Alexander: President Bush Should Lift The Steel Tariffs

Tuesday, August 26, 2003 - by Sen. Lamar Alexander

President Bush is working very hard to get this economy moving again. I have strongly supported his jobs and economic growth plans. His hard work and those plans are paying off. But in one case, I want to respectfully suggest that the President consider making a mid-course correction.

That case is the sad story of steel tariffs. It is the story of an honest effort by our President to save jobs that has backfired, and it could not be coming at a worse time. The last thing our country needs right now is a wave of plant closings in the auto and auto parts industry. But that is exactly what will happen if the tariffs continue. The tariffs have become a job killer in the United States and a jobs growth program for Korea, Japan, Germany and other countries that produce quality auto parts.

In March 2002, the Bush Administration imposed tariffs of up to 30 percent on 10 different categories of steel imported from Europe, Asia and South America. The tariffs may have saved a few steel-producing jobs for the time being. But since their institution in March 2002, the tariffs have already destroyed nearly as many jobs in the steel-consuming companies of America than exist in the entire steel-producing industry. Some auto parts plants in my state of Tennessee are already closing because of the higher costs of steel imposed by the tariffs.

In addition, the World Trade Organization ruled in July that these U.S. steel tariffs are illegal and in violation of global trade rules. The European Union has already announced that it intends to impose $2.2 billion in retaliatory sanctions on American imports sold in Europe ranging from footwear to fruits and vegetables - which will destroy still another batch of American jobs.

If these steel tariffs continue through 2004 and 2005 as scheduled, there will be a wave of plant closings across Tennessee and other steel consuming states, especially among auto parts suppliers. Ironically, many of the steel-producing jobs themselves will also disappear, for two reasons: (1) when the tariffs eventually end, the protected and inefficient steel mills will find themselves unable to compete in the world marketplace; and (2) the demand in this country for this kind of steel will have dropped because automakers and auto parts suppliers will be buying parts overseas - instead of buying U.S. steel to make parts in the USA.

Fortunately, the President has an opportunity in September to review his decision to impose steel tariffs. I respectfully urge him to end the tariffs. This would allow America’s steel-consuming auto parts suppliers and other American manufacturers a fair chance to make their products in the USA instead of overseas.

For Tennessee, the steel tariff affects hot and cold rolled steel, the kind that is used to make cars and trucks in our country. Tennessee ranks fourth in production of cars and trucks in the United States. With over 95,000 employees, it has the seventh largest state employment by the auto industry, and a growing number of direct and indirect jobs in this sector stem from automotive suppliers. Over the last twenty years, the number of auto parts suppliers in our state has grown from a couple of dozen to at least 900. Moreover, when you consider the number of jobs in all steel-consuming industries, Tennessee has almost 100 times more steel-consuming jobs than steel-producing jobs. As a whole, the United States has over 12.8 million steel-consuming jobs as compared to only 226,200 steel-producing jobs.

Ironically at the time of the tariff in March 2002, many auto parts suppliers in the United States were buying only about 5 percent of their steel overseas. In other words, of about $5.4 billion the U.S. auto industry purchased in 2002, only about $270 million came from overseas.

But as soon as the tariff was placed on this 5 percent of steel that was imported, domestic steel producers raised their prices on the 95 percent of steel that was being produced in the U.S. Suddenly, auto parts suppliers and other steel consuming businesses were paying up to 30 percent more for all their steel — in some cases even more than that because of shortages.

The parts suppliers turned around to their customers - the big automobile companies - and tried to pass along these price increases. The answer from the auto companies was: sorry, we’re cutting costs, not increasing them.

Because auto suppliers could not raise prices to cover increased costs, they suffered losses and began to lay off employees. In a few instances, entire plants closed. Both the automakers and the auto parts suppliers began to consider the next logical step — looking offshore for a place to build parts where steel was cheaper.

President Bush is working hard to improve this economy. I am his strong supporter and believe he is on the right track. His jobs growth plan is working, and the economy is beginning to recover. The last thing we need is any new cost on a major segment of American manufacturers that slows this economy’s growth down.

I fear that if the steel tariffs stay on as scheduled, that we will see a wave after wave of plant closings in the automobile industry across this country.

I respectfully hope that as September approaches, the President will say: I did my best. I made a good faith effort to save those steel producing jobs. It hasn’t worked, it backfired, and the best thing I can do for the American worker is to end the steel tariffs.

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