Big Steel’s Big Push : Industry Lobbying Bush, Dukakis to Protect Import Quotas

DETROIT — More than a year before import quotas on foreign steel are to expire, the American steel industry has decided not to wait for the small matter of a presidential election to find out whom to lobby next fall.

Instead, Big Steel, frantic to keep out the sea of imports that nearly drowned American producers in the early 1980s, has decided to lobby both presidential candidates--long before one is elected.

As part of a massive campaign to win a five-year extension of steel quotas when the current import limits expire in October, 1989, the industry and the United Steelworkers union have been lobbying key campaign aides, the Republican and Democratic platform committees, and leading trade experts in Congress as well, to make sure both parties support the quota program.

Huge Recovery Under Way

The steelmakers want to make the election irrelevant, at least as far as they are concerned.

“We recognize it is extremely important to have both candidates’ support,” says Milton Deaner, president of the American Iron and Steel Institute, the steel industry’s major trade group. “Since we don’t have any idea who is going to win, we want to have both of them support it.”

Curiously, all this political maneuvering comes amid a roaring recovery in the steel industry, during a period when steel makers are reaping huge profits, charging higher prices and running their plants at close to full capacity.

Production costs, slashed by years of Draconian restructuring, are competitive on a worldwide basis, and, thanks to higher worldwide demand and the weakening of the dollar against other currencies, American steelmakers are actually exporting steel once again.

“Toyota now pays more for its steel than General Motors does,” Deaner says proudly.

Still, steel industry executives, scarred by the memories of the industry’s devastating slump of the early 1980s, don’t want to take any chances and are counting on their lobbying campaign to win protection for another five years.

But the campaign has been only partially successful.

Bush Won’t Take Stand

While he was campaigning in Pennsylvania in April, Democratic presidential candidate Michael S. Dukakis, under pressure from the steelworkers union, which has a powerful voice in the Democratic Party, endorsed an extension of the quotas.

Dukakis’ only proviso was that the industry must agree to reinvest its profits in plant modernization and worker retraining, but that has been a condition of the quotas since they were first put in place in October, 1984.

On the Republican side, however, George Bush has refused to say where he stands on quotas. While industry executives think that he leans their way, they are still worried by his silence.

“Sure we’re concerned,” says Thomas C. Graham, president of the steel operations of USX Corp., the nation’s largest steelmaker. “We have not had any public statement of endorsement from Vice President Bush, and we would regard (such a statement) as very helpful.”

Industry executives say the candidates’ positions are vital, since the next President will be able to make a decision on steel quotas with only limited input from Congress.

They stress that this is now the most important issue facing steel: “In our view, it is absolutely necessary that the (quotas) be extended,” says David Carroll, a spokesman for LTV Steel, the nation’s second-largest steel producer. “When you look ahead to 1989, that is the standout issue for steel for the year.”

But in 1988, it is not clear that the quotas are having much of an effect on the steel marketplace or the steel industry. In fact, some analysts doubt that they are doing much now to stop imports.

Indeed, imports have taken it on the chin, yet industry analysts say the changes in currency exchange rates have been more of a factor than the quotas. The weaker dollar has forced foreign producers to raise prices here, reducing their competitiveness.

Imports Way Down

“There is no question that, during the period of the (quotas), the domestic market has improved, but the turnaround is mostly due to currency changes and the industry’s improved competitiveness,” says John Jacobson, a steel analyst with AUS Consultants, a Philadelphia consulting firm. “The quotas have only been a coincidental factor.”

Imports remained stubbornly high for several years after the quotas were imposed by the Reagan Administration at the end of 1984 but now have fallen dramatically, and many foreign producers, including the Japanese, are not even shipping as much steel here as they are allowed under the quota program.

In fact, while the quotas only cover 29 steel-producing countries, accounting for just 67% of total imports, the share of the American market held by all imports is still under the level set by the quota program, according to the American Iron and Steel Institute.

(The quotas, officially considered voluntary restraint agreements, are negotiated separately with each nation, and many countries have refused to limit their imports.)

“I’d put the (quotas) fourth or fifth on a list of factors leading to the steel recovery,” observes Louis Schorsch, a steel analyst at McKinsey & Co., a management consulting firm.

But the industry disagrees. Steel executives argue that there is still too much steel-making capacity around the world because so many Third World nations subsidize or own their steel industries.

If the quotas are dropped, they argue, the next recession will see foreign government-owned steelmakers once again dumping their surplus steel on the American market. American executives charge that they also did before the quotas were in place rather than cutting back on production and employment at home. That would once again depress prices and profits for the U.S. industry, they say.

“All that the U.S. steel industry has done to make itself competitive can go by the boards if a handful of foreign governments decide to increase their shipments here and dump steel,” says LTV’s Carroll. The quotas ensure that “foreign producers can’t just dump steel in our market in a worldwide glut,” adds National Steel Vice President David Chatfield.

But Big Steel’s demands for further protection are starting to rile its customers.

Manufacturing firms that rely on stable supplies of steel complain that a brief steel shortage last winter disrupted their operations, while price increases this year have made them less competitive with imports--imports made of foreign steel.

“The quotas have hurt our competitiveness,” says Bill Lane, a government affairs specialist with Caterpillar Tractor, one of the most vocal critics in heavy industry of the steel quotas. “They have resulted in sharply increased steel prices, they have created manufacturing inefficiencies, and have frustrated our efforts to increase U.S. production.

Complaints About Quotas

“You have a situation now,” adds Lane, “where you have a steel industry at full capacity, you have quotas restricting new sources of supply, and you have strong demand for U.S. manufactured products around the world. Something has got to give.”

Even some small companies say they are being hurt by the quotas. All America Manufacturing, a Los Angeles manufacturer of specialty plumbing items, has had to scramble for special types of steel products since the quotas went into effect. “We end up searching all over the place to get it,” says John Norton, All America’s president.

But for all the dire warnings from the industry and angry complaints from customers, most analysts don’t see the quota issue as a life-or-death matter for steel anymore. The quotas provided breathing room at first; but the industry is competitive once more and may not need further protection.

In any event, analysts note, the quotas are not much of a factor in the marketplace now. The rising prices that customers are complaining about are mostly due to higher demand, not quotas, analysts say.

“I would claim that, in the early years, they prevented prices from collapsing more than they did,” says Peter Marcus, a steel analyst at Paine Webber Inc. “But now, world export prices are higher than domestic prices, so I don’t think they are having any impact on the marketplace.”