Steel Tariffs

STEEL TARIFFS

Mr. ALEXANDER. Mr. President, I would like to make a few remarks about the report of the International Trade Commission on steel tariffs, which was made over the weekend. Late last Friday night, the International Trade Commission released its report on the impact of the steel tariff. The steel tariff is a tax. It is a tax that the administration imposed in March of 2002 on at least 10 different kinds of imported steel, including the kind of steel that is used to make automobiles and trucks in this country. The effect of the tariff was to increase the price of that steel up to 30 percent. It had a noble purpose. The President hoped to save some steel jobs in this country.

The International Trade Commission (ITC) over the last several months has taken a lot of testimony and done a good deal of study to see what was the impact of that decision made in March of 2002 on both the steel industry, the steel producing part of our country, and on the automobile industry and on the other steel consuming parts of our economy. The report's finding on the overall economic impact of the steel tariff was not very surprising. According to the report, the steel tariff has saved a few steel jobs by raising the price of steel. But it has cost U.S. manufacturers, the auto parts suppliers, for example, over $680 million. The report also claims that somehow to make up for this, the tariff revenue to the U.S.
Government, collected on the steel that came in from outside the country, was about $650 million. So the ITC estimates that there was not too much damage to the economy, only a $30 million loss in GDP.

But what that overlooks is who paid the tax? It was, in part, the struggling auto parts suppliers who are manufacturing parts in this country in competition with auto parts suppliers all over the world. They paid the tariff to the federal government directly when they shipped in foreign steel themselves and in part indirectly when they paid higher prices to their distributors who brought in steel from abroad for them. They paid the tax.

What has happened over the last year and a half, when all of us have been making speeches about how our greatest economic challenge may be how to keep our manufacturing jobs from moving overseas, is that we have imposed upon our manufacturers a tax, a tariff that has increased their costs by up to 30 percent and made them less competitive.

As a result, they have done what manufacturers have to do. Rather than lose money, they have laid off a few employees or they have begun in a few cases—I know this in my own State of Tennessee; we are a big manufacturing State and one-third of the manufacturing jobs are automotive jobs—they have begun to move their parts suppliers to Mexico or Japan or Korea or other parts of the world where parts can be made, paying the global steel price.

So, yes, we may have brought in $650 million to the U.S. Treasury in the tariff, but it has been paid on the backs of the steel-producing auto parts suppliers and other steel consumers of this country, and it has had the effect of driving jobs overseas.

The report also illustrated something we knew to be true; that the steel tariff is hurting steel-consuming firms all across the United States, from auto parts suppliers to home appliance manufacturers, to tool and die shops to metal stamping facilities. All of these steel-consuming firms have been affected by the burden of the steel tariff in some shape or form.

Here are a few things the report said: One-half of the steel-consuming firms surveyed reported they had difficulty in obtaining steel in the qualities and quantities they needed. That is an added cost.

Second, almost a third of these firms relocated or shifted production to foreign plants, facilities, after the implementation of the tariff.

That is exactly what we do not want in this country is any kind of new cost added by the Federal Government which causes a parts supplier in New Hampshire or Tennessee to move a plant overseas.

Third, one-quarter of these steel-consuming firms reported that their customers shifted to purchasing finished parts or assemblies overseas as a result of the steel tariff.

Let's say you are making a sunroof in Gordonsville, TN, and the cost of steel goes up 15 or 20 percent and that is the major raw material you are using. The Nissan Smyrna plant in Tennessee can buy that roof from just down the road in Gordonsville, everything else being equal, but the sunroof can also be made to a high standard of quality in many other countries in the world—in Japan, in Korea, in Mexico, in Canada. If costs are too high, too much out of whack, then the
American automobile plant, in order to keep its costs down so it can be competitive, will buy that finished part from overseas. That is not subject to any tariff.

Fourth, almost one-third of these firms reported the contracts they had in place to purchase steel were broken or modified after the tariff was imposed and reported a loss in profits due to these problems of approximately $190 million.

Finally, one-third of these firms reported longer lead and delivery times.

