Clinton's iron will and steely resolve on strategic trade

[Charles Jannuzi]

This piece from then is highly indicative of
something, I think. If nothing else, let us
emphasize the continuities across Clinton and
Bush. Like when the Bush administration people
say something just like this:"The President and
Ambassador Barshefsky reiterated that Japan
cannot expect to export its way out of its
recession; rather, it must take decisive and
immediate steps to revive its economy and
consequently its domestic demand for steel."

 If you are in the habit of reading LBOT quickly,
please realize this is NOT a current news release
but historical artefact courtesy of Tim Berners
Lee and my ability to clip and paste plain text.

CJ   

http://usembassy.state.gov/seoul/wwwh4463.html

(see also:
http://usembassy.state.gov/seoul/wwwh4466.html
http://usembassy.state.gov/seoul/wwwh4462.html)

  USTR'S ESSERMAN ON STEEL IMPORT SURGE POLICY 
(She cites multilateral, bilateral efforts) 

--------------------------------------------------------------------------------

Washington -- The Clinton administration response
to a surge in steel imports has combined
multilateral efforts aimed at resolving the
global financial crisis and bilateral efforts
aimed at steel-producing countries, an Office of
the U.S. Trade Representative (USTR) official
says. 


In November 30 testimony before the Senate Steel
Caucus, the official, USTR general counsel Susan
Esserman, said the financial crisis precipitated
the surge of imports. She said the administration
intends to monitor implementation of trade policy
and market reforms required of countries rescued
by the International Monetary Fund (IMF).

She also cited expedited administration handling
of dumping cases concerning imports of hot-rolled
steel from Japan, Russia and Brazil. She
discussed President Clinton's discussions during
his November trip with Japanese and Korean
leaders about their steel production.

Of the 34-percent increase in finished steel
imports so far in 1998, Esserman said, Japan,
Korea and Russia accounted for 84 percent of the
increase.

Following is the text of Esserman's testimony as
prepared for delivery:

(begin text)

Testimony of Susan Esserman General Counsel
Office of the United States Trade Representative
before the Senate Steel Caucus

November 30, 1998

Thank you, Mr. Chairman, for providing the
opportunity to discuss steps the Administration
has taken to date in response to the recent rapid
rise in imports of steel.

Our goal in this effort is clear: We seek to
ensure that competitive American steel companies
and steel workers have the opportunity to compete
fairly and not be asked to bear the burden of an
economic crisis they did not create. In pursuit
of this goal, we are vigorously and expeditiously
enforcing our own trade laws; engaging in
consultations with steel exporting and importing
countries aimed at ensuring fair trade and
sharing the import burden; and working with the
IMF and our trading partners to address the
financial crisis which has reduced world demand
for steel.

This is a top-level concern for our
Administration. President Clinton personally
expressed his deep concern about steel trade,
both in public and in private meetings, including
in his recent visits to Japan and South Korea.
Ambassador Barshefsky has done so as well in
meetings with European and Asian officials, as
has Secretary Daley. The Administration as a
whole has already taken a number of actions to
address the situation, and is assessing other
options including those recommended by industry,
labor, and members of Congress. We welcome the
opportunity the Steel Caucus has provided us to
review this important issue.

IMPORTANCE OF THE STEEL INDUSTRY TO THE U.S.
ECONOMY

The American steel industry is critically
important to our economy, including as a vital
contributor to the auto, high-tech, and
construction industries and many other sectors.
The steel industry employs 235,000 American
workers and supports employment in many related
industrial and service fields.

Internationally, the United States is the world's
third largest producer of steel after China and
Japan, with production of 110 million metric tons
of crude steel in 1997. Over the last several
years, due to strong demand and favorable market
conditions, U.S. and foreign firms have added
substantial new steel capacity in the United
States, amounting to about 9 million metric tons.
We have a highly competitive industry, which can
compete and succeed in a market that is not
distorted by subsidies and government
intervention.

However, many foreign governments continue to
view steel production and self-sufficiency in
steel as prerequisites for industrialization.
Foreign steel industries, therefore, have often
been supported through government subsidies to
encourage expansion or forestall restructuring
and layoffs. Thus, overcapacity has been a
long-term problem in the industry.

