I understand that the administration consulted closely with the U.S. steel producers during the negotiations with the Russians. To what extent did the administration also consult with steel users in this process?

Mr. DALEY. Mr. Chairman, we hear from steel users on occasion. We have heard from a number of them over the last number of months as the discussion of the steel crisis has grown. We consult with them on a fairly regular basis. They have not been heard strongly at this point. There is a public hearing on Tuesday on the agreement that was reached with the Russians, the comprehensive agreement. I would assume at that hearing, we will have an opportunity to listen to those steel users.

Chairman CRANE. Ambassador Barshefsky, what is the administration's view on the Regula bill, H.R. 412, on the Visclosky bill, H.R. 506, Traficant bill, H.R. 502? I am concerned that the Regula bill cherry picks. It deletes reference to "substantial" in the causation standard because it doesn't appear in the WTO language.

At the same time, the bill omits WTO language which says essentially the same thing, that increased imports cannot be the cause of injury when factors other than increased imports cause the injury at the same time.

Do you agree with that?

Ms. BARSHEFSKY. The administration has not yet taken a position on the Regula bill, but it would certainly have to be examined for consistency with WTO rules. We have been quite clear that we will not support trade legislation that is inconsistent with our international obligations.

I would note that the domestic steel wire rod producers have already filed a trade case under the current section 201. I would note further that the domestic carbon steel industry successfully brought a comprehensive section 201 case in the eighties, which is the same law as the law that we have now. So we will be examining the proposal by Mr. Regula, but at this juncture, at least the wire rod producers believe that section 201 as currently written, is sufficient.

Chairman CRANE. How about the Visclosky bill?

Ms. BARSHEFSKY. We have some significant concerns with respect to the Visclosky bill. First, we have effective tools to combat unfair trade practices. As Secretary Daley's and my testimony indicate, we believe we are achieving important results.

Second, our trade laws tend to be based on fair and transparent processes. They are not designed to favor one set of interests, producers or workers, at the expense of another set of interests, producers, or workers. It is very important that we not favor one constituency over another as we administer our laws.

Third, we do have a concern that legislative quotas can create severe distortions in the market. They can add to, rather than resolve economic problems, potentially creating shortages, potentially leading to excessive price hikes.

Fourth, the market is beginning, it is in its early stages, admittedly, but beginning to look as though it may stabilize. We don't want to disrupt that very important progress.

Last, action outside our trade laws exposes U.S. producers and workers to retaliation. The United States is the single largest ex

porting nation on Earth. We have much to lose if foreign countries adopt protectionist practices against our exports. We have much to lose if foreign countries implement mirror legislation parallel to legislation we might propose. So we believe we must proceed cautiously in this area.

We do believe we are making impressive progress on the steel issue. We plan to work with you, with the industry, with the steelworkers, as we have been doing very, very closely. Certainly we will be examining whether other actions are appropriate to take if this crisis does not soon abate. But we must also be very careful to protect overall our export interests, including in steel intensive sectors such as machinery, heavy electrical equipment, automobiles, as well as in our agricultural sector.

Chairman CRANE. Thank you. One final question to both of you. To what extent do our trading partners subsidize their steel industries? How can we pursue an agreement to lower the subsidies so as to better enable the U.S. steel industry to compete?

Ms. BARSHEFSKY. Well, of course for many years there has been a negotiation on a multilateral steel agreement, which would discipline steel subsidies, both as to carbon steel and as to specialty steel. Those negotiations have been running for many years, producing little result and problems identified early on in the negotiation have seemed to prove intractable over the years.

We still think an agreement that would sharply discipline global subsidies would be important, but the United States will not give up its rights under U.S. trade law in order to achieve that goal.

I think that, overall, global subsidization of steel has come down, particularly as countries realize money is not infinite. It is a finite resource, and there are many pressures on the public purse. But subsidization still does remain a significant issue with respect to steel.

Mr. DALEY. As I mentioned, Mr. Chairman, just one brief note. We did find in the case that was filed against Brazil subsidization, we take this issue very seriously. We are monitoring for subsidies around the world, our commercial service people and our import administration people are monitoring to make sure that as the Ambassador stated, subsidization, which was rather rampant a few years ago, continues to come down. In the case of Brazil, we did find subsidization.

