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Hearing Summary

Senate Committee on Finance
Subcommittee on International Trade
Senator Craig Thomas, Chairman
Rock Springs, Wyoming

Thursday, April 15, 2004

"International Trade and the Impact on the U.S. Soda Ash Industry"

The hearing was designed to bring together representatives from government, the private sector, and labor to discuss the current state of affairs in the soda ash industry and the impact global trade has on the production of soda ash in the United States. The field hearing was conducted at Western Wyoming Community College in Rock Springs, Wyoming. The first witness was Representative Barbara Cubin (R-WY). The Federal panel included Dennis S. Kostick, Senior Commodity Specialist, U.S. Geological Survey and Meredith Broadbent, Assistant U.S. Trade Representative for Industry, Market Access and Telecommunications. The industry and labor panel included John M. Andrews, President and Chief Executive Officer, American Natural Soda Ash Corporation (ANSAC); James Pearce, Manufacturing Director and resident Manager, FMC Wyoming; and Monte Morlock, President, United Steelworkers of America, Local 13214, Rock Springs, Wyoming.

In his opening statement, Chairman Thomas stated his goal was to identify issues in the soda ash industry and determine what the Congress can do to help strengthen the industry. Senator Thomas identified trade barriers as one of the problems hurting Wyoming companies that produce natural soda ash. He noted that there has been flat growth in the domestic soda ash industry for some time and shared his desire to renew opportunities in the "trona patch." The Chairman expressed a desire to find new uses for trona and find a solution to the high cost of transportation. Among the ideas Senator Thomas mentioned as part of the remedy to the current situation were a federal royalty reduction on trona leases and passage of the comprehensive energy bill. Chairman Thomas also took the opportunity to mention S. 2317 which he introduced in the Senate on April 8, 2004. The bill would amend Section 24 of the Mineral Leasing Act by limiting the royalty on soda ash to 2 percent for a period of 5 years.

Representative Barbara Cubin was the first witness. In her statement, Ms. Cubin called for a reduction in the royalties paid by Wyoming trona producers to aid in leveling the playing field for Wyoming companies in an increasingly competitive global soda ash market. Representative Cubin noted that the Green River Basin in Wyoming is home to the world's largest trona deposit; however, China has great advantage over domestic soda ash producers due to cheap labor costs, lax pollution laws, and lower transportation costs. She also expressed concern for the stagnant domestic soda ash market and vowed to ensure the industry has a level field of play when competing on the global economy. Representative Cubin mirrored Chairman Thomas' concern over increased energy prices and their effect on industry profitability and stated a desire for passage of a comprehensive energy bill.

Meredith Broadbent was the first witness on the government panel and began by noting that President Bush and Ambassador Zoellick are working hard to break down trade barriers to industrial exports. She also stated that 95 percent of the world's consumers reside outside the United States and that the President believes that ensuring that our country can compete globally helps maintain a dynamic and strong economy here at home. Ms. Broadbent shared concerns with China's growth in production of synthetic soda ash and that country's displacement of the U.S. as the world's largest producer of soda ash. She spoke to China's responsibilities as a member of the World Trade Organization (WTO) and gave assurance that the Federal government is working hard to ensure that China plays by fair, consistent international trade rules. Ms. Broadbent spoke at length of the critical U.S. leadership role in the Doha Development Agenda, the global trade negotiations at the WTO. She also discussed the tariff and non-tariff barriers to trade of U.S. soda ash.

Dennis Kostick was asked to speak to the history and outlook of the U.S. soda ash industry. In doing so, he described the uses of soda ash for consumer product production and the challenges presented within the world economy. Mr. Kostick outlined world soda ash production, the domestic soda ash industry, and described domestic consumption of the commodity. He stated that rising energy costs associated with soda ash production as well as rising fuel costs in railroad and ocean transportation sectors have affected the delivery price of soda ash to distant markets. Mr. Kostick also described the challenges that lie ahead for the U.S. soda ash industry including declining demand and global competition.

ANSAC President and CEO, John Andrews thanked the Wyoming Congressional delegation for their actions on behalf of the industry. Mr. Andrews stated that while there aren't a lot of new uses for soda ash, there are many new consumers in developing countries. He expressed concern for China's ability to unfairly grow their synthetic soda ash industry with state subsidized energy and materials costs as well as state controlled financing.

James Pearce, Manufacturing Director and Resident Manager, FMC Wyoming, stated that soda ash is directly responsible for 2300 jobs in Southwest Wyoming. He noted that Wyoming is home to a world-class trona resource and the most environmentally friendly source of soda ash. He also reiterated Mr. Andrews' concern that China is competing on an un-level field with state run producers with state run banks utilizing fixed rate currency. Mr. Pearce, like Mr. Andrews, was supportive of the Chairman's attempts to reduce the royalty rate on trona leases.

The final panelist was Monte Morlock. In his brief statement, Mr. Morlock pointed to the 400 lost jobs at FMC Corporation over the last five years. He mirrored the concerns of the previous two witnesses with regard to global competition from China. He concluded his comments with an observation that we need to export soda ash from the United States, not jobs.

Chairman Thomas asked a variety of questions of each of the panelists. Many of the questions pointed to barriers to global trade and global competition, and its affects on the U.S. soda ash industry. There was general consensus that there are valid reasons for concern for the future of the soda ash industry. There appeared to be general agreement from the industry panel that a reduction in the royalty rate would provide some relief to the domestic soda ash producers.