CITAC STUDY SHOWS 200,000 U.S. JOBS
LOST NATIONWIDE FROM HIGH STEEL PRICES IN 2002 —
STEEL TARIFFS AN IMPORTANT CAUSE

More American Workers Lost Their Jobs Last Year Due to Higher Steel Prices
Than Total Number Employed by U.S. Steel Producers

Washington, DC — Members of the Consuming Industries Trade Action Coalition Steel Task Force (CITAC STF) announced findings today from a study that reveals that higher steel prices — caused in large part by the Section 201 steel tariffs imposed in March 2002 — resulted in the loss of nearly 200,000 American jobs.

The study, "The Unintended Consequences of U.S. Steel Import Tariffs: A Quantification of the Impact during 2002," shows that more American workers lost their jobs in 2002 to higher steel costs than the total number employed by the U.S. steel industry. It reveals that the lost jobs represent approximately $4 billion in lost wages over ten months (February - November) last year.

"This study proves what steel consumers across the country have been reporting for nearly a year — that the steel tariffs are devastating to many steel consuming businesses, especially small businesses," stated William Gaskin, President of the Precision Metalforming Association (PMA) and member of CITAC STF.

Gaskin continued, "Every state lost employment as a result of the higher steel costs. While steelmaking jobs in some states may have been protected as a result of tariffs, steel consumers were not as fortunate. More than 12 million Americans work in steel consuming jobs, compared to approximately 190,000 in the steel-producing sector. We cannot continue to have a trade policy that protects a few at the expense of the majority. We hope that the Bush Administration will now pay attention to those American families who have greatly suffered from the steel tariffs."

California, Ohio, Michigan, Illinois, Pennsylvania, New York, and Florida experienced the highest job losses from increased steel costs. Job losses in these states ranged from 8,370 in Florida, to more than double that in California, with 19,390 jobs lost. Sixteen states lost at least 4,500 steel consuming jobs each in 2002 due to higher steel prices.

Lewis Leibowitz, Counsel to the CITAC STF noted, "The Bush Administration has an opportunity to terminate or modify the tariffs during the mid-point review process, which is to begin in a few weeks. The mid-point review is conducted by the International Trade Commission (ITC) and must be completed by September 20, 2003. While the ITC is required to examine the efforts of steel producers to make a positive adjustment to import competition, the Commission is under no obligation to consider the effects of the tariffs on steel consuming industries unless specifically directed by President Bush."

"We join Rep. Joe Knollenberg (R-MI) and the bipartisan group of 51 co-sponsors of House Concurrent Resolution 23 which calls on President Bush to direct the ITC to look at the impact of the Section 201 tariffs on steel consumers in the U.S.," continued Gaskin. "It is the common sense approach to analyze the tariffs' impact on both producers and consumers. The President should insist on having all the facts on the table before making any decisions. These job losses do not have to continue to escalate."

Jim Zawacki, President of GR Spring & Stamping, a Grand Rapids, Michigan based company that manufactures metal stampings, stated, "I am very nervous at what will happen if the tariffs aren't repealed. Our company's mission is to be the 'best at what we do,' but how can we when the tariffs have made us unable to compete effectively? We can't pass higher prices on to our customers. Since March 2002, we have experienced delays and shortages, we've lost major customers to foreign competitors, and I've had to let employees go… this can't go on."

Zawacki continued, "Last year, we wrote to the Bush Administration to voice opposition to the restrictions on steel imports. Now, almost a full year after the tariffs were imposed, all I want to know, is what makes steel producers' jobs more important than the jobs of 200,000 steel consumers?"

The study, conducted for the CITAC Foundation by Trade Partnership Worldwide, LLC, and authored by Dr. Joseph Francois and Laura Baughman, uses a standard and well-accepted regression analysis to quantify the employment losses on American steel consuming industries based on the impact of higher steel costs.

The authors write that while sufficient data is not yet available to measure the precise role steel tariffs played in causing price increases, "it is clear that the steel tariffs played a leading role in pushing prices up," and add, "in the absence of the tariffs, the damage to steel consuming employment would have been significantly less than it was in 2002."

The study looks at the Section 201 steel tariffs on a range of steel products, such as hot-rolled sheet, cold-finished bar, certain welded tubular products and stainless steel wire. The study also discusses the definition of steel consumers, from sectors including fabricated metal products and household appliances, to chemicals and petroleum refining. According to the Bureau of Economic Analysis, 66 of 84 sectors of the US economy use steel. The authors conservatively focused on just 29 of them, those that rely on steel the most. Finally, the study looked at the impact that reduced steel capacity, countervailing and antidumping duties, market uncertainty, among other events, has had on steel costs.

Francois and Baughman explain that steel consuming manufacturers — 98 percent of which are small businesses employing less than 500 workers — need to purchase steel and steel containing products at internationally competitive prices or risk losing business. "They are simply too small to be able to demand that their customers pay more for the products they sell because their input costs, for example, have gone up."

These increased costs, the authors explain, are attributable to the tariffs, along with other market factors such as supply disruptions. They note that early in 2002, steel supplies tightened as significant tons of steel left the market when LTV shut down. Total U.S. steel shipments dropped from 8.6 million tons in October 2001, to 6.9 million only two months later in December. "During the first quarter of [2002]," they write, "steel producers began to push for higher prices and they had the market power of steel shortages to force through some price increases."

Antidumping and countervailing investigations, also started late in 2001, which raised steel costs. "The steel supply shortage problem deepened because of uncertainty associated with the tariffs," the authors state. They write that Domestic steel supplies were so tight that in May 2002, U.S. producers operated at over 90 percent of their capacity, when 80-85 percent is more typical.

Francois and Baughman conclude, "The analysis shows that American steel consumers have borne heavy costs from higher steel prices caused by shortages, tariffs and trade remedy duties, among other factors. Some customers of steel consumers have moved sourcing offshore as U.S. producers of steel-containing products became less reliable and more expensive. Other customers refused to accept higher steel costs, which put many in a precarious (or worse) financial situation."

The Unintended Consequences of U.S. Steel Import Tariffs: A Quantification of the Impact During 2002 by Dr. Joseph Francois and Laura M. Baughman 2/4/03 Summary | Full Study

Background on the Steel 201 Remedy. 2/4/03 Read

CITAC is a coalition of companies and organizations committed to promoting a trade arena where U.S. consuming industries and their workers have access to global markets for imports that enhance the international competitiveness of American firms. The CITAC Steel Task Force is comprised of steel consumers working to achieve the termination of the 201 steel tariffs by mid-point review and reform U.S. trade laws and policies to benefit U.S. steel consumers.