For Immediate Release
Office of the Press Secretary
March 5, 2002
USTR Briefing on Steel
Press Briefing by U.S. Trade Representative Robert Zoellick
The James S. Brady Briefing Room
3:37 P.M. EST
MS. BUCHAN: Good afternoon. Welcome to our
briefing. This will be on the record, on camera, with
Ambassador Robert Zoellick, the United States Trade Representative.
AMBASSADOR ZOELLICK: Good afternoon. Over the
past year, President Bush has been regaining America's momentum for
free trade. In November, at Doha in Qatar, we were able to
launch a new round of global trade negotiations, reversing the failure
in Seattle in 1999. Earlier in the year, at Quebec City, the
President was able to give a push to the free trade area of the
Americas, and agree with the leaders of 34 other democracies about
trying to complete that by the year 2005. And we also
completed a free trade agreement with Jordan, got it through the
Congress; and also a basic trade agreement with Vietnam.
After a 15-year effort, we were able to bring China and Taiwan into
the WTO. We've been using a new piece of legislation called
the African Growth and Opportunity Act to boost trade in
Africa. And on the congressional front, we were delighted
that we were able to get the President's trade promotion authority
through the House of Representatives and the Senate Finance Committee
by a vote of 18-3. And we hope for Senate action on that
trade promotion authority in the near future.
So the President believes that free trade benefits America's
consumers and families, and that it's vital to generating jobs for
America's workers, opening markets for American products and services,
and in spurring economic growth.
But the President also recognizes that some industries, workers and
communities can't respond as quickly as one might wish to the changes
of a fast-moving global economy. We all know that financial
and information markets move with lightening speed. But some
traditional manufacturing industries and the communities that depend on
them cannot. Some may need a breathing space to regain
competitiveness. And this includes the steel industry.
The global steel industry has been rife with government
intervention, subsidies and protection. These unfair
practices have hurt the U.S. steel industry because our market has been
much more open than others. The Organization for Economic
and Community Development, the OECD, a government body, in 1999
produced some measures of openness -- what they
call import penetration -- for the steel
industry. And the United States figure was 30 percent, with
the European Union was 16 percent, and Japan 9 percent.
In the Financial Times today, you might have seen there is a report
about the fact that the United States was one of the largest net steel
importers in the world last year, with 23.5 million
tons. And, for example, the EU and Japan, even though
they're no more productive, are exporters.
So the President is committed to using U.S. laws and the
international trade rules to the fullest extent possible to help
American industries under stress to make sure that they have the
opportunity to restructure and compete. The international
trade rules of the World Trade Organization recognize that sometimes
imports, whether fairly or unfairly traded, can cause such harm to
domestic industries that temporary restraints are
warranted. And these rules include safeguard provisions for
industries that have had substantial injury from imports.
Other countries, for example Japan, Korea, India, the European
Union, Brazil have also used safeguards and there are about 21 of these
in effect in the world today.
In June, the President launched discussions with our trading
partners to try to reduce global capacity for steel and to try to
address these unfair practices that plagued the steel industry
throughout the world, and we're starting to make some
progress. He also asked the International Trade Commission,
an independent agency, to review whether the U.S. steel industry had
suffered substantial injury from imports in recent years. They came
back with a unanimous decision. All six said that the U.S.
steel industry had been suffering substantial injury from imports,
although they disagreed on the nature of the remedies.
In general, about three of the six recommended tariffs of about 20
percent or less, depending on the product. One of the
members recommended large quotas to deal with future import
surges. And two of the commissioners recommended tariffs up
to 35 or 40 percent.
The steel industry, as this ITC report noted, faces some very harsh
facts. At the end of the year, prices for steel in the
United States were at 20-year lows, and about 30 percent of the
industry, by capacity, was in bankruptcy. Losses have been
piling up, whether for the traditional integrated producers or for the
newer mini-mill manufacturers.
So, therefore, today the President announced a comprehensive
three-year plan to help the American steel industry and its workers get
back on their feet. First, the President is imposing tariff
safeguards of 30 percent on major steel products. These
safeguards are generally stronger than those recommended by most of the
ITC commissioners and will extend for three years. At the
same time, they're designed to meet some of the particular concerns
that were voiced to us by steel users.
