U.S. steelmakers spring back Quotas expire today as industry shows new competitiveness.

March 31, 1992|By New York Times News Service

The American steel industry, long a symbol of decay in industrial America, has undergone a transformation in the last decade that has drastically sharpened the industry's competitive position.

Now, after the government has provided a decade of protection from imported steel, the Bush administration has decided not to extend quotas on imported steel that expire today. The move reflects the industry's improved condition and the administration's preference for using existing laws to fight what it sees as unfair trade practices.

American steelmakers have so improved their productivity that the industry now often rivals -- and in some aspects outperforms -- its competitors in Germany and Japan. Japanese automakers, including Toyota, Honda and Subaru, are using American steel in their plants in the United States.

Thanks partly to the lower value of the dollar, foreign steel shipments into the United States have fallen in recent years to the point that they are below the limit the government had set. And the industry's bellwether efficiency measure -- the man-hours needed to produce a ton -- is at a record level.

Exports, which in the last 20 years have rarely accounted for more than 2 percent of all the steel shipped from American mills, soared last year to 6.3 million tons, or about 8 percent. And customers contend that the quality of American steel is better than ever, comparable with that from foreign steelmakers.

"The steel made in the United States is equal in quality to steel made anywhere in the world now," said James M. Glazebrook, director of General Electric Co.'s trading operation. "And the industry is now being recognized more and more throughout the world, not only for having top quality, but for being among the best in the world in efficiency. You could never have said that 15 years ago."

Trade protectionism gets some credit for the comeback of the big steelmakers, but so does domestic competition from low-cost, non-union "mini-mills" that pushed the big mills to change their ways. The value of the dollar played a big role, too.

When the dollar was strong in the mid-1980s, American producers recognized that they had to become more efficient to block inroads by imported steel. When the dollar later weakened, foreign steel prices rose and imports fell.

Over all, the effectiveness of protectionist measures is mixed. Protection has been a boon to some industries, such as motorcycle makers, who have been rejuvenated after four years of tariffs on foreign makes, but it has backfired for the automobile industry, where Japanese manufacturers got around the import limits by building plants in the United States and capturing still more market share from Detroit.

The steel import quotas "have been an important help to the industry's recovery," said the Rev. William T. Hogan, a professor of economics at Fordham University and author of several books on the steel industry. "The agreements have given them an opportunity to catch up."

He added that the steel industry spent $23 billion in the 1980s to modernize plants and buy efficient equipment. Some of the money came in the form of joint ventures with Japanese and South Korean steel companies. "Without the agreements," Mr. Hogan said, "we would have a high influx of imports, and I doubt they would have been able to invest as much."

The decision by the administration, which was confirmed yesterday by Gary R. Edson, general counsel for the U.S. trade representative, suggests that American trade negotiators and some steel industry executives would prefer to open the market to steel imports, but would insist that foreign governments commit themselves to ending subsidies.

The administration is negotiating in Geneva for a multilateral agreement with steel-producing nations, hoping to determine levels of imports through a more flexible policy centered not on import quotas but on restricting government subsidies.

"The foreign producers are not using their quotas, and demand in the United States is down," said John I. Griffin, president of the Maurice Pincoffs Co., a Houston-based steel-trading company.

Mr. Griffin, who is also president of the American Association for International Steel, said the voluntary-restraint agreements that produced the steel quotas were "designed to give the American steel industry time to catch up with foreign steel." He added, "But the industry in the United States is certainly catching up, if it has not caught up already."

American steelmakers still have weapons for trade battles. They can file legal cases against foreign producers accusing them of selling steel below cost or of benefiting from government subsidies.

Despite the emergence of big steel companies as trimmer and more efficient operations, they are still plagued by the effects of continued overcapacity. There is more steel than demand, and that has caused prices -- and profits -- to remain in the doldrums.

A ton of the sheet steel that goes into cars is priced at about $440 now, but was $504 in 1980. The six largest producers lost a combined $2.3 billion last year.

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