[House Report 107-437]
[From the U.S. Government Publishing Office]



107th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     107-437

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



 
 DISAPPROVAL OF ACTION OF THE PRESIDENT UNDER SECTION 203 OF THE TRADE 
                              ACT OF 1974

                                _______
                                

  May 7, 2002.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

    Mr. Thomas, from the Committee on Ways and Means, submitted the 
                               following

                             ADVERSE REPORT

                             together with

                            DISSENTING VIEWS

                      [To accompany H.J. Res. 84]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
joint resolution (H.J. Res. 84) disapproving the action taken 
by the President under section 203 of the Trade Act of 1974 
transmitted to the Congress on March 5, 2002, having considered 
the same, report unfavorably thereon without amendment and 
recommend that the joint resolution do not pass.

                            I. INTRODUCTION


                         A. Purpose and Summary

    House Joint Resolution 84 disapproves the action taken by 
the President under section 203 of the Trade Act of 1974 
regarding steel imports, which was transmitted to Congress on 
March 5, 2002. The effect of the resolution is to enact instead 
the remedy recommendations of the U.S. International Trade 
Commission (ITC) transmitted to the President on December 19, 
2001.

                             B. Background

    On June 22, 2001, USTR Robert Zoellick requested the ITC to 
initiate a section 201 investigation of the effect of steel 
imports on the U.S. steel industry. The request covered four 
broad categories of steel products: certain carbon and alloy 
flat products, certain carbon and alloy long products, certain 
carbon and alloy pipe and tube, and certain stainless steel and 
alloy tool steel products.
    For purposes of its investigation, the ITC divided steel 
imports into 33 product categories. On October 22, 2001, the 
ITC made an affirmative determination of injury for 12 of these 
product categories, finding that the products were being 
imported into the United States in such increased quantities 
that they are a substantial cause of serious injury or threat 
of serious injury to the U.S. industry. In addition, the ITC 
was evenly divided in its determinations for four product 
categories and made negative determinations for 17 product 
categories. In cases where the ITC was evenly divided, both 
determinations were forwarded to the President, who may 
consider either determination as the ITC's determination 
(section 330(d)(1) of the Tariff Act of 1930). The imported 
products covered by the ITC's affirmative and evenly divided 
determinations accounted in the year 2000 for 27 million tons 
of steel, valued at $10.7 billion (74 percent of the imports 
under investigation).
    On December 7, 2001, the ITC announced the recommendations 
and views on the remedies regarding steel. According to section 
202(e)(6) of the Trade Act of 1974, only Commissioners who made 
affirmative injury determinations for a product are eligible to 
recommend remedies for that product. On December 19, 2001, the 
ITC transmitted to the President its remedy recommendations.
    Section 203 provides that the President, not the ITC, makes 
the final decision whether to provide relief to the U.S. 
industry and the type and amount of relief. On March 5, 2002, 
President Bush announced trade remedies for all products on 
which the ITC affirmatively determined or had an evenly divided 
determination that imports had caused substantial injury except 
two specialty categories (tool steel and stainless steelflanges 
and fittings). The President's remedies were imposed as of March 20, 
2002, and are effective for three years and one day.

                         C. Legislative History


Committee action

    House Joint Resolution 84 was introduced on March 7, 2002, 
by Mr. Jefferson to disapprove the action taken by the 
President under section 203 of the Trade Act of 1974 regarding 
steel imports, which was transmitted to Congress on March 5, 
2002. The resolution was referred to the Committee on Ways and 
Means. On April 24, 2002, the Committee on Ways and Means 
ordered House Joint Resolution 84 reported adversely without 
amendment to the House of Representatives by a voice vote with 
a quorum present.

Legislative hearing

    No legislative hearing was held.

                   II. EXPLANATION OF THE RESOLUTION


Present law

    Title II of the Trade Act of 1974 authorizes safeguard 
actions to be taken under certain circumstances and sets forth 
applicable procedures.
    In a section 201 investigation, the U.S. International 
Trade Commission (ITC) determines whether an article is being 
imported in such increased quantities that it is a substantial 
cause of serious injury, or threat thereof, to the U.S. 
industry producing an article like or directly competitive with 
the imported article (section 202(b)). After the ITC makes an 
affirmative or evenly decided injury determination, the ITC 
then recommends to the President relief that would prevent or 
remedy the injury and facilitate industry adjustment to import 
competition. The President, not the ITC, makes the final 
decision whether to provide relief to the U.S. industry and the 
type and amount of relief (section 203).
    Section 203(c) states that if the President's remedy action 
differs from the ITC's remedy recommendation, the Congress may 
enact a joint resolution within 90 days to disapprove the 
President's remedy and instead enact the ITC's remedy.

