Steel quota's end sparks debate over guarding industry

EXERCISING RESTRAINT

March 22, 1992|By Ross Hetrick | Ross Hetrick,Staff Writer

The looming expiration of Voluntary Restraint Agreements -- the diplomatic term for steel import quotas -- on March 31 has sparked a debate among steel companies about how to protect their troubled industry.

President George Bush has pledged that he will not extend the VRAs in favor of trying to conclude negotiations in Geneva on a much larger international accord on steel trading.

Officials from more than 30 steelmaking nations have worked two years on a pact aimed at ending steel tariffs within 10 years, eliminating quotas and other trade barriers, and limiting subsidies.

Many steel companies, worried about losing the protection they have enjoyed for eight years, are lobbying for an extension of the VRAs, which have limited imports to 20 percent of the U.S. market -- at least until the Multilateral Steel Agreement is reached. But other companies say extending the VRAs will only delay getting stronger trade laws.

This split among the steel companies is evident in Baltimore where Bethlehem Steel Corp. is pushing for extending the VRAs while Armco Inc. and Cyclops Industries Inc., stainless steel manufacturers, oppose prolonging the agreements.

But, all the steel companies agree stronger trade measures are needed to guard U.S. companies from what they call the unfair practices of foreign steelmakers, which they blame for ravaging the U.S. industry.

The VRAs were born in 1984 when steel imports claimed more than a quarter of the steel sales in the United States.

Bethlehem, which operates the Sparrows Point mill in Baltimore County, and the United Steelworkers of America filed a case against foreign steelmakers for dumping and subsidizing steel production with the International Trade Commission, the federal body that handles such matters. The case was brought under Section 201 of the Trade Act of 1974.

The ITC sided with Bethlehem and the Steelworkers and directed the president to take action against foreign steel imports, specifically recommending a series of quotas and tariffs. In reaction, then-President Ronald Reagan proposed the VRAs as an alternative. Under the agreements, major steel producing countries agreed to reduce their exports to less than 20.2 percent of the domestic market.

Despite the misgivings of some of the steel companies, the VRAs did what they were supposed to do. For eign steel penetration of the American market dropped from 26.4 percent in 1984 to 20.3 percent in 1988 and to 17.8 percent last year.

The protection, along with a prosperous economy, boosted the fortunes of the steel industry, which returned to profitability in 1987 and 1989 after five consecutive years of losses. Bethlehem enjoyed profits in 1987, 1988 and 1989. However, Bethlehem and the industry went back into the red in 1990 and 1991 as the recession cut sales.

The industry has invested $10.5 billion in new technology since 1986. Bethlehem has spent $3.2 billion on new equipment since 1984.

Such investments and other cuts have produced a more efficient U.S. steel industry that says it can produce and deliver steel at a lower cost than its foreign competitors. But industry representatives say the foreign companies still are subsidized and sell their steel below costs.

The VRAs were set to expire two years ago, but were extended by Mr. Bush with the hope that international trade talks on steel would have concluded by now. Bethlehem is urging Mr. Bush and Congress to extend the VRAs until an agreement is reached at the Geneva talks.

"Such an extension might defer trade cases while VRAs are continued and would keep public policy focused on a successful conclusion of [Multilateral Steel Agreement] negotiations with the disruption and confrontation that trade cases would cause," Curtis H. "Hank" Barnette, senior vice president and general counsel to Bethlehem, told the Senate Judiciary Committee on Jan. 27.

Bethlehem and the United Steelworkers plan to file unfair trade practice charges with the International Trade Commission if the VRAs are not extended, Mr. Barnette said. He contends that despite the protection of the VRAs, foreign companies have continued to sell their products below cost, with government subsidies providing 15 percent to 40 percent of the cost of the steel.

"If we are being injured by subsidized and dumped steel, don't we have a right to the protection of the law?" Mr. Barnette asked. "We are only seeking the protection of the established law."

Even if an agreement is reached, the company still may pursue the unfair trade charges, he said.

Armco, which owns the Baltimore Specialty Steels Corp. on East Biddle Street, agrees with Bethlehem that the industry has been victimized by foreign steel, but it does not see the extension of the VRAs as even a temporary answer. It wants a broader international agreement.

"If you put in VRAs again, you're saying you'll get to it [a multilateral agreement] in a couple of years," said John L. Bauer, vice president of the Washington office of Armco.

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