Old Headache

Steel seeks more protection

Big Steel is once again protesting about imports. Only this time the object of the complaint comes from a different direction. The battered industry, which lost $3.2 billion during 1982, had been feeling somewhat buoyed earlier this year. In October 1982, the Government had persuaded the European Community, one of the heaviest shippers of steel to the U.S., to hold back exports for a while. The other big exporter, Japan, had been voluntarily restricting sales. The results were dramatic. In the first nine months of this year, Japan reduced shipments to the U.S. by 35% compared with the same period last year. During that time, the European Community trimmed its exports by 36%.

But the break from imports has not materialized. Such Third World steel producers as Brazil, Mexico and South Korea are leaping into the void. In the first nine months of 1983, Brazil's exports increased by 82% over last year's and South Korea's rose by 46%. Mexico's steel sales in the U.S. rose ninefold, from 47,000 tons during the first nine months of last year to 428,000 tons over a comparable time.

While the share of the U.S. market going to imports has declined from 22.4% to 19.6% during the first nine months of this year compared with the same period in 1982, American steel companies are again demanding trade protection. Says U.S. Steel Chairman David Roderick: "Importation has reached dangerous levels." Last month U.S. Steel filed complaints with the Commerce Department against Brazil, Mexico and Argentina, asking Washington to slap tariffs on imports from those countries. According to U.S. Steel, government-subsidized industries are selling shipments in the U.S. at below their cost of production. Earlier this year the Commerce Department found that Brazil was selling wire rod at discounts of 50% to 67%.

Companies buying foreign steel, though, counterattacked last week during the annual meeting of the American Institute for Imported Steel. Fred Lamesch, the group's newly elected president, warned that quotas could increase prices for steel products in the U.S. by as much as 20% next year and maintained that such measures would only lead to an inefficient U.S. steel industry. Said he: "Protectionism makes an industry become lazy and nonaggressive in modernizing."

Robert Crandall, a senior fellow at the Brookings Institution in Washington, agrees that setting up import barriers is futile. "Shutting down a product flow in one direction simply means that steel comes in from some other country," he said. "We cannot raise prices in the U.S. relative to the rest of the world and then complain about the deindustrialization of America."

The Reagan Administration is likely to oppose any sweeping quotas on steel imports. Says U.S. Trade Representative William Brock: "The laws are adequate to deal with the problem on a case-by-case basis."

The basic problem in world steel is that excessive capacity is simply causing too much production. Says Roderick: "World steel capability is being added at a pell-mell pace without regard to demand, to cost and price." Deeply indebted Third World countries are manufacturing as much steel as possible in order to earn currency to pay off their loans. Mexico, which owes $85 billion, and Brazil, which is $93 billion in debt, need all the income they can get. Just last month Brazil's President Joao Figueiredo inaugurated his country's new, $3 billion Companhia Siderurgica de Tubarao steel works, the biggest in Latin America. Tubarao has no firm export orders yet. Said one Brazilian steel consultant: "We've tried not to assault U.S. companies that are just beginning to recover from the recession. But our sales to the U.S. are critical." This file is automatically generated by a robot program, so viewer discretion is required.