WASHINGTON — How to save a declining industry without igniting a trade war that could hurt an already weakened world economy?
Those factors will be important aspects as the government investigates the impact of steel imports. Six days of public hearings began Monday. American and foreign steel executives, union leaders and members of Congress are among those scheduled to testify.
The Bush administration called for the investigation in June. Since then, conditions have changed.
Steel imports have declined and efforts are under way to negotiate a worldwide reduction in steel production. Nevertheless, American steel companies and unions want the government to impose tariffs to protect American firms against imports.
"The crisis that was once so strong is less so because of natural turn of events. It casts a different light and makes it less clear that government has to act," said Charles Bradford, a New York-based analyst of the steel industry.
Allies of the American steel industry are unconvinced.
"This is a question of helping an industry that has been vital to the economy and been an unfair victim of a deliberate effort by foreign companies and governments to undermine our industry," said Rep. Phil English, R-Pa., who chairs the Congressional Steel Caucus.
American manufacturing companies fear that they will be unable to sell their products abroad because of retaliation by foreign firms if tariffs are imposed.
American steel companies and unions refer to the imported steel that comes in at low prices — often subsidized by foreign governments — as "dumped" steel.
Companies that use steel to manufacture products argue that tariffs will cost jobs because foreign countries will retaliate by cutting access to their markets.
"We will lose 10 jobs for every steel job that is saved because we will not be able to sell our products abroad," said Jon Jenson, chairman of the Consuming Industry Trade Action Coalition.
The United States is the third most popular target of anti-dumping measures, after China and Japan. This would escalate if tariffs on steel are imposed, according to a report by the Cato Institute, a Washington think tank.
That argument does not sway William Klinefelter, legislative director of the United Steelworkers of America, a Pittsburgh-based union that represents 700,000 workers.
"The idea that sanctions will cause a trade war is a hollow argument because we have the biggest market. People are beating down the door to get to our market. Other issues, like tax policy, are more volatile and more likely to cause a trade war than is steel," Klinefelter said.
Fear of igniting a trade war prevented the Clinton administration from asking for an investigation of imports.
"Nobody wants to bring a case and lose. That could be interpreted as a green light for bad practices by our steel importers," said Gene Sperling, who was President Clinton's top economic adviser.
Sperling said the efforts to reduce production would be more effective in curbing the supply.
Treasury Secretary Paul O'Neill was in Japan last week trying to convince officials to cut steel production. Japan and other steel producers such as Brazil, South Korea and Russia are resisting because of American efforts to curb imports from those countries.
Global steel production increased 7 percent last year to an all-time-high of 747 million tons.
American companies say the problem is more than just overproduction.
Since a surge of foreign imports began in 1998 as a result of the Asian currency crisis, 23 U.S. steel companies have filed for bankruptcy protection — including Geneva Steel in Utah — and 25,000 jobs have been cut, according to industry figures.
"The import problem persists, and the bleeding must stop. It is imperative that the commission recognize the nature and cause of this crisis," said Andrew G. Sharkey, president of the American Iron and Steel Institute, a Washington-based lobbying group.
The International Trade Commission, an independent government agency, will weigh the evidence.
If the commission finds "serious injury" from these imports, it could make recommendations to President Bush on what types of punitive tariffs or quotas should be imposed to restrict imports.