U.S. ends tariffs on some steel

Detroit praises move, but Big Steel hates it

December 15, 2006|By James P. Miller | James P. Miller,Chicago Tribune

In a move that cheered automakers but angered domestic steel producers, the U.S. International Trade Commission yesterday eliminated most of its controversial tariffs on carbon-steel imports.

The independent federal agency's ruling ends an unusual, high-profile feud between two American smokestack industries battered by global competition, Big Steel and its major customer, the auto industry.

The commission's action will lower the price auto companies pay for steel and bring a similar benefit to other major steel buyers, such as implement makers Caterpillar Inc. and Deere & Co.

Those same lower steel prices promise to pressure profits at many American steel producers. Shares of U.S. Steel Corp. and other steelmakers declined moderately after the commission's late-morning decision was made public.

The duties the ITC voted to remove "are outdated and hurt American manufacturing competitiveness and U.S. jobs," a Ford Motor Co. trade official said. The import restrictions, he added, have been "needlessly helping a steel industry that is now profitable and healthy."

But the domestic steel industry maintains that the tariffs are needed to prevent the kind of low-priced, sell-at-any-cost import practices that helped bring the steel industry to its knees in the 1980s and 1990s.

The United Steelworkers union, a prominent backer of the steel industry's efforts to retain the protective tariffs, complained that U.S. International Trade Commission had "turned a blind eye to the unfair trade practices harming our steel industry."

The commission's decision rewards the automakers' recent lobbying efforts, said Leo W. Gerard, president of the Steelworkers union. "Sacrificing one industry to unfair trade in a vain attempt to help another is a losing strategy for American manufacturing," he said.

The dispute over steel imports arose over allegations of "dumping," a strategy in which offshore producers sell their products in this country at below the cost to produce it.

When the U.S. International Trade Commission decides that American producers are being damaged by such under-pricing, the agency can impose tariffs, which raise the price of the offending import.

In 1993, the commission put such tariffs in place on corrosion-resistant flat-rolled carbon steel, a high-quality, high-profit product used almost exclusively in making automobiles and appliances.

The commission originally had set those duties on imports from six nations - Canada, Japan, South Korea, German, France and Australia. It separately established tariffs on carbon steel plate, a less economically crucial product, imported from 10 nations.

Under the law, tariffs are automatically lifted after five years, unless the commission holds a "sunset" review and finds that the domestic industry would still be damaged if the duties were removed.

When the commission opened its review of the carbon-steel tariffs in mid-October, automakers with a presence in the U.S. - Ford, General Motors Corp., DaimlerChrysler AG , Honda Motor Co., Nissan Motor Co and Toyota Motor Corp. - used the hearings to attack the levies.

In general, the automakers accused the U.S. steel industry of using the import protection to jack up prices and profits. The steelmakers said automakers' claims were "ludicrous" and "laughable."

Steel producers argued that the half-ton of corrosion-resistant steel that goes into the average car represents only about $400 in the cost of making the auto.

The dispute underscored a major change in the financial status of the two industries. When the dumping levies were imposed back in 1993, the U.S. steel industry was reeling from a combination of excess capacity and heavy import pressure.

The excess capacity that once kept prices low has been brought under control, and the survivors of the steel-industry shakeout are now in much better financial shape.

In contrast, U.S. automakers, have seen their fortunes decline sharply over the same period, their costs bloated by the same retiree pension and health care obligations that once shackled the steel companies.

James P. Miller writes for the Chicago Tribune.

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