Statement of Hon. Jerry F. Costello, a Representative in Congress from the State of Illinois

I appreciate the opportunity to present testimony before this panel today. The United States has built a steel industry that has one of the highest productivity levels and lowest costs in the world. Unfortunately, our commitment to new technology and increased labor productivity is of little worth in a global marketplace that favors illegal trade and commercial practices. Our domestic markets are being flooded with cheap imports from Asia, Russia and Brazil who continue to defy international trade policies in order to prop up their own markets. We can ill afford to be the world's dumping ground for unfairly-traded steel. While I am concerned by the financial disasters in Asia, Russia and elsewhere, these countries should not be allowed to export their problems here. We must find other means to help our trading partners deal with their economic challenges; allowing unfairly-traded steel to flood our markets creates an imbalance that helps no one.

As a member of the Congressional Steel Caucus, I have worked diligently with my colleagues to urge the Administration to take a strong stand against illegallydumped steel. The proposed agreement with Russia to reduce Russian imports of steel products by almost 70 percent is a good first step. However, it must be followed by continued pressure on other nations to reduce their dumping of illegallysubsidized steel. I am pleased the Administration has responded to those of us in Congress who continue to make steel a high-profile issue. The U.S. must continue to be vigilant in providing relief to our steel industry and its workers, after they have suffered from an unfair flood of foreign imports. However, let me be clear about this: the Administration's efforts to date are not enough. We must do more and we must do more immediately.

In my own district in Southwestern Illinois, steelworkers and their families and communities have stood up strongly for steel. Workers at Laclede Steel in Alton and National Steel in Granite City have faced difficult times since the surge in steel imports flooded our markets. Laclede is facing bankruptcy and efforts are underway just to keep the plant open. Orders have been down and prices have fallen at both plants. Unfortunately, these steel companies like others across the nation, have been unable to avoid layoffs. Mr. Chairman, I represent approximately 4,000 USWA union members in my district. I cannot in good conscience report to them that we have done enough here.

I strongly support legislative remedies-specifically measures introduced by my colleagues Rep. Visclosky and Rep. Regula-to end the flood of illegal foreign steel imports. I hope the Leadership of this House will expedite consideration of legislative remedies to put an end to the steel crisis. The U.S. steel industry, steel workers and their families, and American consumers of steel products and its derivatives deserve a fair market for U.S. steel. Foreign dumped steel not only has immediate negative consequences on the steel industry, over time the impact on the U.S. economy in terms of lost production, high-wage jobs, and investment is irretrievable.

I hope this Congress and the Administration will take immediate action to end illegal foreign imports of steel.

Statement of Thomas R. Howell, and Brent L. Bartlett
DEWEY BALLANTINE LLP

The world economic crisis which began in 1997 has resulted in an extraordinary surge of imported steel products into the U.S. market. (See Figure A). The import surge struck a U.S. industry that has spent nearly two decades undergoing a radical restructuring, an effort which has transformed it into one of the most efficient, productive, and innovative steel industries in the world. The import influx destroyed the prospects for a strong earnings year for the U.S. steel industry in 1998, drove 10,000 workers out of their jobs, and pushed several steelmakers into bankruptcy. Financial analysts warn that the U.S. steel outlook for the industry for 1999 is grim. and that far more extensive layoffs may occur.

The import surge reflects the impact of the current financial crisis on a world steel industry that has been grossly overbuilt as a result of decades of market intervention by governments. The financial crisis produced an abrupt drop in steel demand in East Asia and the former Soviet Union, and producers which served those markets desperately turned to the export market. (Figure B.)

Japan's integrated steel cartel shifted virtually all of the export sales which it lost in Asia toward increased sales in the United States -- U.S. imports of hot-rolled flat products from Japan increased by over 1000 percent over 1995 levels as Japanese prices fell dramatically. (Figure C.)

At the same time, Russia's massive (but aging and inefficient) state-owned steel sector, having lost most of its markets at home and in Asia, redirected a huge volume of steel toward the United States. (Figure D.) Uşing deep discounts, the Russians plunged into a “race to the bottom" in steel pricing with Japanese producers, precipitating a steep fall in U.S. steel prices.

