The United States Fastener Manufacturing Group is an ad hoc committee of 29 companies, formed to pursue avenues of relief for the American industrial fastener industry which is heavily impacted by imports. The Group's membership accounts for the majority of steel nuts, bolts and large screws produced in the United States. The Chairman of the Group is Mr. W. Tom ZurSchmiede, Jr., President of Federal Screw Works in Detroit, Michigan. A membership list is attached. U.S. FASTENER MANUFACTURING GROUP MEMBERSHIP LIST Alpha Bolt Co., 1524 E. 14 Mile Rd., MSP Industries Corp., Subsidiary of Bethlehem Steel Corp., Bethlehem, Pa. Mid-West Fabricating Co., West Bent 18016. Jos. Dyson & Sons, Inc., 33300 Lakeland Corp., 2330 Vauxhall Road, Union, N.J. 07083. Everlock Detroit, A Microdot Co., 433 Stephenson Highway, Troy, Mich. 48084. Fastener Systems, 25801 Richmond Rd., Cleveland, Ohio 44146. Federal Screw Works, 3401 Martin Avenue, Detroit, Mich. 48210. Ferry Cap & Set Screw Co., 2150 Scranton Road, Cleveland, Ohio 44113. E. W. Ferry Screw Products Co., 5240 Smith Road, Cleveland, Ohio 44142. Gripco Fastener Division of Mite Corp., 111 E. Broad Street, South Whitley, Ind. 46787. Huck Manufacturing Co., Waco Division, P.O. Box 8117, 8001 Imperial Drive, Waco, Tex. 76710. Lake Erie Screw Corp., 13001 Athens Lewis Bolt & Nut Co., 504 Malcolm Avenue, S.E., Minneapolis, Minn. 55414. Bolt Division, 8623 Dice Road, Santa Fe Springs, Calif. 90670. Modulus Corp., Suite 400, 100 North Main Street, Chagrin Falls, Ohio 44022. National Lock Fasteners, Division of Keystone Consolidated Industries, Inc., 4500 Kishwaukee Street, Rockford, Ill. 61101. National Machinery Co., Tiffin, Ohio 44683. R. E. C. Corp., 2 Sheraton Plaza, New Rochelle, N.Y. 10801. Ring Screw Works, 31550 Stephenson Hwy., Madison Heights, Mich. 48071. Russell, Burdsall & Ward, Inc., 8100 Tyler Blvd. Mentor, Ohio 44060. Standard Pressed Steel Co., BensonEast, Jenkintown, Pa. 19046. Townsend Division of Textron, Inc., 1015 Seventh Avenue, P.O. Box 370, Beaver Falls, Pa. 15010. Wyandotte Industries Inc., 4625 13th [Reproduced by permission of the National Journal] National Journal Protecting American Steel... A Taxing Look at Lobbying TRADE REPORT The Anti-Dumping Laws— Caught between rising demands to protect the steelmakers and its own commitment to free trade, the Administration is turning to a strategy that is fraught with risks. BY ROBERT J. SAMUELSON The Carter Administration has stumbled across a new antidote for the steel blues: the anti-dumping law. Caught between rising demands to protect the steel industry from cheap imports and its own rhetorical commitment to free trade, Administration officialsfrom President Carter on down-are advising steel executives to look for relief under the anti-dumping statute. And, interestingly, the industry seems willing to go along. It almost seems too good to be trueand it may be. Examined closely, aggressive application of the anti-dumping law to steel imports seems to involve most, or all, of the risks of other protectionist devices, including a speedup of domestic inflation and retaliation by foreign trading partners. Moreover, the mere prospect of steep anti-dumping duties against most European and Japanese steel--a possibility in the next six months or year-could build pressure for more formal regulation of the world steel trade, anything from a legalized cartel (which the Administration says it opposes) to a set of commonly accepted ground rules specifying when countries would be allowed to impose restrictions against imports. The basic economic and political pressures for such an accommodation remain awesome. The world steel industry today is a case of too much supply-steel mills-chasing too little demand. And, unless the world recovery accelerates more rapidly than anticipated, the situation may remain that way until at least the early 1980s. (For background, see Vol. 9, No. 23, p. 862.) The new consensus on how to defend against cheap imports and remain loyal to free trade emerged after a four-hour 1636 NATIONAL JOURNAL 10/22/77 White House meeting Oct. 13. President Carter lectured steel executives, union leaders, and interested Members of Congress on the evils of protectionism. "It's an erroneous thing to present to the American people that there is a simplistic, quick, painless solution to the steel industry's problems-and that is to erect trade barriers around our country and not to let foreign steel come into the nation," Carter said. But, at the same time, the President declared that "free trade has got to be fair trade" and told the group that the Administration would "vigorously" enforce the anti-dumping law. Normally, this law is intended to prevent exporters from selling products more cheaply abroad than they do at home. In a press conference afterward, steel executives said that they, too, preferred anti-dumping relief to formal import restrictions-a reversal of a