Steel import quotas rejected by Senate

Protectionist measure could set off trade war, damage to agriculture

`It's not over'

As House-approved measure dies, backers vow new campaign

Manufacturing

June 23, 1999|By Karen Hosler and William Patalon III | Karen Hosler and William Patalon III,SUN STAFF

WASHINGTON -- Under heavy pressure from the Clinton administration, the Senate easily derailed a quota bill yesterday designed to protect beleaguered U.S. steel producers from what they claim has been a flood of illegally low-priced imports.

Voting 57 to 42, the Senate refused even to allow the House-passed measure to come up for a vote, effectively killing the legislation. Opponents echoed the administration line that setting quotas to help the steelmakers would hurt the rest of the U.S. economy, particularly agriculture, and possibly ignite a trade war.

"We all have strong feelings about issues like this in our states," said Senate Majority Leader Trent Lott, a Mississippi Republican. "But free trade has been shown time and time again to benefit American consumers. We should not start down the trail of imposing quotas here and there."

The bill would have imposed quotas on steel imports for three years to bring their importers' shares of the market down to where they were in 1997, before economic meltdowns in Southeast Asia, South America and Russia caused steelmakers in those areas to dump steel on the only healthy open market in the world -- the United States.

World trade agreements prohibit nations from "dumping" goods on foreign markets at prices lower than they sell for at home. U.S. steelmakers contend that foreign companies have breached trade laws by dumping steel, getting illegal subsidies from their home governments, and at times pricing the product for less than it cost to make.

Those illegal actions, in turn, have caused profits to fall and forced smaller steel companies to fire workers, the U.S. industry has said.

Right now, the remedy is to file dumping charges with the U.S. government, a maneuver that tends to have a chilling effect on imports, but which usually takes a long time to resolve. The U.S. steel industry has been successful at winning cases against countries that it contends are competing unfairly. But in addition to the drawn-out process, the industry complains that those trade decisions are sometimes undercut by the Clinton administration, which many lawmakers said has been not aggressive enough about enforcing them.

Strong political cross-currents were at play in the quota debate. Hundreds of Steelworkers rallied on the Capitol grounds in support of the bill, while farmers pleaded with senators in agrarian states to vote against it.

Yesterday's lopsided tally in favor of killing the bill without a veto or final vote was believed to be strongly affected by the administration's desire to minimize damage to the presidential ambitions of Vice President Al Gore.

"It's not over," declared Sen. John D. Rockefeller IV, a West Virginia Democrat and lead supporter of the bill. He estimated that the administration had peeled away at least a dozen of the votes he expected, including three who came to him at the last minute.

Rockefeller said supporters of the legislation would regroup to devise a new strategy for their campaign, perhaps by attaching amendments to other legislation.

A bipartisan coalition of steel-state legislators argued that the industry has been deeply and unfairly hurt by the alleged dumping of cheap steel from countries such as Japan, Russia, China and Brazil at a time when sales were already down because of the Asian economic crisis.

"The U.S. steel industry is the most productive, efficient steel industry in the world and yet they are being wiped out by subsidized, illegally dumped steel," said Sen. Rick Santorum of Pennsylvania, the lead Republican supporter of the bill. "Thousands of families are not going to have paychecks."

For instance, Bethlehem Steel Corp., whose chairman, Curtis H. Barnette, has served as the industry's point man, is investing $600 million in its Sparrows Point plant to put an edge on its ability to compete.

Maryland Democrats Barbara A. Mikulski and Paul S. Sarbanes were among those senators voting to allow the measure to come up for a debate and vote.

Opponents successfully argued, however, that imposing quotas on steel not only invites retaliation on other U.S. industries but hurts U.S. businesses that use steel products.

"This bill is a job killer and a trade war starter," argued Texas Republican Phil Gramm. He quoted economic studies that predicted that the bill would save only 1,500 steelmaking jobs at a cost to the economy of about $800,000 each.

Gore has been on the spot because he will likely need the active support of organized labor to win the presidency, and the AFL-CIO has been leading the drive along with the Steelworkers union in favor of the quota bill. Yesterday's vote doesn't eliminate the damage, though, Rockefeller said.

"I begged him to make this his first [policy] break with the administration," Rockefeller said. "There are voters in Indiana, Michigan, Illinois, New York, Ohio, West Virginia, Texas and Arkansas who care deeply about this. I think it will be detrimental to him."

But inside the administration, political imperatives may have succumbed to economic realities. The president has billed himself as a free-trader. And the danger of starting trade wars aside, the president's advisers have been extremely concerned that any strident crackdown on imports could crush a tender overseas recovery from the "Asian Contagion." Those concerns have real merit with the Federal Reserve poised to raise interest rates -- a reversal from last year when it cut rates three times to head off a global economic implosion.

"Anyone who would like to see the domestic economic expansion continue, and the rest of the world economy continue its recovery can breathe a sigh of relief" that the quotas were voted down, said Daniel T. Griswold, associate director for trade policy studies at the Cato Institute, a free-market think tank based in Washington.

Pub Date: 6/23/99

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