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TESTIMONY OF
Joe Knollenberg, U.S. Representative
Hearing Concerning Investigation 332-452,
"Steel-Consuming Industries: Competitive Conditions with Respect
to Steel Safeguard Measures"
Before the
United States International Trade Commission
June 19, 2003
Good morning, Commissioners, and thank you for allowing me to testify
this morning. This hearing, investigating the effects of the steel
tariffs on steel consumers, is a critical one for the economy as
a whole, particularly for my home state of Michigan.
I come here to deliver a simple message that must be heard: U.S.
manufacturing as a whole is in a crisis, and tariffs on imported
steel are part of the problem.
Let me make my position clear: end the steel tariffs now.
It's not hard to see why this is so important.
As you know, in March last year, the Administration imposed tariffs
on imported steel of up to 30 percent for three years, intending
to help a small portion of the manufacturing industry, the steel
companies. However, the much larger portion of the manufacturing
industry, the steel consumers, has been forced to suffer.
Immediately after the tariffs went into effect, the supply of steel
in the U.S. shrank. Then, steel companies logically capitalized
on the opportunity and held out for the highest prices possible.
In addition to cost, the tariffs caused other problems such as
long lead times to receive orders, broken contracts and quality
issues. The sampling of companies testifying today and tomorrow
can explain their experiences in detail, as many of them have already
explained to me.
The manufacturing industry in this country, as a whole, is under
severe pressure. Between July 2000 and December 2002, my home state
of Michigan lost over 85,000 manufacturing jobs - and the U.S. lost
over 2.2 million. More have been lost this year.
The fact is right now we're losing steel consuming jobs in this
country, and the steel tariffs are making the problem worse.
These jobs are leaving because our manufacturers are struggling
to remain globally competitive. Whether it's health care, pensions,
regulations, or other costs, foreign manufacturers have distinct
cost advantages.
In this environment, American manufacturers have to do everything
they can to cut costs, improve productivity, and in some cases deliver
their products at lower and lower prices. The pressure is often
highest on the smallest businesses.
Some of these companies are doing well. But others are just trying
to stay afloat. In many cases, keeping steel tariffs on the steel
consumers is like throwing a drowning man an anvil.
A few weeks ago, I held a meeting with CEOs and Presidents of auto
supplier companies to discuss the state of manufacturing. The suppliers
ranged in size from some of the largest to some of the smallest.
The discussion centered on many topics, from health care to pension
reform to education.
But the topic that stirred the most impassioned response was steel
tariffs.
In order to understand how these tariffs are hurting our manufacturing
base, we have to understand how the industry works. Auto suppliers
make commitments on price and quality three to four years ahead
of time. If the price of one of their inputs goes up during that
time, such as steel, it's the suppliers' problem - they still have
to deliver the finished product at the price level they committed
to.
As a result, they have to find any way to meet that price and,
in many cases, they conclude they have to move production offshore
or buy finished steel products and import them from offshore. Either
way it's American jobs that suffer.
One executive said the steel tariffs are costing his company $30
million per year, and that increased cost has resulted in the export
of $60 million in jobs out of the country.
Or as another executive put it succinctly: steel tariffs mean lower
profits, fewer jobs, and jobs moving offshore.
Let me be clear. I support a strong American steel industry. I
believe we should help the steel industry, and the entire manufacturing
industry, with sound manufacturing policies.
Instead of adding tariffs, we should be reducing costs. We have
to address the increasing costs of health care, pensions, and regulatory
burdens. These are the fundamental problems affecting steel, and
manufacturing as a whole.
What we cannot afford to do is aid one ailing industry at the direct
expense of another ailing industry.
Last month Federal Reserve Chairman Alan Greenspan testified before
the Joint Economic Committee in Congress. Chairman Greenspan said
the following, and I quote: "Artificially increasing the price
of steel in the United States has and will induce steel users to
move out from under steel tariffs . . . we should, as quickly as
we can, take those tariffs off and open the market to competitive
forces."
I completely agree with Chairman Greenspan, and I believe we all
should take his advice. We need to take these tariffs off as quickly
as we can. This review gives us an opportunity. Now is the time
to take that opportunity, and end the steel tariffs.
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