Relief from the disaster of the late 1960's and early 1970's was too little and too late, and that is why we strongly recommend both an early warning provision and a triggering mechanism for automatic action in a new trade bill. As the world steel capacity nears a billion tons a year, with more than a million tons of largely exportable stainless steel capacity alone in each of several individual nations, we in specialty steel fear a repeat of the invasion of our markets, as in the late 1960's and early 1970's, should there be abatement of demand for specialty steels abroad or should the economic policies of foreign governments dictate a change.

Therefore, a trade bill which will determine our country's economic future for decades to come requires at the very minimum the realism of sector negotiations, orderly marketing agreements on a sector basis in international negotiations, and strong antidumping, subsidy and unfair trade practice provisions which the American Iron and Steel Institute here has requested and which we in the stainless and tool steel industry also strongly favor.

Thank you, Mr. Chairman.

Senator BENNETT. Thank you very much.

And we will now hear Mr. Anthony, vice president and general manager of Kaiser Steel Corp.

Statement of Mark T. Anthony

Mr. ANTHONY. Thank you, Mr. Chairman.

My name is Mark Anthony, and I am vice president and general manager of the Steel Division of the Kaiser Steel Corp., with headquarters in Oakland, Calif.

I appreciate the opportunity to appear before the committee and to testify on H.R. 10710. My testimony will be brief and specific. I will forego any general discussion of the Trade Reform Act of 1973 of the larger issues of international trade policy as they affect the U.S. economy or the steel industry domestically and internationally. These matters and others are of interest to us, but they are covered by other spokesmen for the American Iron and Steel Institute.

I have been authorized by the chief executive officers of five other steel companies in the western United States to say that they associate themselves with my testimony here today. My statement will be confined to a specific recommendation for improvement of H.R. 10710. I would like to emphasize that our recommendation to you for amendment of the bill does not represent special interest pleading. To be sure, this proposed amendment grows out of Kaiser Steel's experience in the steel industry, but it is of general application to all industry and thus constitutes an improvement in the bill of broad application and interest.

The facts on which these requests for improvements are based are indisputable. Imports of foreign steel into the western United States are and have been twice as severe as for the United States as a whole. Thus, as a regional company we feel we must speak for the special and specific problems of the industry on a regional basis. And we believe that similar regional considerations are important for other industries as well.

For years western steel producers have been decrying the disproportionate burden they have faced from cut-priced foreign competition, pointing out that the flood of imports was stifling growth of the domestic steel industry, and thereby causing an increasing dependence upon foreign sources for this material which is so vital to a modern industrial economy. Unless some modicum of orderly marketing entered into the picture, we said, the time would come when imported steel would command a premium price, and steel in some product areas would not be available at any price. Gentlemen, that time has come. Some foreign steel is now selling at a premium price in the West.

When, over the period from about 1959 to 1972, foreign steel producers wanted to establish a particular product position in the western market, they carved out any portion they wanted--25 percent, 35 percent, 45 percent, 55 percent--by undercutting domestic prices by the amount it took the achieve the penetration. The American steel producer, and particularly the American steel producer located in the western United States, had no practical weapons with which to turn back this penetration of his markets. Under such a condition, the domestic steel industry could not possibly attract the investment capital necessary for expansion.

As a consequence, western manufacturers and other users of steel mill products have come to rely upon foreign steel production for a significant portion of their requirements. We should never have allowed the situation to arise where 30 percent of the American steel market is supplied by interruptible foreign sources. It is not good for the American economy; it is devastating to the western economy. It is not good for the domestic steel producer, or the steel consumer.

I can assure you, gentlemen, that from the letters and phone calls I have received from our customers, our customers are not happy with this situation either.

The capacity for production of domestic steel in the western United States right now is woefully inadequate to meet the demand. Before the tremendous amounts of capital required to expand this capacity can be marshalled, there must be some assurance that this flood of foreign imports will not be allowed at some future time to again disrupt this market.

In our view, this situation can be greatly alleviated in the future. by more specifically defining the determination of injury on a regional or geographic basis and by certain technical changes in the language. I refer to chapter 1 of title II of the bill, relating to import relief and more specifically to section 201, which relates to the Tariff Commission's investigations under the so-called escape clause provision.