As demand for Brazilian steel collapsed in Brazil and in Asia, Brazil's mills
(which, according to WTO estimates, have received $26 billion in subsidies in the
past four decades) increased their exports to the United States in 1997 and
maintained these levels in 1998, exacerbating the price erosion in the American
market.

The Korean industry, which has been vastly overbuilt as a result of billions of dollars in government-directed bank loans, dramatically increased its exports to the United States in late 1998.

The European Union, facing its own surge of steel imports, established quotas on steel from Russia, Ukraine, and Kazakhstan, diverting exports from those countries toward the American market.

The convergence of these foreign export drives on the U.S. market produced a flood of imported steel in 1998 that simply has no historic precedent:

Import penetration rates jumped from 242. percent in the first 10 months of 1997 to 29.5 percent in the same period in 1998.

Prices collapsed despite continuing strong domestic demand.

The import volume was so great that it clogged U.S. ports and has resulted in
huge stockpiles of steel anywhere space for it can be found.

As a result of the import influx, U.S. steel operating rates fell from 90 to 74 percent, profitability and stock value have fallen sharply, three producers have gone bankrupt and 10,000 steelworkers have lost their jobs. The outlook for the steel industry, a basic pillar of the US. economy, remains uncertain.

[Attachments are being retained in the Committee files.]

Statement of Hon. John P. Murtha, a Representative in Congress from the State of Pennsylvania

FIRST I WANT TO ACKNOWLEDGE THE EFFORTS OF STEEL LABOR AND INDUSTRY IN WORKING TOGETHER ON THE ISSUE OF THE STEEL IMPORT SURGE. THE STEEL CAUCUS HAS ALWAYS PRIDED ITSELF ON ITS BIPARTISAN APPROACH TO SAVING THE STEEL INDUSTRY, EVER SINCE RALPH REGULA AND I HELPED TO FOUND THE STEEL CAUCUS IN 1983 TO SAVE OUR U.S. STEEL INDUSTRY FROM FOREIGN SUBSIDIZED STEEL IMPORTS. BY CONVINCING THEN PRESIDENT REAGAN TO SUPPORT VOLUNTARY RESTRAINT AGREEMENTS, THE ONLY PROTECTIONIST MEASURE HE EVER SUPPORTED, WE WERE ABLE TO GIVE OUR STEEL INDUSTRY THE CHANCE TO MODERNIZE AND BECOME COMPETITIVE. MORE RECENTLY, AT THE START OF THE CURRENT CRISIS, THE UNION AND THE INDUSTRY CAME TOGETHER TO FORM A COALITION AND SPEAK AS ONE VOICE ON THE ISSUE. THEIR UNIFIED MESSAGE WAS STRONG AND CLEAR. I WOULD LIKE TO ACKNOWLEDGE THAT BECAUSE I THINK IT'S IMPORTANT IN NOTING HOW MUCH MORE WE CAN ACCOMPLISH WHEN WE WORK TOGETHER.

RONALD REAGAN WAS THE MOST FREE-TRADE ORIENTED PRESIDENT WE'VE SEEN IN MODERN TIMES. HE WAS ABSOLUTELY DEAD SET AGAINST PROTECTING INEFFICIENT U.S. INDUSTRIES, AND COMMITTED TO BREAKING DOWN TRADE BARRIERS AROUND THE WORLD. YET EVEN PRESIDENT REAGAN RECOGNIZED THAT THE STEEL INDUSTRY OF THE UNITED STATES IS UNIQUE. IT'S UNIQUE BECAUSE WITHOUT IT, OUT NATION WILL NOT BE ABLE TO MOBILIZE FOR MAJOR MILITARY CONFLICT. OUR NATIONAL SECURITY IS JEOPARDIZED IF WE ALLOW OUR STEEL INDUSTRY TO BE CRIPPLED OR PERHAPS EVEN DIE BECAUSE OF FOREIGN SUBSIDIES. SO THE PLAN THAT PRESIDENT REAGAN INSISTED ON WAS ONE THAT REQUIRED OUR STEEL INDUSTRY TO MODERNIZE AND TO BECOME THE MOST COMPETITIVE IN THE WORLD.