Chairman CRANE. Thank you.

Mr. Levin.

Mr. LEVIN. Thank you. Well, I think the record is something like this, that in the last months, the administration did act. I think it acted more aggressively than was true under previous administrations or would have been true, and acted more aggressively than it probably would have in the first years of this administration.

But at the same time, there was a substantial lapse between when the problem arose and when action became effective. It wasn't that jobs were threatened, they were lost. Right? Ten thousand? At least 10,000 people lost their jobs. Companies were put under very severe pressure, and some into bankruptcy.

I think we have to ask ourselves about that response. Europe did not face the same kinds of pressures, though it did have some, being closer to Russia, for example. There was a dramatic impact

here from the Asian crisis in steel and virtually none in Europe. I think we have to ask ourselves and I think our constituents, and I mean yours and ours here, want to know why.

Ambassador, when you say on the first page, "therefore we can and will lick this problem within this framework" and second, "by sticking to the established rules, we can help ensure that the Asian crisis does not lead to a cycle of retaliation and protectionism. I just think we want to be sure we are not frightened into inaction because some people call action protectionism.

So I want to start, and we have talked about this before, a discussion with you about the rules of competition here and our reaction.

Under what we have done on the antidumping rules, and Amo Houghton and I were proud to help lead the efforts to safeguard them in the WTO, but look, they raise certain problems. Right? We invoke them and countries can simply shift products. It took a number of months. We did not seem to have an effective trigger mechanism, effective monitoring system. So I think we have to ask ourselves whether our framework is adequate, whether the established rules respond.

So just if you would respond to that. In the last pages of your testimony, there is an indication that you are willing to look at some further legislation, some changes. You have instituted a few of them yourself. I wanted to ask you, Mr. Secretary, about my suggestion that we give you more resources.

But clearly there is something, there is a shortfall. There is something missing. There is something wrong. We can't, as problems shift from one product of steel to another or one country that decides to fill the gap to another, simply take 8 to 10 to 12 months and lose another 10,000 jobs or begin to lose another chunk of an important industry because other countries are taking advantage of not free trade, but our open market.

So if you would, just give us a preliminary response to that.

Ms. BARSHEFSKY. Let me say a few general things. First of all, as a general matter, the fact that imports are increasing does not necessarily mean they are unfairly traded. This administration, and I believe the Subcommittee have always understood

Mr. HOUGHTON [presiding]. Madam Ambassador, I think we are all set now.

Ms. BARSHEFSKY. So I don't know where your tape ended, but first, the fact that imports increase is not necessarily an indication of unfairness, particularly given the growth rate of our economy relative to the growth rates of other world economies, and particularly given the fact that 40 percent of the world is in deep recession.

Second, once cases were filed, which presented an indication that imports were unfairly traded, Secretary Daley acted in extremely aggressive manner to ensure that the investigations would be expedited, but also more importantly, to ensure that his department could reach back and be able to impose penalty duties on imports that had entered even as early as 6 weeks after the case had been filed. This is almost unprecedented, and went a long way I think toward the kinds of downturn in import figures we see now.

Third, with the President's program, we have instituted a much more comprehensive monitoring scheme, including the early release of import data. I think we agree with you that our monitoring before this crisis had perhaps not been as carefully crafted as it should have been. The administration has taken steps to rectify that so that we can identify much earlier on problem areas, and attempt to deal with that on an expeditious bilateral basis, that obviously if the trade is unfair, it will be subject to treatment similar to the treatment to which the current crop of countries is subject. So we do think that we now have in place an effective means of dealing with the problem. There is no question that the surge itself is of unprecedented nature. There is absolutely no question about that. But we believe we have attended to it in a way that is effective and that at the same time, does not risk a retaliatory spiral against our exports, including our exports of steel intensive products.

Mr. LEVIN. Mr. Secretary.

