COMMERCE SECRETARY WILLIAM M. DALEY

TRADE SUBCOMMITTEE

HEARING ON STEEL TRADE ISSUES

Thank you, Mr. Chairman. President Clinton shares the concerns raised by this Committee, and he is dedicated to ensuring that America's steel industry, our steel workers, and their families are not hurt by unfair trade practices and import surges. The President has made this one of his top priorities, and all of us in the Administration have been actively involved in developing a swift and effective response.

Before I describe for you the substantial efforts made by the Commerce Department, I would like to announce some encouraging news.

January's Preliminary Steel Import Data

Just this morning, the Commerce Department released the preliminary steel import statistics for January. Let's look at how January compares with November 1998 -- when steel imports reached record highs, and the last month before our critical circumstances determination began to have an effect. Hot-rolled steel imports from Russia, Japan, and Brazil, the three countries subject to the dumping investigation, fell precipitously. Imports from Russia fell from over 600,000 metric tons in November 1998 to less than 11,000 tons in January 1999. Hot-rolled imports from Japan also plummeted, from over 400,000 tons in November to less than 16,000 tons. Imports from Brazil fell from more than 64,000 tons to less than 16,000 tons. The three countries combined fell by 96% from the record levels in November. Worldwide imports of hot-rolled steel fell by 70% from November to January.

The January figures show that worldwide imports of all steel products dropped by 34% compared with November 1998. Total steel imports from Japan and Russia plunged from more than 1.4 million tons to less than 425,000 tons -- a drop of 70%.

Enforcement of Trade Laws

These numbers are encouraging. They show that tough enforcement of the trade laws works. However, we recognize that 1998 was a record year for steel imports, and that one or two months of good data do not make a trend. Let me assure you that we will not relent in our determination to ensure that the United States does not become a dumping ground for unfairly traded steel.

This Administration has made fast and strong enforcement of the trade laws a key component of our steel action plan. First, we established a new policy on critical circumstances, which we applied for the first time in the hot-rolled steel investigations. This was a key factor in the decline of hot-rolled steel imports in December and January. Under this new policy, Commerce can issue determinations of critical circumstances prior to the preliminary dumping determination in order to respond to import surges. In November, we made preliminary critical circumstances determinations in the hot-rolled steel cases on Japan and Russia, almost three months before the preliminary dumping determination was due. This put importers on notice -- earlier than ever before -- that they could be liable for retroactive dumping duties.

Then, on February 12, we issued preliminary determinations on hot-rolled steel from Japan and Brazil, finding dumping margins ranging from 25 to 71 percent, as well as subsidy margins for Brazil. We made a commitment to expedite these cases, and we shifted resources within the Department so that we could provide relief to our industry and workers as early as possible. These determinations were issued an unprecedented 25 days early.

Russian Steel Agreements

On Monday of this week, we reached two proposed agreements with Russia that will significantly reduce imports of Russian steel and provide effective relief to the steel industry and U.S. workers. The first agreement would suspend the hot-rolled steel dumping investigation in favor of a three-part deal:

-- First, there will be a six-month moratorium on imports, which is intended to offset the recent surge. As a result, total 1999 Russian hot-rolled steel imports will be less than 345,000 metric tons. This is a reduction of almost 90 percent from the 1998 import level of 3.8 million metric tons.

-- Second, starting in 2000, there will be an annual quota on hot-rolled steel of 750,000 metric tons per year. This is equivalent to the pre-surge, non-injurious 1996 import levels. It represents a 78 percent reduction from 1998 levels.

-- Finally, the suspension agreement sets a minimum price for Russian steel, high enough to ensure that U.S. prices are not forced down.

As required by law, we also issued the preliminary dumping determination on Russian hot-rolled steel, finding margins ranging from 70 to over 200%.

The second agreement is a comprehensive agreement restricting exports of other Russian steel products to the United States to 1997 levels. This agreement will provide the steel industry and U.S. steelworkers with additional, immediate relief from imports of other Russian steel products.

-- It covers 16 steel products other than hot-rolled steel, such as cold-rolled steel, galvanized sheet, and wire rod. It also covers pig iron.

-- The comprehensive agreement will prevent surges in other steel products. In addition, it will deter circumvention of the hot-rolled suspension agreement by preventing the Russians from shifting to other steel products to get around the quota.

Together, the two agreements, when combined with the 1997 steel plate agreement, will reduce overall imports of Russian steel mill products by almost 68 percent in 1999 compared to1998 import levels.

Early Warning System to Monitor Import Trends

Early last year, in response to the Asian financial crisis, the Commerce Department established an import monitoring system to watch for import surges and falling prices, particularly for import-sensitive industries, such as steel.

Building on this approach, the President's steel action plan, announced in January, put into place new guidelines for the release of preliminary import statistics. To ensure that the U.S. steel industry and workers had accurate information as early as possible, the Commerce Department took the unprecedented step of publicly releasing preliminary steel import statistics almost a month before the release of the official trade statistics. The release this morning of steel import data, which I announced earlier, marks the second time we have done this.

Other Trade Enforcement Efforts

In addition to expediting the hot-rolled steel cases and issuing a new policy on critical circumstances, last November Commerce issued strong new countervailing duty regulations that strengthen our ability to combat unfair subsidies.

Overall, the Commerce Department is currently enforcing more than 100 antidumping and countervailing duty orders on steel products, and we are currently conducting 31 new steel investigations.

Bilateral Efforts

We continue to press the countries accounting for the largest volume of imports to end unfair trading practices, particularly Japan, which accounts for the largest share of the recent import surge. The President put Japan on notice in his State of the Union address and in meetings with Prime Minister Obuchi that if Japan's exports in 1999 do not revert to their pre-crisis levels, the Administration stands ready to take further action. Ambassador Barshefsky and I have reiterated this message as well in our bilateral meetings. In addition, we have pressed Korea to end government involvement in the steel industry.

Finally, we have also issued stern warnings to other countries that may be tempted to sell more steel in the United States unfairly: we are monitoring imports closely and will enforce our trade laws vigorously.

Conclusion

Mr. Chairman, the President remains deeply concerned about the recent plant closings and layoffs in the steel industry. We are all committed to continue our efforts to ensure a long-term solution for our industry and the steelworkers of America and their families.

I would be happy to take any questions.