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US, Japanese automakers argue for end of US steel tariff

By: | at 08:00 PM | Channel(s): International Trade  

US automakers joined their Japanese competitors recently to argue before the US International Trade Commission for an end to 13-year-old steel tariffs.

They said the steel industry had changed enough in recent years to survive without protection from imports from Japan, Canada and other countries.

“The restructuring of steel has created a very different industry,” said Mustafa Mohatarem, chief economist for General Motors Corp. (GM). “It is not just an industry that is ready to face competition. It is an industry that needs more competition.”

But Robert Lighthizer, a steel industry lawyer, said he doubts that $472 worth of steel in a $27,000 car is causing US automakers’ woes, especially when the more profitable Japanese companies are paying the same steel costs as their American counterparts.

Steelmakers “are only making $19 per vehicle,” he said. “Does that sound like market power to you? That’s not even enough for a packet of air fresheners.”

The future of the tariffs is crucial enough to jobs and profitability that 11 lawmakers interrupted their campaigning for the Nov. 7 midterm elections and returned to Washington to appear before the commission.

Two Michigan congressmen said the tariffs should end. The rest spoke in favor of extending them for five more years against galvanized steel from Japan, Canada, Australia and other countries.

One central dispute is how much profit steelmakers are getting from high-end corrosion-resistant steel, 1,000 pounds (453 kilograms) of which goes into the average car. Steel companies say they’re earning 5.2%; the car companies say it’s 12%.

On the other hand, the automakers say car buyers are feeling the effects of higher steel prices, which have gone from less than $400 a ton in 2001 to about $740 a ton last month, according to Purchasing Magazine.

The US Commerce Department said earlier this year that eliminating the tariffs would revive dumping of low-priced foreign steel in the American market. Opponents of the tariffs say that assessment used market assumptions from 1993.

Consumers use steel every day, in electronics, household goods, appliances and their vehicles. Jobs also are affected by steel imports. From 1997 to 2004, 45 steel manufacturers, about 40% of those operating in the US, went bankrupt, partly because of an influx of low-priced foreign steel.

More than 85,000 jobs were lost from western Pennsylvania through West Virginia, Ohio, Michigan, Indiana and Illinois, according to the United Steelworkers union.

But automakers and other steel users say they have a far greater effect on the US economy. They say steel consuming jobs outnumber steelmaking jobs 60-to-1.

“That’s protectionism at its worst,” said Rep. Joe Knollenberg. “It helps one small contingent and hurts a huge group.” (DJCS via Comtex)