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Odd couple Sherrod Brown, Jeff Sessions bond on curbing surging steel imports

Ohio and Alabama U.S. Senators Sherrod Brown and Jeff Sessions agree on little. But defending American steel manufactures isn't one of them.
Ohio and Alabama U.S. Senators Sherrod Brown and Jeff Sessions agree on little. But defending American steel manufactures isn't one of them.

It tries the mind to think of more than a few issues that Ohio Democratic U.S. Senator Sherrod Brown and Alabama Republican Sen. Jeff Sessions agree on, but one that binds them together like a new and tough steel alloy is defending American steel manufactures, which have significant presences in their states, against foreign state subsidized steel products that are being dumped below cost into the economy.

In a conference call with reporters Tuesday, following the release of a new report by the Economic Policy Institute detailing the need for the Obama Administration to protect Ohio and Alabama steel manufacturers and the jobs they support, Sens. Brown and Sessions are asking the White House and the U.S. Department of Commerce to go to bat for steel workers across the nation and in their respective states.

In Ohio, 33,900 jobs are supported by steel manufacturing jobs, while Alabama as 13,000 jobs similarly positioned. Topping the list of states with steel supported jobs at risk is Texas with 59,800 jobs.

. In the aftermath of the Great Recession, heavily subsidized overseas steelmakers are offloading excess steel in America’s large, open market, and this dumped steel now poses a serious threat to domestic steel producers, putting roughly half a million U.S. jobs at risk. Particularly troubling, the report notes, is the dumping of Oil Country Tubular Goods (OCTG), primarily from South Korea, which threatens to disrupt America’s newfound and growing energy independence. Greater domestic natural gas production could be replaced by a reliance on overseas producers for the pipe and infrastructure needed to tap new oil and gas reserves.

Sen. Brown, who served many successive terms in the House before being elected the first time to the Senate in 2006 and reelected again six years later, is an unmatched advocate for manufacturing in generally and steel jobs in particular. It's no secret that generations of steel workers built this country, he said, noting that the nation is now on the cusp of a manufacturing renaissance that has produced a half-million manufacturing jobs. With natural gas now an affordable and predictable source of energy, Sen. Brown not standing up to overseas OCTG producers who don't play by the rules endangers 583,000 steel related jobs. Brown's first solution, with cosponsorship from Sen. Sessions, is to treat currency manipulation as an unfair trade subsidy, which if it could be done, he said, would help create another 250,000 jobs nationwide.

The report said that In the aftermath of the Great Recession, steelmakers around the globe, backed by aggressive government support, have targeted the large and open U.S. market to offload excess supply. The resulting surge of unfairly dumped and subsidized imports poses a serious threat to domestic steel producers and the half million jobs they support.

Global excess steel capacity is now more than twice the volume of excess capacity that followed the 1998 Asian financial crisis, and this glut of supply produced largely by state-backed steelmakers has made its way onto America’s import ledgers. The report's findings show that the American steel industry risks long-lasting damage unless the U.S. government fully enforces its established trade remedy rules.

Sen. Sessions told reporters today that he appreciates Sen. Brown's alertness to these issues, but trading partners who sell a lot to American but who buy little in return must be confronted. He said there exists a "clear national interest in insisting that all trade be fair, done according to the rules and not have our workers and businesses subject to products below cost," he said, adding, "We need to stand up and defend ourselves ... We can't ignore unfair competition ... government should defend companies and workers."

The report observes that OCTG imports from nine countries, chief among them South Korea, more than doubled between 2010 and 2012. As the surge continued, it said, domestic steelmakers’ production, capacity utilization, shipments, and sales all fell in the first quarter of 2013, and they slashed operating income by nearly $191 million. The more than 7,000 U.S. OCTG workers worked more hours but saw their combined wages fall.

The harm to domestic steel producers in the OCTG market sparked a petition for trade remedy relief in July of 2013, one of 38 individual petitions filed by steel producers and workers that year, EPI said. The Department of Commerce’s preliminary analysis gave South Korea a free pass on its dumping and a final determination from Commerce is due on July 8th.

"South Korea has no home market for OCTG and sends nearly all of its product to the United States – consistently below fair market value," said Scott Paul, President of the Alliance for American Manufacturing (AAM). "If Congress doesn’t act, we’ll head down a path of swapping our dependence on foreign oil with a dependence on foreign energy infrastructure."

Unfortunately, EPI, which got help from co-author Elizabeth Drake of the law offices of Stewart and Stewart, notes that significant damage to the wider industry has largely happened. Domestic steel imports increased by 12.8 percent from 2011 to 2013, and surged even more sharply in the first two months of 2014, hitting 6.4 million net tons, an increase of 24.5 percent over the same period in 2013. The loss of market share has translated into depressed domestic steel production and revenues, leading to sharp declines in net income in the U.S. steel industry over the past two years, as well as layoffs for thousands of American workers.

The report documents that all 583,600 steel-related jobs are at risk if the U.S. does not effectively enforce its established trade remedy laws, which have historically been vital to the steel industry’s health. Moreover, an estimated 4,184 workers in eight states have lost their jobs to the import surge since the beginning of 2012 and resulting shifts in production. Nearly 1,000 steel jobs have been lost in the first three months of 2014.

"As a United Steelworker and a small business owner, I personally experience how the plant's ups and downs create a ripple effect throughout the community," said Ralph Mercado, expediter at U. S. Steel's Lorain Tubular Operations, in a media release. "It's not just those of us who work at U. S. Steel who are affected by unfair trade - it's our families, neighbors, and other business owners. We all suffer when the mill can't operate because of unfair trade."

Other report findings: The excess capacity plaguing the industry stems largely from state support for – and direct government involvement in – the steel industry in other countries. In 2011, half of the world’s 46 top steel companies were state-owned, and they accounted for nearly 40 percent of global production.

U.S. imports of unfairly traded products are increasing as countries such as China and others deceptively sell subsidized basic steel products to companies in third-party countries, who in turn finish these products, like pipes, for sale in the American market.

Aggressive government support, coupled with the steel industry’s capital-intensive nature, leads to the kind of import surges now threatening the American market. Strong trade remedies have been critical to the health of domestic industry during previous periods of trade distortions, and are necessary now if the industry is to avoid long-term damage.

The report concludes that unless policymakers insist established trade rules remain strictly enforced, the consequences for domestic steelmakers and their workers will be dire. In the OCTG market, both management and workers warned about the long-term effects of overcapacity.

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