The New York Times

July 12, 1992, Sunday, Late Edition - Final

HEADLINE: FORUM; Big Steel's Suicidal Attack on Imports

BYLINE: By JAMES BOVARD; James Bovard is the author of "The Fair Trade Fraud."

BODY: As the Munich economic summit sinks mercifully into oblivion, industrial nations face grave problems from the proliferation of protectionism. American steel producers -- in buildup to the summit -- deluged the American Government with more than two million pages of allegations of unfair trade against 21 foreign nations. The steel lobby's legal bombshell will severely disrupt steel trade, hamper American competitiveness and decrease the likelihood of a successful completion of the current General Agreement on Tariff and Trade negotiations.

Within those two million pages were 48 petitions alleging that foreign companies are dumping steel in the United States. Dumping refers to selling for a lower price in America than in the foreign home market, or selling for less than cost of production.

Unfortunately, the dumping law is far more protectionist than it appears, and it ought to be abandoned. The current law was largely written by steel industry lobbyists in 1974; as a result of their strict wording, the Commerce Department now finds 97 percent of foreign companies it investigates guilty of dumping.

Steel companies can reap big profits simply from filing anti-import petitions. Dumping penalties are assessed retroactively -- thus creating great uncertainty among steel buyers about possible future penalties they might face. Japan's NKK Steel and Nippon Steel recently announced that they would cease exporting some steel products to the American market to avoid any possible dumping penalties. That does little to keep costs and steel-producing technology competitive.

But while American steelmakers file lawsuits here, they are massively dumping in foreign markets themselves. An analysis last month by Donaldson, Lufkin and Jenrette, a New York investment banking firm, concluded that "more than 90 percent of the nonspecialty steel exported from the United States since 1990 -- over 10 million tons -- has been dumped. It is reasonable to estimate that exports have involved losses of more than $100 per ton for most carbon steels." (The analysis estimated that exports by American mini-mills, in contrast, are profitable). Mexico filed an anti-dumping suit against American steel exports last month, and Canadian companies are expected to soon file a similar suit.

Steel imports have been politically throttled for most of the last 20 years. Steel-import restraints have been perhaps America's worst anti-industrial policy. A study by the Center for the Study of American Business estimated that import quotas destroyed three jobs in steel-using industries for every steel-making job saved. The Institute for International Economics estimated that steel import quotas cost American consumers $6.8 billion a year, $750,000 for each steel worker's job saved. A 1984 Federal Trade Commission study estimated that steel quotas cost the American economy $25 for each additional dollar of profit for American steel producers.

In addition to the dumping charges, American steel companies filed 36 petitions accusing foreign companies of receiving Government subsidies. But the American steel industry has also been heavily subsidized. The Economic Development Administration in the Commerce Department loaned $265 million to four struggling steel companies in the late 1970's; all four -- Korf Industries, LTV, Wisconsin Steel and Wheeling-Pittsburgh -- defaulted. The federal Pension Benefit Guaranty Corporation has assumed the pension liabilities of several steel companies, thereby providing a benefit of $3.7 billion to the industry. The Canadian Steel Producers Association estimates that the American steel industry has received almost $30 billion in Government subsidies over the last two decades.

Import barriers on foreign steel make less sense now than ever. They hurt the competitiveness of American products overseas and unfairly penalize the auto, construction, electrical and equipment industries by forcing them to use a higher-priced, often inferior product. This nation can no longer afford a trade law that allows one laggard industry to take dozens of other industries hostage.