Mr. DALEY. I would just add a few comments to it, Congressman. I do think, I believe as the Ambassador stated, we have reacted very strongly and aggressively. I think we are having an impact, and it is a balance between overreacting too early and making sure that when you do act, you act in a concerted action, and we have done that.

On your comments about additional resources, that is an issue that I would like to pursue with you because we have seen a substantially increasing caseload. We are trying to expedite these cases. We have numerous investigations going on, probably more today than we have ever had. It is putting quite a strain on our resources, so we would like to follow up with you on that issue. Mr. LEVIN. Thank you. My time is up.

Mr. HOUGHTON. OK. Well, I guess it is my turn next. Thanks, Sandy. I just forgot to repay the compliment. Sandy is a great advocate for fair trade, always has been, very articulate, and an enormous influence here, certainly with me.

I would like to thank you very much for being here. You are our friends at the administration. You always have been. You are right to the point. You have been very, very, very helpful. So I want to thank you for being here and sharing your wisdom with us.

I have a couple of questions. The first is, that you really sort of pick on the weak person. In other words, when you take a look at the shipments, the metric tons out of Russia versus Brazil and Korea and Japan, it is really not very much. I mean that Russia has gone from 150 approximately to about 45,000 metric tons, January to January. Whereas Japan and Korea not only are huge, but also they have gone up about 200,000 tons. So you have sort of a neat program with Russia. It says something to them. It says something to the others. You are going to have a 6-month moratorium, you are going to have a quota, you are going to set minimum prices for Russian steel, like that.

Why didn't you do that with the others? Now I realize that Russia is not part of the WTO, but it is a very specific tough hard message out there for Russia, but they are so small compared to the others. What about the big producers?

Mr. DALEY. Two reasons, Mr. Chairman. One, the Russians had asked for these discussions and they had asked for first of all, the comprehensive discussions, quite frankly, quite a while ago. Shortly after the cases were filed, they asked for discussions, negotiations on the hot-rolled cases sometime in late September. So they came forward. The other countries did not.

We have gotten notice from Brazil within the last week that they have an interest to discuss the case. We have not had any discussions with them yet. But the Russians did come forward.

In spite of the fact that their volume may be much less than the others, they were, in the opinion of industry and workers, were very much driving the price down rather substantially. It was the Russian steel that was playing a rather large part, and is shown by the margin range, close to 200 percent on some of their steel coming in. So those were the two reasons why we moved forward with both the suspension agreement and a comprehensive deal with the Russians.

Mr. HOUGHTON. Would you like to answer that or is that it?

Ms. BARSHEFSKY. No. I think Secretary Daley has answered the question.

Mr. HOUGHTON. All right. Good.

You know, the second point is you talk about a trade war. That is not good. Clearly we do not want to get into a match where we are just biting at each other's heels, because as we all know, that 95 percent of the world's customers are outside of the United States, and we want to get at them. Of course that is what you are trying to do with the fast track, the multilateral

Mr. JEFFERSON. Mr. Chairman.

Mr. HOUGHTON. Yes.

Mr. JEFFERSON. Excuse me, please. Could you yield for just a moment? Those children who are leaving here from my district, they were here to see this hearing through. Apparently they are having to leave. But I wanted to recognize their presence and to say to them that we really are very pleased to have them here. Many of them are now into the hall.

So I thank you for yielding for a moment. I hope some of them heard what I had to say. I was going to recognize them when it came my turn, but apparently they are having to leave. So glad to have you here.

Mr. HOUGHTON. Yes. Thank you.

[Applause.]

Mr. JEFFERSON. Thank you, Mr. Houghton.

Mr. HOUGHTON. But you know, various suggestions have been made that always just sort of fringe on retaliatory actions by other countries. But really so what? Japan has not been particularly sensitive to our needs, year after year after year after year, the trade imbalance. Brazil, through Mercosur wants to freeze us out anyway. Obviously we don't want to get into a trade war, but is that a real danger with those two countries?

Ms. BARSHEFSKY. First, let me say we have had a persistent trade surplus with Brazil. I think the United States has to be cautious in the way in which we respond to situations such as this. We are able to be cautious in part because we have an effective program to deal with the crisis.