The weather forecast in Washington these days is cloudy with a chance of gridlock, based on interviews with steel industry representatives.
In the next few years, political and business leaders say trade groups will play an increasingly important role advocating on behalf of the steel industry. They say it also will be important to push current and future White House administrations to develop policies supporting the manufacturing sector, which likely will include discussions on how to handle international trade relations.
Lack of consensus
International trade has been one of the strongest lobbying platforms the domestic steel industry has promulgated as the share of imports consumed has grown in the last few decades.
In the last few legislative sessions, U.S. Rep. Pete Visclosky, D-Merrillville, said there hasn't been a majority of members in the House or Senate who have been willing to take "forceful, compelling action on trade." Visclosky has backed legislation to add countervailing duties on imports from countries that have an undervalued currency. The House passed the measure in 2010, but it died in the Senate. The following year, the Senate approved a similar measure, but it wasn't brought to the House floor for a vote.
"That's not getting the job done," Visclosky said. "And that's (just) one example."
In the future, Visclosky said it will be important for the government to respond faster with trade remedies. Typically, petitions are filed seeking trade relief after the industry has suffered significant damage and jobs are lost. He said if the system were improved to compress the time frame for trade cases and so customs personnel could spot duty violations, the domestic industry would benefit greatly.
"Steel, while it's profitable today, remains under great competitive pressures," Visclosky said.
Thomas Gibson, American Iron and Steel Institute CEO, said the industry has received good support from the Department of Commerce and individuals working in trade relations with the government. However, he said would like to see more support from the Oval Office.
“You see this split in rhetoric in wanting to promote jobs but bashing the job creators and seeing job creators as a tax (vehicle),” Gibson said.
Bob Weidner, president and CEO of the Metals Service Center Institute, said the future will be about how to keep members involved, because they are now more vocal than ever. He said MSCI and other trade groups are keeping a well-informed audience engaged.
Several steel companies with operations in the United States have pushed national and international regulators of commerce to ensure countervailing and antidumping duty laws are in place to restrict anti-competitive behavior.
Gibson said the government can force action where duty orders exist, but individuals and companies have seen in recent years cases of duty evasion by rerouting products through countries to avoid duty orders. His group is pushing for passage of the ENFORCE Act in Congress to create a path where domestic industries could petition customs to investigate complaints.
Gibson said the China Iron and Steel Association expects annual steel production capacity in China to reach a level that's nearly eight times larger than the U.S. capacity.
He expects the relationship with China to remain difficult as the industry remains overcapitalized and products seek a home market.
China sees steel as an industry requiring substantial government intervention and doesn't allow majority foreign ownership of steel enterprises in the country, Gibson said.
Steel groups have found allies with unions in supporting domestic companies and advocating for fair international trade. Tom Conway, vice president of the United Steelworkers, said the union isn't anti-trade, but he said domestic manufacturers large and small would be helped if the U.S. government dealt with the value of China's currency.
Conway said the government could set up an appropriate tax policy and other initiatives to encourage manufacturing to locate in the United States.
Imports enter the U.S. market because customers, which include the nation's largest steel mills, small steel processors and other steel-consuming companies, are buying it, said Dave Phelps, president of the American Institute for International Steel. Phelps said many of the products imported are not made in sufficient quantity in the United States.
"It's not a regulation issue," Phelps said. "It is a market-demand issue. The market demands imports. That's why imports come in. They are needed in this U.S. market. They are part of the competitive landscape of the U.S. market."
Phelps noted domestic steel mill purchases of semi-finished slabs represent 23 percent of U.S. steel imports. Companies also are importing steel sheet for rolling operations and additional processing.
Honest importers are hurt by customs fraud as badly as domestic steel producers, Phelps said. He said the members of his group work with the federal government to make sure they have proper information for products and that the appropriate duties are collected when necessary.
He said there is a subsidy issue in China at some of the loss-making enterprises, and those operations are contributing to the overcapacity problem in the country.
Phelps said the Chinese currency continues to appreciate against the dollar but there are varied opinions about what the "right" level is. He said it's important to keep in mind the U.S. government also is keeping the value of the dollar down as a result of its monetary policy dictating low interest rates.
"It's easy to say they manipulate their currency and it's undervalued," Phelps said. "It's hard to really do a serious analysis of that to say look how far it's come to where it is today. Is that enough? I don't know."
Also, he said it's important for domestic industry to remain in this country because of the widespread economic opportunities it provides.
While it may be cheaper to buy goods imported from other countries, Visclosky said it's not good for the economy if it is at the cost of employment in the United States.
"They may have bought something cheaper, but their life has been cheapened," he said. "... You still need to make stuff in this country."