Second, this relief will be buttressed by an import licensing and
monitoring system to assure that the remedy fits with market
trends. And, third, this remedy will exclude America's four
partners in free trade agreements, and most poorer, developing
countries which export limited amounts of steel to the United
States. Yet these exclusions will be monitored to ensure
consistency with our goals for the recovery of the U.S. steel
industry.
Now, this safeguard remedy gives American steel industry some
temporary relief from years of import surges and unfair trading
practices that have hurt its ability to compete and to
prosper. Yet this safeguard only offers an opportunity that
the steel industry and its workers will need to seize. They
need to use this breathing space to restructure and to regain
competitiveness. We'll also monitor and review how the
industry uses this period of adjustment to restructure and improve
productivity. And we can adjust the safeguards, if conditions
warrant.
In conclusion, the American steel industry faces a turning
point. We believe the actions that the President is taking
today can help restore the strength and profitability of this very
important American industry. The President has listened to
the frustrations and the anxieties of steel workers and their
families. He is offering help. Now it's the
responsibility of the steel industry -- owners,
management, workers, communities -- to use this
breathing space to construct a new future.
Thank you, and I'd be pleased to take your questions.
Q What's this going to mean for American
consumers? Will they be paying more for autos and houses and
appliances? And how much?
AMBASSADOR ZOELLICK: There are as many analyses as you
can count of people in terms of the effect of this. But I
think the starting point is the fact that I mentioned about steel
prices being at a 20-year low. So it's our belief that this
will give the opportunity for the U.S. steel industry to get back on
its feet, because it's had to struggle with the situation where you
have large-scale bankruptcies, but without any significant effect on
the economic recovery and growth.
Q What does this do for your office, in
terms of your credibility, vis-a-vis free trade and seeking trade
promotion authority? Are you, and is the President going to
have to do more to convince potential trading partners that the U.S. is
a free trader and not a protectionist?
AMBASSADOR ZOELLICK: Well, I think it's important to
look at the steel safeguard as part of an overall portfolio of
actions. And if you take the first signal that we're sending
today, I think it will send a good signal for any country that has a
free trade agreement with the United States, because, as you can see,
they're excluded from this. So Canada, Mexico, Israel and
Jordan are outside it.
But in order to promote free trade, the United States has to manage
the homefront and the international front. And on the
homefront, the only way that we can continue to get support for the
American people for open markets in trade is to use our domestic laws
and our international laws to the fullest.
Now, what we're talking about today -- and
people have used different terms for it -- is a
safeguard action. And as I noted in my opening comments,
this is an action that is permitted under the World Trade Organization
rules; it's under Section 201 of our domestic law. There's
21 of these around the world. And it's a temporary process
to give this industry a chance to get back on its feet.
The President believes very strongly that if we're going to have an
open, dynamic marketplace -- and we have to have
that to be able to compete -- we also should be
willing to help those that need a breathing space to come
back. Now, in terms of the rest of the international
community, it's important to keep in mind that this element is combined
with two others -- the President has also said
that the problems of the steel industry are obviously more than those
of the U.S. industry.
We've got a problem of a fragmented global industry with
over-capacity. And that's why, as you've probably seen, we,
working with the Department of Commerce, have gone to a series of
meetings; we brought together some 40 countries to try to reduce the
global capacity. And we've talked about reductions of about
117 million, 120 million tons out of global production over the future
years.
The third element of this is obviously to get these unfair
practices. And anybody who has looked at anything over economic
history has a strong sense that the steel industry is probably the
worst example of government intervention around the world, and we've
got to be able to try to address those practices, whether
they're subsidies in countries, or hidden barriers. And
that's also what we're going to try to do in the Doha agenda.
So this, in my view, is both a strong message to the rest of the
world that the United States is willing to work with others, but we're
also going to take care of our people and give them a chance to
compete.
Q Members of Congress have already reacted
to this, and you mentioned the --
AMBASSADOR ZOELLICK: Positively, I hope.
Q For the most part, yes. You
mentioned the fact that this allows some breathing room to the steel
companies. Many of them, as well as people in the industry,
have talked about the need to deal with the legacy costs for steel
workers. And I know there is some resistance in the
administration doing something specifically for steel, but is there a
new proposal the administration will make to deal with the problems of
workers displaced by foreign competition? Something new as a
result of this effort?