Section 201 (b) sets for the various criteria and standards which the Tariff Commission must take into account in making a determination of injury to a domestic industry. In section 201(b) (3), on page 51 of the bill, the concept of domestic industry is further defined. Two such definitions are offered in subparagraphs (A) and (B). I would submit for your consideration an additional definition which would form a new subparagraph (c) to read as follows: (C) May, in the case of a domestic producer located in a major geographic area of the United States and serving a market in that area, treat as part of such domestic industry only that segment of the producer located in such geographic area.

This additional language would make it possible for the Tariff Commission, where the circumstances and the facts warranted, to make a finding that imports are causing or threatening serious injury to a domestic industry located in a major geographic area of the United States and serving an identifiable market within that area. Upon such a finding and recommendation by the Tariff Commission, the President would be free to provide import relief when he determines such relief to be appropriate as provided for in sections 202 and 203 of the bill.

We believe that such an amendment is both appropriate and desirable. Chapter 1 of title II of the bill contains provisions designed to protect a domestic industry from injurious imports. Such protection has been established national policy for many years. The provisions of that chapter, however, are inadequate. They do not explicitly make provision, in defining a domestic industry, for cases of serious injury to a domestic industry when the import problem is confined to a major geographic area of the United States. This is an actual and not a theoretical situation. It has happened in the case of the west coast steel industry and can no doubt happen again, both for steel as well as for other industries in major geographic areas within this huge continental economy of ours.

I understand that their have been at least eight cases under the Antidumping Act in which the Tariff Commission found injury to geographic segments of the industry in the United States assessed dumping duties against the imports. Citations from the Tariff Commission's reports in these cases are attached as annex C.*

Certainly, when production facilities are underutilized, when wage earners are unemployed in layoffs, and when returns from economic activity are depressed, the injury is just as real when confined to an industry in a specific geographic area as when it is general injury throughout the United States. Indeed, one can conceive realistically of the following situation arising: a geographic segment of an industry is injured by imports causing 10,000 people to be unemployed, but access to relief under the escape clause is doubtful. By contrast, an industry in the United States as a whole is injured, resulting in only 2,000 people or one-fifth the number unemployed, and access to the escape clause is assured. I cannot believe that the Congress intended to permit such an anomalous situation to exist.

Would our proposed amendment do violence to the policy of the bill before you? It would not. On the contrary, it would give full effect to a policy as presently stated in the bill. In the trade bill as submitted by the administration, and as passed by the House, the special problem of geographic impact of imports was recognized. Thus, in section 202 (c) (7), the President, in making his determinations under the escape clause, is instructed to take into account "the geographic concentration of imported products marketed in the United States." The President, however, cannot take this into account unless the Tariff Commission can make a finding of geographic injury which then goes to the President for action. This situation was brought out in a colloquy between Congressman Pettis of the Ways and Means Committee and Acting Chairman Ullman during the House debate on the trade bill. The text of this colloquy is attached as annex B.**

*See p. 1979, **See p. 1078.

The amendment which we have proposed to section 201 (b) (3) would simply make it explicit that the Tariff Commission may make a finding under the escape clause with respect to a geographic segment of an industry when the facts warrant such a finding and would, therefore, make it possible for the President to act in such a case.

I recommend this proposed amendment for your serious and sympathetic consideration.

I have also affixed to this statement a memorandum (annex A) covering two related amendments which I shall not read at this time, but which my associates and I would be glad to discuss with members of the committee and its staff.*

Thank you very much, Mr. Chairman.

Senator BENNETT. Thank you very much. You have done excellent jobs of keeping within the 10 minutes, and we appreciate that because we have a number of other witnesses.

There are two or three questions here that I would like to raise for the record.

Mr. Larry, you did not get a chance to say anything. Your chance comes now. The United States Steel annual report for 1973 shows that the number of employees of United States Steel has declined from 271.000 in 1957 to 184,000 i 1973. It also shows that income declined steadily over this period, both absolutely and as a percentage of sales. Although 1973 was a recovery year, you are still earning far below what you earned 17 years ago.