previous stance. APPEALING SOLUTION Superficially, the appeal of antidumping is undeniable. American producers agree to compete as long as foreign exporters agree to sell at "fair" prices. In turn, the Administration avoids both a bruising battle in Congress over steel import restrictions and the discomfort of trying to negotiate with affected trading partners, primarily the European Community and Japan. Last year, the steel import bill totaled $4.0 billion, representing about 14 per cent of U.S. shipments. About three-fourths of the 14.3 million tons came from Europe and Japan. But, in practice, anti-dumping's appeal may tarnish. If the steel producers have suddenly warmed to the anti-dumping law-an avenue of relief they long condemned as cumbersome it's because the Treasury Department is using a new standard for determining dumping charges. In a case decided early this month, that standard resulted in a tentative decision to slap anti-dumping duties of about 32 per cent on nearly $200 million worth of Japanese carbon steel plate. If the same standard is applied against other imports, there's a good chance that the steel industry would receive more, not less, protection than would be possible under any quota system likely to be negotiated. Such protection, of course, would provide more room for price increasessomething the companies feel they desperately need. In the first half of 1977, for example, steel companies averaged only slightly more than one cent of after-tax profits on every $1 worth of sales. In 1976, the average for all manufacturing companies was about five cents. But Administration economists have resisted import restrictions precisely because they might be inflationary. Not surprisingly, a number of steel companies are reported to be preparing additional dumping complaints. U.S. Steel Corp. already has filed a complaint against almost all remaining Japanese steel, which Treasury has agreed to investigate; five American firms have filed a complaint against Japanese and Indian producers of steel wire strand; and other complaints are expected soon against European companies. "When those are filed, there is going to be an outcry in Europe. They're going to scream like stuck pigs," says one U.S. official. Finally, there is one more potential problem with the anti-dumping strategy: not everyone believes that Treasury's measure of "fair" prices is, in fact, "fair." Specifically, Japan contends that the 1974 amendments to the U.S. antidumping law violate the international dumping code. The Japanese are expected to complain formally to the GATT (General Agreement on Tariffs and Trade) secretariat later this month, and, if the Japanese interpretation is upheld, there could be retaliation against American exports. The Japanese retaliation could equal the damage caused to their trade by the dumping duties, and, if heavy duties were applied to all Japanese and European steel, there could be a sizable trade collision-precisely what the Administration says it wants to avoid. If, in these circumstances, the Administration altered dumping duties, it would be thrust back into the position of having done little, or nothing, for the American steel industry. In short, the steel problem hasn't been made to vanish miraculously, and whether the Administration has anticipated future problems is unclear. Earlier this year, Robert S. Strauss, the President's Special Representative for Trade Negotiations, urged some steel companies to file anti-dumping petitions instead of complaining to him. There is some speculation that Strauss sees the threat of the dumping duties as leverage to push trade talks, either inside or outside the Geneva multilateral trade negotiations. Such bargaining would presumably lead to an agreement on steel, an over-all agreement on import "safeguards"-protective steps, such as quotas-that countries would be allowed to adopt when their domestic industries faced substantial injury from imports, or both. One U.S. concession in such bargaining could be changes in the controversial American dumping law. But other officials say that the antidumping strategy is mainly intended to "buy time" and that many of the implications-especially of the application of the new dumping standards mandated by the 1974 Trade Act (88 Stat 1978)- haven't been thought through. "There's a mass of straightening out as to how the dumping is going to work and how it fits in with over-all trade policy," said one official. He added that the antidumping findings could have "disastrous implications" for the Europeans. As for President Carter, he seems to have been only dimly aware of the dumping law until recently. He told the White House meeting that the anti-dumping law hadn't been vigorously enforced. "I have not been aware of this derogation of duty until just this week. We're going to do something about it, but we need your help," he said. STEEL'S PROBLEMS The Administration's newfound