectfully hope as the President
comes to September and sees this opportunity, he will say: I did my
best. I made a good-faith effort to help save those steel-producing
jobs. It has not worked. It has backfired. It is the wrong policy, and
the best thing I can do for the American worker is to end the steel
tariffs.
I yield the floor, and I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. ALEXANDER. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
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