Import group decries U.S. aid

Trade association says domestic makers get billions in help

Steel industry

November 30, 1999|By Jay Hancock | Jay Hancock,SUN NATIONAL STAFF

WASHINGTON -- American steelmakers, who often complain that foreign-government subsidies give an unfair advantage to steel companies in South Korea, Japan and elsewhere, receive similar assistance themselves in billions in state and federal aid, an industry group said yesterday.

U.S. plants such as Bethlehem Steel's Sparrows Point mill in Baltimore County get substantial federal tax breaks and state economic development assistance, said the American Institute for International Steel, a Washington-based trade association of importers and other distributors.

"These guys have egg on their face," said David Phelps, AIIS' executive director. "They're constantly crying that everyone is subsidizing and the whole world's unfair. Well, these guys run to the trough as quickly as anybody."

U.S. taxpayer infusions prop up inefficient factories that otherwise might close or shrink, Phelps said, distorting the steel market and diverting resources that could be better invested elsewhere. The subsidies should go on the agenda in global trade negotiations for possible elimination or reduction, AIIS said.

U.S. complaints about foreign steel subsidies are a leading topic this week in Seattle, where the World Trade Organization intends to start negotiations on reducing global business barriers.

AIIS members -- U.S. steel importers and other middlemen -- benefit from lower trade barriers. While AIIS is backed by importers and even includes members that are subsidiaries of foreign steelmakers, the organization opposes steel subsidies everywhere and has done so for years, Phelps said.

According to the report, state and local giveaways to U.S. steel concerns have added up to more than $1 billion over the past two decades, mostly in the past 10 years. Among the biggest packages: $78 million for Steel Dynamics Inc. in 1994 and $71 million for AK Steel Corp. in 1997, both in Indiana; $60.5 million for Granite City Steel in 1995 in Illinois; and $75 million for Bethlehem Steel Corp. in Baltimore County in 1997.

U.S. steelmakers have had a terrible two years, as collapsing foreign currencies and excessive global manufacturing capacity have driven down prices.

The Bethlehem Steel incentive, to retain the company's new cold-rolling mill in Maryland, is one of the state's biggest. The $75 million in subsidies includes grants, low-interest loans and an agreement by Baltimore Gas and Electric Co. to build a substation next to the plant and reduce rates.

As have many states, Maryland has extended tax breaks, cash grants, low-cost loans and other inducements in recent years to lure new employers from all types of industries or to keep existing employers from moving elsewhere. A recent series of articles in The Sun showed that state and local subsidies for all kinds of businesses exceed $3 billion a year nationwide.

Meanwhile, the AIIS study said federal subsidies for the steel industry have exceeded $4 billion in the past 20 years, the result of prolonged and intense lobbying by unions and steel corporations.

U.S. steel corporations denied that the subsidies documented by AIIS are comparable to taxpayer infusions for foreign steelmakers.

The U.S. aid is small compared with the huge direct investments made by foreign governments in their domestic steelmakers, said Andrew G. Sharkey III, president of the American Iron and Steel Institute, a big steel trade group.

What's more, he said, U.S. subsidies aren't an unfair trade practice because U.S. mills export little steel. Subsidies break international rules only when goods are unloaded below cost in foreign markets, he said, and that is not happening with U.S. steel plants.

Bethlehem Steel Chairman Curtis H. Barnette said the AIIS study "grossly exaggerates" taxpayer subsidies received by U.S. steel firms.

Backed by importers who benefit from cheap foreign steel, Barnette said, the study "was clearly compiled in an effort to draw attention to this issue" as the World Trade Organization meets in Seattle.

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