Steel's Deal

Aid for an ailing industry

Big Steel has big problems. The nation's mills are currently operating at only 66% of capacity, while the U.S. imports nearly 17% of its steel. In the first eight months of 1980, domestic mills produced an estimated 35 million tons for U.S. consumption, while imports totaled 10.6 million tons. Blue-collar employment in the industry has slumped from a high of 544,000 in 1953 to 264,000 in July. Profits of four of the five leading steel companies are expected to decline sharply this year.

It was, therefore, with an air of urgency that President Jimmy Carter last week announced a six-point program to aid the ailing industry. The President's plan will give steel some tax relief, loosen antipollution regulations, and provide protection against foreign imports. Although the proposals were less than steelmen wanted, they generally applauded the measures. Said one top steel official: "This industry has been a whipping boy for 50 years. Now we find the Administration in power saying we need to support steel and not knock it."

At the heart of Carter's program is a revival of the trigger price mechanism (T.P.M.), which was adopted more than two years ago to protect U.S. producers against competition from low-priced foreign products. If imports enter this country at less than the minimum or trigger price, an antidumping investigation is launched. The trigger price is based on the cost of production in Japan, which has the world's most efficient steel factories. In the past, the steel industry has complained that the T.P.M. was inadequately enforced and set too low, thus allowing cheap imports. It also accused the Europeans, whose production costs are generally higher than those of the Japanese, of dumping steel in the U.S. at low prices. U.S. Steel last March filed a complaint before the Commerce Department and International Trade Commission against steel producers in seven countries of the European Community, charging them with selling $1.3 billion worth of steel in the U.S. during 1979 at less than its cost of production. The Administration, fearing that U.S. Steel's attempts to block imports might set off a trade war, responded by suspending the T.P.M.

The new trigger price system will be set 12% higher than the average March level of $358.31 a ton. In addition, a new "antisurge provision" requires a Commerce Department review whenever imports exceed 13.7% of steel consumption in the U.S. at any time that the domestic industry is running below 87% of capacity. After the announcement, U.S. Steel dropped its case against the European producers.

The rest of the Carter program includes: tax incentives for plant modernization, increases in research, a three-year extension for fulfilling the antipollution requirements of the Clean Air Act, and subsidies for workers and communities affected by industry layoffs and plant shutdowns. One likely effect of the Carter program will be to increase steel prices, since domestic steelmakers will now be able to raise prices without as much fear of low-cost foreign competition.

The steel plan again raised questions about the Government's role in aiding declining sectors of the economy. Says Murray Weidenbaum of Washington University: "None of this deals with the underlying problems that have created the steel industry's competitive problems. It's like handing a faulty parachute to a man who has fallen out of an airplane." Big Steel will now have to prove that a little bit of Government will help it land safely. sb

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