The country's top steel companies, their trade organizations and their largest unions have joined forces to fight what they call unfair, subsidized steel imports from China.

Officials from the organizations recently lobbied Congress to support legislation aimed at making U.S. trade laws tougher in the wake of soaring imports from China. Steel imports from China soared more than 133 percent in 2006, displacing domestic steel sources and threatening U.S. markets with steel subsidized by Chinese government in violation of world trade policies, they said.

U.S. Steel Corp. Chairman and Chief Executive Officer John Surma, Mittal Steel USA CEO Lou Schorsch, United Steelworkers President Leo Gerard and the heads of four organizations representing steel interests in the U.S. visited congressional leaders and freshmen senators in January to express concern "about overproduction in China and the potential flood of low-priced imports that would put the entire American steel industry at risk," U.S. Steel Corp. spokesman John Armstrong said.

The group also pushed for a number of critical actions that can be taken to address China's "threat" to their industry. The actions include the need for strict and effective enforcement of U.S. trade laws, the need to preserve American anti-dumping and countervailing duty laws, World Trade Organization action with respect to the Chinese steel, and applying U.S. anti-subsidy law to China, Armstrong said.

Legislation proposed

Among their message to the congressmen, the steelmakers asked them to pass the "Strengthening America's Trade Laws Act of 2007" recently introduced by Sen. John Rockefeller, D-W.Va. Rockefeller contends the bill is necessary to stem the flow of imports from countries that allow unfair trade practices.

Rockefeller also claims the current administration has been lax in enforcing current trade laws and that indifference has allowed countries to flout U.S. trade laws and gain an unfair trade advantage.

"This has led to our record-breaking -- and still growing -- trade deficits, which threaten the long-term health of our economy, and have contributed to the migration of manufacturing jobs to factories overseas," Rockefeller stated.

The legislation would improve the country's ability to correct deficiencies in four areas of U.S. trade policy, he said. First, it bolsters the United States' position in WTO dispute settlement proceedings. Secondly, the legislation tightens the rules in anti-dumping cases in favor of the petitioning domestic industry. Thirdly, it makes it harder for dumping countries and businesses to circumvent the rules.

Finally, it also expands the reach of countervailing duties and -- in certain circumstances -- it removes the U.S. President's discretion to disregard recommendations of the International Trade Commission.

"Our members agree that this legislation includes key provisions to strengthen existing trade laws to ensure that any affected sector can seek effective relief through trade remedies," stated Gerard in a letter signed by the leaders of four steel industry organizations.

The organizations -- the American Iron and Steel Institute, the Steel Manufacturers Association, the Specialty Steel Industry of North America and the Committee on Pipe and Tube Imports -- represent the country's major steel producers and processors.

"While the United States plays by the rules and adheres to its WTO obligations, some of our trading partners do not," the joint letter said. "....We appreciate your recognition that domestic manufacturers and their workers can compete with anyone in the world on a level playing field, but we cannot compete against governments."

China fights back

A China Iron and Steel Association official recently said China is trying to resolve steel trade disputes in discussions with the United States, and well as with the European Union and the Republic of Korea, the three major importers of China's steel.

"China has been talking to these countries since last year," said Luo Bingsheng, vice chairman and secretary-general of the China Iron and Steel Association, in a published report. "We have made legal preparations in case of an anti-dumping move aimed at China."

He claims China's steel exports rose on the back of higher demand and a high price on the international market.

"The price of China's steel is generally consistent with the world market," said Luo, who denies China has dumped its steel to foreign countries at unfairly low prices.

China's policies reflect subsidies

But the U.S. steel officials point out that as recently as 2005 -- after China joined the WTO -- China's National Development and Reform Commission issued a policy that strongly indicates China will provide significant subsidies to its steel industry.

"There shall be supported and organized the implementation of localization of steel industry installations so as to improve China's research and development, design and manufacturing ability of key steel industry technological installations," according to one of the policy's provisions.

Plus, the steel officials contend China's steel subsidies come in various forms, including preferential loans and directed credit from state-owned banks; assistance with energy, raw material and other input costs; and government grants.

"...The available evidence leaves no doubt that China's steel industry has been, and continues to be, propped up by unfair government support," according to a position paper issued by the group.

The government takes action

Since the steel officials' trip to the Hill, the U.S. has filed a complaint to the World Trade Organization alleging China is unfairly subsidizing its steel exports.

"We are committed to challenging China's WTO-inconsistent practices that harm American workers and businesses," U.S. Trade Representative Susan Schwab said on Feb. 2. "China's use of market-distorting subsidies creates an uneven playing field and subverts China's own efforts to foster consumption-led growth."

Yet, after facing record Chinese imports in 2006, domestic steelmakers and others still are concerned unfairly subsidized exports will continue to enter the country. The U.S. Commerce Department's most recent Steel Import Monitoring and Analysis data indicates steel import permit applications for January totaled 2,838,000 net tons with China accounting for 592,000 net tons of the amount.

Too little, too late?

The AISI's Sharkey said the WTO complaint "only touches the tip of the iceberg" of subsidies China is providing to steel and other manufacturing industries.

"An essential and urgently needed next step is to ensure that U.S. countervailing duty law will be applied in an effective manner to counter the trade and market-distorting impacts of subsidies provided by China and other non-market economies," he said.

Peter Morici, a professor at the University of Maryland School of Business and former director of the Office of Economics at the ITC, said the history of WTO disputes addressing broad subsidies indicates the U.S. complaint will likely take years to resolve

"Practically speaking, asking the WTO to address Chinese export subsidies instead of applying U.S. countervailing duty laws would be like calling the United Nations to coordinate clean-up after Hurricane Katrina instead of dispatching the Federal Emergency Management Administration," Morici said.

Morici also joins others economists and others, including the National Association of Manufacturers, is a belief that China needs to allow its currency to appreciate so its exchange rates are set in the open market rather than float against the dollar. Its undervaluation effectively provides a subsidy to China's manufacturer and steel producers.

"By any reasonable reading of the WTO rules, Chinese currency intervention is an export subsidy," Morici said. "China's currency intervention provides a monetary benefit to exporters by putting yuan in the hands of foreign purchasers, and for Chinese businesses to gain access to this benefit, they must export.

"WTO rules treat export subsidies as among the most egregious forms of protectionism, because these directly impede free trade based on comparative advantage."