AMBASSADOR ZOELLICK: It's a good
question. The first and most important aspect of this is to
try to help people keep their jobs, because that's the best way to have
a pension plan and a health plan and to take care of your family and
your community. So we hope that this breathing space will
help steel workers and their communities have a chance to make it.
Second, as you probably know, the steel industry was somewhat
divided on this question of legacy costs. Some of the large,
integrated producers wanted the government to pick up some $13
billion. The mini-mills, who have had a different set of
labor contracts, didn't want that.
What I was struck by was in the meeting that the President had with
members of the steel caucus last week, Democrats and Republicans,
everyone who spoke about this topic said, Mr. President, you should
focus on the safeguard action and let Congress deal with this question
of legacy costs, recognizing that there are a variety of views.
As a general matter, the administration believes very strongly that
you do have to help workers adjust. And frankly, this is one
of the reasons why the President is so strong about education, because
the start of helping adjust is making sure that you have kids that go
to good schools all throughout America, and they have the ability to
learn and to be able to learn throughout their lives.
But more than that, what we will be working with the Congress
on -- and, in fact, some of this will go on this
month -- is something called a trade
adjustment assistance plan. Senator Daschle has said that he
wants to move the trade promotional authority that passed the House,
and we certainly urge him to do so. And in that context, he
wants to take on this trade adjustment assistance issue.
And I just spoke to him today and talked to him about how we want
to try to work with him to try to do so. Some of the issues
that are involved with that are extending benefits, covering more
workers, trying to make sure that people
can -- some ideas about getting people back into
jobs more quickly.
But there are other pieces that -- some are
already in place. For example, for a lot of workers in the
steel and other industries, their concern is pensions. And
as you probably know, the Pension Benefit Guarantee Corporation,
fortunately, is well- funded; it has about $10 billion of
assets. And for most workers, the average
protection -- or their benefit for workers who
are vested would be about 93 percent of their pension, if for some
reason their company does go bankrupt.
Obviously you then have Medicare. But for workers who
don't qualify for Medicare, the issue is, what do you do about their
health insurance? And dating back to the campaign, the President had
proposed something that is valuable for workers in the steel industry,
or any other, which is a refundable tax credit, so as to allow people
to be able to buy health insurance.
So those are important components. The message we got
from Congress was to focus on the safeguards. And I think
some of those will be pushed forward in the larger context of the Trade
Adjustment Assistance and other trade issues. As a general
matter, we believe that shouldn't just be focused on workers in the
steel industry, because there's lots of people who are going through
adjustment.
Q Bob, last month when you were here
briefing us on another trade issue, you said, tariffs are nothing more
than taxes that hurt low and moderate income people, who pay a lot for
goods, in that case, we import from
Africa -- whether it be clothes, or shoes, or
food. Just before, you told us that the increases that would
occur from these tariff increases, which economists are saying are in
the sort of 6 to 8 percent range, by the time the steel is done,
wouldn't have a significant effect on economic recovery. Can
you tell us what the effect of consumers would be? On the one hand,
you've been arguing in the past against tariffs like this.
AMBASSADOR ZOELLICK: Well, the most astounding point is,
I don't remember being here last month. Are you
sure? But taking your word for it, and recognizing my travel
schedule is putting me in places I don't
recall -- look, David, this is a safeguard
action. And the key distinction is it's a temporary nature,
to try to give steel companies and steelworkers a chance to get back on
their feet.
Now, the nature of the relief -- and I think
this is a key distinction -- is focused on
foreigners, not Americans. And so this does not affect the
ability of the American companies and consumers. So the
safeguards are applied, obviously, to exports to the United States, not
American production.
Now, as for the question of prices -- I think
in reality, it's hard to predict what the prices will
be. You start out with the fact that there are 20-year
lows. You know, this will -- it will
partly depend on what the production decisions are by U.S. firms.
We will continue to have imports, not only from our NAFTA partners,
but under this as -- if we get into some of the
details -- there are some provisions for
obviously the developing countries. There is something
called the Tariff Rate Quota which allows certain semi-finished product
in without a tariff. And then, ultimately, it depends on the
demand side. And while I hope the economy is in the process of
recovering, that is also going to affect prices.