WE HAVE DONE THAT. WE DEVELOPED THE MOST MODERN, COMPETITIVE STEEL INDUSTRY IN THE WORLD, AND TODAY WE STILL HAVE THE MOST MODERN AND COMPETITIVE STEEL INDUSTRY IN THE WORLD. THE ISSUE TODAY CLEARLY IS NOT ABOUT COMPETITIVENESS-THE ISSUE IS ABOUT UNFAIR SUBSIDIES THAT VIOLATE ALL THE FAIR TRADE POLICY DEVELOPED AND ACCEPTED IN INTERNATIONAL ACCORDS.

THE BOTTOM LINE IS THAT NO ONE CAN CLAIM THEY'RE AGAINST WHAT WE PROPOSE BECAUSE THEY ARE "FREE TRADERS." NOTHING WE PROPOSE HERE IS COUNTER TO THE FREE TRADE MENTALITY. EVERYTHING WE PROPOSE IS COMPLETELY CONSISTENT WITH THE COURSE ESTABLISHED BY FORMER PRESIDENT REAGAN.

TO UNDERSTAND THE CURRENT CRISIS, WE NEED TO UNDERSTAND THE CRISIS OF THE 1980'S. THAT CRISIS PRODUCED A LOT OF CASUALTIES. WE HAD DOZENS OF PLANTS CLOSE AND LOST THOUSANDS AND THOUSANDS OF JOBS. THE COMPANIES THAT SURVIVED WENT THROUGH RADICAL RESTRUCTURING. IN THE DISTRICT I REPRESENT THE ECON

OMY HAS NEVER FULLY RECOVERED. IN THE JOHNSTOWN, PENNSYLVANIA MARKET ALONE, WE WENT FROM OVER 12,000 STEEL JOBS IN 1983 TO ABOUT 2,000 TODAY. THE UNEMPLOYMENT RATE HAS REMAINED AT NEARLY TWICE THE NATIONAL AVERAGE. WE DON'T NEED ANY MORE LAYOFFS IN THE OPERATIONS WE HAVE LEFT.

THE CURRENT CRISIS BEGAN OVER A YEAR AGO WHEN WE STARTED TO SEE THAT THE EXTREME DISTRESS OF THE ASIAN ECONOMY WAS SPURRING ASIAN COUNTRIES TO TRY TO USE THEIR SUBSIDIZED STEEL PRODUCTION TO EXPORT THEIR WAY OUT OF ECONOMIC DISTRESS. THEY, AS WELL AS OTHER COUNTRIES LIKE BRAZIL, FOUND DEMAND FOR STEEL IN ASIA EVAPORATING, SO THEY SENT IT HERE AT PRICES AS LOW AS TWO THIRDS OF THE MARKET PRICE. THE LATEST FIGURES SHOW THAT IN 1998 WE IMPORTED MORE STEEL INTO THIS COUNTRY THAN IN ANY OTHER YEAR IN HISTORY. IT REPRESENTED A 33% INCREASE OVER 1997, WHICH ALSO HAD BEEN A RECORD-BREAKING YEAR. ALMOST A THIRD OF ALL THE STEEL CONSUMED IN THE UNITED STATES LAST YEAR WAS IMPORTED STEEL. IN THE LAST QUARTER OF 1998, JAPAN AND RUSSIA EXPORTED TO THE U.S. TWO AND A HALF TIMES THE AMOUNT OF STEEL THEY SENT HERE DURING THE SAME PERIOD IN 1997.

NOW, LET ME ALSO SAY I THINK THE RECENT ADMINISTRATION EFFORTS HAVE BEEN HELPFUL AND HAVE HOPEFULLY AT LAST BEGUN TO STEM THIS TREMENDOUS FLOOD OF IMPORTS, WHICH HAVE TO-DATE CAUSED AT LEAST TEN THOUSAND LAYOFFS DOMESTICALLY. THESE LAYOFFS HAVE CERTAINLY BEEN FELT IN MY AREA OF SOUTHWESTERN PENNSYLVANIA, WHERE THE EFFECT OF THE IMPORT SURGE HAS TRICKLED ALL THE WAY DOWN FROM THE BIGGER PLANTS TO THE MELTING FACILITIES, TO THE SMALLEST MACHINE SHOPS.

