The six-member United States Federal Trade Commission has ruled the domestic steel manufacturing industry has been "seriously injured" by imports of foreign-made steel.

The investigation dates to this past June 2001, when President Bush directed the ITC to open a Section 201 investigation into whether the entire industry is threatened.

Section 201 of the Trade Act of 1974 (Global Safeguard Investigations) allows trade sanctions to be imposed on import products, solely on the basis that they are being imported to the United States in sufficient volume to endanger that particular domestic industry. There does not need to be any finding of dumping or unfair trade practice by the imports, simply that their presence in the marketplace threatens the existence of the domestic industry.

The ITC found 16 steel product lines out of 33 studied have been injured by imports. Those 16 lines together represent 80% of all U.S.-made steel. The findings are described in detail by TA-201-73, dated October 22, 2001:

• slabs • plate • hot-rolled • coated • tin • cold-rolled

• hot bar / light shapes • cold bar • rebar

• welded • flanges

• bar / light shapes • rod • flanges • tool steel • wire

• GOES

• ingots • rails • wire • strand • nails • heavy shapes • fabricated units

• seamless • seamless OCTG • welded OCTG

• slabs • plate • cloth • rope • seamless pipe • welded pipe

Within 60 days, by December 19, the commission must make its recommendations for penalties and/or sanctions and other ways to achieve trade relief for the industry. In this case, relief is likely to take the form of tariffs and quotas. President Bush then has another 60 days to approve the measures, which he is likely to do.

At that point, foreign steelmakers can appeal any measures to the World Trade Organization.

U.S. steelmakers have been pressuring the government for protection since 1998. In that period, over two dozen U.S. steelmakers have filed for bankruptcy protection.

The decision and remedies will lead to higher steel prices in the United States, which will then be passed on to consumers for everything from automobiles to washing machines.

The Consuming Industries Trade Action Coalition came out strongly against restricting steel imports in any way. They said, "The injury finding lays blame for steel's trouble at the feet of imports that peaked three years ago. The challenges facing integrated steel producers are therefore not imports, but overcoming legacy costs, correcting management mistakes, and responding quickly to the realities of the market."

Leo Gerard, President of the United Steelworkers of America, was understandably pleased with the finding. "This is a tremendous first victory in this journey. The tide has turned, we've got the tonnage covered, we'll keep the jobs. We want strong quotas and substantial tariffs for as long as we can get them."

USX-U.S. Steel CEO Tom Usher said, "The industry is on the verge of annihilation. It's very important that a strong remedy, which allows this industry to get back on its feet and restructure, takes place."

The ITC heard arguments from steel consumers and foreign producers saying the U.S. industry's history of widespread mismanagement, inefficiency and legacy costs are the roots of the problems. For example, 160,000 steelworkers are currently employed, but over 300,000 are retirees with substantial benefits packages. Retiree expenses add $70 to the cost of each ton of steel produced in the United States.

Japan Steel Information Center's Chairman Hidenori Tazawa said, "Many U.S. integrated steel mills are old, high-cost and inefficient facilities that cannot compete with U.S. mini-mills and are dragging down prices just to survive. With imports down dramatically since 1998, there is no legal or economic justification for a finding that increased imports are a substantial cause of the current economic situation of the U.S. steel industry."

David Phelps, President of the American Institute of International Steel, warned, "It most certainly will start directly a trade war with our allies."

Worldwide, steelmakers produce 110% of demand. Rather than cut production in facilities with high fixed costs, manufacturers have been engaged in long-running price wars to gain and maintain market share.