BY EVA CHENG
Capitalism's nagging overcapacity problem refuses to go away. Having long plagued many key industries, the problem found new and sharp expressions in the global steel industry in the wake of the 1997-98 economic crises in Asia, Russia and Brazil, overwhelming the US with rising steel imports and prompting then President Bill Clinton to impose prohibitive punitive tariffs.
Now, President George Bush is threatening to reimpose tariffs as high as 40%. Bush is scheduled to make a formal decision on the matter in early March. He may not press ahead with the tariff and import quota plan if other steel-producing countries make offers to cut enough of their steel production capacity as Bush has asked them to.
Although the European Union (EU) on February 8 made an 11th-hour pledge to cut its steel output by 24 million tonnes a year between 2003-05, the cut amounts to only about 10% of the global excess steel production of more than 200 million tonnes a year. Global steel excess capacity is 300 million tonnes a year, while annual consumption is 700 million tonnes.
In this context, it's hardly surprising that steel prices are now at their lowest in 20 years. The US imported about 27 million tonnes of steel products in 2000, valued at US$10.7 billion.
Japan is still resisting cutting its output. Not only has it been "quiet" on its capacity reduction projections, on January 30 it launched an action against the US at the World Trade Organisation (WTO) for the US refusal to lift anti-dumping duties on steel imports which were first imposed in 1993.
It remains questionable if the total cuts on offer will satisfy the Bush administration.
The failure of other steel-producing countries to actually make cuts in output prompted Bush to call in September on the 39 major steel-producing countries to meet under the auspices of the Organisation for Economic Cooperation and Development (OECD). A meeting in Paris on December 17-18 failed to produce any meaningful action.
Driven by aggressive US steel producers, the Bush gang aims to have other nations cut their steel-production capacity while allowing US steel companies to maintain theirs. The rationale for this approach is that US corporations are allegedly far more efficient than their foreign competitors and the aim should be to cut "the least efficient" capacity.
This attitude is clearly expressed in a US government report on the December gathering, which says: "The United States has remained by far the largest net importer of steel products, so it is not obvious that the US steel industry accounts for a considerable portion of global 'excess capacity' that might exist, and by various standards the US industry is amongst the most efficient in the world."
A December 7 report of the US Mission to the European Union says: "The United States has mounted a diplomatic campaign that aims at reducing the global excess of steel production and capacity. Officials from the Commerce Department, the Office of the US Trade Representative and the Treasury Department have been travelling to countries with the biggest steel producing industries, including Japan, China, Mexico, Brazil and Russia, to persuade them to support significant cuts in output."
US protectionism
Under the OECD process, steel-producing countries were to conduct their own reviews of the "efficiency" levels of their steel industries, identify the "inefficient" capacities and "volunteer" to eliminate them.
The US report presented a comparison of the labour productivity of eight selected steel-producing countries, which shows the US (together with the EU and Japan) as among "the most efficient". They employed far fewer worker-hours per unit of steel output than the other producers, especially China and Russia.
The logic of the US argument is that China, Russia and other "less efficient" steel producing countries should shut down a greater proportion of their industries than the imperialist triad (US, EU and Japan) and thus rescue the triad from its overinvestment in steel-producing capacity.
On the basis of their "efficiency" argument, in January 2001 North American steel producers took issue with the German government for providing funding for Cuba to expand its steel-producing capacity. They also sought to stop foreign funding to China's steel industry.
On the other hand, even though Japan and the EU are hardly inferior to the US in steel-producing productivity, Bush is still trying to get them to cut their capacity.
The US claim that its steel producers are the most efficient doesn't always hold true. Steel companies which account for 29% of US steel output are currently in bankruptcy and in the last 18 months nearly 15% of US steel capacity has become idle or will do so soon.
Rather than recognising that these companies have simply lost out in the normal course of "market-based" competition, the Bush administration has blamed their demise on cheap steel imports. Often these exporting countries were accused of "dumping" (selling below costs) and/or of having benefitted from government subsidies.
The basis of the dumping verdicts is dubious, and rarely open to public scrutiny. They are based on US laws, allowed by the WTO.
As for government backing, this is a "crime" when provided by a competing government but fully justified when delivered by Washington to US corporations. The US steel report said: "The US government does not provide significant subsidies or similar assistance to the US steel industry. The most visible federal program toward the steel industry, the Emergency Steel Loan Guarantee Program, adopted in 1999, is limited in scope... Although there has been assistance to certain steel producers at the state and local level, such assistance by itself, is unlikely to result in the creation of new capacity."
That loan guarantee program has covered a US$110 million loan and approved six others.
Despite its "free-market" rhetoric, whenever major US corporations are "substantially injured" by a surge of imports, the US government intervenes to protect these corporations from foreign competitors.
This approach is enshrined in law by section 201 of the US Trade Act of 1974, which authorises Washington to undertake "safeguard actions" to punish "aggressive" competitors.
The other prime items in Washington's protectionist arsenal are the antidumping and countervailing duty laws. In 1993 and again in 1998, they, often with time-bounded applications, were liberally lashed on steel exporters to the US, with great immediate effects.
"Free trade" is upheld whenever the US rulers seek to break into, or strengthen their hold on, a foreign market but can conveniently be ignored when "US interests" are perceive to be threatened. This "free trade" double-speak has also been applied to other imports such as clothing and textiles.
Government subsidies
The US capitalists switched to another logic when confronting their own workers. While still campaigning against their foreign competitors receiving any government support, US steel producers are asking Washington to provide subsidies to help them lower their production costs, especially by subsidising their healthcare and pension obligations toward retired steel workers ("legacy costs"), but also in meeting environmental standards.
Crying poor, US steel producers said retirees, totaling 400,000, have outnumbered active steel workers by more than four to one, inflicting, for healthcare alone, a bill of US$8 billion. The US Mission to the EU report said the US steel industry has indicated "it would be unable to adjust to import competition, independently of import remedies, unless impediment to restructuring, such as labor agreements and pension, health care, and environmental clean-up costs were removed".
US Steel Corporation, which is on course to take over five other major US steel producers, even asked the Bush administration for US$12 billion to pay for hitherto unfunded employee retirement benefits.
US steel producers have gone so far in their pleas for government hand-outs as to demand ownership of the revenue coming from the planned import tariffs! Following a new law passed by the US Congress last year, the income from anti-dumping duties was already being distributed to US companies which are competing with foreign exporters. This outraged many countries and at least 10 of them, including the EU, Japan and Australia, lodged a complaint with the WTO over this practice.
The claim that the US isn't responsible for global steel overcapacity just doesn't square with facts. Following the last wave of steel overcapacity in the early 1980s, US producers invested tens of billions to "modernise" their plants, a move that exacerbated global steel overcapacity.
The industry-sponsored American Iron and Steel Institute acknowledged in a 1998 report, "the [steel] crisis is global, long term and structural". Since then the problem has got worse.
In congressional testimony in December 2000, when the steel oversupply worsened again, Department of Commerce undersecretary Robert LaRussa said that "two important factors may make this crisis even more serious than 1998". These were, firstly, indications that domestic steel demand had declined, down for the first time since 1992, suggesting a "cyclical downturn", and secondly, "the industry no longer has reserves to carry it through another downturn".
US steel capacity utilisation at the time was already below 74%. It's become much worse since.
From Green Left Weekly, February 27, 2002.
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