Explanation of resolution

    House Joint Resolution 84 states that Congress disapproves 
the action taken by the President under section 203 of the 
Trade Act of 1974 regarding steel imports, which was 
transmitted to Congress on March 5, 2002. The effect of the 
resolution is to enact instead the remedy recommendations of 
the ITC transmitted to the President on December 19, 2001.

Reasons for Committee action

    The Committee on Ways and Means reports House Joint 
Resolution 84 adversely because the Members believe the 
President's remedy is better tailored than the recommendations 
proposed by the ITC to provide relief to the steel industry 
while minimizing the negative impact on the rest of the 
economy. The President's remedy acknowledges that the U.S. 
industry is not homogenous, and it provides the segments of the 
industry that have already restructured with the flexibility 
they need to continue to operate.
    The President's remedy rewards America's Free Trade 
Agreement (FTA) partners (Canada, Israel, Jordan, and Mexico) 
for their commitments to free trade by excluding them from the 
relief and excludes those developing countries accounting for a 
very small share of the U.S. market.
    The Committee notes that the President made his 
determination after a thorough investigation by the ITC which 
followed World Trade Organization (WTO) rules on safeguard 
measures. This is in direct contradiction to the actions by the 
European Union (EU) when it implemented its own provisional 
safeguard protections on steel in March 2002 without conducting 
any investigation. Moreover, Committee Members are very 
concerned about the EU's contention that it can retaliate 
against the United States prior to an adverse ruling by the 
WTO.

Effective date

    If a joint resolution is enacted, section 203(d)(2) of the 
Trade Act of 1974 provides that the President shall proclaim 
the remedy recommendations of the ITC within 30 days after 
enactment.

                       III. VOTE OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the votes of the Committee in its consideration of 
House Joint Resolution 84.

                    Motion to Report the Resolution

    House Joint Resolution 84 was ordered reported adversely 
without amendment by a voice vote with a quorum present.

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d)(2) of rule XIII of the Rules 
of the House of Representatives, the following statement is 
made concerning the effects on the budget of House Joint 
Resolution 84, as reported: The Committee agrees with the 
estimate prepared by the Congressional Budget Office (CBO), 
which is included below.

    B. Statement Regarding New Budget Authority and Tax Expenditures

    In compliance with subdivision 3(c)(2) of rule XIII of the 
Rules of the House of Representatives, the Committee states 
that House Joint Resolution 84 does not involve any new budget 
authority or tax expenditures.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the Congressional Budget Office, the following 
report prepared by CBO is provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                       Washington, DC, May 6, 2002.
Hon. William ``Bill'' M. Thomas,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.J. Res. 84, 
disapproving the action taken by the President under section 
203 of the Trade Act of 1974 transmitted to the Congress on 
March 5, 2002.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Erin Whitaker 
(for revenues), and Lauren Marks (for private-sector mandates).
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.J. Res. 84--Disapproving the action taken by the President under 
        section 203 of the Trade Act of 1974 transmitted to the 
        Congress on March 5, 2002