Does this matter of foreign competition enter into this trend?

Mr. LARRY. Senator, it enters into it most markedly. It was certainly a large part of the reason for the decline in the 1960's, and as you say, we have partially recovered from the decline of the 1960's, but really only about halfway. We and the rest of the industry, I think, made a herculean effort in the latter part of the 1960's to bring our facilities up to topmark in the hope of being able to compete more viably in the world market. We still have a way to go. We have improved our quality, but at the moment, as you are aware, we are certainly short of capacity for this economy. Unfortunately, the rate of return is really not a competitive rate compared to many things, including the prime rate of interest. I think there is little question that the combination, if you will, of former trade policies, the import threat, and more recently the Cost of Living Council rules and regulations these factors have contributed to our inability really to do a job for the Nation, which ought to be done.

Senator BENNETT. Your company is a corporate citizen-a constituent of mine.

Mr. LARRY. We are very proud to be so.

Senator BENNETT. Also, Mr. Anthony's company, at least so far as coal is concerned.

Do you agree with his comments about the necessity to handle this thing on a regional basis?

Mr. LARRY. I think it is very appropriate to give attention to the regional problems because they have varied so markedly as the years have gone by. We have seen vast penetrations in the west coast, almost to, at one point, near destruction of the industry in the West. We saw it begin to happen down on the gulf coast. It has varied from time to time, depending upon the origin of foreign exports.

*See p. 1078.

The Japanese, of course, have been a major threat in the West. Then some of the South American countries began to, if you will, unload their unemployment into our Southern markets for a period of time. It was a very special and a particular threat, a very isolated situation. and one that certainly deserves consideration, even if it occurs at a point when the industry as a whole might be lacking in what you would call a definition of injury. But injury can be very important to the employees, the governmental bodies concerned, the tax base, and everything else, in particular areas such as the west coast.

Senator BENNETT. The voluntary steel import program has a provision intended to avoid rapid shifts in geographic imports or shifts in the product mix.

I would like any of you to comment, if you like, particularly Mr. Ahlbrandt, and Mr. Anthony.

Has this voluntary program failed?

Mr. AHLBRANDT. Well, if I may be first, Mr. Chairman, I would say that so far as the voluntary restraint arrangements were concerned, the first one was a complete failure so far as the specialty steel industry was concerned, in that the product mix was not really adhered to and. the foreign imports more or less tended toward the high-priced, supposedly more profitable material. But during the second voluntary restraint arrangement which will be terminated at the end of 1974, Japan very definitely stayed with her commitment, or at least commitment of the arrangements itself except for tool steel-based on our data. Whereas, I think, the commitment was totally neglected so far as France was concerned. However, the other EEC countries, more or less due to the very high demand of worldwide steel, certainly helped considerably during the last couple of years to hold down the imports. I think probably Mr. Anthony though could be better served to answer for himself.

Mr. ANTHONY. Well, I would like to comment, Mr. Chairman, that the voluntary restraint arrangements, No. 1, certainly gave recognition to the type of problem of which we are speaking. In the case of the west coast, I think the voluntary arrangements did not fully do the job. During periods of world oversupply, the percentage of steel into the Western United States increased rather dramatically under the first part of the voluntary arrangements, and did not decrease to the agreed upon portion during the second phase of the voluntary arrangements.

I think the problem we have with the VRA is that No. 1, it is due to expire at the end of 1974. No. 2, there is somewhat of a cloud over its legality, and we are looking really for an alternative solution to the problem.

Senator BENNETT. Do you want to make any comment, Mr. Cort? Mr. CORT. The signatory countries-in other words, Japan and Europe, the Common Market-have in the last several years, possibly due largely to market conditions, stayed within the limits of the agree ment. But we have seen a very dramatic increase from nonsignatory countries, and that is one of the weaknesses of the voluntary arrangement; it only affects the steel economics of Japan and the Common Market.

Senator BENNETT. Mr. Cort, while you are talking, can you comment on the fact that steel is still in tight supply in face of the fact that automobile production seems to be slowing down?