Investigation No. TA-201-73
Under Section 202 of the Trade Act of 1974

Prehearing Brief Of Consuming Industries
Trade Action Coalition ("Citac")

Lewis E. Leibowitz
HOGAN & HARTSON L.L.P.
555 13th Street, N.W.
Washington, D.C. 20004
Telephone: 202-637-5600
Fax: 202-637-5910

September 10, 2001

Table of Contents

1. Introduction

2. The Injury Phase Is Crucial For Downstream Industries

3. Imports Not Available From Domestic Sources

4. "Like Or Directly Competitive Products"

5. Causation

6. Conclusion

This Prehearing Brief is submitted on behalf of CITAC, a coalition of consuming industries in the United States. CITAC includes corporations and trade associations representing millions of American workers.1//

1. Introduction

This proceeding is a major event in U.S. trade policy for steel consumers and indeed all consuming industries. This investigation could result in import restrictions that may injure, and perhaps devastate, many American companies that rely on imported steel products, both domestic and imported, at world competitive prices. This proceeding may also serve as a precedent for other industries.2 / Therefore, there is great potential for economic harm from this case.

CITAC recognizes that this investigation has two phases at the Commission, injury and remedy. The focus of this first phase must rely on rigorous analysis of the situation of the domestic industries under consideration. The Commission has received hundreds of questionnaires from purchasers of the products under investigation, which should be of material assistance in determining the state of the industries, the source and purpose of imports and the causal relationship, if any, between imports and the state of the industries involved. CITAC appreciates that customers' views have been sought and urges that the Commission pay particular attention to the views expressed by purchasers, who are the backbone of CITAC.

1./ CITAC is not an "interested party" within the meaning of the Commission's APO regulations, although CITAC and its steel using members have sufficient interest to claim standing under Section 201. See Sneaker Circus Inc. v. Carter, 457 F. Supp. 771 (E.D.N.Y. 1978), aff'd, 614 F.2d 1290 (1979). The inability to argue from APO information is prejudicial to CITAC.

2. / See Public Version of Prehearing Report, Table OVERVIEW-7. Steel production jobs declined by 51,000 between 1989 and 1999, which ranks 18th among American production sectors. While not all of them are susceptible to Safeguards actions (e.g., government employees), there are several that could be.

2. The Injury Phase Is Crucial for Downstream Industries

The injury phase of this investigation is vitally important for downstream industries in the United States. The injury phase requires strict adherence to a set of legal criteria to establish entitlement to relief. These criteria exist so that the Commission can appropriately limit relief to industries that meet strict criteria. Without strict adherence to the serious injury standard, the considerable benefits of fairly traded imports could be denied to our economy and the economic freedom of downstream industries could be jeopardized.

The remedy phase of a Section 201 case is, simply put, too late to consider the potential harm to U.S. economic interests. The Commission must carefully weigh the threshold injury issues.

The Commission should also consider that the welfare of consuming industries is at stake in the injury phase of the case. Nationwide, the number of workers in steel-consuming industries outnumbers steel workers by a ratio of 50:1. Every State has more workers in downstream industries than steel production jobs. A CITAC Foundation study earlier this year concluded that import restrictions on steel products would cost 9 jobs in downstream industries for every steel job saved, at an annual cost to the economy of over $565,000 per job.

This investigation will deal with a considerable number of difficult issues. CITAC trusts that the briefs of other parties will discuss those issues extensively. If we have views on other issues after review of those briefs, there is ample opportunity to express those views.

However, we believe that U.S. consuming industries have an important role in the injury phase. Many consuming industries will appear in the individual product presentations. Here we give an overview of principles common to all products.

3. Imports Not Available from Domestic Sources

A reasoned analysis of the "serious injury" issue requires that imports be examined specifically. Steel using manufacturers know that imports of many steel products are an economic necessity: In the aggregate, U.S. producers are not capable of supplying the needs of America's steel consumers. At best, only 75-80 percent of U.S. needs can be filled from domestic producers. Imports are not a luxury but a necessity. In considering this, the Commission should examine the levels of steel demand, which has increased considerably during the period of investigation (1996-2001).

In addition to questions of inadequate aggregate, there are many specific products (numbering in the hundreds if not the thousands) that are not made in the United States at all or are not available in adequate supply. The letter initiating this very investigation bears that out. The initiation letter included no less than 40 product exclusions, representing products that are not available domestically.

The statute requires that imports must be a "substantial cause" of serious injury. By definition, imports that fill U.S. needs that cannot be filled from domestic sources cannot possibly be a substantial cause of serious injury. Within the limits of time and available data, the Commission must be satisfied that it is not finding injury solely by the application of a numbers game, when many imports in many product lines do not compete with U.S. production because U.S. production of a specific product is not available. The Commission must perform this examination of imports and their effects on domestic industries even within "like or directly competitive" product groupings. Imports that do not compete directly with domestic products cannot be a substantial cause of serious injury.

In each product group presentation, there may well be U.S. consumers that claim their product is a "niche" product not available from domestic sources. These claims should be considered carefully, because they bear directly on the issues before the Commission in this phase of the investigation.

4. "Like or Directly Competitive Products"

We urge the Commission to consider carefully the wide disparity in the product groupings in labor costs, tons per 1,000 hours and costs of goods sold. Labor costs range from approximately $22 per ton for rebar to $3070 per ton for stainless flanges and fittings. Plainly there is much that separates these industries in terms of analysis. The only valid injury analysis is one that takes full account of the substantial differences.

The "like product" issue is of critical importance to downstream industries. The "like

5. Causation

A second significant issue is the "substantial cause" standard. The statute requires that increased imports must be a "substantial cause" of serious injury (an important cause, and no less important than any other cause). This causation standard is critical to the proper functioning of the Safeguards statute. Downstream industries are protected by the strict adherence to a rigorous causation standard against arbitrary import restrictions.

CITAC remembers that only last year, certain steel producers were complaining that the Safeguards statute was too restrictive because it had a "higher" causation standard than "required" by the WTO Safeguards Agreement. CITAC opposed changing the requirement, because it provides protection to consuming industries against unwarranted intrusions of government in the marketplace. Congress did not change the causation standard. We urge the Commission to apply the standard as it exists, not as some parties would like it to be.

6. Conclusion

We are well aware of the burdens this investigation puts on the Commission and Staff. However, there can be no short cuts to just results in this case. Each "like or directly competitive product" finding m ust be supported by substantial evidence and make a credible and reasonable injury finding possible. The nine million workers in steel consuming industries are entitled to no less.

Respectfully submitted,

Lewis E. Leibowitz
Counsel to Consuming Industries
Trade Action Coalition ("CITAC")

September 10, 2001