    Summary: Under the Trade Act of 1974, the President may 
proclaim that additional tariffs, quotas, or other actions be 
imposed on certain articles if the International Trade 
Commission (ITC) determines that the import of such articles 
causes serious injury to a domestic industry. However, the 
President may proclaim that different remedies be imposed than 
those recommended by the ITC in its report. On March 5, 2002, 
President Bush transmitted to the Congress his decision to 
raise tariffs on certain steel imports from March 20, 2002, 
through March 20, 2005. H.J. Res. 84 would disapprove the 
President's action. This resolution would, if enacted, replace 
the remedies imposed by the President with the remedies 
recommended by the ITC. CBO estimates that altering these 
remedies would reduce revenues by $80 million in 2002, and 
increase revenues by $93 million over the 2002-2006 period. 
Since adopting this resolution would affect receipts, pay-as-
you-go procedures would apply.
    The bill contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA) and would impose no 
costs on state, local, or tribal governments. H.J. Res. 84 
would impose a private-sector mandate on importers of steel 
that would be subject to higher tariffs. Although the amount 
paid by importers would be lower compared to current law in the 
first three years that the new system of tariffs is in effect, 
CBO estimates that the net increased costs to importers would 
total about $300 million in fiscal year 2006. That amount 
exceeds the threshold for private-sector mandates established 
in UMRA ($115 million in 2002, adjusted annually for 
inflation).
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.J. Res. 84 is shown in the following 
table.

----------------------------------------------------------------------------------------------------------------
                                                                     By fiscal year, in millions of dollars--
                                                                 -----------------------------------------------
                                                                   2002    2003    2004    2005    2006    2007
----------------------------------------------------------------------------------------------------------------
                                               CHANGES IN REVENUES

Estimated Revenues..............................................     -80     -81     -92      52     294       0
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: Under the Administration's steel action, 
tariffs on most U.S. imports of steel were increased for the 
period between March 20, 2002, and March 20, 2005. Tariffs were 
phased in for product groupings under several schedules, with 
the greatest tariff increase occurring between March 20, 2002, 
and March 20, 2003. In certain cases, products would be subject 
to tariff-rate quotas, under which products would not be 
subject to higher tariffs until a certain quantity of imports 
had entered the United States. Under the Administration's 
action, imports generally would enter with duty rates as in 
current law if such imports were from Mexico, Canada, Israel, 
Jordan, countries receiving Carribean Basin Economic Recovery 
Act (CBERA) treatment, or from countries who had received 
Generalized System of Preferences (GSP) treatment.
    Under the ITC recommendation, as submitted on December 19, 
2001, tariffs on most U.S. imports of steel would be increased 
for four years rather than three, with most product schedules 
including lower tariff increases for the first three years than 
under the Administration's action. The ITC recommendation also 
included more products that would be subject to tariff-rate 
quotas. In certain cases, imports from countries not subject to 
the Administration tariff increases would be subject to the 
tariff increases under ITC recommendations. Based on 
information from the ITC, the United States Trade 
Representative, and other trade sources, CBO estimates that the 
replacement of Administration steel remedies with those 
recommended by the ITC would reduce revenues by about $80 
million in 2002, and increase revenues by $93 million over the 
2002-2006 period, net of income and payroll tax offsets. This 
estimate includes the effects of increased (decreased) imports 
from trading partners that would result from the reduced 
(increased) prices of imported products in the U.S.--reflecting 
the lower (higher) tariff rates relative tothe Administration 
action--and has been estimated based on the expected substitution 
between U.S. steel products and imports from trading partners.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act sets up pay-as-you-go procedures 
for legislation affecting direct spending or receipts. The net 
changes in governmental receipts that are subject to pay-as-
you-go procedures are shown in the following table. For the 
purposes of enforcing pay-as-you-go procedures, only the 
effects through 2006 are counted.

----------------------------------------------------------------------------------------------------------------
                                                     By fiscal year, in millions of dollars--
                                 -------------------------------------------------------------------------------
                                   2002    2003    2004    2005   2006   2007   2008   2009   2010   2011   2012
----------------------------------------------------------------------------------------------------------------
Changes in outlays..............                                   Not applicable
Changes in receipts.............     -80     -81     -92     52    294      0      0      0      0      0      0
----------------------------------------------------------------------------------------------------------------

    Estimated impact on state, local, and tribal governments: 
H.J. Res. 84 contains no intergovernmental mandates as defined 
in UMRA and would impose no costs on state, local, or tribal 
governments.
    Estimated impact on the private sector: H.J. Res. 84 would 
impose a private-sector mandate on importers of steel and steel 
products that would be subject to higher tariffs. Although the 
amount paid by importers would be lower compared to current law 
in the first three years that the new system of tariffs is in 
effect, CBO estimates that the net increased costs to importers 
would total about $300 million in fiscal year 2006. That amount 
exceeds the threshold for private-sector mandates established 
in UMRA ($115 million in 2002, adjusted annually for 
inflation).
    Estimate prepared by: Federal Costs: Erin Whitaker; Impact 
on the Private Sector: Lauren Marks; and Impact on State, 
Local, and Tribal Governments: Elyse Goldman.
    Estimate approved by: Roberton Williams, Deputy Assistant 
Director for Tax Analysis.

