Monday 12 August 2002
18 Metal Bulletin

By Greg Rushford

Prime Minister Tony Blair has blamed US steel tariffs for helping drive long-troubled UK mini-mill ASW into receivership. But that was the idea back in March, when President Bush slapped tariffs as high as 30% on steel imports — to hurt foreigners. Bush wants the votes of grateful steelworkers in key Ohio Valley electoral states come his re-election race in 2004. There are no votes for him in places like South Wales or Kent.

But the Bush steel plan has also hurt hundreds of US businesses that make products from foreign steel. These businesses have been hit hard as US mills have jacked up prices. Ironically the Bush steel tariffs have given foreign manufacturers — who can buy their steel on the world market — a competitive advantage. Thanks to the Bush plan, manufacturers in Europe, Asia and Latin America who make things from steel are luring customers away from small US businesses.

Concerned congressman Donald Manzullo — an Illinois Republican who chairs the small business committee — has called for a Justice Dept anti-trust investi-gation into possible criminal price gouging by domestic steelmakers. "While the tariffs on foreign steel products were raised to 30%, many small manufac-turers have seen price increases on domestic steel rise even higher to 70 and 80%," Manzullo declared at a July 23 hearing on Capitol Hill. "The first law of medicine — do no harm — is also valid in trade." Manzullo has heard from more than 200 steel-using manufacturers, some of which complained that large steel producers have refused to honour existing contracts while hiking prices. "As they are unable to break their own contracts with their customers based on a higher steel price, the small manufacturers are caught in a vice," Manzullo reported.

Manzullo’s hearing was the first of its kind in 13 years. In 1989 Sam Gibbons, a Democrat member of the House of Representatives, held hearings before the ways & means committee’s trade panel that exposed the adverse consequences of US steel protectionism. Since then the Stand Up for Steel lobby has grown used to going unchallenged by lawmakers.

But last month some members of labour unions stepped forward to tell their stories to Manzullo. "I don’t understand why the union jobs of steel producers are any more important than my union job," said witness Gordon Jones, a drum loader at Chicago’s Trilla Steel Drum Corp, which makes drums used to transport products including hazardous materials. Trilla’s prices have risen more than 54% since March. Thanks to the Bush steel plan, the jobs of Jones and his fellow members of the Sign, Display, Pictorial Artists & Allied Workers union are in peril.

Robert Herrman, a machine technician at AJ Rose Manufacturing Co, belongs to the United States Steelworkers local in Avon, Ohio. AJ Rose makes metal stampings and air bag components for automakers and company president David Pritchard testified that without the (expensive) hot rolled material with its guaranteed tight tolerances that he buys from European steel giant Corus, his company is in trouble. Pritchard said that the tariffs have put him at a price disadvantage of up to 42%, and that he has been losing business to competitors in Brazil and Asia.

Herrman, who sat next to his boss at the witness table, articulated the human side of the story: "The steel tariffs were supposed to protect American businesses and save American jobs," the steelworker declared. "So why do the steel mills deserve to stay in business more than AJ Rose? And why are jobs at steel mills more important than the 250 jobs of the union associates who work at AJ Rose?"

John Grove, vp for procurement of Pennsylvania-based Cold Metal Products Inc, said that his company — also represented by the United Steelworkers union — was in a similar position. Cold Metal Products makes special and conventional strip steel for precision parts manufacturers, and also provides value-added products to manufac-turers ranging from automakers to consumer goods. Grove said that he has lost business to British and Chinese competitors because his company has "been forced to accept non-negotiable price increases of $130 per [short] ton".

Manzullo attributed the horror stories to "the law of unintended consequences". Surely the Bush administration had not anticipated that its tariff hikes would hit innocent US businesses so hard, the Republican reasoned.

Perhaps the White House did not want to anticipate the consequences.

As Manzullo spoke, one observer in the audience smiled knowingly. Jon Jensen is active in the consuming industries trade action coalition (Citac), whose steel-consuming members inspired the letters that led to the July 23 hearing. In 1989 Jensen was president of the Precision Metalforming Assn and a key witness when Gibbons’s subcommittee probed the adverse consequences of the Reagan administration’s "voluntary" steel quotas. "We have documented nearly 100 specific examples of where our members lost jobs, lost contracts to our competitors in Europe and in the Pacific" because of the US steel quotas, Jensen informed Gibbons. For Jensen, the Manzullo hearings inspired déjà vu.

When the Bush White House imposed its tariffs in March, what did officials expect would happen to US steel-consuming businesses? US Trade Representative Robert Zoellick learned the unhappy business of administering steel protectionism when he served in the Reagan administration in the 1980s. And earlier this year Citac sent a study to the White House warning that for every job in domestic steel mills, there are at least 59 jobs in the steel-consuming sector.

But the president’s men did not want to listen — instead they were concerned with garnering electoral support from thousands of energised "Stand Up for Steel" supporters in the Ohio Valley. While well-organised protectionists in mill towns are vociferous, small-business advocates of free trade in the steel-consuming sector are scattered and outgunned politically.

It’s that simple.

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