This also is very important. There is such a thing as just-in-time delivery in the automobile business. That is why in
Tennessee we have gone from having two dozen auto parts suppliers 12 or 14 years ago to more than 950 today. The
Toyota plant and the Nissan plant and the Saturn plant and the Mercedes plant—all of them located in the South, some still located in the Midwest—they like to have their parts suppliers nearby. If those firms have longer lead and delivery times, it makes that just-in-time delivery advantage less reliable.

In addition, the report further highlighted the impact the steel tariff had specifically on auto parts suppliers. There are a lot of automotive people in the country. Historically, they have been in Michigan and in Ohio—the song "Detroit City" was written about Tennesseans who went to the Midwest to get good jobs and send the money home, and then they would come back themselves one day. Now, a lot of those auto parts suppliers have followed the auto plants to the rest of the country, to the Southeast and the Deep South.

As I mentioned earlier, Tennessee is home to about 950 of these auto parts suppliers. They make up about one-third of all our State's manufacturing jobs.

Mr. President, 85 percent of the auto parts suppliers surveyed in the ITC report said that their steel prices in the United States were higher than global prices; 31 percent reported that customers had shifted purchases to buying finished parts or assemblies overseas as a result of the tariff; 74 percent reported changes in contract prices for steel; and 55 percent reported the steel tariff was the only important factor in these changes in steel prices. Mr. President, 79 percent reported an inability to pass on steel price increases to customers.

There is a lot of back and forth about just to what extent these steel prices have gone up. The report mentioned a variety of figures. It mentioned a figure of an 8 percent increase in hot bar steel. I wonder if maybe taking a snapshot of 8 percent in March of this year over March of last year ignores some of what goes in between.

But here is what some of the auto parts suppliers said in testimony before the International Trade Commission was the effect of the steel tariff on steel prices.

Arvin Meritor said its price increases were 25 percent to 40 percent on cold rolled and galvanized steel. Delphi said its prices increased 5 percent to 48 percent. DURA saw its prices increase 30 percent. Federal Mogul saw its prices increase 25 percent. Metaldyne saw its prices increase 10 percent. Transpro saw its prices increase 25 percent.

Maybe some were lower and maybe some were higher, but these plants found in a very competitive business that even a few pennies more in cost per part makes a difference in their ability to keep a job in the United States. They found their costs suddenly way up—15 percent, 20 percent, or 25 percent. All of these burdens have meant extra costs to steel-consuming firms—extra costs that have affected steel-consuming jobs all across America. The steel tariff may have saved some steel-producing jobs, but it has already destroyed a lot more steel-consuming jobs. The findings of the ITC report alone should give the President ample reason to end the steel tariffs.

I spoke on this subject on July 16 in this Chamber. I tried to point out at that time how both steel-consuming and steel-producing jobs are important to our country. But if that is all you are considering, there are a whole lot more steel-consuming jobs than there are steel-producing jobs. For example, in Tennessee, there are about 328,000 steel-consuming jobs. There are only about 3,000 steel-producing jobs. There are 100 times more steel-consuming jobs than steel-producing jobs.

The United States has 12.8 million steel-consuming jobs—2.1 million of which are in the auto business. The United States has 226,000 steel-producing jobs.

Everybody's job is important. Just to come along and say we want to save steel jobs cannot be used as a rationale for a steel tariff when the effect is that it destroys a lot more steel-consuming jobs. Even in States such as West Virginia and Pennsylvania, there are a lot more steel-consuming jobs than there are steel-producing jobs. There are more auto jobs in Pennsylvania than there are steel-producing jobs. That is no reason for the steel tariff.

The economy is beginning to recover. Manufacturing is up. Manufacturing jobs are not up. We are more productive. So
there are fewer jobs. But manufacturing for the last 3 months, according to the Wall Street Journal, is up.

I strongly believe this recovery is a direct result of the President's job and economic growth plan. The last thing we need now is to continue any new costs such as the steel tariff on a major manufacturing sector that slows down our economic growth. I fear that if the steel tariff remains, we will see more plant costs during 2004 in Tennessee and across America.

I believe the President has made an honest, good-faith effort to save steel jobs. But it has backfired by destroying auto and other steel-consuming jobs. I hope he takes into account the information that was revealed in this report this weekend. The President is a very good listener. He has given this decision almost 2 years to operate. I hope he will decide based on the fact that the tariff is destroying auto jobs that the best decision he could make for the American worker is to end the steel tariff, and to end the steel tariff now.