EFFECTS OF THE FINANCIAL CRISIS AND RECENT MARKET
DEVELOPMENTS

This year, the chronic problem of overcapacity
has been compounded by the financial crisis and
the catastrophic drop in demand in Asia. As a
result, a high volume of shipments has been
diverted from Asian to North American markets.
Aggravating the situation further, substantial
Russian excess steel tonnage, much of which had
found a home in Asian markets, also shifted to
the United States.

As a result, steel imports to the United States
have surged. This year, through September of
1998, the United States imported 27.7 million
metric tons of steel. This represents an increase
of 27 percent over the 21.8 million metric tons
we imported in the first nine months of 1997 and
close to the approximately 28 million metric tons
total we reached in 1997.

This is the highest figure ever recorded for U.S.
steel imports. Imports of finished steel products
grew at an even higher rate, reaching 22.8
million metric tons by the end of September -- an
increase of 5.8 million metric tons, or 34
percent. Most major foreign steel producers have
contributed to this import growth. However, the
increase is concentrated in three countries,
which together account for 84 percent of the
increase. They are:

-- Japan, now the single largest source of
imports at 4.1 million metric tons through
September, up 154 percent or 2.5 million tons,
accounts for 43.3 percent of the import growth;

-- Korea, now the fourth largest source of
imports at 2.2 million metric tons through
September, up 138 percent or 1.3 million tons,
accounts for 22.7 percent of the import growth;
and

-- Russia, the third largest supplier at 3.2
million metric tons, up 47 percent or 1 million
tons through September, accounts for 17.6 percent
of the import growth.

Measured by product category, the largest
increase has been in hot rolled carbon flat
steel, in which imports grew by 2.6 million
metric tons. This growth in hot rolled imports
accounts for 45 percent -- nearly half -- of the
total import growth we experienced so far in
1998. Japan and Russia together account for 84
percent of this increase. U.S. producers and
unions have filed dumping cases on these imports.

The second largest product increase is in heavy
structurals, which are up 1.2 million metric tons
or 187 percent. This is followed by bars, up 0.7
million metric tons or 41 percent; and pipe and
tube, up 0.6 million metric tons or 28 percent.
These are the largest increases in tonnage, but
increases are evident in almost every product
type.

Equally dramatic as the growth in import volume
has been the steep drop in prices. The value of
the average imported net ton of steel had dropped
from about $450 to $370 since the beginning of
1998. This has placed substantial downward
pressure on steel prices in the United States.

During this period, U.S. steel production and
employment have fallen. The American Iron and
Steel Institute (AISI) reports that capacity
utilization has dropped to 77 percent this month
as compared with 91 percent a year ago. Further,
AISI estimates that 2,500 workers have been laid
off this year, and 10,000 more affected in other
ways.

ACTIONS TO DATE

To date, we have taken steps in three broad
areas:

1. U.S. Trade Remedy Laws

Our efforts begin with vigorous enforcement of
our trade laws. Maintaining strong trade laws and
vigorous enforcement has been a critical element
of our trade policy. Dumping orders are in effect
for a number of steel import categories, and most
products covered by these orders are already
subject to import duties. In response to the
recent surge in imports, the U.S. industry and
workers have filed dumping cases against hot
rolled steel from Japan and Russia, which account
for a large proportion of the recent increase, as
well as cases against Brazil. As you will hear
from Undersecretary Aaron, the Commerce
Department is administering these cases on an
expedited basis. It has made early determinations
on critical circumstances to afford the earliest
possible relief consistent with U.S. law.

2. Bilateral Initiative in Support of Fair Trade

We are also engaging Japan, Russia, Korea, other
steel producing countries, and the European Union
in consultations on steel trade beyond these
particular products and cases, with the goal of
ensuring that nations follow fair trading
practices, respect established international
rules, including refraining from subsidization,
and fairly share the burden of absorbing
additional steel imports. Let me briefly review
these initiatives:

Japan -- Japan is responsible for almost half of
the recent increase in steel imports. During his
trip to Japan 10 days ago, the President
expressed concern about the enormous increase in
Japanese steel imports into the United States.
Citing the 500 percent increase in imports of
Japanese hot rolled steel into the United States,
the President underscored the need for fair,
rules-based trade and greater market opening, as
well as the need to avoid market penetrations
that have no relationship to market forces. The
President and Ambassador Barshefsky reiterated
that Japan cannot expect to export its way out of
its recession; rather, it must take decisive and
immediate steps to revive its economy and
consequently its domestic demand for steel.