The best thing I can do is to tell you to go look at futures
markets or the prices that people are having. And what you
start to see there is that, from these 20-year lows, you're starting to
get price increases of maybe 4 or 5 percent and those might go up over
time. But guessing prices is not my business.
Q How concerned are you about the reaction
from some U.S. allies in Europe and even Japan, some considering
lawsuits, even some retaliatory tariffs of their own?
AMBASSADOR ZOELLICK: Right. Well, the key is
we've tried to do this according not only to our domestic law, but
under the WTO rules. That's why I noticed, in some of the
coverage of this, not surprisingly, people aren't up on all the
minutiae of the WTO rules. These are provisions that are
created under WTO, World Trade Organization agreements, for this exact
reason, to allow temporary safeguards for an industry to get back on
its feet. And, as I emphasized, there are 21 of these in
place around the world with a number of other countries. So
I have no doubt that there will be some challenges by our partners
about whether we applied the rules totally correctly, and we'll discuss
those in the WTO.
I will say that the nature of this
remedy -- and I've talked with some of my
colleagues around the world today -- obviously,
our free trade partners are very pleased with it; a number of the
developing world countries are very, very pleased with
it. So some of the countries that will be more troubled by
it will be, for example, the European Union. But as I've
said to my good friend, Commissioner Lame, of the European Union, they
don't really approach the issue of steel with clean
hands. And the starting point of that
is -- my recollection is when they started the
European Union, they called it the Coal and Steel Community, which
revealed the whole political nature of the steel industry.
In the course of the '70s and '80s and '90s, as they started to
restructure their industry, they put $50 billion into it. So
when you talk about subsidies, that's a pretty striking
case. And from about 1978 to '92, they had voluntary
restraint agreements. And so, I might add, did the United
States during the Reagan administration and in President Bush's
father's administration.
So their industry, frankly, not only used various types of
safeguards at earlier points, but they're still using it. So
they have various restrictions through anti-dumping orders and other
issues, for example, dealing with Russia and Ukraine and others.
So, in some ways, the most telling question of the European
approach is -- Commissioner Lame said, look, if
you guys put on safeguards, we'll have to put on
safeguards. And what that, frankly, suggests to me is we
have a relatively open market. Theirs has been less
open. If there is less steel coming to the United States, it
might go to Europe and then they don't necessarily want to face it.
So what we're trying to do in this is take advantage of the U.S.
law, the international rules, to give our guys a chance to
compete. And I know there's a lot of talk about, well, free
traders' perspective on this. I've
been -- as probably many of you
know -- as free trade as they come. And if you
look at the steel industry, this is a worldwide industry that has just
been rife with these subsidies and unfair practices. So I
think what we've come up with since last year has been the right
approach at this. Try to get at the unfair practices, try to
get at the problem of overcapacity.
I mean, China has devoted another $6 billion to their steel
industry just last year in terms of subsidies. But in the
meantime, we're darn well going to use the rules available to us to
help our industry get back on its feet.
Q Can I follow up on that? On the
Russian side of it, do you regard the recent action taken by the
Russians on poultry trade as connected to this decision today, because
the decision wasn't expected? And there also seemed to already be some
real threats to the Russians that their action on poultry trade might
have negative repercussions for their entry to the WTO and maybe on
Jackson-Vanik and some other issues?
AMBASSADOR ZOELLICK: They're not veiled threats, they're
statements of fact. Okay? What has happened is
the Russian Agriculture Ministry, without looking at any of the
information that we provided in terms of the safety of our chicken
exports -- and if you think it's so unsafe,
there's a lot of Americans eating chicken and they don't seem to be too
sick -- blocked those exports. That's 20 percent
of our exports to Russia and 50 percent of our poultry exports.
And, frankly, I called in the Ambassador on Friday when I learned
of this and told him, the fact of the matter is, I've been trying to
work with our Congress to help deal with the repeal of
Jackson-Vanik. But if this stays on, I don't see it getting
repealed; it's just a fact of life. And I talked to Leader
Lott of our party and he certainly made that point exactly clear to
us.
So what I suggested to my Russian colleagues is that we get this
turned around as quickly as possible and we offer to send a team to
make sure that we provide all the information about the safety and the
quality of the poultry.