 V. OTHER MATTERS REQUIRED TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee believes, based on a comparison of the remedy 
actions proposed by the President and the ITC, that the 
President's remedy is preferred and disapproving such action by 
enacting House Joint Resolution 84 would be unwise and more 
harmful to the economy.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that H.J. 
Res. 84 has no general performance goals or objectives.

                 C. Constitutional Authority Statement

    With respect to clause 3(d)(1) of rule XIII of the Rules of 
the House of Representatives, relating to Constitutional 
Authority, the Committee states that the Committee's action in 
reporting the bill is derived from Article I of the 
Constitution, Section 8 (``The Congress shall have power to lay 
and collect taxes, duties, imposts and excises, to pay the 
debts and to provide for * * * the general Welfare of the 
United States * * *'').

            VI. DISSENTING VIEW OF HON. WILLIAM J. JEFFERSON

    Conditions in the US steel industry are difficult. There is 
a need to do something. The critical issue is whether a 30% or 
even a 20% tariff is the right decision. The answer must be a 
resounding no. The President's decision is an economically 
indefensible, politically driven, WTO-inconsistent decision 
that has, in the short span of 6 weeks, damaged relations with 
our key trading partners; increased taxes on consumers; and 
threatened hundreds of thousands of jobs across the country. 
Steel imports have declined steadily over the past four years 
and the problems with the domestic steel industry are primarily 
internal.
    The President's action simply does not meet the strict 
standard for applying safeguards. Better remedies would include 
global negotiations to reduce steel overcapacity. (At the very 
least, setting quotas at historic levels would protect the 
domestic steel industry against import surges).
    On several fronts, the President's action on the section 
201 steel investigation is unsupportable.
The Decision is Economically Indefensible and Politically Driven
    The President's decision is not supported by any mainstream 
economist. Even senior Bush Administration economic advisers 
such as the Treasury Secretary and the Chairman of the National 
Economic Council did not support the imposition of tariffs 
against steel imports. Ambassador Zoellick, you may recall, 
initially expressed skepticism about the tariffs but later 
adjusted his views.
    The bottom line is that the President's action is 
economically indefensible. It was unadulterated election year 
politicking. The Washington Post's David Broder had it exactly 
right when he described the President's decision as follows:
    ``Bush managed to rise above principle to please industry 
and workers in two * * * states, Ohio and Pennsylvania. His 
deviation from his avowed free-trade beliefs was described in a 
Wall Street Journal news story--not an editorial--as `the most 
dramatically protectionist step of any president in decades.' 
''
    Commentator George Will described the tariffs as ``an $8 
billion contribution coerced from manufacturers and consumers 
of steel products, for the benefit of about six Republican 
congressional candidates in steel-producing districts, and for 
Bush's re-election campaign.''

The President's Decision Constitutes an Enormous Tax on American 
        Consumers

    President Bush has been a forceful advocate of tax breaks. 
``Tax relief for American workers and businesses'' has been a 
key component of this Administration's agenda. Ironically, his 
decision constitutes one of the biggest tax increases that our 
nation has seen in years. In a Washington Post op/ed, George 
Will describes the steel tariffs as ``new taxes on American 
consumers--approaching
$1 billion annually just on the purchasers of cars and 
trucks.''
    Beyond the pain of imposing a billion dollars in new taxes 
on American consumers, these tariffs have already resulted in 
higher prices for products manufactured by a broad range of 
steel-consuming industries. Invariably, these higher costs will 
be passed on to average American consumers of products such as 
refrigerators, dishwashers and microwave ovens. Here are a few 
examples:
     Domestic steelmakers have begun to ration steel 
and increase prices in response to demand surges. One major 
domestic steelmaker has already announced price increases of 
$50 per ton for hot-rolled steel and $70 ton for coated steel.
     A Chicago-based auto parts manufacturer has 
reported a 15% increase in stainless steel prices.
     As of April 1, an Ohio-based manufacturer of 
cryogenic containers has applied a surcharge of 8% to 18% on 
several of its products.
    At a time when our nation is recovering from a recession, 
the steel tariffs have the potential of plunging us back into 
recession.