Russia -- As I noted earlier, hot rolled steel
from Russia is already the subject of a dumping
case. We are also looking for other ways to
secure early and effective relief for the
industry and its workers.

Korea -- Led by President Clinton, we have an
active dialogue under way with Korea on steel
issues, aimed at placing its steel sector on a
market footing. As in Japan, President Clinton
made clear in Korea, in public and in a private
meeting with President Kim, that the openness of
the U.S. market depends on nations playing by the
rules. He asked President Kim that special care
be taken to avoid unfair trade practices or
subsidization in sensitive sectors such as steel.
He emphasized the need for further progress in
our expanded steel dialogue.

We have been engaged in extensive and detailed
consultations with the Korean Government
regarding Hanbo Steel, which has been an
important concern of our industry. Hanbo has now
temporarily shut down production of hot rolled
sheet. We worked to obtain assurances from the
Korean Government that it will not support or
direct others to support Hanbo, and that the
company will be sold based on transparent
international procedures. We are continually
monitoring those commitments.

We have recently expanded our dialogue to include
concerns with two other Korean steel producers:
POSCO, the world's second largest steel producer,
and Dongkuk, a large producer of cut plate which
is being shipped to the United States. The Korean
government is in the process of selling its
remaining 33 percent share of POSCO. Our goal is
to ensure that POSCO is fully, expeditiously, and
permanently set on a market footing. We also want
to ensure that Dongkuk is not benefiting from
government support.

European Union -- We have pressed the European
Union to bear its share of absorbing the excess
supply of steel in the world market. In her
recent visit to Brussels, Germany, France and
Britain, Ambassador Barshefsky, while
acknowledging that the EU has also experienced
substantial steel import increases, underscored
that the EU's steel imports from Russia are only
half of our Russian imports, and its imports from
Japan are only a tenth of our Japanese imports.
We have thus urged the European Commission to
review its import licensing and quota
arrangements with Russia and other former Soviet
republics and to examine reasons for the low
levels of imports from Japan.

3. Addressing the Financial Crisis

Third, we are addressing the financial crisis,
which has precipitated the recent surge in steel
imports into the United States. Our targeted
steps in steel trade thus come against the
backdrop of a broader macroeconomic and
international economic policy designed to help us
weather this international financial crisis with
minimum damage to the U.S. economy. This includes
the recent Congressional appropriation of IMF
funding and the important conditionalities in the
IMF stabilization programs in Korea, Thailand and
Indonesia, which require structural trade policy
reforms, including goods and services market
liberalization, restrictions on the use of funds
for subsidization purposes, enhanced competition,
and commercial and financial decisions based upon
the disciplines of the market, transparency and
deregulation. These steps, in addition to our
bilateral efforts with key countries, are aimed
at restoring stability and growth abroad, which
in turn will help revive domestic demand for
steel products in these Asian markets.
Restoration of growth in Asia is critical to
reducing the steel import pressure on our market.

The Administration has also developed a
monitoring program to help ensure full
implementation of the commitments made to the
IMF. USTR and the Department of Commerce are
actively monitoring actions taken by IMF
recipients to implement their trade-related and
subsidy commitments, and the State Department has
instructed our Embassies to supplement these
efforts. The information collected is reviewed
with the Treasury Department, which uses its
representatives to the international financial
institutions to ensure its effective use.

4. Other Options

Finally, we are also continuing to consult with
industry, with the unions, and with Members of
Congress on further steps we might take. We will
listen carefully to all suggestions to address
this situation and work closely with all
interested groups.

CONCLUSION

In conclusion, let me say that this year's sharp
rise in imports has presented America's steel
producers and workers with a very difficult
challenge. The Clinton Administration is
determined to provide an effective response.

The steel industry is a critical part of our
economic strength. Its companies, workers and
communities deserve an environment which gives
them a fair chance to compete and succeed. We
intend to continue to work with the industry, its
workers, and Members of Congress toward that
goal.

Once again, I thank the Steel Caucus for holding
this hearing.

(end text)


 
 


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