On steel, I'll just say this -- is that it's
the irony of ironies, because if you get into the details of what we're
proposing here, the tariff rate quota that we offered on slab, which is
primarily what Russia is exporting to the United
States -- so, for those of you a little newer to
this, it's kind of a semi-finished ingot product that gets
rolled -- the tariff rate quota that we provided with the
reference base of 2001 would help Russian steel exports to the United
States. But, frankly, that's going to be hard to sustain in
this program, if Russia doesn't act responsibly on
poultry. And I cannot emphasize that enough.
Q So on tariff rate quotas, it establishes a
5.4 million tons, is that per country?
AMBASSADOR ZOELLICK: No, let me tell you where that
number comes from. Our imports of slab in the year 2000,
which was the -- we picked 2000 because the
ITC -- the majority of the ITC commissioners
recommended a tariff rate quota using that year. And it's
before you had the slowdown or recession, depending on your view of the
quarters. And so we had about 7 million tons. You
have to back out the numbers for Canada and Mexico, because they're not
going to be sort of covered under this overall
safeguard. And that gets you down to 5.4 million tons.
So the 5.4 million tons is the slab exports in the year 2000,
taking out Canada and Mexico. And then those would be
allocated by countries among their relative shares. And that
was the exact -- under the 2001 imports, because
we wanted to take the most recent data. And that goes to
this gentleman's question, is that if Russia doesn't mess it up, it
will do better.
Q Some countries were pleased, actually,
with these quotas. In terms of South America, Brazil for
instance, does it seem pleased?
AMBASSADOR ZOELLICK: Well, I should let my Brazilian
colleagues speak for themselves. I called Minister Laffer
today, and caught him on his way to Panama, just to give him the basic
explanation of this. And I said he needs to look at the
numbers himself, but if you combine this slab quota, plus the other
products that will not be covered for Brazil under the developing
country, plus the fact that we're not covering all products under the
safeguard, about 85 or 90 percent of Brazil's steel exports will not be
affected. And I think from my prior conversations with
Brazilian leaders, I think they'd be pleased with that result, but they
should speak for themselves.
And for the other countries of Latin America, they're covered
basically under the developing countries. So it's a Western
Hemispheric arrangement that I think will
be -- go down rather well.
Q What percentage of existing or this year's
or last year's imports would have been exempt under these rules that
you proposed today?
AMBASSADOR ZOELLICK: I'm not sure I understand the
question.
Q What percentage of import tonnage, if you
use last year's tonnage?
AMBASSADOR ZOELLICK: Just so we have it, there are
different categories here. For the developing countries,
because this was covered in some of the articles, the way that the WTO
rules work, is that you have to look at it by product line, and we're
talking about 11 or 12 product lines here. If a country's
exports are only 3 percent of the total U.S. imports, they can be
excluded if --
Q I understand that. What is your
analysis of these rules applied to the steel that came into the United
States? Which percent would have been exempted under your
rules because of the various exemptions? Is it a third, a
quarter? From tariffs.
AMBASSADOR ZOELLICK: Pardon?
Q What's the impact on overall imports?
Q Yes, what percentage of overall imports
would be exempted?
AMBASSADOR ZOELLICK: It will depend on demand in the
United States.
Q -- last year's numbers?
AMBASSADOR ZOELLICK: Well, I can't use last year's
numbers because there was a recession. Markets do
change. I can't -- in other words, I
can't tell you whether imports will go up or down because it depends on
demand. So all I can tell you is, is that for the vast
majority of developing countries -- and the way
we define that is countries that have generalized system of preferences
and WTO membership.
They will be excluded for almost all products. There's a
couple little exceptions here, depending if they're over the 3 percent
level. Our NAFTA partners will be excluded and, obviously,
Israel and Jordan will be excluded, but they're not big steel
producers, obviously. And then slab is not really an
exclusion, it's we're using the nature of a tariff rate
quota. So I'm afraid I can't compute that to your question.
Q How would an exporting country know
whether they're exempt if they're right on the bubble of the 3
percent?
AMBASSADOR ZOELLICK: Oh, we'll be informing
them. And I have a list here, if you want to go through
countries -- it's a lot of countries. And so we
will be informing them through our posts.
But the other point I want to emphasize on this, and your question
nicely gives me the opportunity to do so, is that in doing so, we're
also putting in, as a I mentioned, a licensing system. And
we will certainly tell these countries that while we are certainly
pleased that we were able to exempt poor, developing countries, we also
expect them not to take advantage of that and we'll be monitoring
them.