Steel Tariffs Will Trigger Job Losses Nationwide

    Some have argued that the President's steel measures will 
eliminate 10 jobs in steel-consuming industries for every 
steel-making job that is saved. This is not a tradeoff that our 
nation can accept.
    The national maritime industry will be harshly affected. In 
the Port of New Orleans, for example, employment for stevedores 
has already dropped by 35%. Barge traffic in ports throughout 
the nation has begun to drop. One shipping executive in New 
Orleans expects to clear only 15 barges during the month of 
April. His average volume is 40 to 50 barges.

The President's Action Has Created Tension With Our Trading Partners 
        and Triggered WTO Complaints

    The President's decision has significantly exacerbated 
transatlantic trade tensions. The EU announced temporary tariff 
measures--ranging from 14.9% to 26%--to protectthe European 
steel industry from a flood of diverted imports resulting from the 
President's decision. The EU estimates that it will incur losses of 
$2.4 billion on steel exports to the U.S. This situation is compounded 
by the fact that the EU has applied to the WTO for authority to impose 
$4 billion in sanctions on our country as compensation for tax breaks 
that are provided to U.S. exporters.
     The European Commission has just proposed a set of 
new tariffs (some of which are as high as 100%) on a range of 
U.S. goods including clothing, citrus fruit, gaming tables, 
nuts, footwear and cardboard boxes. The WTO will have to be 
notified by May 17. Once this happens, the tariffs will go into 
effect on June 18.
     The products for which new tariffs were imposed 
were selected for maximum domestic political impact in the 
United States. Citrus fruit exports are critically important to 
the state of Florida; we all know of steel's importance to West 
Virginia, Pennsylvania and Ohio. Textile and footwear exports 
are important to the Carolinas.
     Russia has begun to restrict imports of frozen 
chickens from the US.
     China, New Zealand, Korea, Venezuela, Japan and 
Norway have filed complaints with the World Trade organization.
     Later this year, the US and Brazil will assume 
joint chairmanship of the FTAA negotiations. Brazil's 
presidential elections are scheduled in October. There is 
evidence that the President's decision has strengthened the 
hand of protectionist candidates running for office. Clearly, 
during an election year, the President's decision has the 
potential for triggering delays in the FTAA talks.

The U.S. Steel Industry and WTO Safeguards

    The WTO has very strict definitions as to how safeguards 
should be applied. For example, safeguards can be justified 
when there are sudden, recent and significant increases in 
imports. However, as the distinguished Chairman of the Trade 
Subcommittee noted in a recent interview, ``It (the President's 
decision on steel) was unwarranted because the steel imports 
have been declining every years since 1998.''
    In addition, WTO safeguards should not be applied when an 
industry's problems are primarily internal. In the case of the 
steel industry, it is abundantly clear that this is the case. 
Decades of inefficiency in the domestic U.S. steel industry 
have created a situation where steel companies are saddled with 
nearly $10 billion in unfunded pensions and health benefits for 
600,000 steel workers (so-called legacy costs). The President 
is unwilling to pay these costs.
    Instead, the President imposes a 30% tariff on steel 
imports that have steadily declined over the past four years in 
an effort to prop up an industry that is unwilling to make the 
hard choices to increase its competitiveness. It is not steel 
imports that have hurt the U.S. steel industry. The wounds of 
this industry are largely self-inflicted.
    I do not believe that it is in our national economic 
interest to prop up a highly inefficient industry at the 
expense of dozens of other more competitive industries and 
hundreds of thousands of jobs in the United States and around 
the world. Sacrificing the global economy at the altar of 
political expediency by imposing tariffs of 30% or 20% is not 
the solution to the woes of the U.S. steel industry. This 
Committee--indeed the entire Congress--has an obligation to do 
the right thing and to urge the President to change his 
decision. The economic well-being of millions of Americans is 
at stake.
    I respectfully dissent and oppose the Committee's decision 
to adversely report H.J. Res. 84.
                                              William J. Jefferson.

                                
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