HOWEVER, MY CONCERN, AS RALPH REGULA AND I RECENTLY EXPRESSED IN A LETTER TO U.S. AMBASSADOR TO JAPAN TOM FOLEY, IS THAT THIS DROP IN IMPORT VOLUME WILL ONLY BE TEMPORARY UNLESS WE KEEP UP THE PRESSURE ON THESE ASIAN COUNTRIES TO REFORM THEIR MARKETS. WE NEED TO SEE MORE THAN ONE OR TWO MONTHS OF RELIEF. THE NUMBERS HAVE TO STAY DOWN. WE NEED TO SEE PEOPLE WHO HAVE BEEN LAID OFF OVER THE PAST YEAR RETURNING TO WORK.

SO, WHILE I AM ENCOURAGED BY THE ADMINISTRATION'S EXPEDITED FINDINGS IN THE CASES AGAINST JAPAN AND BRAZIL, ITS STRONG MESSAGE TO JAPAN, AND THE AGREEMENT IT HAS REACHED WITH RUSSIA, I FEEL WE NEED A MORE COMPREHENSIVE AND LONGER-TERM SOLUTION THAT WILL ENSURE THE IMPORT NUMBERS DON'T JUMP RIGHT BACK UP, EITHER IN THE HOT-ROLLED CATEGORY OR IN ANY OF THE OTHER STEEL PRODUCT CATEGORIES. I AM ALSO CONCERNED THAT THERE MAY YET BE MORE LAYOFFS UNDER THIS SCENARIO, ESPECIALLY GIVEN THE GLUT OF STEEL THAT IS ALREADY ON THE MARKET AND THE UNCERTAINTY THE INDUSTRY STILL FACES.

ONE OF THE MEASURES I'VE COSPONSORED IS THE BILL CONGRESSMAN VISCLOSKY HAS AUTHORED TO RETURN ALL STEEL IMPORTS TO 1997 LEVELS. THIS IS A COMPREHENSIVE, IMMEDIATE, EMERGENCY STEP THAT CONGRESS COULD TAKE AND NEEDS TO TAKE TO MAKE SURE THAT WE DON'T LOSE MORE JOBS AND MORE PLANTS IN THE STEEL INDUSTRY IN THE NEAR TERM.

ALLOWING THIS CRISIS TO CONTINUE ANY LONGER CAUSES A NUMBER OF PROBLEMS. IT PLAYS HAVOC WITH THE LIVES OF STEELWORKERS AND THEIR FAMILIES, WHO'VE BEEN THROUGH SO MUCH TURMOIL ALREADY. IT SENDS ANOTHER ROUND OF SHOCK WAVES THROUGH LOCAL ECONOMIES IN AREAS THAT NEVER FULLY RECOVERED FROM THE LOSS OF STEEL JOBS IN THE '80S-ECONOMIES THAT ARE STILL STRUGGLING DESPITE THE STRONG NATIONAL ECONOMY. WE CANNOT LET ENTIRE PLANTS SHUT DOWN WITH THE EXPECTATION THAT THEY CAN START RIGHT BACK UP AGAIN WHEN THE CRISIS IS OVER. THE STEEL INDUSTRY DOES NOT HAVE THAT KIND OF FLEXIBILITY. THE COSTS INVOLVED IN SHUTTING DOWN OPERATIONS AND STARTING THEM BACK UP MAKE THE STEEL INDUSTRY DIFFERENT THAN MOST OTHER INDUSTRIES. IF WE LET THIS GO ON LONGER, WE'LL NEVER GET THESE PEOPLE BACK TO WORK BECAUSE THE PLANTS JUST WON'T BE THERE ANYMORE. THE U.S. STEEL INDUSTRY WILL SUFFER MORE PERMANENT DAMAGE AND THAT IS UNFAIR. IT'S UNFAIR BECAUSE OUR STEEL INDUSTRY IS THE MOST EFFICIENT IN THE WORLD AND THESE COUNTRIES WITH INEFFICIENT MAR