Steel import tariffs to cut both ways

Win-lose: The tariff on steel imports sought by domestic producers may save jobs in one industry but cut jobs in others and increase prices on a range of products.

March 03, 2002|By Kristine Henry | Kristine Henry,SUN STAFF

When a cargo broker needs to deliver foreign steel to the port of Baltimore, more than likely Robert Herb will get the call.

His company coordinates all the details needed to get steel into the port, from the pilots who guide the ships up the Chesapeake Bay to the tugboat operators who maneuver the ships to the stevedores who unload the cargo.

And Herb is as anxious as anyone to hear what President Bush will do about steel imports.

In the wake of an extraordinary lobbying campaign by U.S. steel makers and steel workers who blame imports for driving down prices and devastating the industry, the president is expected to announce by Wednesday what actions he will take.

Bush could implement the 40 percent tariffs demanded by the steel industry, he could impose lower tariffs or a combination of quotas and tariffs, or he could do nothing.

The White House has been largely mum on what the president will do, although some in the administration have indicated that Bush will likely impose lower tariffs than the steel makers are seeking and could impose "tariff-rate quotas," which allow a limited amount of steel into the country without duties.

Herb is hoping for the weakest restrictions.

"It is a life or death situation," said Herb, president and owner of Terminal Shipping Co. Inc. "It can put my company out of business."

On one side of the battle over tariffs is the Stand Up for Steel Coalition, made up of the United Steelworkers of America and their employers. About 150,000 people work for U.S. steel companies and there are 600,000 retirees and dependents whose health care and pensions are tied to the industry's fate.

The steel coalition has been extremely active in lobbying for a 40 percent tariff, which, if put in place, would likely raise the price of both imported and domestic steel by about 10 percent.

The coalition's push for a high tariff culminated Thursday with a huge rally near the White House that drew thousands of steel workers from across the country.

Steel imports to the United States reached an all-time high in 1998 with 41.5 million tons - 38 million metric tons. Since then, more than two dozen domestic steel makers have filed for bankruptcy protection, including Bethlehem Steel Corp.

Bethlehem, which employs about 3,500 in Baltimore, was also overcome by multibillion-dollar shortfalls in its health care and pension plans.

The price of hot-rolled steel averaged about $342 a ton between 1980 and 2000, but by October 2001 - the latest figure available - the price had fallen to $215.

A job saved but 13 lost?

Although not as vocal as the steel industry, steel users and others whose livelihoods depend on the material are waging their own fight against trade restrictions.

They claim to represent 12.8 million people and come armed with studies that argue higher steel prices and a decrease in imports will be just as painful - if not more so - for the economy.

A recent study by Robert W. Crandall, a senior fellow at the Brookings Institution, estimated that for every steel job that is saved, 13 jobs in steel-using industries will be lost.

"Not only would [40 percent tariffs] risk retaliation by the United States' trading partners, but it would punish many of the industries that have been most affected by the current economic downturn, namely the durable-goods industries - automobiles, appliances, furniture, electrical equipment, etc.," Crandall said in the report, which was commissioned by European steel maker Arcelor.

Another study, paid for by Consuming Industries Trade Action Coalition, concluded that higher prices and inefficiencies caused by the tariffs "would force consumers to pay a total of between $1.9 billion and $4 billion a year."

The Chevrolet Astros and GMC Safari vans that roll off the assembly line at General Motors' plant on Broening Highway are supported by steel frames made at Tower Automotive plant in Belcamp in Harford County. GM's contract with the supplier locks in prices, so any increase in raw material costs comes right out of Tower's bottom line. Each frame is made of about $60 worth of steel.

"If that goes up 10 percent, it has just increased the cost of our product by $6," said Jeffery Venanzi, head of operations at Tower's plant. "That will have a very severe impact on our profit margin."

And not only is Tower prevented from charging more for its frames, but every year GM pressures the supplier for even lower prices. Venanzi said Tower, which exclusively uses domestic steel, earned a small profit last year. But this year volume is down and the company is expecting a loss - even without tariffs.

"I'm proud of our country and what we've become as a country and I don't want to bad-mouth the [steel] union," he said, but rising steel prices are a major concern. "It is a very large factor looking forward."

For its part, the world's largest automaker said it is far more concerned about defeating pending legislation in Congress that would force automakers to improve fuel efficiency by 2013.

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