infatuation with the dumping law emerges as the magnitude of the world steel industry's problems-and America'shave come into clearer focus. Steel mills are idle everywhere. In Japan, the industry is operating at only about 70 per cent of capacity, the U.S. industry at about 78 per cent, and the European at 60 to 65 per cent. That enormous surplus capacity has President Carter has come under pressure from steel workers to protect them from cheap steel imports. depressed prices and profits, caused layoffs and plant shutdowns, and spawned acrimonious charges that Japanese and European steelmakers are subsidizing exports abroad to maintain employment at home. In the last five months, imports as a percentage of total U.S. steel shipments have neared 20 per cent, up sharply from last year's 14 per cent. In turn, the worldwide glut simply reflects the impact of the 1974-75 recession on steel demand and the inability of the sluggish recovery to restore production. In particular, new industrial investment-normally accounting for 40 to 50 per cent of steel demand-has lagged badly. Nor is there any quick relief in sight. A somber analysis by the Central Intelligence Agency estimates that world steel demand (including net trade with Communist countries) could total 530 million tons in 1980. That's only 7 per cent more than actual demand in 1973 and less than the existing capacity of 600 million tons. Yet, a number of producers particularly Japan and developing countries are building new plants as a result of decisions made during the 1973-74 steel boom. By 1980, the CIA estimates capacity at a minimum of 638 million and says it could be more. Until recently, the Administration had ignored the industry's complaints, hoping NATIONAL JOURNAL 10, 22:77 1637 that protectionist pressures would abate. In fact, they have done just the opposite. Facing persistently weak markets, companies have taken increasingly harsh measures to eliminate high-cost plants and increase their profits. The resulting shutdowns and layoffs have coalesced congressional support for steel. "We're like a sleeping giant which has got a hell of a lot of potential . . . if people don't pay attention," says Rep. Charles J. Carney, D-Ohio., who heads the Congressional Steel Caucus. The caucus claims 140 members. Carney's 19th District includes Campbell, Ohio, where the Youngstown Sheet and Tube Co. recently decided to close part of its mill, eliminating 5,000 jobs. Other major shutdowns include Bethlehem Steel Corp.'s decision to cut back operations at Lackawanna, N.Y., and Johnstown, Pa., involving a total of 7,300 jobs, and the bankruptcy of Alan Wood Steel Co. in Pennsylvania with the loss of 2,300 jobs. The Administration's early reluctance to assist the industry reflected a realization that virtually anything it might do- restrict imports, provide tax relief or relax pollution requirements--could backfire. These steps could increase inflation, inflame relations with trading partners, and invite similar demands for help from other industries. Publicly, Administration officials still voice the same concerns, but under the glare of layoffs and shutdowns, the President has tried to appear more sympathetic. In late September, for example, he appointed Anthony M. Solomon, undersecretary of the Treasury for monetary affairs, to head an interagency group to examine ways to help the industry. The industry itself has long offered a number of suggestions. Aside from the relaxation of antipollution requirements, it has pressed for tax relief. The two most important items involve the immediate write-off of all investment in government-mandated pollution and safety equipment and a shortening of the depreciation lives-now estimated to average about 18 years-on most basic steelmaking equipment. Both these measures would allow more of a company's investment spending to be deducted immedi The Shape of the Steel Industry Production Raw steel production, U.S. (millions of metric tons) ately as a business expense, rather than having those deductions stretched over a period of years. Solomon says his group hopes to have proposals within six weeks, but isn't saying much else. "We're going to be looking at the growth in value of investment that would be needed for modernizationwhat benefits that would bring the industry and the national economy," he said in an interview. DUMPING LAW Given the steel industry's preoccupation with imports, however, the Administration's enthusiasm for the antidumping law represents its most significant commitment. To understand why, it is necessary to examine the peculiarities of the dumping statute. Normally, dumping occurs when a country sells a product more cheaply abroad than at home. Suppose, for example, that a shoe firm sells a pair of shoes in its home country for $10, but sells the same pair for only $6 (after adjustment for transportation) abroad. That would be a clear case of dumping, and, under the |