Q Why not go all the way to 40 percent, as
the unions and some of the larger steel corporations have wanted?
AMBASSADOR ZOELLICK: Well, first off, if you look
through most of these product lines, three or four of the ITC
commissioners actually recommended 20 percent or 20 percent with a
liberal quota system, as opposed to any set of tariffs.
And so by going to 30 percent, frankly, the President's decision
went beyond the plurality or the majority. And 40 percent,
frankly, we felt would have done potential damage to the U.S. economy
in terms of the added cost.
You start to get -- and this, again, you can
get different economic models -- at certain rates
you're going to block steel, at certain rates you allow steel to come
in but the price goes up a little bit and then it depends on the
ability of U.S. steel producers to compete. The other point
I guess I'll direct you towards here is that there are really three
main product lines that have the 30 percent. I think you
have a sheet that has some of these numbers and tries to give you the
ITC numbers, as well.
The most important one is what they call "flat products," that's
about 60 percent of America's steel production, and that is 30
percent. Then there are products called "bar," hot and cold
"bar," and that tends to be produced more by the mini-mills, the flat
products tend to be produced by the integrative
production. And we also apply a 30 percent to that number.
Now, I will note that even the ITC commissioners that wanted a higher
rate didn't use 40 for that, they had used 35 for that.
Q So the 40 percent that the unions and some
of the larger companies had asked for, was it unrealistic, given the
economic realities?
AMBASSADOR ZOELLICK: I think it would have been a
mistaken course. And then the last one I was going to mention is tin
mill. And the tin mill, in particular, is produced by
Weirton in West Virginia. And there, there is actually a
split decision among the ITC commissioners and the President decided to
apply 30 percent to that, as well. And you can see these
other products vary. And it's a determination
based -- we tried to follow the TIC plurality as
much as possible. In some cases we made our own assessment
of market conditions, profitability of the companies, ability to make
sure we had competition in the market.
Q Weirton, though, raises the question,
there's been a lot of talk about the politics, potential political
benefits to the Republican Party and to the President, himself, from
this action. And you seemed obliquely to talk
about -- when you talked about on the home front,
building support for free trade by enforcing these laws. How
much of a role did politics play? Why
Weirton? And did you seek and/or receive any assurances from
members of the steel caucus that they would vote for trade promotion
authority if the President provided this relief?
AMBASSADOR ZOELLICK: Well, on the first part of the
question I want to distinguish the nature of what I think is the
political support. I'm talking about support for trade in
America, and I think this is part of a larger
challenge. Because all of you have had endless words written
about globalization, and the problem is that a lot of this change
frightens people and it leads to anxiety. And it's our
strong belief that if we're going to promote a free trade agenda around
the world and have support for it at home, we have to be willing to use
the rules available internationally and domestically to help those
industries that have really gotten flattened to be able to help
themselves.
And that's what this is. I've been making this point,
frankly, since before the election of 2000 about how one has to use
safeguards. And without getting you into too much detail, we
used this in the case of wheat gluten industry, we've used it in the
case of the lamb industry.
If you're basically an open economy, as the United States
is -- I mean, our average trade-weighted tariff
is about 1 to 2 percent -- you are really subject
to the dynamism of the international economy. And, as I
said -- I came from the world of financial
markets -- you have to be able to move in seconds
in that world. You can't ask communities that have
manufacturing plants and depend on employment and schools and all
that, to be able to move on a dime. And so I have always
believed it's appropriate to use these. And, in the process,
we get political support, I hope, for both parties for continuing to
keep America open.
Now, there was another view. I mean, there were many
members of Congress, over half the House of Representatives last year
who wanted to have quotas to block steel. That was not, in
our view, the right approach. And so that's why the President went to
the ITC, asked for their analysis, and then we've looked at their
recommendations.
As for the second part of your question, on this remedy phase, I
neither asked for, nor got any sort of particular promises of
votes. But in the process of talking with people in this
industry, but, frankly, other industries, agriculture, I mean, part of
my job is how to put together a coalition to try to support
openness. So that's what I do abroad and at home.
Q Thank you.
END 4:10 P.M. EST
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