Some Reassurance for Steel

Carter vows that international trade laws will be enforced

Only hours after issuing his scorching televised blast against oilmen, President Carter last week dropped in on steel executives meeting with his aides in the White House and gave them a far different message: international trade laws will be enforced. That pledge, mild as it might seem, came a few days after European and Japanese steelmakers had informally offered to restrict exports to the U.S., and it gave American steelmen some assurance that one of the nation's basic industries might get a little relief.

The occasion of Carter's remarks was itself unusual: a White House conference on steel, attended by mill and union bosses and presided over by the Administration's chief trade negotiator, Robert Strauss. That it was called constituted Administration recognition that the steel industry is in bad trouble: rising imports of cheaper steel from Japan and Europe in August captured almost 20% of the American market, causing layoffs of some 60,000 American workers, slicing steel company profits and forcing the closing of old mills in several cities. Steelmen have long complained that much of the foreign metal is being "dumped"--that is, sold in the U.S. below the cost of production. But little was done about the problem until two weeks ago, when the U.S. Treasury accused five Japanese steelmakers of dumping carbon plate and ordered them to post bonds totaling $50 million to cover penalty tariffs that Treasury might later assess against their products.

Dumping is universally recognized as a violation of international trade law, but Carter confessed to the steelmen that he had been unaware of the problem until last week. Now, the President said, "we're going to do something about it." Said Edgar Speer, chairman of U.S. Steel: "We have been assured by this Administration that it would act promptly and aggressively on any antidumping cases brought before it."

How much relief this can ultimately bring to the U.S. steel industry is questionable. The Treasury Department will have to thrash out pricing problems that approach the metaphysical. According to the way they add up the numbers, for example, the Japanese steelmakers contend that they are not dumping, just producing steel more efficiently. American mill executives swear that cannot be true. Says Speer: "No foreign producers, including those in Japan, can manufacture steel, ship it to this country and undersell our domestic product without engaging in unfair trade practices."

The Administration pledge to enforce antidumping laws has momentarily lowered the protectionist fever that had been mounting in the U.S. and the rest of the industrialized world (TIME, Oct. 17). Speer, who as head of the American Iron and Steel Institute is the industry's spokesman, said he did not recommend to Carter a so-called orderly marketing agreement, under which the Administration in effect would negotiate with other countries quotas on foreign steel to be shipped into the U.S. An OMA has been much talked about as a temporary balm for steel; similar agreements already restrict imports of shoes and color-television sets. The United Steelworkers of America is for a steel OMA, but the executives who met with Carter and Strauss last week declined to press for one. The steelmen are awaiting a report from an Administration task force, headed by Treasury Under Secretary Anthony Solomon, on ways to help the industry. The Solomon report, due in four or five weeks, could recommend an OMA for steel, tax credits for the industry, or even changes in antitrust law that would help American companies get together to overcome the pricing advantage that foreign steel mills have over U.S. companies.

American steelmakers got a bit more help last week when European producers, meeting in Rome, proposed to set voluntary limits on their sales in the U.S. The Japanese steel industry had made a similar proposal two weeks earlier. American steelmen mostly see the offers as politically inspired attempts to avert more drastic U.S. action against steel and other imports, but the offers nonetheless indicate that the foreign producers realize they may have been pressing their competitive advantage a bit too hard.

None of that is likely to solve the long-term difficulties of the steel industry. The trouble is the worldwide low level of capital investment. Sluggish global economic growth and new technologies--the building of smaller cars, for example--have reduced worldwide demand for steel and left mills in Europe, Japan and the U.S. with excess capacity. The Europeans and Japanese have been trying to get rid of the surplus steel by selling it in the U.S.--and also to each other; Europeans complain about the Japanese invading their home markets. U.S. steel companies have a special problem: many of their mills are old and inefficient by European and Japanese standards, and they are burdened by high labor costs as a result of generous wage boosts granted to workers. One result: third-quarter profit reports of American steel mills, to be released next month, are expected to be among the worst in the history of the once proud industry.

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