Not for the first time -- but we hope for the last -- the American steel industry is seeking government intervention to help it through an economic crunch. On March 6, President Bush will announce his decision on whether tariffs will be imposed on imports to protect U.S. companies.
The steel industry, a vital part of the economic past and present of this region, is entitled to some relief from Washington, as long as it is temporary, targeted and tied to future efficiency.
There is more to the picture than the extreme arguments of both advocates and opponents of additional protection for American steel.
The industry and the United Steelworkers of America are correct in their claim that imports are hammering domestic producers. Thirty U.S. steel producers have sued for bankruptcy protection over the past four years.
Moreover, foreign countries do subsidize their steel industries, in subtle as well as obvious ways. A meeting of world steel producers held in December to address the global overcapacity problem resulted in agreement to reductions in production worldwide, but only by about a third of what is needed and with the rationalization stretched out to 2010. By that time, much of the U.S. steel industry could look like a stomped beer can.
On the other hand, some U.S. steel companies do not operate at the height of efficiency. Historically, that has been as much a factor in their problems as unfair competition.
In recent months, Big Steel has proposed mergers to increase efficiency and competitiveness -- a development that over time would make tariffs less necessary. But there is a catch: The federal government has been asked to facilitate consolidations in the industry by assuming some of the health-insurance obligations of the companies to be absorbed.
Cynics argue in advance that anything Mr. Bush does for the steel industry and its active and retired workers will be motivated by a desire to buy votes in Pennsylvania, West Virginia, Ohio and other steel-making states. Only that ulterior motive, the critics say, could justify the Bush administration's departure from its general enthusiasm for free trade.
As a general proposition, open markets are in America's interest, and not just because removing trade barriers abroad helps U.S. exporters. Free trade also helps U.S. manufacturers and consumers. Why, for example, should General Motors or Ford have to pay more for U.S.-made steel components, running up the price of U.S.-made cars purchased by Americans as well as foreigners?
The truth is that there will be economic and human costs regardless of whether the federal government grants relief to domestic steelmakers. If steel companies are unable to satisfy their health-insurance obligations to retirees and their families, the pain will be felt especially hard in this region. With no apologies for parochialism, we believe a federal assumption of those obligations is a fair tradeoff for consolidation that will make the domestic industry leaner in the future.
We suggest that President Bush announce a tariff schedule that starts near the top of what he is authorized to grant -- 40 percent -- and works progressively and irrevocably downward to zero, year by year, pledged over a 10-year period. That also provides time to see if foreign producers cut their production by 2010 as they have promised.
Meanwhile, Washington should encourage the mergers with reasonable concessions including a one-time assumption of responsibility for medical benefits.
We recognize that a benefit once conferred is likely to lead to appeals for similar relief in the future, but we believe Washington should take the industry at its word that it seeks emergency relief aimed at allowing it to be self-sufficient in the future.
With its burdens lifted, a streamlined U.S. steel industry should be able to prosper, given an American market of 115 million tons of steel per year, a gradually growing world market for steel and a rationalization of global production.
The United States needs a functioning steel industry, and that requires some government relief. But the American taxpayer and the rest of American industry should not have to carry an inefficient steel industry on its back in perpetuity. A strict 10-year "diet" should be enough to restore the industry to self-sufficiency.
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